Economic conditions in Canada might be sluggish, but that hasn't slowed Canada's second-largest burger chain from its continued expansion across the country.
North Vancouver-based A&W Food Services of Canada, which is one of the largest companies in B.C. with a national or global presence, is expecting annual growth of roughly 4.5% in its number of quick-service restaurants over the next few years. That compares with under 2% growth in Canada's gross domestic product (GDP) estimated this year and less than 3% GDP growth expected by most forecasters in 2014.
A&W's CFO Don Leslie sees an economic upside in those numbers.
"We see an opportunity to expand our footprint."
Much of the company's growth has come from confirmed franchisee interest to build an additional 200 restaurants across the country over the next five to seven years.
This planned growth stems from the company's shift back in 2009 to signing multi-site agreements that give franchisees the option to open more than one location in a given region over a contract period.
About 250 locations have been contracted through these agreements and Leslie said 50 have thus far been opened, primarily in Eastern Canada. If all goes according to plan, the company could have nearly 1,000 locations by 2020, up from 790 today.
But a relatively lengthy approval process in its key market has limited the company's growth rate. In Ontario, the development cycle can take two years from the initial discussions with a landlord to the opening of a freestanding restaurant.
"Of that, 12 weeks is the construction period," said Leslie. "The rest is the time it takes getting through all the site planning approvals. The development cycle in Ontario is incredibly long. And in places like Ontario, there are times when you can't be under construction because it's harder in the winter time, so if you miss one build cycle, then you have to wait for the next spring."
But he noted that other jurisdictions don't have the same issue. In Quebec, for example, it can take as little as six weeks to get approvals for a new restaurant. That relative ease has helped Quebec become one of the top five markets in Canada.
"Ten years ago, B.C. and Alberta were our top two markets. Now, Ontario is our largest market. Quebec is still behind B.C. but catching up with the number of restaurants we are opening there."
Finding ideal real estate for new restaurants, however, has continued to be a challenge. After expanding into virtually every enclosed shopping centre in Canada, the company has been focusing on building freestanding restaurants and opening locations in downtown, urban areas. In recent years, the company has opened seven locations in downtown Vancouver and continues to open outlets in downtown Toronto and Montreal.
For its freestanding locations, part of its strategy has been to partner with other retailers. The company has been working with Canadian Tire to open restaurants in locations that have a large enough parking lot for a freestanding A&W restaurant. It has eight restaurants on Canadian Tire sites; three more locations are slated for construction in 2014.
The company also continues to expand its relationship with Petro Canada, which has been a franchisee for decades. To date, it has opened 35 restaurants in gas stations and highway truck stops across the country. Its first Petro Canada A&W in B.C. opened last year in south Richmond.
"They've got everything from small kiosks in their convenience stores to full restaurants at truck stops," said Leslie. "They are a fantastic partner for us."
Better burgers and updated look key to sales growth
While A&W has been expanding its market penetration in Canada, it continues to rejuvenate its brand and improve its burgers.
Last month, the company announced that it had changed the source of its beef to ensure that the meat in its burger patties had no hormones and steroids and were sourced from ethical and sustainable ranchers.
The company and its franchisees have also continued to invest in refreshing the look of its restaurants.
In 2010, the company began to roll out its new "boomerang" design for its restaurants. The first one in B.C. with the new design opened in Langley's Port Kells neighbourhood last year after launching in Ontario three years ago. About 100 restaurants have opened with the new design and another 200 incorporated elements of the new design.
"It's a marked departure. The operator in Langley that owns a few others has gone and modernized his other restaurants in this new design, and he's really had some strong sales growth because of it."
While A&W has had to deal with key challenges in B.C. over the past few years, Leslie is optimistic about the company's growth over the next few years despite muted economic forecasts.
"Absolutely, the economic conditions aren't great. But you always can find companies, no matter what the economic circumstances, that do well. We certainly see an opportunity right now."
