Popeyes' CEO: Obamacare can be navigated with sales growth

Feb. 28, 2013 | by Alicia Kelso

Popeyes is on an undeniable roll. The company announced its fourth quarter and full-year earnings for 2012 today, which included a 30-percent jump in revenue and 40-percent profit increase in Q4, as well as global same-store sales of plus 6.2 percent.

"Our fourth quarter results capped off an excellent year," said CEO Cheryl Bachelder.

As has been the case for the most of the company's recent earnings calls, Bachelder attributed these results to the company's strategic, five-pillar roadmap put into place five years ago.

And although other companies in the QSR segment have experienced a thriftier consumer base because of payroll taxes and high gas prices, and have shifted pricing and messaging in response, Popeyes plans to stay the course.

"A lot of our competitors have been talking about external factors. We're focusing on innovation and media plans that are set up to continue to lead in the category," Bachelder said. "If the category becomes stronger, I think we'll be the beneficiary. Our guidance is based on what we're seeing today and the belief we'll grow market share and outperform our competitors."

Bachelder also said the company won't change its strategy to fit the current value-pricing trend surfacing throughout the QSR segment, particularly in the burger category. Also, there is no indication that future cost pressures stemming from Obamacare regulations will affect Popeyes' positive outlook.

"Our team has been very proactive in providing our franchisees' education on what they need to do and when. I am personally feeling that 2014 (when Obamacare kicks in) is not going to be as problematic as some once forecasted," Bachelder said. "I think you will see benefit programs that are competitively priced that allow us to take care of our employees. For 2014, we feel well-prepared to navigate it and we believe the No. 1 way you navigate is to keep your sales growing, to keep your market share growing and outperform your competitors."

Building on a strong brand

As for the company's strong Q4 and 2012, Popeyes relied on its five-pillar approach, including building a distinctive brand. For example, during 2012, the chain introduced items such as garlic pepper Wicked Chicken, Rip'n Chick'n and Zatarain's Butterfly Shrimp. The brand's product launches were introduced through an increased use of national and local media advertising throughout the year, which led to a 7.5 percent increase in domestic same-store sales. Additionally, Popeyes has been transitioning into a new Louisiana-inspired image, including logo, packaging and spokesperson, Annie.

"The results are that we continue to see Popeyes' share of the chicken QSR segment increase – to 19.2 percent compared to 14.8 percent in 2008," Bachelder said.

The second pillar, run great restaurants, is measured through the company's guest survey called GEM. In 2012, GEM yielded higher response rates than during previous years. By year-end, approximately 70 percent of guests rated Popeyes as 5 out of 5 on the survey.

Growing restaurant profits is the third pillar. Bachelder said the operating profits of domestic freestanding franchise units (before rent) have exceeded 20 percent of sales, an increase of about $30,000 over 2011.

"Our strong sales performance and our continued focus on cost savings are expected to more than offset the commodity inflation of roughly 2 percent for the full year," she added.

Growing footprint

As part of its fourth pillar, accelerate quality restaurant openings, Popeyes reported 79 new domestic franchised restaurants in 2012.

"Our domestic openings put Popeyes among the top three growing brands in our competitive set in 2012. As a testament to our solid site selection approach and the quality of our franchise operators, the average first-year sales of our new restaurants are approximately 40 percent higher than the system average," Bachelder said.

Also during 2012, parent company AFC Enterprises acquired 27 restaurants in Minnesota and California, two underpenetrated areas that will experience growth acceleration, according to Ralph Bower, president of Popeyes U.S. Additionally, the brand made its debut in Charlotte, N.C., during Q4.

The Popeyes system is undergoing restaurant reimaging and about 25 percent of domestic units are now in the new image. By the end of 2013, about 60 percent is expected to be complete. Bower said they're pleased with results from the reimaged restaurants, but added that it's too early to quantify specific returns.

Internationally, 20 new restaurants were opened in Q4, bringing total openings for the year to 57.

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Topics: Franchising & Growth , Insurance / Risk Management , Marketing / Branding / Promotion , Operations Management

Alicia Kelso / Alicia has been a professional journalist for 15 years. Her work with FastCasual.com, QSRweb.com and PizzaMarketplace.com has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, Consumerist.com and Franchise Asia magazine.
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