The boomers' favourite burger is going urban.
A&W , long-time purveyor of draft root beer in frosted mugs and the quaint "burger family," is challenging industry leader McDonald's Corp. for the growing downtown market.
Aiming to reignite a decades-old brand name, A&W is rapidly expanding in dense urban centres, opening a quartet of outlets on its home turf of Vancouver, plus locations in Calgary, Toronto and Montreal. The restaurants have modernized the chain's signature orange decor, playing Arcade Fire on the sound system and offering free wi-fi along with the traditional burgers and onion rings.
Until now, McDonald's has been the leader among fast-food burger outlets with its significant downtown presence in the corporate and condo-tower market. But now the country's No. 2 burger chain aims to build on recent growth - A&W sales have doubled in the past decade - with its own urban push.
"Canadians are going to see a significant shift in the next two decades, in terms of the way they work," said Paul Hollands, A&W chief executive officer and three-decade veteran of the North Vancouver company. "There'll be a much greater proportion of people living and working in urban cores."
The $5.5-billion fast-food burger market is in flux and A&W aims to seize market share as some competitors increasingly focus on high-end coffee beverages and non-burger items such as salads. A&W instead is doubling down on the hamburger, with an emphasis on premium quality.
"Yeah, we've got salads, and great chicken sandwiches, but lots of customers say: 'Today, I feel like a hamburger,'" said Mr. Hollands, whose favourite is the Teen burger - fried onions, hold the pickles. "We want to be the place they choose."
The new urban locations are smaller than a normal fast-food restaurant, which is typically 2,000 square feet, on a half-acre of land, with 25 parking stalls and a drive-through window. The urban outlets are spiffier, with slick concrete floors, china plates and real cutlery on aluminum trays, and self-order kiosks.
But the A&W beloved of the boomer generation is still there. The old theme colour, orange, is bright and prominent, as is the mainstay "home of the burger family" slogan, along with the A&W name - as well as in smaller font, "Allen & Wright," an echo of the company's origins in California after the First World War.
And, of course, the frosted glass mugs remain.
It is the future imbued with the past, say outside industry consultants and those who helped A&W make the change.
"The thing that was intriguing to us was they have such a long history as a brand, ingrained with generations - but a lot of companies that find themselves in that place are hesitant to innovate, to change," said Rob Depp, a vice-president at FRCH Design Worldwide, a Cincinnati firm that deals in mostly in retail and worked with A&W.
The strategy emerged out of a company rethink in early 2008, as A&W pondered how to attract younger customers and still keep its base - the baby boomers who have been burger-family fans since the company was a popular drive-in destination in the late 1950s and 60s. Mr. Hollands said A&W looked outside the burger industry for inspiration on matters such as decor and atmosphere, citing the likes of Starbucks as "best in class."
It's a tricky recipe to perfect, noted David Kincaid, CEO of Level Five Strategic Brand Advisers and past head of marketing for Labatt. It is "extremely difficult" to reinvigorate an established name, he said.
"A&W's a classic Canadian brand success story," Mr. Kincaid said.
Doug Fisher, president of food-services consultancy FHG International, sees opportunity in A&W's downtown push. "I think McDonald's is vulnerable," Mr. Fisher said.
McDonald's is by far the industry's No. 1, with about 1,430 restaurants in Canada. A&W has slowly expanded over the past two decades to its current number of about 730. It has added an average of a dozen outlets annually in the past five years and Mr. Hollands has increased the pace to about 25 new A&Ws this year. Within four years he aims to open 40 annually.
Urban locations, in the next several years, will account for close to a third of the accelerated growth trajectory.
Much of the focus is in Ontario, where A&W has about 150 locations and wants to double its presence. Beyond urban cores, the primary push remains traditional locations that dot Canada's suburbs. A&W already has development agreements for 70 new free-standing restaurants in place.
Reinvention is a key part of A&W's history. It began in Canada in Winnipeg in 1956, the country's first burger chain, and by the mid-60s had 200 drive-in locations. In the early 70s it was severed from its American cousin in a takeover.
The first overhaul of the company began in the late 70s, when it shuttered failing drive-ins, a restaurant style that had long fallen out of favour. A&W turned its attention instead to malls and remains the Canadian market leader in that segment with about 220 locations. In the late 80s it started opening free-standing locations. In 1999 it resurrected the burger family from the drive-in days - mama, papa, teen, etc. - which had been abandoned in the mid-80s (though the teen burger was never forsaken).
In the past decade, the company has scored steady success. Sales were $736-million in 2009 - and on track for close to $800-million this year - compared with less than $400-million a decade ago. In the same period, average sales per restaurant have surged to more than $1-million from about $600,000 a decade ago. Same-store sales growth averaged 5 per cent annually in the five years to 2009 and is at 2.8 per cent this year.
The results have drawn retail investors to A&W, whose A&W Revenue Royalties Income Fund has climbed about a third in the past year - the units hit an all-time high in November - and recently increased its distribution. Since the units' debut in 2002 the payout to investors has never been reduced. Also, A&W plans to remain as a trust, after reorganizing its structure to minimize the impact of new taxes set to be introduced next year. (It was privately held before going public as a trust in 2002.)
A&W's biggest challenge, according to Mr. Hollands, is the economy. While the recession and weak recovery makes it a good time to expand in terms of securing locations, reasonable rents and better construction costs, the typical customer remains stretched.
"We don't see an enormous recovery in the food-service industry," said Mr. Hollands in an interview at a new location in Vancouver on a budding higher-end retail stretch of Alberni Street, in the shadow of the city's tallest building, the Shangri-La.
"Our industry is a little more resistant to a downturn but we don't see it lifting tremendously. Unemployment is still high. People are cautious with spending. Generally, it's going to be hard work."
David Ebner