Business Driven Technology 6th Edition by Paige Baltzan

Exercise 169

The Brain behind the Big, Bad Burger and Other Tales of Business Intelligence
Jay Leno, the New York Times, and health nutrition advocacy groups have commented on the newest Hardee's fast-food item "The Monster Thickburger," which consists of:
Two charbroiled 100 percent Angus beef patties, each weighing in at a third of a pound (150 grams)
Three slices of processed cheese
Four crispy strips of bacon
Dollop of mayonnaise
Toasted butter sesame seed bun
The Monster Thickburger sounds like a hungry person's dream and the dieter's worst nightmare. Yes, this delicious sounding burger nirvana contains 1,420 calories (5945 kilojoules) and an artery-clogging 107 grams of fat. Even though the Monster Thickburger is one of the most fattening burgers on the market-not to mention that most people add a coke and fries to their order-it is selling like crazy, according to Jeff Chasney, CIO and executive vice president of strategic planning at CKE Restaurants, the company that owns and operates Hardee's.
With the national diet obsession and health-related warnings concerning obesity, most fast-food companies probably would never have even put the Monster Thickburger on the menu. CKE confidently introduced the Monster Thickburger nationwide convinced that the product would sell based on intelligence the company obtained from its business intelligence (BI) system. CKE's BI system-known ironically inside the company as CPR (CKE Performance Reporting)-monitored the performance of burger sales in numerous test markets to determine the monster burger's increase to sales and ensure it was not simply cannibalizing other burger sales. CKE monitored several variables including menu mixes, production costs, Thickburger sales, overall burger sales, profit increases, and Thickburger's contribution to the stores' bottom-line. Using its BI system CKE quickly determined that the production costs of the Thickburger were minimal compared to the increase in sales. Armed with burger intelligence CKE confidently paid $7 million in advertising and successfully released the burger nationwide. In its first quarter sales of the burger exceeded CKE's expectations and the company knew the $7 million it paid in advertising was a smart investment.
Hardee's, Wendy's, Ruby Tuesday, T.G.I. Friday's and others are heavy users of BI software. Many of the big chains have been using BI for the past 10 years, according to Chris Hartmann, managing director of technology strategies at HVS International, a restaurant and hospitality consultancy. The restaurants use operational BI to determine everything from which menu items to add and remove to which locations to close. They use tactical BI for renegotiating contracts and identifying opportunities to improve inefficient processes. BI is an essential tool for operational-driven restaurants and if implemented correctly they can highlight operational efficiency and effectiveness such as:
Carlson Restaurants Worldwide (T.G.I. Friday's, Pick Up Stix) saved $200,000 by renegotiating contracts with food suppliers based on discrepancies between contract prices and the prices suppliers were actually charging restaurants. Carlson's BI system, which at the time was from Cognos, had identified these discrepancies.
Ruby Tuesday's profits and revenue have grown by at least 20 percent each year as a result of the improvements the chain has made to its menu and operations based on insights provided by its BI infrastructure, which consists of a data warehouse, analytical tools from Cognos and Hyperion, and reporting tools from Microsoft.
CPR helped CKE, which was on the brink of bankruptcy, increase sales at restaurants open more than a year, narrow its overall losses and even turn a profit in 2003. A home-grown proprietary system, CPR consists of a Microsoft SQL server database and uses Microsoft development tools to parse and display analytical information.
In June 2003, Wendy's decided to accept credit cards in its restaurants based on information it got from its BI systems. Because of that decision, Wendy's restaurants have boosted sales; customers who use a credit card spend an average of 35 percent more per order than those who use cash, according to Wendy's executive vice president and CIO John Deane.
Other industries could learn a great deal about BI by analyzing such strategic use of BI. "Most BI implementations fall below the midpoint on the scale of success," says Ted Friedman, an analyst with Gartner. It appears that the restaurant industry has avoided the three common barriers to BI success by cleansing voluminous amounts of irrelevant data, ensuring high-data quality, and decreasing user resistance.
What are the negative impacts of CKE's business intelligence