New Products Have Been Really Good For Arby's
Think that the 2011 split of Wendy's and Arby's hasn't been good for both brands? While Wendy's is getting large sums for company owned restaurants from highly regarded franchisees because of its system's success, Arby's has turned its sales around in its three years as a private chain.
The chain's same-store sales have increased in each of the past three years, including 4.3 percent in 2011 and 2.8 percent in each of the past two years.
Danton Nolan, Arby's senior vice president of finance, said at the Franchise Times Franchise Finance & Growth Conference today that the brand had "lost its way" during those Wendy's years, from 2008 through 2010. The company had struggled with weak sales for years, and Nolan blamed leadership changes, inconsistent brand positioning, reduced service levels and underinvestment for the problems.
In addition, he said, the company's product innovation was limited. That has clearly changed in the years since Roark Capital bought the brand in 2011.
Arby's has had a series of new product victories, including the Angus Three Cheese and Bacon sandwich in 2011, the Reuben in 2011, the King's Hawaiian sandwich and then the Smokehouse Brisket sandwich, each in 2013. All of them have driven same-store sales by at least 5.3 percent during their time on the menu. But none has been stronger than the brisket.
The brisket sandwich had a menu mix of 14.5 percent when it was introduced in October last year. And system same-store sales rose 12.6 percent during its offer period. Franchisees have told me that it has been a huge seller, to the point that they have a tough time keeping enough product.
LTOs and new products have been a key element in the marketing for many QSR brands, and Arby's is no exception. Yet its same-store sales growth has been important for the chain, which needed the sales improvement badly because many of its locations were burdened by costly leases when Roark took over.
But the chain hasn't just added items, it's taken a few away. Nolan told me after his presentation that the company has taken "about a dozen" products off the menu that didn't drive enough sales and were either too complicated to prepare or took up too much space. It also removed some equipment. The company used a toaster exclusively for its toasted subs. The company has since figured out how to use its main toaster to fix those subs, and it dumped the other toaster.
The result: Lower utility costs for the company and its franchisees. "We just got rid of the toaster and saved a lot of kilowatts," he said.