Grow Market Lead
14
Part 2
By Hala Moddelmog
Refranchise-Ready
Arby’s taps refranchising for growth strategy
W
hen I joined Arby’s
as president in May
2010, I was eager to
once again work with
the roast-beef sandwich leader and
pioneer, where I served as vice president of product marketing and strategic planning in the early 1990s.
This time I had a much greater task
at hand. Through the collaborative
effort of a new leadership team, we
succeeded in restoring the confidence
of our franchisees and their employees
and reinvigorating our menu. With
eight consecutive quarters of samestore sales increases, we are laying
the foundation to start growing the
Franchiseupdate Iss u e I, 2 0 1 3
brand again.
Part 1 of this series (Franchise Update, Q4 2012) explored the strategic
steps taken to bounce back from four
years of slumping sales and profits. In
Part 2, I discuss how Arby’s refranchising strategy contributed.
Why refranchising?
Arby’s is a 48-year-old quick-service
restaurant chain with more than 3,400
restaurants system-wide. For us, and
for most established franchisors, growing the brand is not just about adding
new locations. For us to bolster our
image and sales in both saturated and
underserved markets, we needed to
adopt a strategy that would put more
capital to work in the system. So we
developed a refranchising program to
attract multi-unit restaurant operators
with access to capital to a) acquire and
operate a group of corporate Arby’s
restaurants, b) complete a remodel
program of existing locations, and
c) open new units to further develop
the market.
Finding the right partners
The success of any refranchising deal
requires that a franchisee not only
has the financial means to purchase
existing stores, but also the experience within your industry to run the
operations efficiently and profitably.
In July 2012, Arby’s announced
its first multi-unit franchise transaction since the company was acquired
in 2011 by Roark Capital Group, an
Atlanta-based private equity firm that
specializes in investing in franchised
companies and brand-building. Arby’s
sold 51 company-owned locations and
extensive development rights for Dallas/Fort Worth to Guillermo Perales,
the nation’s largest Latino franchisee
and one of the pre-eminent multibrand franchisees in North America.
In addition to remodeling Arby’s restaurants purchased in the Dallas/Fort
Worth market, Perales committed
to building 15 new Arby’s over the
next 5 years.
In November 2012, we announced
our second major deal with another
seasoned, multi-brand restaurateur,
Tony Lutfi, who purchased 42 Arby’s
units in the Seattle and Portland markets. He committed to remodeling at
least 17 locations and building 5 new
Arby’s locations in the next several
years. Both Perales and Lutfi have
extensive backgrounds in restaurant