A lot has been going right at Arby’s in the last year or two, enough to drive the company’s same-store sales up 9.8 percent in the first quarter of this year, the 18th consecutive quarter that number has climbed. But the brand has a secret: It’s not just the menu innovation that’s leading the rejuvenation (though that has helped). Nor is it just the new store prototype, which integrates production and service counters, reduces store square footage, and improves the guest experience.
Rather, Arby’s has hit a sweet spot: It found a way to save some serious money while also raising its profile among a new generation of consumers that cares about a sustainable world. How has it done that? Through energy conservation.
At Arby’s Restaurant Group, energy reduction has become a corporate mantra. The 3,400-unit chain based in Atlanta has reduced energy use 11 percent since 2011. By the end of 2015, it will be 15 percent. And by 2020, that goal will be stretched to an eye-popping 20 percent.
But this isn’t just another story about how to save on energy costs. It’s something bigger; Arby’s actually figured out how to get its cultural mojo back in parallel with its energy reduction campaign.
The company is on a roll. The recent 9.8 percent same-store sales jump proved Arby’s wasn’t out of line when it stated its goal to surpass $4 billion in annual sales by the end of 2018. Its recent menu introductions are on fire, highlighted by last year’s Smoked Brisket sandwich LTO that ranked as one of the chain’s best-selling new products ever. Its marketing is finally getting noticed, too.
The energy initiative has gone hand-in hand with a bigger brand evolution and reinvention.
“We’re expanding way beyond what everybody’s grandparents knew Arby’s for,” says John Bowie, chief operating officer at Arby’s, who’s been with the company about two years. “We’re really 3,400 neighborhood businesses. It makes good sense to do this as members of the human race.”
The brand launched its “Arby’s Efficiency Matters” program in 2012. Over the long run, Bowie says, the money savings has allowed the company to upgrade equipment, update old stores, and build new restaurants.
Energy costs matter to restaurant owners and employees because, in most cases, next to the high costs of labor, food, and rent, nothing else costs more than energy. Of course, it’s not so simple to convince some restaurant owners of this because many are so focused on labor and food costs, which can be five to 10 times greater than energy costs, says Jeff Clark, the Conserve program director at the National Restaurant Association.
But the need to squeeze energy costs is real. After all, Clark says, the average commercial kitchen uses five to seven times more energy per square food than any other type of commercial building.
Restaurants are energy eaters. Commercial foodservice operations use about 0.9 quads of primary energy per year, or about 5 percent of total commercial use in the U.S., according to the U.S. Department of Energy.
If you were to divide up that energy use at the typical restaurant, roughly 35 percent would be in food preparation, another 28 percent in heating and air conditioning and ventilation, some 18 percent in sanitation, about 13 percent in lighting, and the remaining 6 percent in refrigeration, Clark estimates.
Sustainability also matters to oh-so-critical Millennials and Gen Z members, who, despite their youth and relative inexperience, have fully embraced sustainability and energy reduction as a factor when choosing one restaurant over another.
But Bowie says that wasn’t the driver for Arby’s. It was more about doing the right thing—and cutting unnecessary spending.
“We adopted this holistic look at all the things we can do to conserve energy,” he says.
Perhaps no one’s got closer tabs on that than Frank Inoa, senior director of engineering at Arby’s. He’s the guy in charge of deciding what, where, and when to save energy. The key, he says, is to start with the simple, no-brainer, no-cost stuff, then work up to the more complex, pricier stuff.
That’s what Arby’s did. After all, by Inoa’s estimates, Arby’s spends an average of $35,000–$42,000 annually per store just on energy costs. When you multiply that by nearly 3,400 global locations, he says, “every small reduction makes a huge difference.” That’s why, in 2012, Arby’s execs started looking into where energy was escaping out the door—or through the roof.
The first thing that Arby’s executives re-evaluated: turning things on and off. Literally.
Employees were asked to think hard about when to turn something on and when to turn it off. For example, most of the stores have two toasters, but there’s really no reason to keep two toasters on during off-peak hours. So now, only one is kept on.
The same decision was used for the energy-intensive fryers. During peak periods, all three fryers in each store are kept on, but during off hours, one of the fryers is typically turned off.
Another freebie energy saver: bringing some logic to hot water heater settings. Most restaurants had them set at 140 F, but that’s higher than they need to be set, since most sanitizing is done with chemicals, not hot water, Inoa says. That enabled the chain to reduce the temperatures by 10 F across the board. This reduced natural gas bills by about $200 annually at each restaurant, he says.
Next, Arby’s went after the lower-cost but higher-impact fixes. The easiest change to make was reducing water flow in faucets. The company purchased thousands of faucet aerators, which reduce the water flow in kitchen and bathroom faucets by as much as 50 percent. Water spray was immediately reduced from about 2.2 gallons of water per minute to less than 1 gallon per minute. Each store spent about $84 on low-flow faucet aerators and made back a whopping $490 per year in lower water costs the first year.
At the same time, Arby’s looked closely at the walk-in refrigerators, where the cooler doors are left open an average 1.5 hours per weeks. The company invested in special vinyl, strip curtains that keep most of the cold air in but allow workers to pass through. The curtains—including installation—cost about $134 per store with average first-year energy savings of $71. In less than two years, the energy-saving curtains pay for themselves.
Far more expensive were the $1,800 programmable thermostats that have been installed in some renovated stores and are being installed in many new locations. Gone are the days when one employee who is overheated can arbitrarily fiddle with the thermostat while another worker who is chilled an hour later can re-jigger it, too.
“This kind of back and forth drives up costs and wear and tear on the units,” Bowie says. The programmable thermostats—which store managers and operations execs can access remotely from apps—have changed the way stores heat and cool. And the costs of installing them were paid off within a year thanks to the energy savings, he says.
Among the most explosive energy improvements are the new fryers. They cost up to $15,000 to install, but save up to $3,000 in utility costs annually. Since Arby’s can’t replace them all at once, due to the high costs, it’s slowly replacing the oldest units—including some 300 this year, Bowie says.
The key to employee buy-in is to simply but clearly explain to employees why energy conservation is important, he says. Then, he says, everything else will follow.
“We’re training everyone from the CEO down,” Bowie says. “We reinforce it every time we visit a store.”
For Arby’s, energy conservation is a key part of the brand evolution. Stores are being redesigned in cool earth tones. New stores now have big screen TVs, WiFi, and, yes, even charging stations for laptops and iPhones.
“We’re bringing Arby’s into the 21st century,” Bowie says. “Arby’s is becoming cool again.”