Setting the trajectory of a restaurant brand’s second 100 years is not a responsibility of most chain CEOs, but A&W is not your usual chain, says its leader for the past eight years, Kevin Bazner. The quick-service chain’s heritage has been as much of a factor in its recent turnaround as root beer, burgers and cheese curds. How do you mesh the traditions of a century-old brand with shifting consumer preferences and new business realities? What’s that magical blend that will keep it relevant yet nostalgic to prospective patrons and franchisees?
A pressing case in point: delivery. A&W has outperformed the quick-service market for the past two years in no small part because of a refocus on its traditional distinctions, which include making root beer on-premise and selling it in frosty mugs instead of the standard-issue fast-food paper cup. “How do you deliver a frosted mug?” rhetorically asks Bazner.
He’s been outspoken in questioning the value of delivery, both because of the difficulties in replicating the A&W experience for at-home customers and doubts about the profitability of using third-party services. Bazner says his prime directive is building profitable sales for franchisees, who own the brand as well as operate all but four units of it. And he has trouble reconciling that mission with the numbers that pencil out for delivery. “For a lot of people I talk to, the jury’s still out,” he says.
But, the 49-year industry veteran adds, “This isn’t something that’s going away. Clearly the customer wants it.” He and the executive board of A&W's franchise association are trying to find a three-way balance between customer demand, A&W’s heritage and unit-level profitability.
It’s a task that’s hardly unfamiliar to Bazner, A&W’s first recruit after franchisees banded together to buy the concept from Yum Brands in 2011. Yum, the parent of KFC, Pizza Hut and Taco Bell, had acquired A&W and then-sister Long John Silver’s in 2002 as co-branding partners for KFC and Pizza Hut. As matches go, it was right up there with a fish and bicycle pairing. The economics didn’t work, and the operations proved far from complementary.
“It was a trying nine years,” says Dale Mulder, A&W’s chairman and a franchisee of 15 units. “We did our best, and they did their best, but it just wasn’t a good fit.”
Bazner, who had spent more than 15 years with A&W in various leadership roles, stayed on with the brand for a year after it was sold by Yorkshire Global Restaurants for $320 million. He then returned to Yorkshire, the company run by former Burger King global marketing chief Sid Feltenstein.
He then tried opening a franchise of a chill-and-grill chain, one of the many concepts that sprang up to provide consumers with a place to prep multiple chilled meals in a social setting and then bring the refrigerated batch meals home for heating and serving.
Mulder and A&W’s Asian franchisee formed a group to buy back their brand from Yum. “The first call I made was to Kevin Bazner,” recalls Mulder.
Bazner came back to a brand that needed to amp up its heritage if it was going to survive. Many of its signatures, including the frosted mug and freshly made root beer, had been sacrificed to accommodate the co-branding sought by Yum. Many franchisees had continued to earn a living during the Yum years, but their success sometimes translated into inertia. Why change for tomorrow when things are going so well today?
The situation even prompted the chain to consider acquiring another brand in case A&W couldn’t bounce back.
The company consisted post-transaction of 14 people sitting in a conference room. Success wasn’t a given, but the brand’s DNA had been preserved by its franchise community, which included a number of operators whose families had been part of the system for decades. The brand’s future meant bringing back key elements of the past, but with a constant eye on the present.
“The magic was simple: How do you get the franchisees reengaged with the brand?” recalls Bazner. “There was a level of apathy.”
Bazner and his team nudged along a system that cried out for reinvigoration. They looked at the menu, which had been expanded by many of the system’s operators as a means of survival. In the team’s retelling, the issue wasn’t so much a bloated or skimpy menu, but one that needed products appropriate to the brand and prevailing tastes.
Cheese curds, an existing product, were repositioned and given a big promotional push. It proved to be a killer move. Transactions have increased 61.5% since 2011, when the fried pieces of cheese were put in the spotlight. A Sriracha-charged version is in the works after boosting transactions by 15% in test markets.
Hand-breaded chicken tenders were also added to the mix, and A&W added a chicken slider this summer as a limited-time item. The slider fits a new emphasis on capturing snack business, a focus consistent with A&W’s heritage as the place for a pick-me-up soft drink.
Making root beer on-premise was a huge part of the comeback effort, says Bazner, and not merely as a draw for customers who remember quaffing an icy mug of the fresh soda as youngsters. The product became a trending topic on social media, which Bazner sees as a key bridge between A&W’s deep heritage and customers who have no firsthand familiarity with the brand.
“We put this together half and half—aging veterans and newcomers,” Bazner recalls of the turnaround team. “We never set out to hit home runs. We wanted a lot of singles and doubles.”
The approach worked. “We had positive comps right out of the gate,” says Bazner. Today, stores are generating 35% higher sales on a comparable basis than they did at the time the current team took ahold of the root beer tap.
Unit-level profitability was helped by a carryover from the Yum years: As part of the sale, A&W was allowed to continue participating in the purchasing co-operative of the megafranchisor’s brands. The 600-unit chain essentially can enjoy the leverage exercised by an 18,000-store buyer.
With the upturn in business, a system that once numbered 2,400 units is growing again. Fifty-one units have been added domestically, and international operations have grown by 151 stores.
“We’re in the decision center now where people are looking for franchise opportunities,” says Bazner. Because the brand has outpaced many of the other franchise options that target rural small towns, A&W is getting interest from newcomers as well as existing franchisees. “We have a lot of operators who say we would like to open two or three restaurants a year,” he says.
Still, says Bazner, A&W’s climb hasn’t come without a few slips. Same-store sales growth started flattening in 2018, prompting the chain to double down on its marketing, which is focused on social media because of the efficiencies. “We’re overindexing on younger generations. For a brand of our size, that’s transformational,” Bazner says.
Having many of its stores in rural communities hasn’t spared A&W from the industry’s vexing labor situation. “It’s no longer the cost of labor that’s the issue, it’s the availability,” Bazner says. Operators just can’t find new hires. Headquarters is aiming to ease their plight by introducing new tablet-based training programs aimed at slowing turnover.
The system also has a problem that’s unique to a franchise brand of its vintage, where legacy operators still abound. “The biggest bitch we hear today is, ‘Why change at all? Don’t market, don’t do any promotions, because I don’t want any more a business.’ They’re quite happy with where they are,” says Bazner.
It’s part of the family-like culture that’s always been a hallmark of the chain, going back decades. And it’s that reality that poses Bazner’s biggest personal concern. “What is the leadership of this brand five years from now?” asks the 64-year-old. “We have to home-grow our next leadership team because someone coming from the outside would have a very, very tough time. It’s so different, in so many ways.”
He quickly adds, “I’m not going anywhere, and I intend to still have an office in our new headquarters,” for which A&W has just acquired the land in its headquarters city of Lexington, Ky. “But I’m hoping the plaque on the door someday reads ‘Guest.’”
Early this year, A&W narrowed Bazner’s role to CEO by shifting his president’s title to COO Paul Martino. “Paul is very much a part of the future of the chain, but he is 61 years old,” says Bazner. “Paul is a part of getting us to the future.”
Regardless of who assumes the helm, they’ll likely be in good shape, Bazner says.
“The coming five years will be the best this brand has had since the 1980s,” he says. “We are ready. The foundation is there. The people are there. But we have to build on it.”