Arby's focus turns to operational efficiencies

Aug. 20, 2013 | by Alicia Kelso

Many eyes have been on Arby's since its divestiture from Wendy's in 2011, with analysts predicting the almost-50-year-old brand's success and downfall. 

And while sales were down 2.4 percent from 2011 to 2012, the brand seems to be finding solid ground now thanks to menu innovations and operational upgrades.

Arby's was acquired by Roark Capital Group shortly after the divestiture and, according to Scott Boatwright, SVP of Operations, the Atlanta-based private equity firm has been a "solid partner."

"The divestiture was great for us. Roark has been a true partner in the business and they've been willing to invest," Boatwright said. "Our EBITDA last year is the best I've seen in my 15 years with the company."

Menu investment

Much of that investment has gone toward research and development, which was showcased in the spring with the launch of the King's Hawaiian Roast Beef offerings.

The sandwiches "far exceeded" expectations, Boatwright said. Arby's Marketing Leadership Team has stated that the LTO was among the most successful LTOs in recent memory.

Arby's benefited from sales and transaction lifts, and from a marketing boost that brought new news to a classic item. Plus, the salty roast beef flavor combined with the sweet King's Hawaiian flavor hit a trend, and Arby's plans to continue along those lines with a Salted Caramel Shake launch this fall.

"The product pipeline has quadrupled since 2011. With the ideation going on right now, we're incredibly excited about this year and next year," Boatwright said.

Operational initiatives

Arby's is also making some changes operationally, including with training and equipment. The current efforts, according to Boatwright, are "bringing the company back to relevance."

"The thinking used to be that we've been around for a long time and this is the way it's worked, so we're going to stick with it. Now, we have the ability to make changes with efficiencies," Boatwright said.

For example, energy-saving equipment became the company standard about a year ago, and Arby's Frymaster equipment generates an ROI in about 3 to 3.5 years, Boatwright says.

And, the chain has partnered with energy management company Ecova to understand its "energy opportunity." With this data, Arby's experienced a 6-percent reduction in energy costs just from behavioral changes. As part of the chain's new "Efficiency Matters" program, every piece of equipment is timed to be off during peak hours.

The impetus behind these changes came in 2011, the year of the divestiture, when the overall kilowatt usage in the QSR industry overall decreased. Arby's was an anomaly, experiencing increases in cost and usage. Upon review, the company realized it was a single piece of equipment pushing those numbers up, and made the change.

The energy monitoring is part of Arby's push to congregate its business data. Currently, the company has disparate systems that pull in metrics, but Boatwright says an enterprise system that pulls it all together will "hopefully be live" in 2014. This will eventually include a standardized POS system, now present in company-owned stores. But although Big Data is where the industry is headed, he does have some apprehension.

"(Big Data) is an 800-pound gorilla. We have all of this information but we will have to figure out what's actionable. Who's going to do that work when this data is pulled? That's what I'm a bit fearful of," he said.

"Plus, if that touchpoint isn't successful, then all the data in the world won't matter."

This is why Arby's will continue focusing on marketing and training efforts. For marketing, the shift has been on its full-service kitchen in the back of the house where meat and produce are freshly sliced. Boatwright said the company will continue to educate the consumer about this "differentiation."

For training, Arby's has implemented a Red Hat Service program that morphs the old training system online to facilitate better efficiency and communication to franchisees. Boatwright said it's an interactive program where employees receive targeted messages and learn through animation.

"This program gives us an advantage because it constantly communicates our guest philosophy," he said. "You hire friendliness, you teach everything else."

Read more about operations management.

Topics: Customer Service / Experience , Equipment & Supplies , Food & Beverage , Operations Management , Staffing & Training

Alicia Kelso / Alicia Kelso has been a professional journalist for 15 years. Her work with and has been featured in publications around the world, including Good Morning America, Voice of Russia radio, and Franchise Asia magazine.
View Alicia Kelso's profile on LinkedIn

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