Arby's CEO on Record Sales, Maintaining Growth in QSR
Speaking with Franchise Times from a hotel lobby in New York City after a long day of talking to the press, Arby’s CEO Paul Brown announced record systemwide sales of more than $3.6 billion, a 25% increase in AUVs and 3.8% same-store sales growth—more than double the growth rate of the QSR category. Zooming out, those numbers represent 25 consecutive quarters of of same-store sales growth and 11 consecutive quarters of transaction growth for the Atlanta-based brand.
Diving into the numbers, Brown suggested the company’s recent growth streak is the result of the brand’s revised (and constantly shifting) menu, an ongoing, multi-year restaurant remodeling program, buzz-generating marketing and the general success of its operations team to deliver on those elements.
“It’s a validation of a lot of the stuff we talked so much about several years ago,” he said, referencing the cover story I wrote about Paul and Arby’s for our October 2015 issue. “The team is continuing to innovate dramatically around the food, around the marketing and the operations team is able to deliver on it.”
For fans of the food, which has included some QSR firsts including a venison LTO in certain markets within the last 12 months, Brown suggested the brand has several more food firsts to continue creating buzz and keep Arby’s top of mind with its customer base.
“Arby’s has the capability and the permission to do some of these things that have never been done before,” he added. “We’re getting a lot more of earned versus paid media, which is allowing us to punch above our weight.”
Asked for some insight on why some of the largest, legacy QSR brands struggle while others that are nearly as big have found success, Brown briefly donned his McKinsey & Company consulting hat and suggested that menu innovating and swelling prices have fundamentally changed the equation for some of the category’s pioneers.
“One of two things, and hopefully both things, need to be true for a restaurant brand to be successful long term,” he said. “One is you have to have products on your menu that people want that you cannot get anywhere else [and] two is, if you have a product on your menu that you can get somewhere else, then for the money it is the best product you can get and if you can’t look at your menu and have the majority of your products fit into one of those two categories, I think you have a problem.”
Returning to net unit growth within the United States, Brown added that the brand is still recruiting new franchisees, but acknowledged that the bulk of its unit growth is coming from existing Arby’s franchisees and non-Arby’s ‘zees who are either building new stores or buying existing corporate locations in exchange for signing large multi-unit deals to add units. On that note, he suggested that Arby’s will announce another such agreement in the coming weeks.
A cities geek (like your author), Brown was excited to share a progress update with the brand’s still-new Manhattan location that opened on 40th and 8th last year, as well as its “flagship” location that’s under construction on 23rd Street and Madison that is set to open sometime in the first quarter of this year.
Outside of the U.S., Arby’s is set to open its first two restaurants in Kuwait in the first quarter, and the company is also in late-stage discussions with large franchisees in several additional countries, which he said should be announced before the middle of this year.
“We’re taking a very thoughtful approach to how we expand,” Brown said. “We want to make sure we’re dealing with the right people and we have the supply chain ready to go and aren’t rushing out there and just planting flags.”
Perhaps he was feeling the buzz after a day of nonstop interviews, but Brown struck a positive tone about the future of the industry, especially in light of political instability and escalating talk of a U.S. restaurant recession.
“It feels good right this moment, but you never know where anything’s going to go,” he said. “I’m feeling pretty bullish, to be honest, about the industry overall.”