New president of Arby's sees signs of improvement
Name: Doug Benham Title: President and chief executive of Arby's. Age: 47. Previous position: Chief financial officer for RTM Restaurant Group, Arby's largest franchisee where he held positions of increasing responsibility since 1989. Career background: Certified public accountant, who worked early in his career for Deloitte & Touche in Miami. Also worked for Bell Atlantic Corp. and Cox Enterprises. Education: B.A., summa cum laude in accounting from the University of West Florida.
June 21, 2004
FORT LAUDERDALE, Fla. (June 22) — When Doug Benham took over as president and chief executive of Arby's in January, he was frequently teased by franchisees about "crossing over to the dark side." But in reality most franchisees were thrilled to see one of their own at the top of the fast-food chain. Benham had spent 14 years as chief financial officer and senior executive with Arby's largest franchisee, RTM Restaurant Group of Atlanta. "I had instant credibility," said Benham, 47, during an interview at the company's Fort Lauderdale headquarters. "Franchisees know I understand what they're talking about. I've lived these issues for years." Benham believes that with small changes in strategy and approach, he can get the chain whose signature product is the roast beef sandwich back on the road to growth after a dismal 2003 when the company had its worst performance in more than five years. Same-store sales declined 2.3 percent in 2003 due to industry price wars, the sluggish economy and new product offerings from competitors. Already there are some signs of improvement with new salads and wraps helping to boost sales. Systemwide domestic same-store sales were flat for the first quarter ending March 28, compared to a decline of 2.3 percent during the same quarter last year. Positive same-store sales are projected for the second quarter and the entire year. "Doug has done an amazing job of getting us back to where we were," said Nelson Peltz, chairman and chief executive of Arby's parent company, Triarc Companies. "We had gotten a little complacent. Now, I feel like we have the wind at our backs again." Benham replaced Michael Howe, who resigned in December to pursue other interests after more than four years as one of the chain's top executives. While his last year was a disappointing one, Howe had led the company to an impressive string of 17 straight quarters of positive same-store sales growth, which is considered the best measure of a retailer's health. But the challenge of getting the company back on track fell to Benham, who hasn't taken long to identify what he sees as the company's top three priorities: · Product innovation: When Benham started as as chief executive, the company had not had a major new product introduction since the Market Fresh deli-style sandwiches in May 2001. Those sandwiches were an instant success and helped position Arby's as an adult alternative to greasy burgers and French fries. Last year, the company focused on trying to capitalize on the success of the Panera Bread Company and moved the menu toward gourmet, fast-casual offerings with a proposed new line called Bistro sandwiches. But the tests flopped because the products were too complex to implement in Arby's fast-food system. Bistro included numerous specialty items like Portabello mushrooms, roasted peppers and focaccia bread that weren't used elsewhere on the menu. The variety of choices also confused customers. "It slowed down our speed of service," Benham said. "We attracted a lot of new customers, but we alienated a lot of our old customers." When Bistro sandwiches faltered, there was nothing else in the pipeline. It was difficult to recover because it typically took between 15 and 18 months to get a product from Arby's test kitchen into the restaurants. Not anymore. Since Benham arrived, he has introduced three new salads and four new Low Carbys Wraps, all under the Market Fresh banner. These products took only about two months from test to implementation. While the new offerings were playing catch-up with industry trends, they've helped the company gain ground. "We have really cut through the bureaucracy," Benham said. "If it's a great idea, let's do everything to get it to market." · Franchisee relations: After a year of declining sales, acrimony was building last year among franchisees who felt they weren't being listened to by management. While franchisees had not been actively campaigning for a new chief executive, they certainly weren't disappointed in the change. "Arby's leadership had been going in a direction that the franchise community didn't believe in," said Geoff Bailey, chairman of the Arby's Franchise Association and a second-generation franchisee whose family owns 67 restaurants in the Colorado, Idaho and Wyoming areas. "We were walking away from our roots in quick service. We were confusing customers. They couldn't figure out what we were trying to be." One of Benham's first moves was to sit down with the company's largest franchisees and identify all the issues they were concerned about, ranging from advertising and product development to licensing. Benham says at least 80 percent of the items on the list have been resolved. He has also scheduled regular monthly meetings with franchisee leaders and reactivated the various franchisee councils that make recommendations on everything from marketing to operations. "There are a lot of second and third generation franchisees at Arby's, and we were not harnessing that power," Benham said. "There was not a great amount of trust between Arby's and its franchisees." That's not the case anymore, according to franchisees. "Doug has done a very good job of building consensus," said Russ Umphenour, chief executive of RTM Restaurant Group and Benham's former boss. "Most franchisees simply wanted someone who would listen." · New Restaurant Development/Franchise Recruiting: With only 3,300 restaurants in the United States, Benham recognizes that Arby's success is hampered by the fact that its restaurants just aren't convenient for many consumers. Benham has beefed up the franchise sales team and the company is reaching out to recruit new franchisees, as well as encouraging existing franchisees to grow. In recent years, Arby's has opened about 120 new restaurants a year. Benham's goal is to increase that number, but he won't say by how many. There are many major markets, including the company's South Florida home, where Arby's penetration rate is low. Arby's has only 30 restaurants in the tri-county area, most of which are owned by Benham's former employer RTM. "In markets where Arby's is well penetrated we can go head to head with anyone," Benham said. "But there are a lot of areas where the brand has missed." In order to help speed up development in urban areas like South Florida, where prime real estate is both expensive and scarce, Benham is studying the possibility of opening restaurants in strip centers. "The idea is to see how can we penetrate in a more cost-effective manner, more quickly," Benham said. The format would be similar to the in-line strip center spaces once used by such chains as Panera Bread, Quizno's Subs and Subway. Now Arby's and other fast-food chains typically use stand-alone locations. © 2004, The Miami Herald. Distributed by Knight Ridder/Tribune Business News.
