Just about two-and-a-half years ago, sandwich chain Arby’s tried a new tagline in a bid to lure millennials: “We have the meats.” The goal of that campaign? Highlight a menu that embraced protein in a bid to entice both loyal customers and new diners.
That salivating message is finding an audience. On Wednesday, Arby’s reported same-store sales grew 3.8% in 2016, helping boost system-wide sales to $3.6 billion from $3.5 billion in 2015. The chain said it was “on track” toward reaching its goal of $4 billion in system-wide sales by the end of 2018. It also reported that it opened 60 new restaurants, resulting in restaurant count growth for the first time in nearly a decade.
The success at Arby’s is due to a basket of ingredients that are working just right. The company has aimed to promote the brand as a step above quick-service restaurant (QSR) concepts like McDonald’s (MCD) and Burger King (BKW) and slightly under the trendy fast-casual space popularized by Chipotle Mexican Grill (CMG)—a space Arby’s calls “fast crafted.” The sales pitch seems to be working: Arby’s CEO Paul Brown says the deli-driven food, packed with protein, is viewed as having more quality than QSR but at more affordable pricing than fast casual.
Menu innovation is also a critical sales driver. Arby’s has quickened the pace of innovation, launching almost a dozen limited-time offering items annually, up sharply from just two in any given year before Brown took over in 2013. Some recent successes include a pork belly sandwich and a venison sandwich, the latter which sold out quickly at the handful of hunting-focused restaurants that it was sold in.
“We’ve been getting bolder about the type of proteins we think will appeal to our customers,” Brown told Fortune. “The American consumer is increasingly trying new things and getting more adventurous with food, particularly if they can do so in an affordable way.”
Much of the success Arby’s is enjoying is a drastic turnaround that can be attributed to Brown’s vision and leadership. Back in 2011, the chain was described as “ailing” and “struggling” when it was sold by Wendy’s (WEN) for $130 million in cash (plus $190 million in assumed debt) to private-equity firm Roark Capital Group. That undid a short-lived marriage that linked the brands back in 2008 in a $2.3 billion deal backed by investor Nelson Peltz. (Wendy’s retains a minority stake in Arby’s and still receives dividends from that investment).
Brown has helped Arby’s thrive. Same-store sales have increased for 25 consecutive quarters. Arby’s has inked deals with new and existing franchisees to develop 167 new restaurants, building on the base of 3,342 locations worldwide today. Brown has been savvy about the use of limited-time offers, which are a popular way that QSR concepts try to get the attention of consumers. He says that while Arby’s has been more innovative, it often relies on ingredients and meats that are already found in the restaurants today.
“Our marketing is always talking about a new product when we launch a campaign,” he said. “Every month we come up with a new item in the restaurant.”
Arby’s menu also is naturally a good fit for a broader consumer food trend: people are trying to eat more protein. New menu items speaks to one group that Arby’s tries to court—so-called “fast foodies”—while the protein stacked menu filled with roast beef, ham, and sliders is for the other core group, the “eating machines.” That’s helped Arby’s outperform the restaurant industry, which has faced some traffic woes as grocery stores have lowered prices on the food they sell and thus have become more competitive. But the company still has a long runway—with $3.6 billion in sales it only commands just a little over one point of market share for the $300 billion QSR/fast casual industry.
“If we can go from a little over a point in share to two points in share or even somewhere in between the growth to us is tremendous,” Brown said.
