Arby’s Executive Summary
Arby’s strong and unique positioning among the $1B+ QSR chains is based upon a credible, affordable NY deli format (with a drive-thru) that bakes beef roasts and freshly slices all other roasts in-house to create fast crafted, made-to-order hot deli sandwiches. Its “We Have the Meats” lineup includes a full selection of roast beef, beef brisket, corned beef, turkey, chicken, gyro & fish and its sandwiches are distinguished by generous stacks of meat toppings (big, meaty sandwiches). Arby’s menu offers a compelling alternative to competitors focused on: burgers, chicken-only, cold-cut subs and veggie-heavy fast casual offerings. TV ads cut through the clutter by featuring Ving Rhames’ distinctive bass voice using humor to illustrate compelling food shots. While the brand’s value proposition is most apparent in comparison to a NY deli which may charge $10 to $15 for a Reuben vs. $6.29 at Arby’s, the chain’s price point value position is strengthened by its 2 for $7 platform (recently increased from $6), $1.79 – $1.99 Sliders, value LTOs and Happy Hour deals. However, Arby’s premium positioning makes it vulnerable to regular cycles of QSR discounting, especially when its larger competitors shift their very large marketing budgets to promote value offers. Along these lines, ongoing low-income consumer weakness suggests that the brand may need to further emphasize lower price points to support traffic for the time being. In any case, AUV and COGs underperformance suggests a lack of pricing power among its core customers while labor margin outperformance suggests room for higher staffing levels in order to improve service speed. In conclusion, while Arby’s is well positioned as a QSR drive-thru player that can serve as a credible alternative to a NY deli, the challenge is to expand its market reach among more affluent consumers sufficient to drive both frequency and checks.