One of Leonard H. Roberts's first decisions as the new chief executive officer of Arby's Inc. in 1985 was to nix plans to add hamburgers to the roast beef chain's menu.
There was no rationale, he said, for a strategy that would have sent the small-fry chain into direct combat with the giants, McDonald's and Burger King. He was right."The biggest mistake we could have made was to fight the hamburger wars," said Roberts, a fast-talking and chain-smoking former executive of Ralston Purina Co. Steering clear of burgers "was one of 50 small ideas" that has accelerated the company's growth since 1986, he added.
The decision to stick with the tried-and-true roast beef sandwich and to add oven-roasted chicken and other specialty sandwiches also heartened many of Arby's disgruntled franchisees who were worried that the chain was about to stray too far from its core business.
While the franchisees stop short of giving Roberts all the credit for the strong growth of Arby's recently, most agree he provided a badly needed dose of leadership and has improved the crucial relationship between the company and its 455 franchisees.
"They have been quick to listen to the franchisee community, and they are willing to try new ideas," said Charles N. Hyslop, president and chief executive officer of Atlanta-based Sybra Inc., Arby's second largest franchisee with 124 units.
Over the past 31/2 years, Arby's has stepped up the recruitment of new franchisees, shut down about 25 restaurants that weren't operating up to Arby's standards and offered franchisees financial incentives to renovate their restaurants. It is also testing credit cards in the company-owned restaurants in Cleveland and Phoenix, Ariz.
Because it doesn't have the marketing clout of the burger chain giants, Arby's has concentrated on local, instead of national, advertising to lure in burger-weary customers.
"One of the things that Len brings to the table is an aggressive, guerrilla warfare management style," said Russell V. Umphenour, president of Tucker-based RTM Inc., Arby's largest franchisee with 204 restaurants.
The local marketing efforts appear to be paying off. Last year, Arby's operating profits before income taxes and interest expenses rose to a record $21 million, up 26.5 percent over 1987.
Profits increased 17.7 percent to $16.6 million in 1987 and 11.9 percent to $14.1 million in 1986, according to the company's circular filed with the FTC.
Last year, sales by the 2,049 company- and franchisee-owned restaurants reached $1.16 billion, up 17.4 percent from 1987.
Arby's and its franchisees added 220 restaurants in 1988 and have a goal of adding an additional 250 this year.