Continue to Site

    A&W's All-American Experience Endures 100 Years Later

  • As the legacy brand celebrates a century in business, its new leaders reflect on a history full of ups and downs—but one that never wavered from classic American food.

    A&W restaurants
    Kevin Bazner was president of A&W prior to its acquisition by YUM! Brands in 2002. He returned as CEO after franchisee group Great American Brands purchased it back from Yum in 2011.

    There’s something magical about surviving 100 years.

    Even though more people are living to see 100, it remains a notable event worth celebrating. And it’s even rarer for an American business to join the century club.

    A&W All-American Food became the first quick-service restaurant to reach that milestone in June. The enterprise began in 1919 when founder Roy Allen set up a stand to sell nickel-a-mug root beer during a homecoming parade for World War I veterans in Lodi, California. In the century that has passed, the operation expanded and contracted, changed hands numerous times, and shifted business models. But one thing has remained constant: the brand’s root beer—a proprietary blend of 16 herbs, bark, spices, and berries—made fresh with real cane sugar and water and served in a frosty mug.

    These days, A&W is continuing on a path started eight years ago when a group of domestic and international franchisees acquired it from quick-serve giant Yum! Brands—the parent of KFC, Pizza Hut, and Taco Bell—for an undisclosed sum. The new owners are focused on the long-term development of restaurants, widening the web of franchisees, and boosting the A&W brand, which some say was diluted by Yum’s previous philosophy of combining two or more of its brands within the same building.

    “Our shareholders are taking no money out of the business,” says A&W CEO Kevin Bazner, who was an executive with the brand prior to Yum’s ownership and returned at the bequest of the new backers. “They want everything reinvested to stabilize and grow the businesses.”

    READ MORE:

    A&W PREPS FOR 100 WITH A GROWTH SPURT

    Since the owners want to protect their interests as A&W franchisees, there is no exit strategy. “It allows us, as management, to make decisions for the long-term,” he says.

    One result has been an increase in new A&W-only stores, while numerous cobranded operations are falling away upon expiration of their franchise contracts. The store count stands at about 600 restaurants from coast to coast and in Alaska—some 350 are cobranded with KFC or Long John Silver’s units—with another 375 in Asia. Canadian operations are owned by another entity.

    The number of multi-branded units has declined by one-eighth over the past four years. Bazner estimates the company will probably end up with between 200 and 250 stores that are cobranded—mostly with KFC—but will remain committed to the A&W brand.

    “We will probably close more units than we open this year, but our single-brand business will open a net gain of probably 10 in the U.S. and 25 in our international business,” the CEO says. “We expect to grow by another 50 next year, and that’s a good number.” With more restaurants in the pipeline for the brand, future annual store gains could rise to 60–70 new stores.

    A&W Restaurants

    In the 1960s, A&W swelled to more than 2,000 stores.

    Franchisees range from single-store family businesses to Harman Management Corporation, a major KFC franchise owner that has 114 A&W units, most of which are cobranded.

    The company owns and operates five stores, including four in the U.S. One near its Lexington, Kentucky, headquarters does testing and training. A recently opened unit in Singapore is the international training and product development facility.

    The reasons a restaurant operation survives even a few years, let alone 100, has been “a question bugging me for more than 10 years,” says H.G. Parsa, the Barron Hilton Professor of Lodging Management at the University of Denver’s Daniels College of Business. In an upcoming research paper, Parsa delivers some answers based on data from numerous long-time restaurant and hotel businesses. One major factor affecting a restaurant’s ability to survive is the ability to adapt to shifting business environments as tastes and styles alter.

    “Every 25 years, Americans change,” Parsa says. “In the 1920s, the No. 1 food [when dining out] was steak. Hot dogs then became so popular that [President Franklin Roosevelt] served them in the White House. Then came hamburgers.” Hamburgers were followed by pizza. Today’s era, he says, is up for grabs.

    Other principles for long-time success include empowering employees and controlling both costs and growth. For a company like A&W, lasting 100 years means that the brand and its franchisees had to adjust as trends came and went and business expanded and contracted.

    Although the enterprise began a century ago, the A&W name was created in 1922 when Allen partnered with one of his employees, Frank Wright—thus “A” for Allen and “W” for Wright. They leased their initial two root-beer stands to other operators so they could expand to Sacramento.

    Wright’s involvement was short-lived, according to company documents. In 1924, his stake was acquired by Allen, who began franchising his root beer, derived from a recipe he purchased from an Arizona pharmacist. Franchisees operating independently bought the root beer concentrate from Allen and had the right to use the A&W trademarked name and logo. Among the early franchisees were newlyweds J. Willard and Alice Marriott, who in 1927 opened a nine-seat stand in Washington, D.C. The couple added food items and named their restaurant Hot Shoppes. Later, their business added hotels and grew into the Marriott hospitality company.

    “We are root beer. You can’t say that about products like hamburgers or french fries. People see it as a treat, a reward.” — Franchisee Anthony Walker.

    There were more than 170 A&W stores in 1933, but business was hard, first due to the Great Depression and then because of sugar and other food shortages during World War II. Still, by the time Allen sold the business to California-based A&W Root Beer Company in 1950, the number of units had grown to nearly 450, thanks to the post-war economic boom fueled in part by G.I. loans. Over the next decade, the company’s franchise base exploded, including the first international operation in Winnipeg, Canada, in 1956. As consumers’ love for automobiles and the road took hold, drive-in restaurants, such as those started by many A&W franchisees, became popular.

    Franchisee Franklin Welch opened his A&W stand in 1954 in Franksville, Wisconsin, between Chicago and Milwaukee. “My grandpa loved the root beer,” says Phil Welch, the grandson of the original owner and the third generation of the Welch family to own the Franksville A&W unit.

    His restaurant is now in its third iteration, coming after his former building was taken by eminent domain for an expansion of Interstate 94. Despite this and other changes over the years, there was never any thought of leaving A&W.

    In the 1960s, A&W swelled to more than 2,000 stores, but a revolving ownership door was on its way. J. Hungerford Smith Company, which had made the root beer concentrate since 1921, acquired the company in 1963. Three years later, Hungerford was bought by United Fruit Company, which merged in 1970 with AMK Corporation, forming United Brands Company.

    United Brands created a restaurant subsidiary, A&W Restaurants; began a franchisee association; and created a core menu. At the same time, it launched retail sales of root beer in bottles and cans—a business now owned by Keurig Dr Pepper—and sold its Canadian restaurant operations.

    Over the next decade, A&W Restaurants faltered due to a range of issues, including operational inconsistencies and franchisee discontent. Many owners refused to meet new royalty terms when their franchise agreements expired. Developer A. Alfred Taubman bought the company in 1982, but the restaurant count continued to fall to about 500. That only began to turn around when E. Dale Mulder, who owned multiple units and had been executive director of the National A&W Franchise Association, was named president. Bazner joined the company as head of corporate operations around the same time.

    A&W Restaurants was on the block again in 1995 and was sold twice more by 2002, when it was acquired by Tricon Global Restaurants, soon to be renamed Yum. At the time, there were about 1,000 A&W stores, and the sale included the Long John Silver’s chain, which A&W’s previous owner purchased in 1999. Bazner, who had been serving as president, left after the purchase.

    Yum acquired A&W to add hamburgers to its portfolio of chicken, pizza, and Mexican food. It had begun multi-branding in 1992 to help boost restaurant unit volumes, according to a research paper by Cornell University Professor Cathy Enz, and A&W became part of that effort. As a result, Yum didn’t pay much attention to the existing single-brand units, Bazner says.

    A&W Restaurants

    A&W's same-store sales rose about 2 percent, year-over-year, in the first half of 2019.

    By 2011, Yum decided A&W—now named A&W All-American Food—and Long John Silver’s no longer fit into its internationally focused growth plans, and put the brands up for sale. While most of the bidders for A&W were investment firms, a franchisee group, Great American Brands, led by Mulder, bought the business with, at that time, 1,200 franchised units. Mulder became chairman of the new company, while Bazner, who entered the restaurant industry nearly 50 years ago washing dishes, was named CEO.

    Bazner’s appointment restored the faith of many franchisees in A&W, including single-store, single-brand owners like Anthony Walker, a third-generation franchisee from Baldwin, Wisconsin. “Kevin coming back was huge,” he says. “Everybody believed in him.”

    Despite A&W’s patchwork history, the brand’s link to customers remains strong, Bazner says.

    “It really amazes me when I travel—and I am always wearing a logo pin or gear—at every airport, hotel, and restaurant, when I meet people, there are so many stories out there that include fond memories of an A&W restaurant,” he says. Whether it’s stopping at one during a visit to grandparents’ or as a toddler with their parents, “the memories are very strong.”

    With new ownership came a renewed focus on quality and the customer experience, including the task of making fresh root beer in-house. The company returned to this foundation and is rolling out a draft arm “just like it used to be,” Bazner says.

    Under long-standing agreements, A&W restaurants are the only stores that can sell the original drink at the fountain. Others can offer bottles and cans, but that’s a totally different experience.

    “We are root beer,” says franchisee Walker, whose grandparents decided to eschew farm life for a root beer stand. “You can’t say that about products like hamburgers or french fries. People see it as a treat, a reward.”

    A&W hit the brakes on development last year in order to stabilize the business and raise the bar for operators. Today, the company is again ramping up new development, Bazner says, noting that there is “a lot of white space out there” for new units, particularly in less-expensive rural communities where the stores work well.

    According to company documents, there were 49 freestanding restaurants with drive-thru windows at the end of 2018, averaging net sales of $950,777. Many topped $1 million—a performance that Bazner says is “a nice economic model.”

    While the top option for new restaurants is the freestanding version, A&W is also looking to add smaller-grossing units that are part of gas stations, truck stops, and convenience stores. Many of the new restaurants are owned by existing franchisees, but several new franchisees have also been signed, including one planning to open a hotel and casino in Nevada.

    So far, the trend lines are pointing upward. Comparable store sales rose 35 percent since the new owners took over, including about 2 percent for the first half of this year. “The emphasis is for franchises to be profitable,” Bazner says. Quality, not lower prices, is paramount.

    The CEO is optimistic about the future as A&W heads into its second century. “We’re in an environment where we don’t need to be in a hurry and can do things right through thoughtful growth,” Bazner says. “We are under no pressure from shareholders to grow for growth’s sake in order for us to be successful.” Instead, his goal is for franchisees to be successful.

    Many franchisees feel the same way, even as the company boosts standards. “I’m very optimistic,” Walker says. “It’s been a great shift to be focused on quality.” And having ownership that listens to franchisees is positive, too. “That is the reason we had so many issues with [Yum]. They didn’t like us very much.”

    “We hoped that the new owners would get us back to our roots, and they’ve done that,” Welch says.