Arby's execs, franchisees mulling 'life after Posner'; as national convention approaches, speculation runs rampant over new era under Trian Group

Nation's Restaurant News, Sept 21, 1992 by Jack Hayes

As national convention approaches, speculation runs rampant over new era under Trian Group

MIAMI - As the Arby's national convention unfolds here this week with its usual strategy sessions for maintaining growth and rebuilding profits, most executives and franchisees will be trying to answer an even tougher question: What changes does Arby's potential new owner, New York-based Trian Group L.P., have in store for the 2,500-unit Arby's organization?

"Is Trian planning to meet with us?" wondered veteran franchisee Joseph Smaltz of 24-unit Tallyrand Inc., a Youngstown, Ohio-based Arby's operation.

"Will we get some long-needed changes - like a regional approach to the menu - so we can compete effectively in more markets?" added Cincinnati-based franchisee Wayne Perrone, who operates in six Southeastern and Midwestern states as head of 64-unit Restaurant Management Inc.

Furthermore, what has Florida financier Victor Posner's embattled eight-year reign meant to the Arby's system - now nearly three decades old?

"As much as I've fought with Posner and cussed him out over the years, I've got to give the man credit for where Arby's is today," said franchisee Robert Davis, president of Tulsa, Okla.-based U.S. Beef Corp., a 100-plus unit operation. "He's had the intelligence to hire some great people."

Two weeks ago the Trian Group and Arby's parent, DWG Corp., made public a proposed takeover deal in which Trian will buy 25 percent of DWG from Posner for $71.8 million, after which Posner will yield the DWG chairmanship. His other 25-percent will be converted to non-voting preferred stock.

Despite speculation by Wall Street analysts that any DWG buyer would sell off the Arby's division, Trian's vice chairman, Leon Kalvaria, denied his group intends to do that.

There are speculators, and there are investors," Kalvaria noted. "We happen to be investors. We're going to work with the Arby's franchisees and with DWG's people. We're going to do whatever it takes to make this deal work."

Arby's employees were told of the Trian deal through an internal memo.

Recovering still from the news that Posner intends to sell DWG Corp. and retire as the man who controlled Arby's since 1984, franchisees and key managers alike are busy assessing what they accomplished during those years.

Though few in the company experience direct contact with the man who's been called eccentric, impatient and sometimes tyrannical - and though none of the franchisees knows him personally - Posner, in fact, has taken Arby's through the most dynamic eight years in its history.

Yet those eight years have also been a time of turbulence.

The Arby's system was being strangle by flat sales, stagnant growth and franchisee disharmony when Posner bought Royal Crown Cos., which owned Arby's in 1984. Distrustful of corporate decisions, the angry franchisees had even formed their own marketing and purchasing groups.

Posner's choice of former Ralston Purina Co. marketing executive Leonard Roberts to turn the company around proved visionary and profitable although the franchisees were slow to trust Roberts and his new people.

"I stood up there and gave my talk - which I knew was a good one - and there was just silence," Roberts recalled of his first address to an Arby's convention.

And even though Roberts got the Arby's machine oiled and rolling - with uncluttered communications, bold marketing and advertising programs, a raft of new products, service innovations such as in-store ATMS, credit-card" tests and interactive touch screens for self-ordering - Posner and Roberts went to war over the issue of splitting Arby's away from DWG.

In a battle that lasted four months, Roberts and Arby's franchisees were aligned against Posner for control of the company that Posner refused to sell.

"I'm very proud of my years at Arby's," said Roberts, "but I don't think of Victor Posner when I remember the company. I think of the management team and the franchisee organization and how we all made magic together.

"As far as wishing good luck to a competitor, I'm not going to do that," Roberts added.

After Roberts' firing in August 1989, Arby's listed through three presidents before Posner named Frank Belatti, who had headed marketing under Roberts, to reignite the system.

But Posner's insistence on relocating Arby's headquarters from Atlanta to Miami triggered the resignation of two and a half layers of top executives - including Belatti and the last remaining Roberts-era managers - less than a year later.

As if that weren't enough trouble for the 74-year-old Posner, this spring a U.S. District Court judge in Cleveland barred both him and his son from DWG for 120 days while the court investigated allegations of shareholder abuse and criminal contempt.

But to the benefit of Posner and the Trian Group, the same judge is said to support the idea of the DWG Corp. sale and Posner's retirement.

"The judge feels so far that it's a good deal for DWG shareholders," said a clerk who works for judge Thomas A. Lambros.

Despite ongoing problems, the Arby's system has nearly doubled - from roughly 1,300 units to just under 2,500 stores - since the end of the year in which Posner bought Royal Crown Cos.