Summary
Highlights
The Raffel brothers, Leroy and Forrest, founded Arby's in 1964. Leveraging their experience in restaurant equipment, they identified an opportunity in the growing fast-food market but chose to specialize in roast beef sandwiches to differentiate themselves from burger chains like McDonald's. This strategy allowed them to cater to a more adult demographic. Arby's expanded rapidly, reaching 100 locations within three years and 300 across 37 states by the end of the decade, largely through debt and franchising.
The rapid expansion led to significant debt. An intended IPO to alleviate financial strain failed, pushing Arby's into bankruptcy by 1970. Despite this setback, the Raffel brothers retained control and spent the next five years rebuilding the company. By 1975, Arby's had 500 profitable locations and was back on track.
Seeking further expansion without incurring more debt or relying on the stock market, the Raffel brothers sold Arby's to RC Cola in 1976 for $18 million, maintaining control. By 1979, Arby's had grown to 800 profitable locations. However, after the brothers retired in 1979, RC Cola made a critical mistake by introducing hamburgers, diluting Arby's unique brand identity and leading to a decline in sales.
In 1984, Victor Posner acquired RC Cola, including Arby's. New management under Posner reversed the hamburger policy and brought Arby's back, leading to rapid new store openings by the late 1980s. However, Posner's questionable business practices and legal issues, including tax evasion and accusations of insider trading, created tension with management and franchisees, leading to another decline for Arby's.
In 1993, Posner's legal troubles forced the formation of a new company, Trianon (later Triarc), which took ownership of Arby's. Under new management, Arby's improved throughout the 1990s as Triarc focused on food and beverage businesses. In 2008, Triarc (now focused almost entirely on fast food) bought Wendy's, forming the Wendy's/Arby's Group. This partnership proved difficult for Arby's, which struggled during the 2008 economic downturn, experiencing significant declines in same-store sales.
In 2011, Wendy's/Arby's Group sold an 81.5% stake in Arby's to a private equity firm, now known as Inspire Brands. Under this new ownership, Arby's experienced a significant turnaround, achieving 14 consecutive quarters of same-store sales growth by 2017. This resurgence was attributed to strategic menu introductions, emotional pricing strategies, and effective marketing campaigns, including engagement with Jon Stewart, the Pharrell Williams hat incident, and Ving Rhames as the voice of the brand. Inspire Brands has also expanded by acquiring Buffalo Wild Wings (2017) and Sonic (2018).
The video delves into the origin of the name Arby's. While commonly believed to stand for "roast beef" (RB), or even "America's Roast Beef" as suggested by an old commercial, the Raffel brothers stated that Arby's actually stands for "R.B." – the initials of "Raffel Brothers." This creates a curious coincidence where the name simultaneously references the founders and the restaurant's signature product.