Bloomberg News

Arby’s Pushes Gyros to Show It’s Got More Than Roast Beef

August 01, 2014

Arby’s is going big on meat.

Arby’s Restaurant Group Inc., which struggled through the recession and was taken private by Roark Capital Group in 2011, is counting on protein-heavy fare to turn around the brand. Along with new double-meat deli sandwiches and national TV ads, it has recently revamped store uniforms and even started a one-day “brand camp” for its restaurant workers. Key to the company’s revival: meat -- and not just roast beef.

“The brand has been so narrowly defined historically just by roast beef,” Chief Executive Officer Paul Brown said in a phone interview. “Having different proteins is a huge focus now.”

Arby’s last week began selling three Mega Meat Stack sandwiches -- each have more than 6 ounces (170 grams) of meat and cost $5.49, compared with about 3 ounces for a $2.99 roast beef sandwich. The Reuben has corned beef and turkey, while the club has bacon, ham and turkey. Ads proclaiming “We Have the Meats” started July 27. It’s also planning to sell gyros and steak sandwiches later this year as a part of the company’s meat-heavy marketing.

Wendy’s Co. (WEN:US) sold Arby’s to Roark for $320 million in cash and assumed debt about three years ago after the chain struggled amid the recession and increased competition. U.S. sales slumped for three of the past four years, according to researcher Technomic Inc., and attempts to revive them with ads touting its “Good Mood Food” didn’t help much.

“Over the last decade, I don’t think they’ve done a lot that’s noteworthy or transformative,” Bob Goldin, executive vice president at Technomic in Chicago, said in an interview. They didn’t advertise much, didn’t remodel restaurants and didn’t build new stores, he said.

‘People’s Radar’

“They’re kind of out of sight, out of mind,” Goldin said. “With the new menu stuff, they’re kind of trying to get back on people’s radar.”

It’s working, Brown said. Last year, after the Atlanta-based chain introduced the Smokehouse Brisket sandwich and King’s Hawaiian brand breads, same-store sales rose 2.8 percent from 2012, Brown said.

The Raffel brothers, Leroy and Forrest, opened the first Arby’s restaurant in Boardman, Ohio, in 1964. In 1977, the Arby-Q BBQ sandwich was introduced. By 1980, the chain had grown to 1,000 stores. In 2008, Wendy’s and Arby’s merged after Triarc Cos., owner of the Arby’s brand, bought Wendy’s International Inc. Triarc changed its name to Wendy’s/Arby’s after the deal closed.

About 14 months ago, Arby’s brought in Brown, a former hotel executive, as chief executive officer. In August 2013, Brown came up with the name for the company’s brand revamp and vision to be carried out during the next five to seven years -- Deli Inspired Delicious. He then hired Rob Lynch as chief marketing officer in September. The next month, Arby’s sent its chefs to delis in New York and other cities to sample food.

High Quality

The stores should have a neighborhood-type feel and make people think about high-quality meat, he said.

That means remodeling restaurants, at an average cost of about $300,000, Brown said. The new look includes white tile, horizontal pine wood paneling and a 10-seat community table in some stores. Large booths along the windows were removed and replaced with tables to let in more sunlight. While just 15 stores have the new look, Arby’s is planning for about 30 to be done by the end of the year and 100 in 2015. There are about 3,300 Arby’s locations nationwide.

An initial public offering isn’t imminent, Chairman Jon Luther said. Arby’s is focused on upgrading and adding restaurants for the next year to 18 months and will think more long-term once those locations are executing well, said Luther, who was chairman of Dunkin’ Brands Group Inc. when it went public in 2011.

New Items

Along with its new meat-heavy fare, the chain is testing more new items -- about 20 a year, compared with only four or five in past years. It’s now trying a Smokehouse Turkey sandwich with cheddar, crispy onions and barbecue sauce. Still, pushing meat may be a risky move as beef and pork costs soar. And other eateries, including Taco Bell and Panera Bread Co. (PNRA:US), also are advertising more meat-heavy items, ratcheting up the competition for protein-heavy foods.

While Arby’s says it can be a “fast-craft” sandwich shop and attract diners from more upscale and fast-casual eateries, such as Potbelly Corp. (PBPB:US), Jimmy John’s and Panera, as well as traditional fast food, it won’t be easy, said Peter Saleh, a New York-based restaurant analyst at Telsey Advisory Group.

“Nobody wants to be the fast-food. Everybody wants to be healthy, fresh,” he said. “But it’s very hard to change business models, especially when you have franchisees. It doesn’t change very quickly.”

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net Kevin Orland, John Lear


Ebola Rising
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • WEN
    (Wendy's Co/The)
    • $8.26 USD
    • 0.00
    • 0.0%
  • PNRA
    (Panera Bread Co)
    • $162.72 USD
    • 3.99
    • 2.45%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus