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A&W Restaurants Prepares for Major Franchise Growth in 2021

As more entrepreneurs look to partner with established, reliable brands in the restaurant segment, A&W is emerging as one of the year’s leading franchise opportunities.

A&W Restaurants, the legacy restaurant franchise with more than 500 units throughout the U.S., is gearing up for some serious franchise growth this year. So far in 2021, A&W has already awarded 14 new franchise agreements, setting itself up to hit its development growth goal of 20 new stores by the end of the year. 

Last year, the brand pivoted quickly during the COVID-19 pandemic to provide consistent revenue streams for franchisees and easily accessible drive-thru service for customers. Now, as the QSR segment experiences pent-up consumer demand for both on- and off-site dining, A&W Restaurants is becoming one of the industry’s hottest investments due to its beloved and nostalgic customer offering and franchisee-centered business opportunities. 

“We're in our 10th year of same-store sales increases. That was not by accident,” said CEO Kevin Bazner. “Today, we have a very competitive story in terms of unit economics, and we all have the same purpose in mind: to grow the business, strengthen the brand’s message and get the story out that we are a literal piece of American history. People gravitate to the brands they know, and A&W is one of those brands.” 

Big News From Last Year

In 2020, A&W restaurants experienced a 9% increase in year-over-year sales across its system. The brand’s standalone drive-thru model saw a 14% increase in average unit volume, separating the brand from the crowd during a year when most foodservice brands were suffering from dramatic sales dips due to dining room closures. 

This success can be largely attributed to the brand’s well-positioned consumer offering and drive-thru restaurant model — A&W understood where customers’ preferences were heading long before the pandemic ushered in an increased demand for curbside pickup and takeout. 

“The growth we’re seeing is not pandemic momentum; it’s A&W momentum,” said John Palumbo, A&W’s senior director of franchise development. “Our restaurants appeal to virtually every demographic in every generation, and as we grow our footprint, our sales have grown right along with it.”

Throughout the majority of last year, the team’s primary focus was on maximizing drive-thru efficiency for franchisees, especially in smaller towns where A&W was one of the very few restaurants operating at all.

Liz Bazner, A&W’s director of digital, said the brand’s robust franchisee support infrastructure also helped the brand thrive over the past year. “When the pandemic first hit, we deferred all advertising and royalty payments for three months for our franchisees,” she said. “We wanted to ensure franchisees could be totally focused on their business and not have to worry about anything extraneous. We also increased our communication with multiple webinars a week and group texts, and shared state-specific information and resources. All of this support helped our owners keep sales strong despite the challenges of the pandemic.” 

Why The QSR Segment Is Poised for Growth

As of 2019, there were an estimated 194,395 quick-service restaurant franchise establishments in the United States. The QSR model was a $273 billion industry in 2019, and while it saw a dip in 2020, it proved to be uniquely resilient amid the pandemic. 

“During the pandemic, QSR brands thrived because of their strong unit-level economics and off-premise capabilities,” said Palumbo. “Still, all QSR concepts weren’t going to be successful just because they operated in the segment. Brands needed to be structured the right way, which is why A&W was able to thrive.”

As other QSRs scaled back their size and offerings, A&W leveraged its established infrastructure to carve out a lane for itself as one of the few full-dining-room models left in the QSR space and stayed true to its legendary brand. “When people think of A&W, they think of the frosty mug, and that’s something you can only get in the dining room,” Palumbo said. 

A&W also built on this infrastructure by developing more modern service options for its customers throughout 2020 when dining rooms were closed, including its drive-thru model and digital ordering. 

“It’s no surprise that drive-thru orders surged in 2020, but it says a lot that our franchise owners were fully equipped to make the pivot seamlessly,” said Liz Bazner. “As this franchise has grown and evolved, we’ve taken great care to ensure that we can provide multiple points of access for customers and multiple revenue streams for franchise owners. Last year showcased the importance of that level of flexibility.”

Now, as the world emerges from the COVID-19 pandemic, experts predict a pent-up demand for on-site dining in the QSR segment, as well as continued growth for the off-premise market share. “Moving forward, A&W is pretty dangerous in the QSR segment because we are not a fast casual concept where the only choice is curbside pick up — we can offer drive-thru, online ordering, sit-down service and delivery,” said Palumbo.

Why Franchisees Are Getting On Board With A&W

A&W continues to welcome new franchisees into its family, starting with target development markets in Ohio, Michigan, Iowa, Minnesota and other parts of the Upper Midwest. 

A primary reason the brand appeals to qualified entrepreneurs right now is because A&W Restaurants is owned by its franchisees and the company is governed by a board of franchisee representatives. Each representative serves two-year terms on the National A&W Franchisee Association board, or NAWFA. This means the people who operate at the store level also have a direct impact on the decisions and directions that affect the brand, including food.

“Every decision we make is filtered through our franchise association,” said Kevin Bazner. “That franchise association also has seats on the main board of the company in which strategic and policy decisions are made. So when we call our franchise partners ‘partners,’ they truly are. It's truly a collaborative environment. Last year, when we were talking with our franchise associates, we were talking with our shareholders. Everybody was on the same page because we were all in the same boat.” 

This collaborative atmosphere is why franchisee Linda Mulder invested in the A&W brand, for example. She started working in her dad’s Michigan A&W as a carhop when she was 12. Today, she helps run multiple A&W locations throughout Michigan and is also a member of the National A&W Franchisee Association board. 

Mulder says she loves the brand because she gets a holistic view of the management as a franchisee. Whether running a grill or helping set the direction alongside her fellow owners, Mulder says the brand is like a family. “Everyone cares about the success and future of the brand — from the quality of the food to connecting with employees,” she said.

Now, Liz Bazner says franchisees are continuing to join the A&W family for similar reasons. “Over the last 18 months, franchisees have been drawn to the support and stability of our brand,” she said. “A&W is 102 years old, and we were still able to survive a year like 2020, which speaks to our staying power. We joke that A&W has been around longer than sliced bread, and now, we’ve continued to adapt to stay successful and relevant. Franchisees want that peace of mind and insurance to know they are joining a proven system and supportive family.”

In addition to new franchisees joining the brand, Palumbo added that many existing franchisees have also been expanding their footprints. “Franchisees continuously wanting to expand is a sign of a healthy system,” he said. “In general, the COVID-19 pandemic really brought people back to the desire for comfort and familiarity — a category where A&W wins everytime.”

Why the Leadership Team is More Excited Than Ever

By the end of 2021, Palumbo says his team is aiming for 20 new freestanding restaurants in emerging markets. With a number of new sites already in development, he says he expects to hit that number easily.

Additionally, Palumbo says the team is laser-focused on highlighting the differentiators that have continued to increase the brand’s value for consumers and franchisees alike. “The commitment to our dining room model is going to drive our successes when our competitors are all looking to shrink down the size of dining rooms and focus on drive-thru,” he said. “There is going to be a pent-up demand for our on-site dining, as well as the continued focus on off-premise offerings.” 

In general, while nostalgia has always been an important part of the A&W brand identity, Liz Bazner says the brand’s leadership team remains forward-thinking. 

“We recently rolled out the most data-driven menu test we’ve ever done, and we are taking a hard look at what sells, what doesn’t, what is most portable, why people order certain items and more,” she said. “We’ve been working with 20 franchisee partners, sending them test menu panels and monitoring the impact on their sales. If the test is successful, we will be able to do a total menu board refresh toward the end of 2022. When we have tried menu refreshes in the past, it was just aesthetic, so it has been exciting to use data to make more informed decisions.”

The A&W Investment and How Much Franchisees Can Make

The total investment to franchise with A&W Restaurants ranges from $276,000 to $1,397,000, including a $15,000 to $30,000 franchise fee. This investment covers professional fees, building costs, signs, furnishings, fixtures, equipment, grand opening fees, management training and more. A&W offers several different build-out options, including freestanding restaurants, inline restaurants, co-branded restaurants and captive restaurants.

With nearly 33% same-store sales growth on average since 2011 and current franchisees expanding into multi-unit ownership, Palumbo says the A&W revenue opportunity gets stronger by the day. Currently, the same-store-sales increase for free standing drive-thru restaurants is up an impressive 25% year-to-date over 2020.

“Last year, we were able to demonstrate the strength of the strategy we’ve been building for the last several years,” said Liz Bazner. “In 2021 and beyond, we’re excited to see how much higher we can climb.”

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