Executive Q&A with A&W Restaurants CEO Kevin Bazner

Kevin Bazner: I think it has stayed relevant for a couple reasons. One is the signature product — root beer that is made fresh daily from the same recipe for the last 102 years. That consistency is a big part of what brings people to the restaurant, and it's what people recognize about A&W. The brand started with Roy Allen, one of our founders, operating a root beer stand in California and serving veterans coming back from World War 1. So, we have a long history of being associated with our craft beverage, and it’s virtually the same recipe with just a couple minor modifications.

And everyone has an A&W story. I hear them all the time when traveling for business and wearing the logo. People come up and say “A&W! I remember when…” and we get that all the time. We’ve been working on recapturing those memories so new parents will continue to bring their kids the same way their parents and grandparents brought them. Of course, there is great food, but it's really about the memories and the root beer.

Bazner: Even before the pandemic, but especially during and coming out of it, the convenience of QSR and drive thrus is at a premium. We are seeing people use less delivery now; more are coming into the restaurant, and the convenience of the drive-through has really propelled our business forward over the past few years. The speed of service inherent in this segment is only becoming more important and we are perfectly positioned in that regard.

Market position and growth

Also, in an inflationary environment, AQR is in a sweet spot for customers still wanting to eat out but are looking for inexpensive options and convenience.

Bazner: We are franchisee owned and have a quality filter that all decisions are run through, asking if things fit our quality proposition and how they will work at a store level. It’s not the corporate team or executives mandating decisions; it all goes through franchise owners and shareholders.

The ownership structure we have is a long-term view. We have third and fourth generation owners in our brand, and they look at decisions in terms of generations. And as a result, we are well capitalized, have no debt, and there is no pressure on me or the leadership team to improve earnings. We are continually reinvesting.

We are part of the industry’s largest purchasing co-op: YUM Purchasing Co-Op. That is very meaningful for our 600-plus restaurants here in the U.S., who are buying chicken alongside KFC and Pizza Hut. So, we have the purchasing power of a much, much larger corporation, which is also a non-profit.

Sales and unit growth

Bazner: In 2011 we went through an acquisition and became an independent brand. Since then, we have had ten consecutive years of same-store sales growth. The last two years, coming out of the pandemic, were record years for us in terms of AUV and same-store sales growth.

We just opened up a new A&W location in Arnold, Missouri a couple of days ago, and it was an absolute smash success. The first three days open, it was breaking sales records each day.

We are seeing the strongest pipeline of interested parties that we’ve seen since the acquisition ten years ago and are attracting more and more attention. We are talking to people who have other concepts and are looking to expand their portfolio with us because of our sales growth, and we have a lot of white space out there. They’re coming to us because we’ve got plenty of opportunities to grow in their existing market. These are industry people who are educated in the QSR segment, and they look at our unit economics and like what they see.

Bazner: Now is a great time to invest because we have ten years of momentum and a lot of white space. We are better today than we were yesterday and the day before, and certainly better than we were ten years ago. The challenges in the industry like the pandemic and labor issues have forced us to improve and provide better support and strengthen our system. Interest rates are also at a historic low, so it is a good time to act now before they go back up.