When other restaurants are selling locations to franchisees, Arby’s is doing the opposite. Just recently, the sandwich company announced a deal to buy 19 locations in Knoxville, TN. Though the terms of the deal were not disclosed, Arby’s chief operating officer, John Bowie, expressed that picking up the locations was a smart idea and fit nicely into their business model. Over the past year, Arby’s has picked up more and more small franchisees in company-operated markets, turning them into company managed locations.
A New Approach with Major Success
Typically, buying small franchisees is not the business model that most restaurants have used in the past. In times of trouble, companies like McDonald’s Corp and The Wendys Co. have opted for refranchising instead.
Instead, Arby’s has focused on increasing unit volume, rebuilding sales, and closing locations that have a history of underperforming. Of the 3,325 locations, Arby’s currently operates 1,031. And it looks like the decision is paying off since Arby’s unit volume has increased 17% in just two years.
Obstacles to Overcome
Even though Arby’s growth and ability to reobtain locations is proving successful, Bowie has noted a trend among franchisees that may slow the pace in which Arby’s is buying. As it turns out, more and more franchisees are choosing to opt out of a retirement plan and are renewing their franchise agreements.
In the past, there have been trends of franchisees retiring and stepping away from their locations, especially if the franchisee did not have a succession plan to pass their business down through. This would typically occur in waves as franchisees would step away. However, as Arby’s performance has improved, fewer franchisees are stepping away and continue to carry the torch. This could impact the company’s ability to pick-up more locations or even push them to consider refranchising.
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