A&W Reinvents Itself to Meet Demand for Ethically Sourced Ingredients

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There’s a whole generation of Canadians for whom the familiar orange A&W sign immediately evokes memories of drive-ins serving juicy hamburgers and crisp onion rings alongside frosty mugs of root beer. In the 1950s and ’60s, A&W drive-ins were the gathering place for teens and as these units morphed into A&W restaurants, they continued to remain a favourite spot for their growing families.

Those early customers are still faithful, graduating from Teen Burgers to Papa and Mama Burgers, and on to Grandpa Burgers. Indeed, through nearly 60 years, Canadians kept coming back for those same burgers, onion rings and root beer.
Over the years, the menu has changed little. In fact, marketers may have recommended replacing those iconic chilled glass mugs with more practical paper cups, but A&W stubbornly refused. While the company that gave Canada the burger family has always been committed to quality ingredients, three years ago A&W broke new ground.

“One of the hallmarks of our company has been a rigorous focus on reinvention. Through the years, we have transformed time after time, from a chain of almost 250 drive-in restaurants to today’s 850 restaurants, not one of which is a drive-in,” says Paul Hollands, CEO and chairman of the board. “A few years ago, we saw a growing concern in Canadians about what they were eating and how the food was raised. At the same time, we recognized that while many Canadians had grown up with A&W, we wanted to appeal to the younger market.”

In 2012, A&W became the first major QSR and the only major burger chain in North America to commit to sourcing beef raised without the use of hormones or steroids, eggs from hens fed a vegetarian diet without animal by-products and chicken raised without the use of antibiotics. “It was a challenge for all of us; when we started, these sorts of ingredients weren’t even available in most supermarkets,” says Susan Senecal, recently named president and COO at Vancouver-based A&W Food Services of Canada Inc. “There was experimentation on both sides, but our suppliers, with many of whom we had long-term relationships, were delighted to find a market for things they believed in, too.”

There was undoubtedly a cost, but, she adds, “it’s a workable investment we wanted to make in order to deliver what our guests wanted, so we did not raise our prices when we introduced these ingredients.” A&W franchisees, such as Vancouver-based Sukh Aujla, embraced the new direction. “Yes, it was more expensive and cut into profits a little at first,” he acknowledges. “But the guests loved it and the sales numbers reflect this. Fast food has been synonymous with junk food in the past. We’re really proud to serve good food.”

That pride is an important factor for Hollands too. “Forget whether one more guest visits us; we would have done this anyway,” he says. “This is what we want to serve our guests; it’s what we want our company to be.”

Leading the change toward what the public patently sees as more desirable ingredients has boosted A&W’s growth along with its image. The chain has opened 37 new restaurants, mostly in Ontario and Quebec, during each of the last three years, for a current total of 850 across Canada. Standard freestanding restaurants typically occupy 2,200 sq. ft., but flexible designs allow for smaller locations, especially in small towns.  Urban restaurant custom designs can operate successfully in prime locations with areas as small as 1,100 sq. ft.

And revenues have also grown. Total sales in 2014 reached $986 million, reflecting a 10.6-per-cent increase over the prior year. Most significantly, a milestone was achieved in the first quarter of 2015, when A&W’s annualized system sales exceeded $1 billion.

Driving that growth has been its multifaceted approach to franchising. The classic franchisee is someone with a significant business background and funds to invest. George and Stella Aujla emigrated from England and bought their first outlet in Vancouver in 2001. The family now has six franchises, and their two sons, Sukh and Gab, currently run these. They have plans for 10 more in the next few years.
Franchisees such as the Aujla family are an important part of the company because they have the enthusiasm and resources to open multiple locations. But recognizing that there are young entrepreneurs with the same enthusiasm and drive to succeed but who lack the experience, the company introduced a new business model.

“We wanted to create a different financial and economic model for the young urban entrepreneur, who might not have the experience and expertise. We created the Urban Associates program to enable them to learn the ropes, while at the same time owning and operating a profitable business of their own,” explains Senecal. “Overseen by a dedicated corporate executive, these franchisees can get into business with less personal investment. The first five of these will be opening in the next 12 months. It’s a brand new program which we hope to grow in dense urban markets like Toronto and Montreal, enabling a young entrepreneur to get into our business quickly and be successful.”

The key for either sort of franchisee is support. Aujla and his family chose A&W from several franchise options. “We got a sense of a real partnership,” he says. “I’ve grown up in this business so I’ve always taken that support for granted, but I’ve learned through others that not every franchise company operates this way. It’s not just putting money down to build a business. They really have your back.”

A&W’s business model is an important part of that support system. Regional representatives meet twice yearly, taking local concerns and ideas to the next level. Nothing major is done without consultation at every level. “At these meetings, we discuss the things we are doing successfully and the areas where we could do even better,” says Hollands. “The process helps us to identify where we might not be on track. We listen to each other, which makes us more effective.”
Franchisees even have a say in how the $20-million advertising budget is spent. Sukh has been part of the franchisee board for four years. “Decisions are unanimous. If even one person is unhappy, we take it into account and try to work out a way to accommodate them.”

Satisfied franchisees and happy employees is the ethos behind A&W’s unique Climate Goals program. Evolved over 40 years, the aim is to go beyond the usual vision statements. “In order for an organization to be successful, there are a handful of critical behaviours. We have to demonstrate these day in and day out as we work together,” explains Holland. “We may not agree on a value, but we can agree on behaviour. For example, listening is a behaviour. If we listen to each other, the likelihood of finding creative solutions goes way up.”
Senecal adds, “It is such a core strength. If we can get everyone lined up and pulling in the same direction, it’s much more fun and you get better results.”

The A&W team is also united in its concern for the environment. The company that had a head start on green efforts with its glass mugs has been working hard to reduce its environmental footprint. Learning from a test restaurant in Edmonton, where energy consumption is carefully monitored throughout the day, A&W strives to continually improve.

Waste and energy consumption have been reduced significantly through innovations such as using high-energy fryers; eliminating packaging where applicable and using compostable packaging for the rest; serving fries in metal baskets and breakfast on real plates and cutlery. “Today the Teen Burger combo uses no plastic, and solid waste has been reduced by 80 per cent,” boasts Senecal. Indeed, while the company takes pride in these achievements, such changes have proved another draw for eco-savvy consumers.

Community involvement has always been a core tenet of A&W’s success. But seven years ago the company undertook what has become a nationwide campaign to conquer multiple sclerosis — a disease for which Canada sadly boasts the highest frequency in the world.

On Cruisin’ to End MS Day in August, $1 from every Teen Burger sale goes to the MS Society of Canada, and in the weeks leading up to it, A&W restaurants hold events such as classic car shows and raffles. Head office empties as senior team members fan out across the country to support this fun-filled day. By the end of 2015, A&W will have raised $8 million for research and equipment.

For this company, commitment to community also includes the foodservice industry. Senior A&W executives have worked tirelessly with organizations such as Restaurants Canada (both Hollands and Senecal have held leadership roles and chaired the board), and the Canadian Franchise Association, which recently honoured retiring A&W vice-president Graham Cooke with its Vince Nichol Memorial Award for his work in helping them determine strategic directions for the future, using the same methods the company has employed for decades.
Looking after the present is also important and the A&W team isn’t afraid to ask customers what they think. The familiar Guest Connect terminals let customers offer thumbs up or down on three main areas — food, cleanliness and service. And they do. Not all are positive, but, says Hollands, “Thumbs down is not a bad thing. It’s an opportunity for us to improve.”

Indeed, this determination to drive innovation and to be the best it can be may very well be the secret to the longevity of a company that next year celebrates 60 years in Canada.

Story By: Liz Campbell

Volume 48, Number 9

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