Popeyes continues to gain market share in QSR space

Popeyes' Louisiana Chicken turned in another positive earnings report today, with total domestic same-store sales up 6.8 percent during Q3, marking the brand's 10th consecutive quarter of positive same-store sales.

During the company's earnings call, CEO Cheryl Bachelder said Popeyes continues to outperform the chicken QSR segment, which is seeing increased traffic from competitive activity and more media spending.

Additionally, in the overall QSR space, Popeyes' market share increased to 19.1 percent — an increase of more than 4 percent since Q3 2008 when the company's five strategic pillars were put into place. Of those five pillars, marketing/product innovation was a heavy focus during this quarter.

"We were fueled by menu innovations and new promotions of our core Bonafide Bone-In Chicken," Bachelder said. This is in addition to the brand's promotions of Zatarain's Butterfly Shrimp, two local offers — "3 of a kind for $3.99" and the Red Hot Popcorn Chicken — and the relaunch of its Handcrafted Chicken Tenders with new dipping sauces.

"Offerings like these demonstrate what distinguishes Popeyes in the crowded QSR space," Bachelder added.

Currently, Popeyes is running its fourth annual Crawfish Festival promotion. Bachelder suggested that Popeyes has a big opportunity in the seafood space, particularly now that the company has undergone a rebranding process to embrace its Louisiana roots.

"We think seafood is a great expression of Louisiana," she said. "And now that we've rebranded, it gives us the breadth to do seafood innovation. Our shrimp is extremely well perceived and our crawfish promotion improves every year; it's distinctive, and no one else has it."

Operational improvements

The second pillar — run great restaurants — also provided a lift during Q3, as Popeyes' guest experience monitor scores continued to rise. Now, approximately 70 percent of the brand's guests are "delighted." Also, by the end of Q3, about 75 percent of restaurants achieved at or below 180 seconds for their speed of service time. This is a gain of 10 percent from the same period during the prior year.

"Improvement in these metrics is driving guest loyalty and visits, as well as restaurant profitability," Bachelder said.

As Popeyes continues to update its system in the new brand image, 18 percent of domestic restaurants are currently remodeled. The company anticipates to have one-third in the new image by the end of this year, and the balance to be completed by 2015.

Fitting the third pillar — grow restaurant profits — the company's franchisees reported average restaurant operating profits nearly 20 percent higher than in 2011, despite commodity inflation of 1.5 percent.

Other call highlights

Ralph Bower, U.S. division president, provided an update on Hurricane Sandy's impact on the system. At the storm's peak, Oct. 30, approximately 200 Popeyes restaurants were closed all or part of the day. The following day, 77 remain closed. As of Nov. 7, four were closed.

"Due to the increase in sales at restaurants surrounding those areas, we believe these closings will not have a material impact," he said.

Bachelder also discussed the implications of the assumed upholding of Obamacare after President Obama's election victory this week.

"We have put a lot of work into accepting the impact of this reform and have provided a lot of guidance to our franchisees," she said. "I think we're probably ahead of many competitors in terms of insight and direction we've given to our system. We don't expect a material effect in 2014. We think it will have a minimal effect until 2015, 2016, 2017, which is still quite a ways out."

Also, Popeyes' parent company AFC Enterprises Inc. is awaiting the transaction of its bid to acquire 29 restaurants in Minnesota and California. The company entered into the acquisition agreement in October, however the KFC franchisee who owns the Minnesota units filed an objection to the deal. According to The (Minneapolis) Star Tribune, the franchisee claimed there was a higher bid for the outlets — another KFC franchisee who would retain that brand's name.

Popeyes' bid, however, was approved this week by a bankruptcy court, and the company plans to close on the transaction this month. The final purchase agreement is for $13.8 million.

Q3 by the numbers

  • During Q3, reported net income was $6.9 million, compared to $5.8 million for Q3 '11.
  • Globally, same-store sales were up 6.3 percent in the quarter. For the year thus far, global same-store sales are up 7.1 percent.
  • Global systemwide sales increased 10.5 percent for a two-year growth rate of 16 percent.
  • The Popeyes system opened 28 new restaurants during Q3 and permanently closed 23 restaurants, resulting in 5 net openings.

Read more about operations management.

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