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FDD Talk 2017: What You Need to Know About the Arby’s Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

by Franchise Chatter on June 6, 2017

in FDD Talk 2017: Food Franchises, Franchise Earnings, Sandwich Franchise

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Arby's Sandwich Photo by mooshee85

In this FDD Talk 2017 post, you’ll learn the following:

  • Section I – Background information on the Arby’s franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for an Arby’s franchise, based on Item 7 of the company’s 2017 FDD
  • Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for an Arby’s franchise, based on Items 5 and 6 of the company’s 2017 FDD
  • Section IV – Presentation and analysis of Arby’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
  • 2016 average monthly gross sales for the 114 Arby’s Restaurants opened after January 1, 2013, which is the year when Arby’s new management team was put in place and the company refocused its efforts on new licensed restaurant development, and operated for at least 6 full months as of January 1, 2017 (the “New Restaurants”)
  • 2016 average gross sales for the 3,013 Arby’s Restaurants that operated continuously for the full year from January 4, 2016 until January 1, 2017 (the “Mature Restaurants”)
  • 2016 average gross sales; cost of sales; wages and payroll expenses; controllable expenses; advertising; property taxes, insurance, and royalties; and EBITDAR for the 883 affiliate-owned Arby’s Restaurants in the United States that operated continuously throughout the last 5 fiscal years (the “Covered Restaurants”)

Section I – Background Information

12 Things You Need to Know About the Arby’s Franchise

Developing 10 New Restaurants in Canada

1.  In early May, Arby’s announced that it had recently signed development agreements to build 10 new restaurants in Canada over the next three years. The company estimates that the new locations will create about 250 to 300 new jobs. The agreements mark Arby’s largest expansion in Canada since 2009 and signals that the company is ready to further expand in the country.

2.  According to Greg Vojnovic, Chief Development Officer of Arby’s Restaurant Group, Inc., “Canada is a market where we see significant growth potential, particularly in Vancouver and Toronto.” Canada currently has 65 locations across the country.

Bringing Back Fan Favorite Smokehouse Pork Belly Sandwich

3.  At the start of May, Arby’s brought back its Smokehouse Pork Belly Sandwich nationwide for a limited time. The sandwich originally debuted last year and quickly became one of Arby’s most popular sandwiches, selling out at multiple locations across the U.S. within a few weeks. Arby’s decided to make the sandwich available again after receiving positive feedback and numerous requests from customers to bring the sandwich back.

4.  Rob Lynch, Chief Marketing Officer and Brand President of Arby’s Restaurant Group, says that when the sandwich was first released, Arby’s was unsure of how well it would perform with customers. Lynch says that the response to the pork belly sandwich was remarkable and that Arby’s had worked hard to bring the sandwich back as soon as possible.

First Quarter Same Stores Sales Growth of 1.6%

5.  In late April, Arby’s announced a U.S. system same-store sales growth of 1.6 percent in Q1 of 2017. This marks 26 consecutive quarters of same-store sales growth for Arby’s, as well as 17 consecutive quarters of outperforming the quick serve restaurant industry. Additionally, the chain achieved 12 consecutive quarters of growing transactions system-wide in the U.S.

6.  According to the press release, Arby’s is on track to reach $4 billion in system sales by the end of 2018 – a goal the company set in 2014.

Executives Receive Top Honors

7.  In March, Arby’s CEO Paul Brown and Chief Marketing Officer Rob Lynch received top awards from Restaurant Business and PRWeek.

8.  CEO Paul Brown was named the 2017 Restaurant Leader of the Year by Restaurant Business. The award is given to the chain executive or multi-concept operator who has done the most outstanding job of stewarding their charge to greater success and opportunities. According to Restaurant Business, Brown received the award for leading “one of the most dramatic restaurant turnarounds in decades.”

9.  Rob Lynch, Arby’s Chief Marketing Officer and Brand President, was named the 2017 Outstanding Marketer of the Year by PRWeek. The PRWeek Awards are regarded as one of the communications industry’s highest accolades.

Company History

10.  Arby’s was founded in Boardman, Ohio in 1964 by Forrest and Leroy Raffel. The brothers opened the restaurant because they saw an opportunity for a fast-food franchise based on food other than hamburgers. The brothers named the restaurant Arby’s after the initials of Raffel Brothers, R.B.

11.  The first franchise location opened in 1965 in Akron, Ohio and expansion into other states began in 1968. Today there are over 3,000 Arby’s restaurants in five countries — the U.S., Canada, Turkey, Qatar, and United Arab Emirates.

Entrepreneur’s Franchise 500

12.  Arby’s has ranked a few times on Entrepreneur’s annual Franchise 500 list in the last decade. The company’s highest rank was No. 15 in 2008, while its lowest rank was No. 205 in 2007. Arby’s also ranked on Entrepreneur’s Fastest Growing Franchises list in 2008.

Section II – Estimated Costs

  • Please click here for detailed estimates of Arby’s franchise costs, based on Item 7 of the company’s 2017 FDD (updated).

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

  • Please click here for detailed information on Arby’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

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