Arby’s, the fast-food chain symbolized by a 10-gallon hat and an emphasis on roast beef sandwiches, treated its 475 franchisees to a slick show last week in Miami Beach.
There were presentations on new sandwiches, a talk on motivating crew members, and the roll-out of Arby’s 1993 advertising slogan, “Different Is Good.”
But what impressed franchisees was the cooperation between company managers and the franchisee board, which had been shaky in the past, according to several restaurant owners.
“There was better harmony,” said Terry McInroy, who owns 11 restaurants in Iowa.
Arby’s is going to need team work to keep up in the fast-food industry. Prices are sinking, competition is fierce and rivals are busy cloning each other’s products.
Last year, sales for the top 50 chains rose 6.4 percent, according to Restaurant Business magazine. After costs, taxes and inflation, that doesn’t leave much for the bottom line.
Arby’s, controlled by Miami Beach financier Victor Posner, is staying in the fight by discounting some sandwiches and franchising Daddy-O’s, a new chain of drive-through hamburger stands.
Arby’s has the advantage of having a niche. “We have no competition in the roast beef segment,” said Gaylon Smith, vice president for franchising, one of the top executives of the Miami Beach-based company.
The niche has its ups and downs, as franchisees heard from the company’s advertising team. Roast beef is seen as the Lincoln Continental of fast food in terms of taste and quality, said Mark Olive, group director of field marketing.
But it is also seen as pricey compared with the 79-cent specials at other chains.
“We can’t afford to let the value-conscious customer continue to visit McDonald’s, Taco Bell and Wendy’s and only visit Arby’s on occasion or when they have a coupon,” Olive said.
To combat the drop in fast-food prices, Arby’s will roll out a 99-cent sandwich called the Value Melt, which has 1 1/2 ounces of roast beef and cheese.
For a limited time, it will also sell for $1.69 a hot ham and swiss sub that typically costs $2.69. Even at the low price, food accounts for only 36 percent of the price, giving franchisees ample room for profits, Arby’s officials said.
But low prices are only part of the competitive mix, said Dennis Willingham, group director of advertising. Trying to steal customers, fast- food chains are offering copies of their rivals’ products.
Arby’s has subs to compete with Subway and chicken to combat Wendy’s and Burger King. It has no hamburgers, but it is franchising an entire new chain called Daddy-O’s, a double-drive-through burger stand that mimics Rally’s and Checkers.
Franchisees got a peek at the concept last week in Hialeah where Arby’s has opened a Daddy-O’s side by side with a prototype 1,791-square-foot Arby’s that costs two-thirds of a standard-sized restaurant.
Arby’s hopes to have 50 Daddy-O’s open in the next year and is pitching it as something franchisees can turn to when their home markets are saturated with Arby’s.
The dual-option restaurant is another trend that helps cut costs, according to Smith. In some areas, it can now cost as much as $400,000 to buy a site for a regular restaurant.
“Real estate values are way too high to single-concept a property,” said Smith, who notes that Pepsi has already combined its Pizza Hut, Taco Bell and Kentucky Fried Chicken chains at some sites.
Arby’s also suffers in fast food because it has a fairly limited ad budget. Last year it spent about $25 million, about 5 percent of what McDonald’s spent, Joe Langteau, operations vice president said.
Arby’s new ad campaign, “Different Is Good,” tries to seize on the perceived sameness of many alternatives to roast beef, especially hamburgers, said Jim Dale, chairman of W.B. Doner, a Baltimore ad shop that created the commercials.
One TV ad pointed at Subway shows an industrial vacuum sucking mounds of lettuce off a sub sandwich. “But what about the meat?” wonders a customer. “There’s the meat!” he exclaims, after the vacuum has removed everything but the bread. “That’s an olive,” the employee operating the vacuum says.
Some franchisees said they liked the ads. “Fantastic,” said Rudy Ruffin, who owns two Delaware Arby’s restaurants. “It really brought out what we have to offer,” he said.
Others were not as enthusiastic. McInroy, the Iowa franchisee, said Arby’s needs to do more to appeal to youngsters. “I was disappointed,” he said. “They never come up with anything for the children.”
One issue hanging over Arby’s was not discussed with franchisees: a pending change in ownership. The 2,500-restaurant chain is owned by DWG Corp., which in turn is 46 percent owned by Miami Beach financier Victor Posner.
Earlier this month, Posner agreed to sell his stake to Nelson Peltz, a New York investor. Posner had been under fire from a federal judge for paying himself too much and charging DWG extravagant rent for space at his Collins Avenue high-rise.
Frank Morton, a Tennessee franchisee, said Arby’s has weathered several ownership changes since a bankruptcy in the early 1970s. “It keeps bouncing back because it has an excellent product,” he said.
At a minimum, Posner’s departure would improve the general perception of the company, Morton said. “The leadership, as people viewed it, was not very reputable,” he said.
