Arby's CEO: We're Not Done Buying Brands After BWW

  • Industry News February 5, 2018
    Matt Odom Photography
    Heading into July, Arby's racked up 25 consecutive quarters of same-store sales growth.

    Buffalo Wild Wings is just the first piece of a potential restaurant empire. Arby’s Restaurant Group’s $2.9 billion deal, which closed Monday, will signal the beginning of Inspire Brands Inc., chief executive Paul Brown told The Wall Street Journal.

    As for what’s next, Brown outlined an ambitious future that includes purchasing “brands that span multiple occasions, up and down the spectrum,” he told the WSJ.

    READ MORE: What’s next for Buffalo Wild Wings after Arby’s merger

    Not just multiple brands in fast food, casual dining, and fast casual, but big hitters, too. Brown didn’t offer specifics but said Inspire Brands Inc. envisions buying no more than 10 chains, with systemwide sales between $1 billion–$4.5 billion each. He also said the company would look at adding a mix of franchise-owned and company-owned chains.

    Currently, Inspire Brands Inc. will wield a sizable portion of the sales pie. Arby’s has some 3,400 restaurants generating $3.7 billion in systemwide sales. Buffalo Wild Wings, despite recent struggles to regain traffic and produce positive same-store sales, offers $3.9 billion from more than 1,250 locations. The chain said it expects comps in the negative 1.6–1.7 percent for fiscal 2017. R Taco, a 25-unit fast casual that Buffalo Wild Wings owns a majority stake in, is also now part of the portfolio. Launched in Dallas in 2010 as Rusty Taco and named for co-founder Rusty Fenton, the company shortened its name in 2015.

    “We believe the time is right to create a different kind of restaurant company— one with a broad portfolio of distinct brands across a full spectrum of restaurant occasions,” Brown said in a statement. “Our goal is to build an organization that leverages the benefits of scale, not only to save cost, but also to enable outsized investments in long-term growth initiatives.”

    According to the WSJ’s interview with Brown, Inspire Brands Inc. wants to capture more visits from the same customers. Meaning the group hopes to keep guests across all dayparts, price points, and interest levels over time.

    Another unique aspect of the purposed setup: Brown, who was hired by Roark Capital from Hilton Worldwide, said he wants to organize the company like Hilton Hotels & Resorts. The company uses one loyalty program for all its different properties.

    Inspire Brands Inc. would stand out from its competitors in this fashion, as most companies stay within a specific segment. Darden, Brinker International, and Bloomin’ Brands, for example, operate casual dining chains across different full-service fields. YUM! Brands, the owner of Taco Bell, KFC, and Pizza Hut, sticks to fast food, as does Restaurant Brands International with Burger King, Tim Hortons, and Popeyes.

    Brown added that Inspire Brands Inc. plans to take the slow-and-steady approach with Buffalo Wild Wings, something that’s now possible thanks to being a privately held company that doesn’t need to share quarterly financials.

    “Ultimately, I think where this all shakes out is that we’ll see a world of fewer large public restaurant companies,” Brown said of the rash of brands taking this route in recent months.

    Panera Bread is one, having been brought under the umbrella of JAB Holding Company July for $7.5 billion. JAB owns Krispy Kreme, Caribou Coffee, Keurig Green Mountain, and Peet’s Coffee & Tea, among other companies. Even though Panera’s stock grew 2,000 percent in the past 20 years, investors were getting restless with flat earnings. Ruby Tuesday was also recently purchased by NRD Capital and taken private.

    Arby’s was formerly part of Wendy’s Co. until Roark Capital Group purchased it in 2011. In 2010, sales from stores open for more than a year dropped 5.8 percent from the previous year, playing a hand in the $4.3 million loss seen by parent company Wendy’s/Arby’s Group Inc.

    The chain has been on the upswing ever since. Heading into July, the company racked up 25 consecutive quarters of same-store sales growth, 16 consecutive quarters of outperforming industry norms, and 11 consecutive quarters of transaction growth. Compared with 2012, AUV is up more than 25 percent and is above $1.1 million.

    Inspire was co-founded by Brown of and Neal Aronson of Roark. Brown will serve as chief executive officer of the company. The company now operates more than 4,600 company-owned and franchised restaurants with more than 150,000 team members across 15 countries. The combined 2017 global system sales of its restaurants exceeds $7.6 billion.

    “I’m incredibly excited about the opportunity ahead,” Brown said. “Our family of brands are iconic within their restaurant segments and have succeeded with the help of a strong franchise base, differentiated marketing and, most importantly, delicious food. I’m looking forward to accelerating their growth under our new model.”

    The Inspire headquarters will be based in Atlanta and it will also operate a support center in Minneapolis.

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