Sometimes brands — like people — do better solo, such has been the case for A&W.
Just five years after breaking up with Yum Brands, which owned the chain from 2002-2011, A&W is not only finding itself but has made a lot of friends in the form of loyal diners and franchisees. In fact, the chain's year-over-year, same-store sales and profit are so positive that the brand is opening 40 units — 20 this year — in the U.S., according to the Lexington-based chain's CEO, Kevin Bazner.
That growth spurt is a welcome change after spending nine years (2002-2011) as a Yum brand with sputtering sales, which lead to a hemorrhaging of units. In an effort to save their beloved brand, a group of franchisees in 2011, bought the brand and returned the CEO title to Bazner, who ran the brand before its Yum phase.
"Yum did a lot of things right and we've learned a lot from their research about the brand. ... The relationship between Yum and A&W was a mismatch of strengths"
Late last year, the fruits of the group's efforts to resurrect the chain were clearly ripe. Same-store sales were up nearly 24 percent, 41 new U.S. restaurants had opened and 23 new products had launched. The journey is an instructive tale of how to stare a harsh reality in the face and push forward with the wisdom of lessons learned over the long haul.
Bazner recently discussed those lessons with QSRWeb.
Q: This brand's story reads like the history of franchising in the U.S. Do you think most consumers are even aware of the fact that A&W is the nation's oldest restaurant chain?
A: Probably not. We are a national chain with a strong regional presence. In our core markets (Midwest, Upper Midwest, Pacific Northwest, California), many of our consumers have grown up with the brand and they know the brand has been around their entire lives. We've provided childhood memories of drinking root beer in baby mugs on summer family road trips, post-football game hang-out spots and the like. We hear it everywhere we go. It's fun to be creating new memories for our customers as we start proactively growing again.
Q: Why would you say that things failed to work out during A&W's Yum ownership?
A: Yum did a lot of things right and we've learned a lot from their research about the brand. Yum acquired us for a co-brand strategy that they shifted away from ultimately. Also, the scale of the A&W business was considerably smaller than Yum's core businesses — their three main brands are the leading chains in their respective categories. The relationship between Yum and A&W was a mismatch of strengths, as A&W relies on local store marketing to compete for share of voice with the consumer.
Q: But even pre-Yum, the brand was losing its way, really after its peak in the mid-70s. What do you think were the main causes of that slump?
A:(First), there was a class-action litigation between the restaurant chain and can-and-bottle operations — one that forced approximately 1,500 locations during a 6- to 7-year period to simply take their sign(s) down. (Additionally), the brand had been developed on a rural, state-road system. As interstates came along there was a shift in how consumers traveled, which forced transportation away from where the restaurants had been built.
Lastly, there was a "revolving door" of leadership … that made it challenging for the system to regain its momentum. We think that has been one of the strongest benefits of our current organization: Consistent leadership in key positions to provide a clear vision for the brand over the long term.
Q: How do you benefit from that collective history and wisdom accrued over the past, including the mistakes made? Or do you?
A: We don't dwell on the mistakes of the past — everything we've done has been from the perspective of looking back to look forward. As a nearly 98-year old chain we've literally tried everything at least once in our past. We have the opportunity now to take the best of what we've been in the past and bring it forward, making it relevant for today's consumer.
"First, we had to understand what the brand was, and not pretend it was otherwise. It was damaged and needed to be stabilized."
Q: What would you say prompted the core group behind the chain's new ownership to not only buy it back, but also reinstate you as CEO?
A: I had a strong relationship with the brand and had kept in touch with the franchisees, including (current A&W) Chairman Dale Mulder, who was the chairman of the Franchise Board at the time.
I'd (also) worked for over 10 years with the international team, lived in Kuala Lumpur to support our international growth in the '90s, and was a close friend of our largest international franchise partner.
I was a "known quantity," passionate about the brand, and had a ring-side seat throughout the ownership changes and mistakes that had been made in the past.
Q: Ah, you had that often overlooked asset of institutional memory, as well as knowing the hard lessons learned from those memories. How did those memories inform the re-branding process and rebirth of A&W five years ago, as well as help you to build a better path forward?
A: First, we had to understand what the brand was, and not pretend it was otherwise. It was damaged and needed to be stabilized. We knew we needed to work with our system — the operators on the ground — to fix it. So we galvanized the franchise community and re-engaged operators simply by getting out into the field and into their restaurants.
Given that we are now owned by our franchise partners, we are in a unique position to bridge the gap between franchisor and franchisee. We knew, given our unique ownership structure, we didn't have to be in a hurry. We didn't need home runs right out of the gate. We just needed to consistently start hitting singles and doubles again.
Q: How has the market responded to these initiatives and how are you measuring success?
A: We measure success by monitoring increased profitable same-store-sales. That is the main factor in our bonus structure throughout the entire company. We've kept it simple. If our operators are more successful, so will be the company. And the results have spoken for themselves:
"I was a 'known quantity,' passionate about the brand, and had a ring-side seat throughout the ownership changes and mistakes that had been made in the past."
Q: How does the path through the shifting sands of the current QSR landscape look from here, particularly with the new emphasis on source transparency, natural and humanely sourced ingredients and the increased importance of ensuring food safety?
A: Given our scale, we can't be on the "bleeding edge" of some trends, but we are always aware, watching how our competitors are responding and running a gap analysis between ourselves and the competition.
We've upped the game on the quality of our food and we've always taken food safety very seriously. Due to our maintained relationship with RSCS (Yum's supply chain network), we're a part of world-class food safety, supply chain management, and crisis communication (efforts). …
The QSR industry is trying to redefine itself, and all chains are looking to (the) fast casual (sector) for inspiration on how to improve quality of food and the consumer experience. We have three of our own fast casual concept restaurants located in Lexington, Kentucky, where we continue to invest, test and learn what is best for the brand's future.
Q: How will you move forward with this franchise model in the future?
A: We know the Base A&W concept (as opposed to co-branding) is our future for growth, and it is most of the demand we are seeing from potential franchise partners. What we've been most successful at and have no plans to change, is our motto that there is no "one-size-fits-all" approach to our business. We will work with any interested potential franchisee to figure out how to make an A&W restaurant work with their unique real estate constraints.
Q: Finally, what are the most valuable lessons you've learned through this whole food service leadership experience?