Focus on quality ingredients delivers strong growth for A&W in fourth quarter

VANCOUVER — A&W Canada’s string of firsts in the fast-food industry that focused on higher quality ingredients helped push its strong growth in its most recent quarter, said the burger chain’s CEO.

“Innovation has certainly been the biggest driver of our business,” said Susan Senecal during a conference call with analysts Wednesday after the company and A&W Revenue Royalties Income Fund reported fourth-quarter results.

The burger chain’s quarterly profit grew 19.5 per cent to $9.8 million, for the period ended Dec. 31, 2018, up from $8.2 million a year earlier. The improvement came as sales by restaurants in the royalty pool totalled $440 million, up 18 per cent from $372.7 million a year earlier.

Same-store sales grew 12.3 per cent, and Senecal said that the company achieved growth in all provinces and restaurant concepts.

She attributed that to all the elements of the chain’s strategy coming together.

There are more restaurants open, especially in Ontario and Quebec, as the company is pursuing an aggressive growth plan, she said. It announced in 2016 plans to add 300 locations to its then 858 Canadian spots over the next five to seven years. In the most recent quarter, the number of restaurants climbed to 896 from 861 a year ago.

The burger joint’s menu and ingredient changes have also enticed customers to either try out A&W or visit it more frequently, she said.

About two years ago, the chain launched all-day breakfast. More recently, it introduced the Beyond Meat plant-based burger that attempts to mimic beef’s properties, including juiciness and chew. Consumers flocked to stores and the burgers were temporarily out of stock shortly after the launch.

In October, the chain announced it was swapping processed cheese for real cheese made using Canadian milk.

“It’s the accumulation of the changes that we’ve made,” said Senecal when asked about the strong same-store sales performance.

The fund raised its payment to unitholders to a monthly distribution of 14.7 cents per unit, up from 14.3 cents.

Royalty income for the quarter amounted to $13.2 million, up from $11.2 million.

The chain’s full year profit was $31.6 million compared to $28.2 million the previous year. Sales from restaurants in the pool totalled $1.4 million compared to $1.2 million the previous year.

A&W units closed up $1.60 or 4.3 per cent to $38.60 in Wednesday trading on the Toronto Stock Exchange.

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