Saturday, June 26, 2004
The fast-food chain was slow to jump on the low-carb craze.
FORT LAUDERDALE, Fla. (AP) -- 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 like 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. suffered a net loss of $10.8 million last year and lost $3.1 million in this year's first quarter.
Arby's president and CEO 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 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.
Successes
But 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.
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.
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, Benham said.
Garrett said sales at his company's restaurants were up about 3 percent in April and probably around 5 percent in May. RTM is based in Atlanta and has 772 restaurants in 25 states.
Stock
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, Tringas said.
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 Benham's strategy.
"We do well as long as people understand that sandwiches are a healthier alternative to burgers and fries," Winograd said.
Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.