Article

Popeyes relies heavily on existing franchisees for expansion plans

Company's four Strategic Plan initiatives have yielded positive results and driven growth.

April 24, 2011 by Alicia Kelso — Editor, QSRWeb.com

To say Popeyes Louisiana Kitchen has been on a roll of late would seem like a bit of an understatement.

The chain, franchised and operated by Atlanta-based AFC Enterprises, yielded a 5.1 percent systemwide sales increase in 2010, its fourth year in a row for positive sales. The company's sales outpaced both the general quick-service restaurant and chicken QSR categories for the second consecutive year.

Much of this success is a direct result of the company's "Strategic Plan" initiatives, put into place by CEO Cheryl Bachelder. Among these initiatives are:

• Build the brand
• Run great restaurants
• Strengthen unit economics
• Ramp up unit growth

The fourth initiative was tackled with fervor in 2010; the company opened 106 new units and now has about 2,000 total. Popeyes hopes to piggyback off of that momentum in 2011, as well. In doing so, it's eyeing a number of markets for growth, including Tampa, Fla.; San Diego, Los Angeles, Phoenix and Philadelphia, among others. The ultimate goal this year is to open between 120 and 140 new restaurants, about 60 of which will be in international markets.

"We've looked at where we have done the best and where the greatest opportunities are. We are not really recruiting new franchisees, but instead are actively romancing existing ones. We figure that we have done well lately because we have great relationships with our franchisees and we want to continue doing just that," said Greg Vojnovic, Popeyes' vice president of development.

He estimates that 75 percent of the chain's growth has and will continue to come from existing franchisees. Vojnovic believes Popeyes' strategy is unique in the quick-service segment.

"Most companies, from what I'm aware of, recruit many new franchisees and put new blood in their pipeline," he said. "We like folks that have invested their time and wealth into the pipeline."

Popeyes' multiunit franchisees vary widely from two restaurants to about 300. Vojnovic said the average franchisee portfolio is between five and 25 units.

New recruits still welcome

Although Popeyes' actively woos existing operators to nurture its growth plan, that doesn't mean the company shuts out rookies entirely. The company is a bit pickier about them, however.

"Our direct focus for new franchisees is those who have other brands that are doing well but that don't compete directly with ours. Our new franchisee looks like our most successful existing franchisee – they're actively involved in their restaurant and they are servant leaders. This is our culture," Vojnovic said.

That culture, he said, trickles down directly from Bachelder. Since she was tapped as CEO in late 2007, the company has turned around its sales and its marketing efforts.

"The most successful thing (Bachelder) did since being hired is drive our culture to where it needed to be. You can talk about how much money you're going to make and your returns, but when it comes down to it, this process is emotional. You have to believe in the brand and your leadership or you're not going to get behind it. That's what she's honed in on," Vojnovic said.

Vojnovic believes Popeyes' partners have a stronger relationship with the brand now more than ever, which has made it easier to develop an expansion plan and to recruit better franchisees. The company has also created a strong incentive program, including minimal franchising and royalty fees.

"We're in it for the long haul with our franchisees and they know that. To live off the top line, you have to live off the bottom line, and 98 percent of our system is franchised, so essentially all of our growth comes from them," he said.

Four pillars complement each other

In Popeyes' big-picture vision, everything in the past few years has related to the four pillars of its Strategic Plan.

The first three – delight your guests, grow your profit, earn sales – not only complement each other, but also are necessary to achieve the fourth, which is growth. A more specific effort that has been made to fit into these initiatives has been to beef up Popeyes' marketing presence. The company didn't advertise nationally until 2008.

Once it did, Vojnovic said it became easier to plant seeds in newer markets and to get franchisees signed on for more developments.

"You can't continue to grow sales if you don't have more marketing. We started to see potential for sales growth from that increased exposure and now we're more excited than ever about the brand because customers are, as well," Vojnovic said. "Also, we are now able to spend less time explaining what Popeyes is and more time explaining what (franchisees) can do to be part of it. Expect a lot more momentum from us, it's an exciting time."

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