Arby’s refranchises units, plans new ad campaign

The quick-service chain has agreed to sell 51 restaurants in the Dallas–Fort Worth market as part of a new strategic plan

Arby’s Restaurant Group Inc., which was spun off from Wendy’s/Arby’s Group a year ago, has begun refranchising some of its 3,500 restaurants.

The first deal entails a sale of 51 units in the Dallas–Fort Worth market.

Dallas-based Sun Holdings Inc., a multiconcept franchisee owned by Guillermo Perales, completed the purchase of Arby’s company units on July 2. Terms of the deal were not disclosed, but Perales and the company said Tuesday that the agreement included provisions to build 15 new units over the next five years and to remodel existing units.

The franchise sale is the first since Atlanta-based Arby’s went private in July 2011 with the $430 million purchase by Roark Capital Group [6].

Refranchising is “definitely part of our strategic plan,” said Hala Moddelmog, president of Arby’s, in a phone interview. “This is the first refranchising of any significance” since the Roark purchase, she added, “and we have a handful of select markets around that country that we will be looking to refranchise.”

She added that Arby’s plans “to keep a healthy number of company restaurants as well.” The Arby’s system is currently about 70 percent franchised and 30 percent company owned and operated, she said.

With this deal, Sun Holdings has grown to nearly 390 units. In April, the company bought 96 Burger King units in the Orlando and Daytona, Fla., markets that were refranchised by Miami-based Burger King Corp.

Sun Holdings now has 171 Burger King, 72 Popeyes, 48 CiCi’s Pizza, 33 Golden Corral and seven Del Taco units. The company sold its five Denny’s units earlier this year, Perales said in an interview Tuesday. The company's units are spread across eight states, with most in Dallas, Houston and the Orlando and Tampa markets.

The Arby’s purchase, Perales said, will further diversify Sun Holdings’ portfolio and help it “perform and do better in everything, from training, retention, local-store marketing and from [employee] incentives.”

Perales also said his relationship with Jon Luther, now chairman of Arby’s board and former Dunkin’ Brands chief executive, goes back to the late 1990s. “Jon Luther had faith in us when we only had two Popeyes in this market and gave us the right to develop the whole market,” Perales said.

Perales added that he was excited that Arby’s “is coming out with a new prototype in late August or September.”

Moddelmog said Arby’s is “thrilled to have someone of his caliber as a franchisee. He’s a great operator.”

In addition to the refranchising, Moddelmog said other changes are planned under the new Arby’s team, which includes Russ Klein, formerly of Burger King, as chief marketing officer. New advertising for the brand is expected soon, she said. “We’ll be introducing a new campaign in the fall under his leadership.”

In the next six months, Moddelmog said the company is also looking to add new products. “We’ve quadrupled our new-product pipeline,” she said, “so frankly we’re trying to figure out which ones we want to go with in the fall and the first quarter of next year.”

Arby’s has expanded its roast beef sandwich menu over the past several years with the deli-style Market Fresh line of sandwiches and salads. Last year, it introduced the Ultimate Angus sandwich that features Black Angus beef. The company said it has seen positive same-store sales for the past seven quarters.

Chief operating officer George Condos, who joined Arby’s in October, has been working on systems and execution, Moddelmog said. “We’ve had some improvements in operations and are continuing to work on that,” she said. “We’re also beginning work on the remodeling program. … It’s hitting all the key levers for a brand that is in need of a bit of turnaround.”

Contact Ron Ruggless at [email protected] [7].
Follow him on Twitter: @RonRuggless [8]