With 100 Years Behind It, A&W Reshapes for the Future
A&W is highlighting its made-fresh root beer as a major point of differentiation in the restaurant industry.
A&W has no intentions of competing in the QSR discounting arena. “We’re not going to play there,” said CEO Kevin Bazner as he stressed the brand, which is celebrating its 100th anniversary this year, is keeping its focus on quality food.
“Quality is a long-term defensible position for the brand,” said Bazner, who as the former president of A&W joined with a group of franchisees to acquire it from Yum Brands in late 2011. Since then the leadership team has been working to reshape the brand for the future with new menu items such as hand-breaded chicken tenders, premium sides—$3.99 cheese curds, “not a 99-cent French fry”—and a focus on highlighting its made-fresh root beer served in the classic frosted mug.
That root beer is a major point of differentiation, said Bazner, and A&W is bringing back the draft arm and the “theater of the pour” in its restaurants. It’s just one way the Lexington, Kentucky-based brand is rebuilding on customers’ memories and “reaching into our past,” he said. “And the report card shows it’s working.”
Freestanding restaurants with a drive-thru have an average unit volume of $950,777, while what Bazner called “captive audience” locations—those in shopping malls and on college campuses—have an AUV of $659,527. Drive-thru units near or connected to gas and convenience stores sit at $566,119. A&W is focused on developing new freestanding restaurants and larger endcaps at truck stops, said Bazner, with a goal to grow by 20-30 locations per year. A&W has 597 U.S. stores and 372 international units.
While A&W separated from Yum Brands in 2011, the brand remains part of the Restaurant Supply Chain Solutions network, a purchasing co-op with Yum. “We have the purchasing power of the Yum brands behind us, so we like that,” said Bazner as he added the RSCS gives A&W leverage when dealing with various distributors.
As it looks to close on real estate to open a training center outside Lexington, A&W is also making investments in franchisee support and this year launched its Second-Century Growth Incentive program. The stair-step royalty structure offers new U.S. franchisees a reduced royalty of 2 percent for the first year, with 1 percent increases each year until they reach 5 percent.
“We’ve got a strong enough balance sheet where we don’t need to get full royalties to start,” said Bazner.
On the subject of delivery, Bazner said he gets asked “all the time” if A&W will bring in a third-party aggregator, but so far the 30 percent fees, lack of data ownership and concerns about quality are holding it back. “For now, we’re on the sidelines with delivery,” he said.
Bazner was among 70-plus c-level executives sharing their franchise brand stories earlier this month at the Franchise Times Finance & Growth Conference. Look for an exclusive digital edition in July and full print coverage in the August issue of Franchise Times.