Drive-thru and drive-in still carry the day. Summertime is peak season for the brand, so Bazner sees adding delivery as more of an opportunity in the fall and winter.
“… We have a good percentage of our system that are skeptical of whether they can do any more business,” Bazner says. “So they’re not rushing to delivery. But it’s certainly something we have launched in the middle of this and continue to learn and get data and one by one we get operators coming on. And I expect more of that as we get through our peak season.”
About 20 percent of dining rooms have come back online, including a few dozen stores that were forced to close during the pandemic because of no ability to utilize off-premises.
Bazner says that so far he’s heard mixed results. Some operators have seen dine-in sales cannibalize off-premises while others have seen incremental growth. The A&W leader adds that dining rooms are certainly not hurting the brand, but they do present risk/reward situations.
“You’re taking on some risk,” he says. “You’re exposing not only your customers, but your crew, for a greater risk of infection. More interaction inside is going to create more opportunities for infection to spread versus what is the potential sales gain? What’s the upside? The other downside is, labor availability is still a big challenge for the industry—for slightly different reasons than before the pandemic—but our operators in our own stores are challenged every day. … Reopening dining rooms requires more staffing and more protocol in terms of sanitation and communicating with the customers, and in terms of managing crowd control if you’re doing it right.”
The future looks bright for the chain, which has received increased interest from potential franchisees amid the pandemic. Recent sales are appealing, but so is the financial flexibility upon entry. A&W is lowering royalties in the first year of all new franchise agreements from the standard 5 percent to 3 percent. Second-year royalties are 4 percent. Initial fees on multi-unit agreements also are being discounted.
A&W is expanding in markets of all sizes across the nation, including deals with 10 new franchisees. Sixteen units are in development in locations like Chicago, St. Louis, Wyoming, New York, Minnesota, Louisiana, and Arkansas. Seven of those will be inside convenience stores or travel centers.
In big markets where other quick-service brands are saturated, A&W has white space—further enticing possible investors.
“Some of these major metropolitan areas, we have an opportunity to get in the burger business that other brands can’t offer because they’re sold out,” Bazner says.
Bazner says A&W’s attractiveness as an investment is tied to its business model in which franchisees are the primary shareholders.
He explains that nothing touches a franchise restaurant unless it’s been thoroughly vetted by franchisees. Partners are heavily involved in the decision-making process, and prospective franchisees love having a voice.
The long-term view of the business benefits everyone, Bazner notes. It’s a view that will carry A&W through this crisis and the next one, whenever that may be.
“We’re not looking to hit home runs and be on the latest bleeding edge trends,” Bazner says "We’re quite happy. Over eight years, we’ve got 38 percent AUVs—that’s 4.5, pushing 5 percent a year—I’ll take that every year. … Unlike private equity that will starve you for cash, our ownership group will take nothing out of the business. They want it all reinvested to continue to grow and strengthen this business for generations. So it’s a generational view, which in not only our industry, but in business in general, is rare.”