Sales at A&W restaurants grew 13% in the fourth quarter as the expanding burger chain continued to target the nostalgic baby boom generation, many of whom are turning to lower-cost meals in the recession.
“We are very pleased that our business continued its strong growth during the fourth quarter, a period in which the overall Canadian economy slowed dramatically and the food service industry faced significant challenges,” said Paul Hollands, president and chief executive of A&W Food Services of Canada Inc.
Hollands said while there aren’t statistics to show more Canadians are choosing cheaper fast-food restaurants such as A&W when dining out, it’s a historical trend in tough economic times.
“Quick-service hamburger restaurants typically fare better than table-service restaurants,” said Hollands. “Obviously it has to do with price point and people watching their dollars.”
A&W Revenue Royalties Income Fund, which receives royalties from A&W’s nearly 700 restaurants across Canada, said total fourth-quarter sales increased 12.9% to $233 million in the quarter ended Dec. 31.
Same-store sales, from locations opened more than a year, grew 7.5%.
Profit was up 5% to $3.98 million or 47.7 cents per unit in the quarter, compared to a profit of $3.79 million or 45.5 cents a year earlier.
Laura Wallace, managing director at Coleford Investment Management, said fast-food chains across the board are benefiting from consumers who are spending less on eating out.
Wallace also said A&W’s decision over the years to lure boomers to its restaurants is wise considering the crowded fast-food market.
“Segmenting a potential audience is probably a good strategy,” Wallace said.
A&W’s annual net income was at $11.8 million, up from $10.6 million. Annual same-store sales grew 7.3% to $710.5 million from $638.8 million.
Hollands said the company’s strategy of targeting nostalgic baby boomers “who literally grew up with A&W” is largely behind the growing sales. Vancouver agency Rethink handles advertising for A&W.
The company not only gears its television advertisements towards that generation, but has a so-called “Cruisin’ the Dub” program, which features car hops, hot rods and classic car events at various restaurants across the country.
A&W also launched the “uncle burger” in September, the first new member of its “burger family” in four decades, which it said is growing in popularity.
And unlike other retailers, Hollands said his company is expanding.
The number of restaurants in the royalty pool was 685 as of Jan. 5, and he said another 14 are committed to open so far in 2009.
