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Shaking up expectations

By SCOTT BARANCIK, Times Staff Writer

© St. Petersburg Times, published June 2, 2002


TAMPA -- When Checkers Drive-In Restaurants decided to launch a Kahlua-flavor shake earlier this year, it didn't consult highly paid chefs, demographers or focus groups.

TAMPA -- When Checkers Drive-In Restaurants decided to launch a Kahlua-flavor shake earlier this year, it didn't consult highly paid chefs, demographers or focus groups.

Instead, half a dozen executives from the Tampa fast-food chain drove to a company-owned store near Raymond James Stadium, cleaned out the shake machine, poured in a Kahlua-flavor syrup and sipped the results, giving some customers and employees a taste, too.

Except for darkening the color a bit, the new menu item was approved that day.

"Our competitors have product development departments that are larger than our entire corporate office," said marketing vice president Richard Turer, one of about 70 employees at Checkers' headquarters. "We're proud of that."

Seven years after Wall Street gave up covering the company, Checkers, the anti-McDonald's, is racking up some impressive numbers. It is doing so through a lean and improvisational approach to the fast-food business.

Profits are rising, and so is the 16-year-old company's stock price, up 645 percent during the two years that ended April 30, from $1.63 per share to $12.10. No other Times 50 company's stock climbed as fast over the period.

Cost-cutting has been key. Since joining the 795-unit company in December 1999, chief executive Dan Dorsch has closed underperforming stores, sold many others to franchisees, trimmed poor-selling menu items, shrunk his staff and reduced debt. He did so while integrating Rally's Hamburgers Inc., a Midwest acquisition that doubled the company's stores.

But efforts to reposition Checkers' brand and redefine its target audience have been equally important.

Television commercials have been overhauled. Gone are ones such as the 1997 ad that taunted boxer Mike Tyson for biting off part of opponent Evander Holyfield's ear, or the 2000 ads featuring "Holly," an animated character blending the aesthetics of Japanese anime cartoons with those of Playboy magazine.

Though such ads may have appealed to the fast-food industry's best customers -- low- to moderate-income white males ages 18 to 24, who indulge an average of more than eight times a month -- they upset women and parents. "While motivating a certain target, you certainly don't want to anger others," Turer said.

Checkers replaced the Miami and Los Angeles agencies that created those ads, signing with Marc USA of Pittsburgh. What the new agency's "You Gotta Eat" ads lack in grammatical correctness they make up for in hip-hop style. They also seek a broader audience: commuters ages 16 to 60 who want a quick meal without parking. Checkers and Rally's restaurants have two drive-through lanes, compared with one at most other fast-food restaurants.

"That's our target," said Turer, a University of Tampa alumnus. "People with cars."

Checkers does not market to kids. It doesn't have playground equipment or inside seating. And the chain lacks the international scale that makes Hollywood filmmakers and toy marketers drool. (It operates in 22 states, most of them east of the Mississippi River; Washington, D.C.; Puerto Rico; and, improbably, the West Bank of the Jordan River.)

Its paltry children's menu is meant to prevent an outright munchkin veto, Turer said.

But being an adult brand has its advantages. "We think we have the right to do a product like a Kahlua shake, where some of our competitors might not," he added. "It would be very hard to have a Kahlua shake sign right next to a Disney Toy Story II sign, even though it's nonalcoholic. I don't think the folks at Disney would approve that."

In its original bottled form, the chocolate and coffee blend contains 26.5 percent alcohol.

Checkers had ample incentive to pursue a tie-in with Kahlua. The No. 1 imported liqueur in the United States, Kahlua has a loyal following and substantial brand recognition. It added a high-profile sweet to a menu heavy on savory items such as seasoned fries. (A prior gambit, adding crushed candy bars to shakes, did not catch on.)

Shakes have a much higher profit margin than burgers. And they do not require new machinery or additional staff training. A franchisee need only drop one of four other shake flavors to make room for it.

Checkers ultimately signed a one-year license with Allied Domecq PLC to be Kahlua's exclusive fast-food licensee. It pays the British company a small royalty for each gallon of Kahlua-flavor syrup it purchases.

So far, franchisees appear happy with the Kahlua shake, which debuted April 15.

Craig Joy, owner of the Checkers franchise at 3946 Fourth Street N in St. Petersburg and nine other locations in Central Florida, said his most recent weekly sales figures showed overall shake revenues up 38 percent vs. last year. Two of every five shakes purchased was Kahlua-flavor.

"It only cannibalized my soft drink sales by 6 percent," Joy said. "That's incredible."

Despite recent gains in its stock price, Checkers is not the Wall Street darling it once was. Its closing price of $xx.xx on Friday was a far cry from its high of $25.25 in November 1992, a figure that rises to $202 when adjusted for dividends and stock splits. Not a single analyst monitors the company today.

But Turer and his colleagues are working on several other menu items, including ice cream and more varieties of chicken.

Might the new items include shakes based on other Allied Domecq brands, such as Canadian Club whiskey, Courvoisier cognac or Harveys Bristol Cream? Turer wouldn't say, though he hinted that branded shakes are a strong possibility.

"That's one thing we know how to do," he said, "pour shake mix in a machine and draw it."

- Scott Barancik can be reached at barancik@sptimes.com or (727) 893-8751.

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