A+W’s ‘better ingredients’ device yields improved sales

A+W Food Services CEO Paul Hollands, shown here in Kitchener last August, reported marked increases in same-store sales growth in 2014, crediting the company’s new marketing campaigns. (CNW Group/A+W Food Services of Canada Inc. photo)

Burger-and-root-beer chain A+W’s bid to differentiate its food in a crowded Canadian market appears to have paid its way in increased sales through 2014.

Releasing their year-end results Wednesday, Vancouver-based A+W Revenue Royalties Income Fund and A+W Food Services of Canada reported net income of $5.84 million on $318.37 million in sales from the 790 restaurants in its royalty pool for the quarter ending Dec. 31, up from $5.62 million on $278.1 million from 760 stores in the year-earlier period.

For the full year, the chain reported $16.99 million in net income on $957.19 million in sales, down from $21.63 million net on $856.38 million in sales in fiscal 2013.

A+W’s same-store sales growth — a better bellwether of progress for multi-store restaurant chains, compared to overall sales — came in at 7.9 per cent in the fourth quarter, up from 3.1 per cent in the year-earlier period, while full-year same-store sales growth for 2014 came in at 6.3 per cent, up from 0.4 per cent in 2013.

Same-store sales growth, plus sales from 30 net new restaurants added to the royalty pool in January last year, led to a 14.5 per cent increase in both sales and royalty income for the quarter and 11.8 per cent for the year, A+W said.

Cash generated in 2014 for distributions and dividends increased by 13.4 per cent, to $20.81 million, the company said.

Same-store sales growth “accelerated in the fourth quarter, resulting in a very strong year,” A+W Food Services CEO Paul Hollands said in Wednesday’s release.

“Our strategic initiatives aimed at growing market share in the quick-service restaurant burger market have been extremely successful.”

“Very positively”

In the past two years, he noted, the chain has shifted its beef supply line over to beef “raised without the use of hormones or steroids,” moved to eggs “from hens fed a vegetarian diet without animal byproducts” and introduced chicken burgers and chicken strips from birds “raised without the use of antibiotics.”

Last month, Hollands added, A+W also became the first “major chain” to launch organic and Fair Trade coffee.

The company last fall also pledged to ensure all laying hens supplying its eggs are moved from conventional cage-type housing to “enriched” housing by the end of 2016.

“All of these ‘better ingredients’ have been very positively received by our guests,” he said.

The beef campaign, launched in 2013, raised the ire of some Canadian ranchers and their supporters, as it led the chain to expand its supply lines beyond 100 per cent Canadian beef to include U.S. and Australian suppliers.

The recasting of A+W’s beef also sparked concern that its campaign could mislead consumers about the safety or quality of Canada’s non-A+W beef supply.

A+W’s royalty pool last month made its annual adjustment for 2015, showing 32 new restaurants opening between October 2013 and September 2014, less eight restaurants that permanently closed. The 24 net new restaurants bring the chain’s royalty pool to 814 stores.

A+W reiterated Wednesday its strategy also includes “accelerating the pace of growth” of new restaurants. During 2014, the chain opened 37 new restaurants, including 26 in the “important growth markets” of Ontario and Quebec. — AGCanada.com Network


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