- The Washington Times - Friday, June 25, 2004

FORT LAUDERDALE, Fla. — The roast beef sandwich that has been Arby’s signature dish for 40 years was starting to get a little boring for some customers.

That’s what kept Sonia Beato away. She was getting tired of roast beef and “they didn’t have any salads I liked.”

That was a big problem for the country’s ninth-largest fast-food chain last year, when it slumped as competitors brought out new dishes including salads and wraps, but Arby’s stuck by its old menu. Sales at Arby’s restaurants open at least a year fell 2.3 percent in 2003 after six straight years of growth. Parent group Triarc Cos. Inc. sustained a net loss of $10.8 million last year and lost $3.1 million in this year’s first quarter.

Arby’s President and Chief Executive Officer Doug Benham acknowledges that part of the Fort Lauderdale-based company’s problem was its failure to respond as quickly as rivals, including Subway and Panera Bread Co., to consumers’ evolving tastes and desire for healthier fare.

“We didn’t have a lot of new product news,” said Mr. Benham, who was named to his posts in December to help revamp the menu for the 3,400 Arby’s outlets. “I think our competitors were coming out with more and more — I’ll call it high-end products.”

McDonald’s Corp. brought out salads and healthier adult Happy Meals last year and other restaurants followed quickly. Arby’s didn’t add salads or low-carb wraps until this year.

“Our pipeline simply dried up and Arby’s for a short period of time really became irrelevant given the focus on health and nutrition,” said Tom Garrett, president of RTM Restaurant Group Inc., Arby’s biggest franchisee.

Arby’s share of the sandwich market shrank from 17.6 percent in 2001 to 15.6 percent last year, according to Technomic Inc. Subway, the biggest sandwich chain, boosted its share by 2 percentage points to 32.9 percent.

But Mr. Benham, a former senior executive at RTM, appears to be having some success with the introduction of new items to the menu. Arby’s sales at stores open at least a year were flat in the first quarter after declining during the same period of 2003, and he predicted further improvement.

Mr. Benham said his close ties to franchisees from years of working among them has helped him get new products into restaurants in a matter of months, not years as in the past. Among them are $3.99 Market Fresh salads with fresh-cut apples, dried cranberries, toasted almonds or mandarin oranges.

Miss Beato has been lured back by the new dishes.

“We saw the ads about new salads and they were so delicious that we’re going to come back,” said Miss Beato, who went for lunch to an Arby’s in Miami.

Jim Tringas, portfolio manager of a Wachovia Corp.’s Evergreen Investments fund that owns Triarc stock, said Arby’s seemed to be appealing to new customers and people looking for healthier food with its more upscale menu.

More salads and other menu items are planned, Mr. Benham said.

“You’ve got to constantly have fresh and new products” to keep customers, said Michael Gallo, an analyst who follows Triarc for brokerage firm C.L. King & Associates Inc. “Arby’s was late, but better late than never. … Mr. Benham is doing what needs to be done.”

Mr. Garrett said sales at his company’s restaurants were up about 3 percent in April and probably about 5 percent in May. He would not release exact figures for the privately held RTM, which is based in Atlanta and has 772 restaurants in 25 states.

While company officials and analysts are optimistic, investors are waiting to see more concrete evidence that the changes are working. Triarc’s class A shares have been trading around $10 in recent weeks, down from a high of $12.28 in November.

One factor in Arby’s favor is that Triarc had about $480 million in cash at the end of the first quarter, which could be used to buy or open more restaurants and capture more market share, Mr. Tringas said.

Mr. Benham said Arby’s new products should help it be a better alternative to Subway, which has added wraps and salads that comply with the low-carb Atkins diet and have gourmet ingredients. Subway spokesman Les Winograd said his company saw its competition with Arby’s as more of a “symbiotic relationship,” so it wasn’t threatened by Mr. Benham’s strategy.

“We do well as long as people understand that sandwiches are a healthier alternative to burgers and fries,” Mr. Winograd said.

Mr. Benham also said Arby’s is competing with Panera Bread Co. and Atlanta Bread Co., two chains that have been successful with more gourmet menus. Panera offers about two dozen different types of bread and food such as a salad with romaine lettuce, poppyseed dressing and fresh strawberries. Panera has taken over more of the market and is catching up on Arby’s, increasing its share from 3.6 percent to 5.6 percent from 2001 to last year.

As many fast-food chains are finding, success comes when they have varied menus that run the gamut from low-fat and low-carb healthier foods to greasy, cholesterol-laden dishes like the traditional fare of hamburgers and french fries.

Arby’s seems headed in that direction.

“Our strategy is … to continue to come out with products that meet the nutritional alternatives that our customers want. And whether it’s low carb, low fat, whatever the next thing is,” Mr. Benham said.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide