COVID-19 Driving Franchise Interest as Americans Move from Urban Areas
July Performance Far Outpaces Burger Segment Average
Sales at franchised A&W restaurants soared 12% in July, the third straight month of double-digit same-store sales growth. By comparison, year-over-year average weekly sales at U.S. limited-service burger chains increased only 1.7%, according to Cardlytics.
July’s success follows a 15% jump in May and 16% in June. In addition to a rebound in traffic, overall system sales are being bolstered by the strong openings of five restaurants this year. Since franchisees acquired the company from YUM! Brands in 2011, average unit sales have increased by 38%.
“Several factors explain why A&W is doing so well,” said CEO Kevin Bazner. “First is the brand itself. During difficult times, people turn to familiar names, and A&W has more than a century of brand awareness.” He added that “comfort foods,” such as A&W’s signature Root Beer Floats, burgers and hand-breaded chicken tenders, are very popular right now.
Bazner noted that A&W’s ability to rapidly adapt to dining rooms being closed has been equally important. “We helped our franchisees quickly ramp up delivery options and increase their drive-thru capacity. The addition of popular new family packs also is contributing to higher sales.”
All but four of A&W’s more than 550 U.S. locations are franchised. “The tenacity of our franchise partners has been truly remarkable,” Bazner said. “Some of our restaurants are owned by third-generation families who have been through hardship before, and they just never give up. Others are newer to the system, but they have the same commitment to their communities and their employees.”
Despite the pandemic, A&W franchisees are continuing to build new restaurants. A gas and convenience store location in Berkeley, California, opened earlier this month. Last month, an A&W in a former bank building opened to long drive-thru lines in Beaverton, Michigan. There are currently 15 locations in development.
“The brand’s strong sales throughout the pandemic has generated even more inquiries from potential franchisees, including many interested in building conversions,” Bazner said. Unlike most other established quick-service restaurant brands, A&W has territories available throughout the country.
“Smaller communities are a ‘sweet spot’ for A&W,” he added. “With people looking to move from large urban areas as the result of the pandemic, we are hearing from prospects who see great potential in suburban markets, as well as smaller cities and towns.”
A&W says new franchise incentives announced in May also are adding to the interest. The incentive program lowers royalties in the first year of all new development agreements from the standard 5% to 3%. Second year royalties are 4%. Initial fees on multi-unit agreements also are being discounted. The reduced fees provide owners with a financial cushion during their first years of operations.
Now in its 101st year, A&W is America’s first franchised restaurant chain. Known for Root Beer that is made fresh in each restaurant and served in frosty mugs, there are more than 900 A&Ws in the U.S. and Asia.