New York - Arby's Inc. President and Chief Executive Officer Roland Smith said the franchise is expecting to add 1,000 locations to its 3,000 existing restaurants over the next five years, but he has higher hopes.
"The U.S. could comfortably hold 5,000 Arby's," Smith said in an interview.
Smith notes that the franchise, which is a unit of Triarc Cos Inc., does not have a strong presence in the Northeastern United States, while other fast food franchises don't have much more room for domestic expansion.
Arby's, which specializes in roast beef sandwiches, is expecting to add 150 locations this year and another 150 next year, but Smith is aiming for 10% year over year growth in the number of restaurants.
One way to help that number is by increasing ties with banks to help provide financing for companies and individuals that are interested in starting franchises, Smith said.
Another key goal for Arby's, which sold its company-owned restaurants two years ago, is to drive sales per location, since its sales per location of $725,000 are below the industry average of $900,000, Smith said.
Smith said several locations have sales of more than $1 million and Arby's is using those restaurants as models for other locations to follow.
Arby's franchisees pay a royalty of four% of total sales to Triarc Restaurants Group, which is on track for $80 million in revenues this year.
Smith said the number of restaurants doing more than $1 million per location has increased to 12% of all locations from eight% two years ago.
"Should we achieve 4,000 restaurants and $1 million AUV (unit average volume), that doubles us to $4 billion in systemwide sales," Smith said.
Arby's plans on driving sales per unit by using its other restaurant brands, such as T.J. Cinnamons and Pasta Connection, in Arby's locations to build up sales outside besides lunch time.
T.J. Cinnamons, a pastry maker, adds to breakfast and between meals sales, while Pasta Connection is aimed at improving dinnertime sales.
Smith said the company tried to position Arby's for dinner crowds, but it was unsuccessful.
"You have to live within your equities," Smith said about trying to extend brands in the fast food business.
"Our business is going through a shakeout," Smith said about the competitiveness of the fast food industry. Smith noted there are only two other fast food chains that offer roast beef sandwiches and many other fast food concepts are struggling.
Because of this, Smith said Arby's is targeting franchisees of other chains to join his company's format.
"We have conversion packages ready to go," Smith said.
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