Popeyes' parent hatches value strategy

ATLANTA AFC Enterprises Inc., the franchisor-operator of the 1,901-unit Popeyes Chicken and Biscuits chain, said it would focus on portability, value and the lunch daypart in its newest menu offerings, which the company expects will drive traffic and reverse negative same-store sales trends.

This month Popeyes will introduce the first of three new menu items under a new “The Big Deals” promotion. The items are priced at $1.49 and include The Loaded Chicken Wrap, the Delta Mini and a Chicken Biscuit.

“This value offering is focused on driving new traffic from younger consumers while capturing snack and late-night dayparts,” the company said in a statement.

The news came as AFC reported a domestic same-store sales drop of 1.7 percent for the second quarter ended July 13. During the quarter, Popeyes promoted 8-piece Buffalo Nuggets for $2.99 and a Firecracker Butterfly Shrimp combo for $4.99.

The move to an even lower price point speaks to the quick-service category’s focus on value during the tough economic climate. Taco Bell lowered its price points with 79 cent tacos, and other chains like McDonald’s, Wendy’s and Burger King have focused marketing on their respective value menus. Higher commodity costs, however, have made the profitability of these items fall under questioning, especially among franchisees.

At Popeyes, the parent company is working to identify ideal food costs, labor scheduling and a new cooking oil management process to increase unit-level efficiencies, it said.

For the company’s second quarter, net income remained at $6.6 million, the same as last year. Per-share earnings rose to 26 cents from 22 cents a year ago on a lower average share count.

Included in AFC’s latest-quarter profit were both a favorable insurance settlement and an unfavorable impairment charge from the sale of corporate restaurants to franchisees. Excluding those items, AFC's second quarter net income would have fallen to $4.3 million, or 17 cents per share, the company reported.

Corporate revenue rose 2.6 percent to $39.3 million.