Kevin Bazner
Founded in 1919 in Lodi, California, A&W is America’s first and oldest restaurant franchise. In that time the brand has launched an iconic root beer, survived a World War, the Great Depression, changes in ownership and changing tastes, and now two global pandemics.
A&W CEO Kevin Bazner, a Lexington resident since 2001, has had two tenures with the company. He served as managing director of the brand’s international operations and then as president and COO until Yum! Brands purchased the company in 2003.
Yum! Brands focused on opening co-branded locations that included A&Ws combined with Long John Silver’s or KFCs. In 2011, Yum! sold the A&W brand to a group of franchise owners and Bazner returned as CEO. Profitability has since hit record levels. We spoke with Bazner to learn more.
Yum! cited flagging sales in its decision to divest itself of A&W. What turned it around and how do sales compare now?
Seven out of the nine years that [Yum! Brands] owned A&W there were negative same-store sales, and that’s what they used as a rationale to exit the business. I would suggest that the brands, [Long John Silver’s] and A&W specifically, did not fit Yum!, in that Yum! controlled, at the time, the three largest brands in their categories. KFC was the largest chicken concept at that time, Pizza Hut was the largest pizza concept at that time, and Taco Bell was the largest Mexican concept and still is. A&W was not even close to a leader in the burger segment. So, it was a different scale of business that frankly Yum!’s structure was not designed to operate.
Start with marketing. Their three major brands are all about national advertising — they do 100 percent national advertising. We do 100 percent local store marketing. It’s a huge difference in resources and in mindset.
Through 2020, we’re up over 50 percent same-store sales since the acquisition nine-plus years ago. Year-to-date in 2021, we’re up another 20 percent on top of that.
What changed?
When we acquired the business in 2011 — literally from day one — our strategy became to focus on the core, single-brand business. That was a big shift, and in order to do that we had to focus on unit economics, and that got us to what is still our No. 1 priority, which is to grow profitable same-store sales.
We have three stores here in Lexington that are company stores, which we use for various purposes, but we are primarily a franchise business — 930 out of 933 restaurants are franchises. When the groups came together to acquire the business, they acquired it to protect their long-term interest as franchisees. My mission is to protect their interests, and the way to do that is to grow profitable sales at the store level.
Many of our owners are single-unit operators — they are family-owned businesses. They work in their store and if they don’t make money, they don’t get a paycheck. We could grow sales by discounting — we could put dollar menus out there and increase transactions and grow the business that way — but that’s not necessarily profitable.
Through 2020, A&W’s samestore sales increased by more than 50 percent since a group of franchisee owners purchased the brand in 2011. “Year-to-date in 2021, we’re up another 20 percent on top of that,” said CEO Kevin Bazner.
The second thing I would say is, when we acquired the business, we placed an emphasis on quality as our value proposition. We don’t have the scale to compete on price with the likes of McDonald’s, Burger King and Wendy’s — we don’t have the share of voice to drive enough transactions to make those discounted offers pay — but, in our research, the consumer was already telling us that ‘yeah, you’re a little bit more in terms of price, but you’re built of better quality.’
I’d say the third thing is just sort of luck of the draw with our 102-year history. Social scientists will tell you that in times of crisis — and of course what we’ve experienced over the past 15 months as a society with the pandemic is certainly a crisis — people gravitate to brands that they know and trust.
What are some of the advantages and challenges that come with being a legacy brand?
The upside is that we’re a nationally recognized brand — we’re a slice of Americana, if you may — and we don’t have to make up history to be hip. But people also have certain memories and expectation associated with the brand, and it’s a bit more di cult to make changes.
We’ve developed three R&D test locations here in Lexington where we try things out and push the envelope of what we believe consumers will accept from the brand today. Well, when we opened the first store in Lexington, we did not have hot dogs, and the second customer who walked up to the counter ordered a Coney dog — the second one! — so we put hot dogs and Coney dogs back on, and we put onion rings back on.
It would be easier to start a concept under a new name than to try and retool our existing history. So, let’s give them what they want and what they expect, and let’s just make it better than they remember.
We meet with our Franchise Association on a regular basis, and literally everything we do that will touch a restaurant filters through that group. It’s not a top-down thing, it’s more of a collaborative effort. Sometimes things look great on a spreadsheet or in a marketing campaign, but if you can’t execute it at the store level it’s not worth it. The worst thing you can do is have a great product that you execute poorly. So, we have a roomful of experienced operators who help us make those determinations. They are our conscience.
What guidance would you offer a business owner who came to you for advice?
Truly understanding what your business is and who your customer is critical. For us it’s important because we straddle generations — we grew up with the baby boomer generation and now into Millennials and Gen Z. You have to know who those customers are, and for us we may have to move more slowly because we have a foot in both camps. All of the bells and whistles of technology today and all the new ideas and concepts are wonderful, and there’s a place for all that but not necessarily for our customers. We look at our business as being more evolutionary than revolutionary because we need to hang on to the customers we have while we grow a new customer base