Arby’s 2023

Sep 13, 2023 | Insights, Restaurant Research

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Executive Summary

Arby’s strong and unique positioning among $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. The brand’s leading-edge protein variety extends well beyond Arby’s core roast beef heritage and its “we Have the Meats” lineup includes a full selection of roast beef, beef brisket, corned beef, turkey, chicken, gyro & fish. Its sandwiches are distinguished by generous stacks of quality meat toppings (big, meaty sandwiches), creating a differentiated menu which offers a compelling alternative to competitors focused on: burgers, chicken-only, cold-cut subs and veggie-heavy fast casual offerings. The brand’s TV ads cut through the clutter by featuring Ving Rhames’ distinctive bass voice using humor to illustrate compelling food shots and the chain offers an abundance of value options provided by its 2 for $7 platform, $1.99 Sliders, value promotions, Happy Hours menu & loyalty rewards. Arby’s positioning further benefits from a high level of product innovation, a relatively fast drive-thru speed and a strong operational philosophy which includes: “the experience of the guest can never exceed the experience of the employee”; “big heart beats out big data”; and “it’s important to take what we do seriously, but not ourselves too seriously”. It is notable that the franchisor owns 33% of system stores, exhibiting a lot of “skin-in-the-game” at a time when most other franchisors incorporate an asset light model. Having said all this, the chain is challenged by a core low-income customer base that tends to use the brand as an indulgent treat and this dynamic is aggravated by current economic pressures on the lower-income demo. Sales pressure is also represented by: Arby’s premium positioning vulnerability to the regular cycles of QSR value discounting; strong competition from chains selling premium sandwiches (Jersey Mike’s, Jimmy John’s, Firehouse & Potbelly); and a lack of a breakfast daypart. Resultantly, the chain’s comps have been subdued post-covid and a resultant all-time worst 2022 store-level EBITDAR margin reflects a lack of pricing power and significant AUV underperformance. In conclusion, while Arby’s has a great business model, it must find ways to reach a higher income demo while it waits for an economic rebound to help its struggling lower-income core customers who love their Arby’s.

Arby's Market Share Graph

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