The Secret of Franchise Growth per Arby's CEO
Arby's CEO Paul Brown was recently interviewed by Nations Restauant News, upon their release of 2016 same store sales gains (plus 3.6%), an overall rise of AUV to $1.1 million (plus 40% from 2010) and an increase in unit counts in 2016 (60).
One very telling comment on the focus of Arby's is worth highlighting:
You have got to get the unit economics to a compelling point. Then you get people excited about the brand, and they start building.
This is a reminder that healthy store economics is the fundamental management imperative for franchise brands. It is not following tactics such as refranchising, additional debt taken on for stock buybacks, additional debt for dividend recapialization, or even cutting costs through staff layoffs. It is not building the brand through signing store development agreements of stores sold but not opened, where there are no or minimal stores in operation. It is not done by overexpanding. Franchise chains are not healthily built through mergers and acquisition. It is however, hard, focused store fundamentals that work.
A further hint of this fundamental concept is that Brown noted store average unit volumes were only $1.1 million, less than that of other brands. That indicates more work needs to be done.
Credit: Nations Restaurant News, Jonathan Maze, January 25 2017.