Century-Old Root Beer Franchise Grows as Standalone Concept
by: Richard Lawson | CoStar News
The century-old fast food chain known for its root beer A&W Restaurants had a good centennial year as it pushes further away from a strategy under a previous owner that combined the brand with other fast-food chains.
A&W, based in Lexington, Kentucky, reported same store sales were up 2.7% last year, and average unit sales volumes increased more than 38% since 2011, the year the chain’s franchisees bought the company from Louisville, Kentucky-based Yum! Brands, the parent company of KFC, Pizza Hut and Taco Bell.
The A&W chain, which has roughly 570 locations throughout the United States, opened in nine locations in the past 14 months and expects to start 15 more stores this year.
Kevin Bazner, the company’s CEO, said in a statement the business is much stronger now.
“Our franchisees are more profitable and we have a healthy pipeline of new restaurants in place," despite the total unit count declining, he said.
The company still has "franchise partners who continue to operate successful co-branded restaurants, and we are continuing to provide support for those restaurants," said Bazner, adding the company's focus for growth is solely on A&W-only stores, and "the results show we are on the right path.”
Along with building freestanding and inline restaurants with drive-thrus, A&W plans to develop more convenience store and travel center locations, according to the statement.
The chain's roots date to a roadside stand Roy Allen started in 1919 in Lodi, California, north of Stockton. Allen and an employee, Frank Wright, opened two stands three years later in Sacramento, coming up with the name A&W at that time. A&W and mini-burger chain White Castle are the oldest fast food chains in the country.
A&W's key feature was draft root beer made fresh each day at every location. Franchising began in 1925, one of the earliest food franchising concepts, and it grew to 2,400 stores by the 1970s.
It traded hands over the years. Stiff competition from the likes of McDonald’s, Burger King and other chains put a crimp on the business and the number of locations dropped to about 500 in the 1980s.
Yum! Bought the chain in 2002 along with Long John Silver’s to pair them together with its KFC- and Pizza Hut-branded locations. The concept didn’t work out so well, according to A&W franchisees.
“We did our best, and they did their best, but it just wasn’t a good fit,” Dale Mulder, A&W’s chairman and a franchisee, told Restaurant Business, an industry magazine, last year.
Since 2011, the franchise has opened more than 70 standalone A&W locations. Excluding real estate, total investment ranges from $841,000 to $1.2 million for a freestanding location, according to the company. The investment drops to $416,000 to $827,000 for inline space in retail centers. Locations range in size from 900 square feet to 2,200 square feet.
One of the biggest changes A&W made was bringing back fresh-made root beer at each location in 2017. Under previous ownership, fresh-made root beer had been replaced by prepackaged root beer to save money and space.
New ownership figured out how to automate the mixing onsite. “Consumers today clearly prefer fresh, hand-crafted food and beverages,” Sarah Mueller, now senior vice president for marketing and development, said in a statement at the time.
But while it is adding new A&W-only stores, Bazner said the total store count has been declining. A company spokesman couldn’t give a specific number, but the decline comes as the number of A&W stores paired with Long John Silver’s has been declining, he said.
Yum! Brands sold Long John Silver’s about the same time as A&W. Franchisees and other investors bought the company, and they have been working on a revitalization of the brand since then.
Last November, A&W opened a new national learning center, called A&W University, and a restaurant in Richmond, Kentucky.