Arby’s Restaurant Group Inc. has begun a comprehensive, systemwide remodeling program for its U.S. restaurants that will include a new prototype design, significant retraining for staff and managers, and a franchisee financing solution to accelerate adoption of the new look.
Chief executive Paul Brown said the remodeling program would support a new positioning and branding campaign that Arby’s will roll out this year in conjunction with its 50th anniversary. The brand purpose Brown and his executive team talk about internally is to achieve “deli-inspired deliciousness” that would achieve a positioning — and with the remodels, a new look — that spans the best parts of quick service and fast casual.
A look at Arby's new design
“We’re taking our inspiration from a great deli, with sandwiches with lots of meat and variety that you wouldn’t be able to make at home, and where there’s a reason to go out and get them,” Brown said. “If you ask customers to position Arby’s today, they put us between fast casual and QSR, which is an extremely attractive place to play.”
He noted that Arby’s officials hope to straddle classification with the décor of the new prototype in the same way they recently have on the menu, where a premium limited-time offer like the Smokehouse Brisket sandwich balanced the chain’s offerings on the value side.
“[The prototype] has economics that feel more like QSR economics to build, but it has the design elements that make people feel like they’re in a fast-casual environment as well,” Brown said.
He added that sales increases at the restaurants that have been remodeled are averaging around “20 percent and holding.”
Exterior enhancements to the building design include cantilevered red awnings at the drive-thru and entrance, new internally illuminated signage, wood tones, white brick, and upgraded lighting and landscaping. Inside the new restaurant, Arby’s has updated its color palette and added fast-casual touches like subway tiling and stainless steel, multicolored wood materials, modern lighting and chalkboard graphics.
Remodeling to restart growth
George Condos, the Atlanta-based brand’s chief operating officer, called the remodeling program “a natural progression” after initiatives across operations, menu development and marketing all contributed to a 5 percent improvement in unit-level profitability from 2011 to 2014.
“Once we have improved the economics within the four walls of the restaurant, the remodel program is next, and then ramping up development,” Condos said.
Arby’s completed 14 remodels out of 950 company-owned units to the “Inspire” design in 2013, and the brand plans to finish another 30 this year, he added. In 2015, Arby’s plans to reimage between 70 and 100 company-owned locations and expects at least 100 franchised units to convert to the new design.
Architectural plans were released in June to Arby’s franchisees, who operate more than 2,400 of the brand’s 3,400-plus locations worldwide.
Arby’s, in partnership with a financial lending institution, will provide the capital for a franchisee financing program that could cover up to 100 percent of the remodeling costs for the brand’s operators who are in good standing and meeting certain performance standards, Condos said, “to really open the doors on this program and eliminate the one big barrier to affording this.”
Brown added, “We’ve designed the program in such a way that the vast majority of our franchisees would qualify for this,” noting that having the backing of Atlanta-based Roark Capital Group, which purchased Arby’s Restaurant Group in 2011 from Wendy’s/Arby’s Group, helps the chain undertake such an expensive initiative in a reasonable timetable.
“What we’re embarking upon is a strategy that requires patience and requires investment,” Brown said. “We’re fortunate to have shareholders who hold that same thesis. It’s a large part of why we can do this.”
Remodeling to reboot service
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The other time- and money-intensive aspect of the remodel program will be the retraining of front-line employees and managers who accompany each reimaged unit, Brown and Condos said. Each company-owned location that has been remodeled closed for half a day and put its staff through an off-site “brand camp” to share Arby’s brand vision for the next five to six years and retrain customer service.
To date, 19,000 team members from company-owned Arby’s units have attended the brand camp sessions, the chain’s leaders said.
“We’re really approaching this differently and holistically,” Brown said. “It’s not just a new physical building, but it’s also a chance to reboot across the system, even if some of the units aren’t remodeling soon. Brand camp is a big investment, but it’s paying big returns already.”
He added that Arby’s grew its systemwide same-store sales by 2.8 percent in fiscal 2013, which outperformed the restaurant industry by more than 2 percent. Year-to-date in 2014, Arby’s outperformance above the industry is even higher, Brown said.
He added that more is on the way from Arby’s, including a new marketing campaign this summer and several more premium limited-time offers in the menu pipeline. The brand recently ended a long-term refranchising program and does not plan to sell more company-owned units to franchisees, he said.
“Because of the time associated with doing remodels, it can take years to make it through a system,” Brown said. “So this will be happening in parallel with a lot of initiatives.”
Arby’s likely will release 10-year targets for unit growth some time this fall, after unveiling more prototype designs to franchisees.
This story has been revised to reflect the following update:
Update: June 11, 2014 This article has been updated to reflect that Arby’s will execute its franchisee finance program in partnership with a financial lending institution.
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