Arby’s do-or-die moment
Paul Brown took the wheel of Arby’s at a tough moment in the brand’s history. Its menu mix was stale, franchisees felt disconnected from corporate and national marketing was inconsistent at best. Adding a sprinkle of salt to the wound, Jon Stewart, then host of "The Daily Show" on Comedy Central, started picking on Arby’s with lines like, “Technically it’s food,” and “It’s like shock and awe for your bowels.”
Soft-spoken and exceedingly polite, CEO Brown surprised viewers and industry watchers by taking the jokes with a smile. Rather than unleashing a pack of lawyers to counter such high-profile disparagement, his reaction to Stewart’s jabs was to play along, rather than fire back.
“When I first started, I would have notes from lots of different franchisees saying, ‘What are you going to do about this?’” Brown said of the publicity. “I looked at it and said, well, he’s poking fun, but he’s not really poking fun. Why don’t we start engaging him?”
"I can really spend a lot of my time thinking about the big picture," says Paul Brown, CEO of Arby's and architect of a brand revival.
The company catered lunch for the show’s crew and, for the last Stewart-hosted Daily Show episode in August, directed its ad agency, Fallon, to create a pair of farewell videos with Stewart’s best Arby’s zingers set to the Golden Girls theme song. One of the videos had more than 1.3 million YouTube views at press time, as hordes of journalists and commentators saluted the company’s ability to take a joke.
As a revived menu has increased sales and transactions, fearless marketing has achieved the seemingly impossible: transforming a giant, legacy fast-food chain into a modern brand that’s proud of its proteins, using scale to its advantage and willing to play along with those who mock it.
This is Brown’s first rodeo as a CEO, let alone leading the world’s 10th largest fast-food chain by sales (excluding pizza). No doubt, his imposing résumé bolstered the confidence of parent, Roark Capital Group, to install Brown, 47, as the head of the private equity group’s largest brand.
He joined in 2013 following five years as president of brands and commercial services and executive vice president at Hilton Worldwide and three years as president of Expedia North America. Prior to that, he worked out of London as a partner for ultra-prestigious consulting firm, McKinsey & Company.
Brown said his background helps him understand what customers look for and how to create an experience to meet those needs. That process began with a listening tour researching the 51-year-old company’s history and what its current customers and employees had to say.
Along the way, he stumbled upon audio recordings of the company’s founders, Forrest and Leroy Raffel, discussing inspiration for the brand they started in 1964. Its first roast beef sandwiches cost 65 cents at a time, he said, when a McDonald’s hamburger went for 15 cents.
“It was a fast-casual restaurant of its day,” Brown said of the brand’s origins. “It wasn’t sit-down, it was a primarily take-out but very high quality, certainly priced above, and they thought about every element of it from the design of the building to the design of the uniform to the food they offered, and even how the steam was put into the packages.”
Sizing up its current positioning, focus group participants were given a stack of restaurant logos and asked to arrange them on an unspecified spectrum. They typically arranged the icons from low- to high-end, Brown said, and often placed Arby’s right in the middle, straddling the line between fast food and fast casual.
Not wanting its future to be defined as “not quite something,” Brown’s team labeled the newly defined positioning as “fast crafted.” In Arby’s speak, fast crafted means higher quality food than traditional QSR players, but greater speed and convenience than fast casual.
“What I love about that positioning as much as anything is that I didn’t come up with it,” he said. “We made up the name, but our guests told us that’s what we were. We did the same exercise with our team members—everybody said the same thing—so instead of fighting it, we’re running with it.”
Brand President and Chief Marketing Officer Rob Lynch said Brown’s leadership style is the reason he left his role as vice president of marketing at Taco Bell, and that the new CEO presented the new direction as a do-or-die moment for the $3.3 billion, 3,300+ unit restaurant giant.
“He came in here and essentially said we’re going to define what this brand’s going to be moving forward, and it’s either going to work and we’re going to be successful or it’s not and Arby’s isn’t going to be viable,” Lynch said.
"There was a big gap between what we actually offered and what people thought we offered," says CEO Paul Brown.
Joining the conversation
Arby’s recent gains are notable; finishing 2014 with a 5.7 percent sales increase in a category that eked out just 0.8 percent. Same-store sales have increased for 19 consecutive quarters, up 7.6 percent in the second quarter of 2015.
Equally impressive are its marketing and social media wins, which propelled Arby’s into the national dialogue in a positive way, bucking the narrative of fast-food giants as the punching bag of comedians and social media venters.
During the 2014 Grammys, after Pharrell Williams appeared on stage wearing an oversized hat, Arby’s tweeted “Hey @Pharrell, can we have our hat back? #GRAMMYs,” which was retweeted more than 77,000 times and made a favorite by more than 47,000 people. Arby’s later bought the hat, which has since “gone on tour” through a variety of events and appeared in museums across the country.
After adding slow-cooked brisket to its menu, many people expressed skepticism. In response, Arby’s social media team created a 13-hour television commercial showing nothing but brisket cooking in a smoker. Half a million (possibly very bored) people watched that video, and kept it on for an average of 38 minutes.
Playing off of the strange trend of slow television—defined by Wikipedia as “marathon television coverage of an ordinary event in its complete length”—Arby’s once again turned new media to its advantage.
“You’re able to really understand through the abundance of feedback that you get in real time, some good and some bad,” Lynch said of the viral marketing efforts. “As a marketer that’s the holy grail—to understand what people really think in an unfiltered way where they’re passionate enough to express their perspective to you through this medium.”
With a dedicated staff of media experts and a posh room of screens where it monitors customer feedback and social media mentions, Brown empowered Lynch’s social media team to speak for the company—with limited oversight—to enable playful, spontaneous reactions and avoid lifeless or overly promotional speak that dominates many corporate Twitter accounts.
Ringing the bell
Contrasting Arby’s bold online persona, its CEO is markedly low-key. He speaks softly, smiles easily and, surprisingly, was waiting at the door of the newly remodeled Midtown location north of downtown Atlanta as I arrived for the second part of our interview.
Brown’s stars aligned to bring him back to Atlanta, his hometown and a city he calls “nice and easy” for family, work and a social life.
“I enjoy the interactions with people in the city,” he said, referencing numerous charitable efforts, including Arby’s Foundation. “It’s a different set of problems to focus on, sometimes not dissimilar skills that it takes to run a business.”
He and his wife, Lisa, have two children—Kelsey and Alex—and three dogs—Langley, Bella and Abbey. Brown said he recharges his batteries by taking the dogs for long walks.
It’s part of a disciplined schedule including 4:30 a.m. weekday alarm calls to hit the gym, stop for coffee and make it into the office by 7:30 at the latest.
A self-proclaimed “building guy” who loves cities, Brown was clearly excited to give me a tour of his new restaurant template. Depressing beige and red has given way to authentic textures—warm wood paneling, minimalist fixtures and brighter colors that fall closer to the modern, fast-casual end of the spectrum.
The back of the house has been shrunk by 20 percent, with a window where guests can see their food being made and a “crow’s nest” allowing the manager to interact with staff and customers. The new, more space-efficient design squeezes 54 seats into 2,000 square feet, as opposed to 2,500 square feet in the previous concept.
Brown walked me around pointing out his favorite details—a marquee-style illuminated “A,” dark wood paneling, bright electronic menu boards installed as a test, and retro light fixtures—he likes this stuff. Switching from building to business guy, he claimed the changes have led to a 14 percent increase in labor efficiency.
“What I’ve brought from my background … is that focus on efficiency in square footage,” he said. “Every square foot carries with it a cost, and so the less square footage you need to get the job done, by definition, the lower the cost and the better the ROI.”
Asked how he views his role as CEO now that he’s settling in, Brown said his goal is building a highly functioning team and letting them do their job without undue influence.
“I don’t have to be a micromanager here, because we have very talented people and everybody is aligned around the vision,” he said. “I can really spend a lot of my time thinking about the big picture, spending time working with franchisees and thinking about the growth of the business, which is really, really nice.”
Two customers rang the good-service bell on their way out, as Brown sidled up to the cashier and ordered a full roster of new menu items. Seeing my surprise as he pulled out his credit card, he said he wasn’t going to hit the manager’s P&L for the sake of this story.
Our aggressive tasting menu included old-style garlic Parmesan potato chips, a Smokehouse Turkey Sandwich, a Pecan Chicken Salad Sandwich, a pair of turkey gyros, two Orange Cream Shakes, and Boylan-brand black cherry soda in a glass bottle.
With a wide grin, Brown excitedly waited for me to taste each item and give my feedback. As I chewed away, increasingly concerned by the quantity of food before me, he went into the back story behind the new recipes, including the distribution gymnastics and on-the-farm relationships required for each item.
He was even more animated talking about price points, and how it related to that fast-crafted brand position.
“Our objective is, for the price, whatever the price is, there is no better product out there,” he said. “We really believe that is a very important thing. For the price, whether it be $5.49, $3 or $2, there is no better product—and that is working for us very well.”
The bell rang again as he talked of his dreams of building an Arby’s in Manhattan, which is now slated to open in November across the street from The New York Times building.
Outside of New York, updated locations are multiplying as Arby’s opens 60 new restaurants by the end of 2015 and completes approximately 180 remodels—both franchised and company-owned locations.
The Meat Mountain
With many commodity prices—including beef—at all-time highs in recent months, Brown said he won’t allow the market’s fluctuations to dictate the menu mix. Whatever the motivation, its revised menus look fresh, as the company reorganized its menu boards by protein-based categories.
“There was a big gap between what we actually offered and what people thought we offered,” he said. “We have long been known as America’s roast beef sandwich place, but it was clearly identified that people didn’t know we had turkey, didn’t know we had chicken, didn’t know we had ham, didn’t know we had corned beef and, in fact, these are great.”
To add weight to the company’s “meat is good” marketing, Brown cited NPD statistics showing 98 percent of Americans are still meat eaters, numbers that have remained steady through the decades.
“Meats been cool for tens of thousands of years,” he added. “Just coming out and saying what most people already felt and thought, we got some credit for that.”
Taking that sentiment to its extreme, Arby’s has a $10 Meat Mountain sandwich on its secret menu containing eight different proteins—two chicken tenders, roast turkey, sliced ham, Swiss cheese, corned beef, brisket, Angus steak, cheddar cheese, roast beef and three strips of bacon. Predictably, “Meat Mountain” is popular on YouTube and Twitter.
As our own meat marathon drew to a close, I asked Brown to predict where the company will be in 10 years. He was quick with his answer: significantly larger than it is now, with an international footprint much greater than its current stable of 131 units outside of the U.S.
Saying there’s “natural sandpaper” in franchisee-franchisor relationships, Arby’s largest franchisee, Jeff Davis, chairman of Tulsa-Oklahoma-based United States Beef Corp., said the brand was in crisis at the time of Brown’s arrival due to the recession, high food costs and lack of solid “value menu” plan.
“Whenever there’s a change in ownership, you have those growing pains,” Davis said, citing Roark’s purchase of the brand. “We had some of those, but bringing Paul in was the biggest key to being able to turn it around and move in the opposite direction.”
Also the chairman of the Arby’s Franchise Association, Davis said the company’s biggest changes have come in improved franchisee relations and Brown’s demeanor.
“From the day he started he was very open and honest about asking questions and there was nothing off limits to talk about,” he said. “We were able to drive some sales with new creative and developing a product pipeline with quality products, not me-too products.”
Tony Lutfi, president and CEO of franchisee MarLu Investment Group, is one of the brand’s largest franchisees, and was also concerned before Brown was brought in as CEO.
“Brown worked really hard in understanding what the breakdown was and consulting with the franchisees for how to solve it,” he said. “He immediately took action and made promises that he knew he would be able to deliver on—it wasn’t long before the franchisees believed in him.” Lutfi attributes the brand’s recent success to Brown’s leadership style.
“I’ve been involved with many brands,” he said. “He’s got a talent of persuasion that is really above and beyond anybody else that I’ve met before.”
Straddling fast food and QSR
Loitering around the Arby’s corporate headquarters after bidding Brown farewell at the restaurant, I interviewed the aforementioned Rob Lynch, Chief Operating Officer John Bowie and Jim Taylor, senior vice president, product development and innovation.
Lynch, the man behind Arby’s successful marketing efforts, said the executive team realized if Arby’s wants to be a top three restaurant in the space, it needed to deliver more value, quality and variety to attract new customers. All of that, he said, required significant cooperation from franchisees.
“With that comes some operational complexity, but we’ve established that partnership with our franchisees so they’re willing to lean in and they’re seeing the profit results from being able to sell higher quality proteins at premium price points,” he said. “Once you start building momentum and get some victories under your belt, the tide really starts to get bigger and you get more people on the train.”
On the operations side, Bowie singled out the company’s new, proprietary “Cook and Hold” ovens that are smaller, stackable and deliver more consistent food quality.
“The objective isn’t to save labor and stick that money in the bank,” he said. “It’s to take those labor dollars and reinvest them back into service, so at lunchtime or dinnertime, we could have another crewperson on the line so we can speed up service—that’s where we’re reinvesting the labor savings.”
Taylor spends his time directing the creation of new menu items, and said his team’s biggest accomplishment is creating food that combines the best of fast casual with the convenience and affordability of QSR.
“People who are really into food and want great quality food, we want to be the go-to place that they come to for fast food and say wow, I know there’s always something on the menu that’s going to tempt and tantalize and excite me,” he said. “I have the best job in the world.”
I asked the team what makes a calm, seemingly easy-going guy like Brown come unglued. After some respectful dithering, Lynch singled out Brown’s unflinching eye for detail, saying he’ll pick up the phone if a sauce is labeled incorrectly or he spots the old logo being used.
“He cares that much—that’s the kind of thing that gets him fired up,” he said.
Bowie added that Brown reads customer comments on a regular basis, and frequently follows up on negative feedback.
“We’re a 3 billion-dollar brand in the hands of 60,000 teenagers and that’s a pretty scary thing,” he said. “He’ll ping any one of my operators, or me, and say, ‘What’s going on here, have we followed up on this?’”
“He hates to see one guest leave not satisfied with what they got—all of us have that type of an attitude,” Taylor added. “That’s one of the things that’s going to make us stand out in the marketplace, is delivering the experience we want every single time.”