A&W goes back to its roots

Chain taking its homemade root beer to the Midwestern small towns where it all started.

A&W went back to its roots last spring. Literally.

All 600-plus restaurants in the Lexington-based chain started making their own root beer, something A&W had historically done but mostly abandoned in recent years in the name of easier, bag-in-the-box variety.

While the process is more complex, even as automation has taken much of the work out of it, the sales results are worth the effort.

“At the end of the day, how did the customer respond? Customers have responded terrifically,” CEO Kevin Bazner said in an interview. “They’re glad to see us back there, making our root beer. It’s been very, very successful for us.”

For the company, shifting back to the old way of doing things and improving quality inside its restaurants simply makes the chain more competitive at a time in which bigger companies dominate the airwaves.

The effort has worked enough to convince executives to get more serious about growth. Global sales increased 4.5% at the brand in 2016, according to Technomic Insight data,

A&W expects to finish the year with another 15 locations in the U.S., which would make its first positive development year domestically in years. The company also expects to finish the year with another 30 international locations.

That will mean A&W will finish the year with more locations than it started with, systemwide, for the third straight year, after more than a decade of shrinking in size, Bazner said.

The company is now gunning for what he called “measured growth” of 25 to 30 domestic locations annually.

The company’s efforts to improve that growth include its first proactive franchise sales effort in years. For instance, A&W has created a new franchise sales site, something that may seem simple, yet the company didn’t have one.

“We’re going to be a bit more proactive in terms of soliciting prospective franchisees,” Bazner said. “We’re turning the lights on, if you may, to a digital marketing campaign to drive interested franchisees to the site. The investment we’re making this year to strengthen the future pipeline of prospective new franchising partners.”

A&W isn’t planning a major, nationwide push. The company is targeting the types of operators who have been looking at the chain to begin with: Convenience store operators and people in the Midwest.

“They were the ones calling us when we weren’t soliciting for new franchisees,” Bazner said of convenience store operators. “Obviously there’s a demand there.”

Then there’s the Midwest, where the chain can find a home in smaller towns where other brands are less likely to tread.

“That’s really the roots of the brand,” Bazner said. A&W recently signed an 8-unit deal in Ohio where the operator plans to open in smaller and mid-sized towns. The company is also talking with an operator in Iowa who would do the same thing. “That’s our bread and butter,” Bazner said. “At one point we had a lot more stores in Iowa. There’s a lot more white space to develop.”

Another point is that people in these communities know the brand as more than a can of soda they buy at the supermarket.

“Consumer recognize the brand in those markets as a restaurant/foodservice brand,” Bazner said. “In other parts of the country they look at A&W and think, ‘can and bottle.’”

The chain believes it can take these steps because it spent years focused on “blocking and tackling,” improving operations and focusing on franchisee profitability to infuse more energy into the base of operators.

A&W ensured that the marketing department, for instance, was focused on local store marketing. “We are not a national advertiser,” Bazner said. “We will not be a national advertiser. We built the marketing team from day one to be very in-tune with and very good at local store marketing. That’s the reality of the brand.”

The field operations team, meanwhile, is focused on building profitable same-store sales. The team receives bonuses based on that metric. “We put a real emphasis on profitable sales,” Bazner said.

A&W also worked to get franchisees re-engaged in the brand, something that had been lost in the years before the acquisition. “There was a real sense of apathy among the franchise community when we acquired the brand,” he said. “Getting them engaged was critical.”

And while the company is focused on “profitable growth,” that doesn’t mean the brand won’t take a more complicated step in a bid to improve quality and win back customers — as the root beer example proved.

“We can’t compete on value,” Bazner said. “We don’t have a share of voice to do that.”

In 2013, for instance, the company a hand-breaded chicken tender that was a step up from the already good freezer product the chain had sold. And then the company told franchisees to increase the price of the product.

Four years later, Bazner said, A&W sells 60% more chicken.

“We can’t compete on value,” he said. “That’s getting back to reality of what we acquired and what we are. We do value. We work with operators on their competition within their store radius. We do daily specials like a BOGO burger or whatever it is. But we don’t do it nationally because we can’t drive traffic with broadcast media.”

The chain’s efforts have worked. Same-store sales among the chain’s core restaurants have increased nearly 30% in the past six years, Bazner said.

And operators are developing and more energetic. Existing franchisees have built 60% of the system’s new locations the past two years.

Now the company is ready to develop more units. But, as Bazner said, the efforts are targeted and measured.

“We’re going in small towns and rural areas where real estate is more affordable and labor is a bit more affordable and available,” Bazner said. “And the operators in those communities are local. They may not be working the grill every day, though some do. But they will be actively engaged in the business and actively engaged in the community.”

And it’s where A&W got its start, after all.

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