John Palumbo With A&W Restaurants

Intro: [00:00:07] Welcome to Franchise Marketing Radio. Brought to you by SeoSamba comprehensive high performing marketing solutions for mature and emerging franchise brands. To supercharge your franchise marketing, go to seosamba.com. That’s seosamba.com.

Lee Kantor: [00:00:32] Lee Kantor here another episode of Franchise Marketing Radio and this is going to be a good one. Today on the show we have John Palumbo and he is with A&W Restaurants. Welcome, John.

John Palumbo: [00:00:43] Hey, Lee, thank you so much.

Lee Kantor: [00:00:45] Well, for the two people out there who aren’t familiar, tell us a little bit about AMW restaurants. I mean, this is a brand that’s been around for probably a is it over 100 years or it’s close to 100 years?

John Palumbo: [00:00:58] Yeah. Yeah. Thank you. And so you’ve heard the saying as old as sliced bread. Well, we may be older, actually. We’re over 100 years old, 102 years old now, and have reinvented ourself, like most folks do over the course of a decade, let alone ten decades. And so we’re excited about where we are today. And yeah, we are over 100 years old.

Lee Kantor: [00:01:22] So can you tell us about the history of the brand? It’s like how did it originate and how did it get to the point where it is today?

John Palumbo: [00:01:30] Yeah, sure, sure. So we we started in 1919 and it’s hard to get those words out 1919. And I started out as a as a hamburger and root beer stand. And after a few years or so, we wound up going into the franchising business. And ironically, one of the first franchisees, a little known fact, was J.W. Marriott. And so once we began the franchising of the brand, it just took off from there. And we’ve been through quite a few different iterations of this brand in terms of geography, in terms of the look, in the feel of it, in terms of ownership. And really all of it has brought us to where we are today. Lee And again, just a phenomenal brand, a legacy brand. And we couldn’t be more proud of this of this opportunity and where we are.

Lee Kantor: [00:02:35] So how does the beverage tie into this?

John Palumbo: [00:02:39] Yeah. So A and W root beer is made fresh in our stores every day. And so if you come into an A and one of our restaurants, you will get a craft beverage in a frosty mug poured out of a tap. That’s consistent today as it was many years ago. When you see our AMW in the can, so to speak, on the shelves, it’s just a different product, obviously, because it’s not made fresh in-store and and served to you as a customer and a frosty mug. So that is a real big differentiator, frankly, not just between the and canned beverage, but just really the beverage in general that you’ll get in a restaurant. It’s phenomenal. And it’s what folks most recognize about us. It’s iconic, as is the frosty mug. And it’s what, probably the single most well, not probably it is the single most recognizable attribute of our brand that folks talk about.

Lee Kantor: [00:03:44] And so that’s been around since the very beginning.

John Palumbo: [00:03:47] It has. Yep.

Lee Kantor: [00:03:48] So the which came first, the root beer or the restaurant?

John Palumbo: [00:03:53] Okay. That’s a good question. The chicken or the egg? Yeah. So kind of parallel paths, really. You know, I, I guess you could suggest the root beer. However, again, they sort of came down the same track together, neck and neck, so to speak. But certainly the delivery of the beverage and the menu innovation over, over 100 years has certainly changed. I mean, it’s changed over the last five years, you know, but what’s remained consistent is the is our beverage is our AMW root beer made it store.

Lee Kantor: [00:04:35] Now as you kind of near your thousandth, I think, franchise location, how has the franchising industry changed for you guys? Has it always you know, I’m sure at the beginning you were partnering with brands like J.W. Marriott. So, I mean, you must have been thinking big. Or from go, you know, most brands start out with, you know, their cousin two states down.

John Palumbo: [00:05:01] Hmm. Yeah, well, I wish I wish I could tell you that we had the roadmap in 1919 to where we would be today, and we knew it then, but we did. And I think our first franchisee, as I mentioned, Mr. Marriott, was it was just by happenstance, you know, and so we kind of crawled into franchising like a lot of brands do. You know, you start with a great concept and an idea and next thing you know, someone really enjoys what you’re doing. And then they want to they want to do it as well and be their own boss. And next thing you know, you have two or three restaurants and then then you’re franchising. And so truly that that path is not so unique for us as many others. But but yeah, we definitely have had a few different roles. We’ve traveled as a, as a, as a brand and as a company. And so where we are today as we are owned, owned and operated lead by our franchise partners, and that’s been for the past ten years. So it’s a very unique ownership structure, not always the case. As you probably know, we’ve started as an independent and went through a couple of different structures. And most recently before we became an independent brand, we were owned by Yum! Brands is where you’ll see some of our and still co-branded with some of the Yum Yum entities. And then ten years ago, we’ve just over ten years we are franchise community got together and with our largest international partner and brought the brand back. And so when we say we have franchise partners, we really do have franchise partners that have a voice and everything we do. And that’s a unique structure and again, a very different path than we were on over 100 years ago.

Lee Kantor: [00:06:59] So now when you are, that is a unique way to kind of do business. Can you talk about how practically that works when when all of the franchisees are the franchise owners? Is what franchise owners how does that you know, how do you do your job? Like, who’s your boss?

John Palumbo: [00:07:17] Yeah, sure. Excuse me? Yeah, sure. So we have a board, right? And so there’s elections and franchise partners run for elections to have voices and and a say on the board. And so. Rw Our restaurant support center, our executive team has a seat on the board as well, and it becomes a collaborative effort with voting privileges. And, and really it works, works unbelievably well because our, our focus every single day is how do we increase our same store sales in a profitable manner, and how do we grow our footprint and add in a responsible growth manner new restaurants that are profitable. And that’s our only focus. And our franchisees, again, have a voice in some of that. And so it’s it’s been a wonderful ride for us. We couldn’t be happier with the structure. In fact, our same store sales are up over 67% over the last ten years. So that’s pre and post COVID, right?

Lee Kantor: [00:08:25] So yeah, that’s amazing. Is that so like if I’m a new franchisee, I am also the franchise or I’m part of that collaborative group as well.

John Palumbo: [00:08:36] Yeah. And so right. So you have a co-op as a co-operative and you have a folks again get a vote in different initiatives with the brand. It’s not a simple process in terms of hiring and necessarily hiring and firing on the executive level. Right. But but yeah, absolutely. We’re going to switch out a bun or we want to change our fry manufacturer. We have our National Franchise Association on the board that will have a say and a voice in all of that. Absolutely. We don’t typically just make unilateral changes. And I’ll tell you, you know, in terms of the we have differences and there should be some good healthy debate among in any work environment. But we’re really singing from the same songbook, so to speak, because our interests are all aligned. It’s not about how much top line sales, how fast can we grow top line sales so we can generate that royalty revenue for us as a franchisor, it’s how fast can we raise our top line profitable sales. And so that’s really our focus. It’s every day, it’s what we do. We live and we breathe it. And again, it’s a structure that. It’s unique to me. I’ve been doing this for 20 years and in the QSR world, and I wouldn’t change to change it. Frankly, the structure we’re in here, it’s just it’s been phenomenal.

Lee Kantor: [00:10:12] Well, it sounds very refreshing. I mean, like because you you hear sometimes in this industry, there’s some adversarial relationship between the franchisor and the franchisee. But if everybody is in the same boat and everybody’s winning when everybody’s winning, I mean, that’s a game changer.

John Palumbo: [00:10:28] It is it is a game changer. And there’s some some some nuances, of course, to the to the structure. But but yeah, 100%. I mean, it’s it doesn’t benefit any of us to just increase top line sales without having our franchisees be profitable. And that’s intuitively you say, well, sure, of course, John. You know, but it’s not always the case. And we don’t our distribution channel isn’t a revenue stream. We don’t have rebates that come to us. It’s a very different refreshingly is a good word environment to be a part of it. And quite frankly, where the brand is growing at a rate now that we haven’t seen and it’s not by accident. But again, we’ll go in attracting the right types of franchise candidates or existing franchise owners who have been, in some cases quite literally for generations, are growing still. And there’s no bigger endorsement for the brand when you have a third or fourth generation franchisee looking to do something new and develop a new restaurant.

Lee Kantor: [00:11:42] So now do you think that other QSRs are going to follow this path?

John Palumbo: [00:11:47] I don’t know. You know, I think it’s. You know, I think it’s it’s possible. Sure. I don’t have the pulse of necessarily of some of the folks in the industry that we network with to say. But I mean, I, I would imagine it’s an option. You know.

Lee Kantor: [00:12:09] What’s it like? What’s it like when you’re talking to a franchisee and you explain this configuration? I mean, if they’ve been in the business for any length of time, this is kind of it’s news to them, right, about how this is operated.

John Palumbo: [00:12:22] Yeah, it’s a different kind of deal. Right. So it’s and to be clear, it’s the the part the ownership in the as a franchisee with our company, when we say franchise partners, again, it’s there are some nuances to the agreement which we won’t necessarily dove into in great detail in an effort not to bore everybody. But but but yeah, there is it’s a different deal when we see common stock. What I don’t understand. So I got to sign up for common stock, you know. Well, yeah, because you have an ownership stake and you have a say and you have a voice. You’ll have an elected official who will vote for your region. We have regional if you think about it as a a Congress, US Congress, you have a House of Representatives that represents a district. It’s no different than there’s voting privileges. And you vote that person in and they vote on behalf of this group of stores for different things. And, and yeah, it’s a real collaborative effort and it’s not, you know, has not gotten in the way like even one iota of growth or decision making.

Lee Kantor: [00:13:29] It’s an amazing story and it’s fascinating to me that you’re able to pull this off. Congratulations. So now you mentioned that things are are going pretty well right now. Like, can you talk about any like where I guess we’re now into the second quarter and coming out of a pandemic? What what’s kind of your growth path looking like, you know, as we move forward in this year?

John Palumbo: [00:13:55] Yeah, sure. So we again, we our same store sales continue to climb and they have again 21 over 20. And then as I mentioned earlier, 67, 67% over the last ten years. But as we come out of Q1, as it relates to new franchise growth, we have seven new awards that were issued in Q1 or franchise agreements, and we do call them awards purposely because we feel like that’s we don’t just look to sell something to someone. We want to award a franchise to someone. And and so we we have aq1. We did seven new awards and we have a very humble and very conservative growth goals when it comes to development. And so we’re actually ahead of our quarterly year to date growth, and we anticipate 20 to 25 new commitments this year and we’ll open up over ten new restaurants across the country. And for us, that’s a real good pace. It’s hopefully ten profitable restaurants that are in the right parts of the country where people want us. And so our pipeline of new openings that are on the horizon and our pipeline for new candidates I want to come into the brand are both very strong. And so we couldn’t be really we couldn’t be more excited for where we are right now. And the nice thing is there’s a lot of green grass. So as folks learn more about AMW and it’s crazy to say right at 100 years old, but there are some some folks that are just coming around at second, third generation to AMW and we’re excited to reintroduce them and their families to our brand again. And and so that’s been has been wonderful, our product innovation. So our chicken tenders are fresh, they’re not frozen, they’re hand-breaded to order. They’re the best in the industry. And I don’t say that because I’m working here talking to you, but I will tell you, they are the best in the industry. They literally are fresh hand-breaded and served to you hot out of the fryer. It’s a real difference. We’re we’re a quality proposition. We’re not a value proposition for the consumer. And that’s really resonated now.

Lee Kantor: [00:16:20] Has the pandemic changed, like the footprint of the store with the delivery, with carryout, with drive thru, like? Is anything changed from that standpoint?

John Palumbo: [00:16:29] Yeah, it’s interesting. Right. So we, we’ve, we’ve certainly engaged all third party delivery platforms and we have as you look back at some of the data kind of post pandemic, I say that carefully post pandemic. But we didn’t have a. Huge percentage of of our sales that were delivery. That said, once we reopened our dining rooms, our business came back into the dining rooms almost to in some cases, more to a higher level where it was pre-pandemic. And a big driver of that, again, Lee, is the frosty mug. Every every patron, every customer, we call them fans of the brand come up when they place an order and they get a frosty mug where they get to pour their AMW out of a tap that was made that morning. And that’s hard to duplicate out of a drive thru window. So. So to answer your question, our footprint has stayed the same, actually more 2176 square feet. That’s our building. We’re on about three quarters of an acre property. We do have a nontraditional platform. So we can go smaller. We can go into some malls where we have a first and going into a Walmart location in Rock Hill, South Carolina. But for the most part, what our brand is a is a freestanding drive thru destination. Folks that come on in and try not only our root beer float but our full sweets and treats line. And again, that’s just hard to do outside of a window. So we don’t expect to shrink down our footprint really anytime soon.

Lee Kantor: [00:18:14] So has the ideal kind of franchisee changed?

John Palumbo: [00:18:21] Yeah. No, I mean, not not necessarily really know. We have always looked for the same type of person, really. And it’s that someone who has some sort of leadership experience, it doesn’t have to be food experience. Folks who are open to learning and embracing a franchise or franchisee relationship. Someone looking to be in business for themself, not by themselves. All of that remains the same, you know, in terms of the financial DNA of our candidates. That changes a little bit. But then again, it changes really every year with every Fed increase or decrease or, you know, liquidity injection requirements in the bank, things like that, that kind of bobs and weaves a little bit. But at the end of the day, financing aside, what we’re looking for is still that someone who’s excited and passionate about the industry and our brand and and someone who wants to learn and wants to be hands on. We’re not a passive investment for sure. So so it has to be someone who really wants to roll up their sleeves and come together with a team. And and maybe it’s not the franchisee who’s the day to day, but they would have an operator with them who’s a day to day person. And so that’s kind of what we look for. So I think the profile has really stayed the same.

Lee Kantor: [00:19:49] Now, you mentioned the previous partnership with Yum, is that person that’s buying now. Do they have complementary brands that this is just added to their portfolio or are you getting kind of the the super fan? A and W I’m all in on AMW.

John Palumbo: [00:20:06] Yeah. So we get both really, which is is great. So we have folks who are multi unit candidates. In fact, we just had a discovery day yesterday with a large group over 25 restaurants and with a different, different non competing brand that is looking to do something on a larger level with AMW in the Upper Midwest. And so then we have folks, to your point, us love the brand. They grew up with the brand and maybe they’ve done something else in their life and they want to transition. Now, when they decided AMW was right for them and and then so they they came in with a one store opportunity and and that’s great, too, right? One at a time. And so we’re open to all types of structures in that way as long as that those basic requirements that get outside of the financial stability, of course. But those traits that we talked about previous, the willingness to learn and the ability to get be hands on and work with people and things like that are just super important.

Lee Kantor: [00:21:11] Now are you looking to grow only here in America, or is this kind of the world’s your oyster at this point? And you just you know, if somebody has an interest anywhere on the planet, you guys will have conversation.

John Palumbo: [00:21:23] Yeah. So one of our we do have international development and that’s actually a separate arm of AMW call us. So we have over 400 stores now internationally to do very well, actually. And so so I guess the answer is yes, we are growing internationally, but it isn’t through the US arm and we feel the interest internationally and that gets sent. Which by us partners who are one company is all still one company, but it’s just handled separately. And so yeah.

Lee Kantor: [00:21:57] So you’re in the US, you’re looking at the entire country. I’m sure you have a presence everywhere right now, right or no.

John Palumbo: [00:22:05] Yeah, we do. We have we have this this is about five states or so we’re not in yet. However, predominantly in the southeast, though, we do have restaurants scheduled to open in some of them. And so but yeah, and we’re more heavily penetrated in the upper Midwest for sure. But yes, we do have a presence in some way, shape or form throughout the US, but we have opportunities to grow our freestanding drive thru restaurant or base platform in every state across the country. And and what’s nice about that too is we when we separated from Yum! Brands and again now it’s just over ten years, we maintain the distribution contact. And so we’re we’re still part of the RSC’S, which is the Restaurant Support Center. And it’s it’s just been a phenomenal relationship. It’s the largest purchasing co op in the food world, QSR world. And so what that means to us is when we buy our ground beef or chicken, we’re buying it with the buying power of the entire system. And so that’s a little known fact. But when you talk about food costs and you’re really getting in the weeds of it all, that’s invaluable to our franchisees profitability. And so and something we’re proud, happy to be still be a part of and maintain that relationship. And it’s again, you couldn’t you couldn’t enjoy the buying power of a brand our size without the risks.

Lee Kantor: [00:23:38] Yeah, it’s a little thing that’s a big thing.

John Palumbo: [00:23:41] It’s a little thing that’s a really big thing. And also consistency through the distribution challenges and supply chain. Having some folks that are kind of ahead of the ahead of the curve a little bit on some stuff is helpful. Not that we haven’t had distribution challenges everyone has, but we were far less impacted, quite frankly, than some other folks, unfortunately. And I do mean that unfortunately even though the competitors. But so that’s a huge advantage to getting product in a door and getting it at the right price for us and for our franchisees has been invaluable with the RSC as well.

Lee Kantor: [00:24:19] Congratulations on all the success. If somebody wants to learn more, have a more substantive conversation with you or somebody on your team, what’s the website?

John Palumbo: [00:24:27] Yeah, so it’s a W franchising dot com. We love to chat with some folks or certainly they can email me at Jay Palumbo at eight restaurants dot com.

Lee Kantor: [00:24:40] Well, John, thank you so much for sharing your story today. You’re doing important work and we appreciate you.

John Palumbo: [00:24:45] Thank you, Lee. Thank you so much.

Lee Kantor: [00:24:47] All right. This is Lee Kantor. We’ll all next time on franchise marketing radio.