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AFC shares marketing, growth plans

AFC shares marketing, growth plans

Heard on the call: Popeyes parent plans more promos after LTOs drove strong 1Q earnings

AFC Enterprises Inc., parent of the Popeyes quick-service chain, credited successful promotions for helping it bounce back in the first quarter from sluggish sales last year.

The Atlanta-based company also cited lower interest expense as it reported Wednesday a 24-percent jump in net income for the April 17-ended quarter. AFC earned $7.2 million, or 28 cents per share, in the period, compared with year-ago profit of $5.8 million, or 23 cents per share.

Revenue rose 6.8 percent, to $46.8 million from $43.8 million last year, as domestic same-store sales trends returned to positive territory, AFC said.

Popeyes’ global same-store sales increased 3.9 percent in the latest first quarter after falling 0.3 percent last year. Domestic same-store sales also were up 3.9 percent in the quarter, compared with a 0.4-percent decline a year ago. International same-store sales remained positive, rising 4.1 percent after a 1.2-percent uptick last year.

“We’re off to a good start in 2011,” Cheryl Bachelder, AFC’s chief executive, told investors during a conference call Thursday. “We continue to grow our global Popeyes sales.”

During the call, Bachelder discussed the promotions that drove first-quarter sales as well new marketing plans in the pipeline. She also outlined Popeyes’ growth plans and initiatives in place to help offset rising commodity costs.

Marketing initiatives

Bachelder said two promotions in March delivered strong sales in the first quarter and made up for flat sales in January and February, which the company blamed on weather.

One of those promotions was Popeyes’ signature Butterfly Shrimp Tackle Box, which featured eight pieces of Butterfly Shrimp with Cajun fries and a buttermilk biscuit for $4.99. AFC said it used national advertising to promote the limited-time offer.

Also in March, Popeyes also offered its customer appreciation "Pay Day" promotion for the third consecutive year. The one-day event on March 23 featured eight pieces of the Popeyes Bonafide chicken for $4.99.

Upcoming marketing plans include the return of Popeyes’ Wicked Chicken, a popular promotion last year that earned the chain a MenuMasters Award from Nation’s Restaurant News for Best Limited-Time Offer. The Wicked Chicken offer, which consists of thin strips of all-white chicken with a buttermilk biscuit, ranch dipping sauce and a mini bottle of Tabasco sauce, will sell for $3.99 from May 30 to June 26.

RELATED: Popeyes looks to repeat 'Wicked' success

Popeyes also launched a buy one, get one free promotion this month to continue the celebration of Popeyes’ spicy and mild bone-in fried chicken, which the chain said beat KFC's Original Recipe chicken n a national taste test. The limited time offer includes a free two-piece meal with the purchase of a three-piece meal at regular menu price

Bachelder said Popeyes continued its strong performance in the chicken QSR category in the first quarter. According to data the chain obtained, she said Popeyes’ same-store sales outpaced the chicken QSR category for the 12th consecutive quarter and the QSR category for the fourth consecutive quarter.

Ramping up expansion

AFC projects net new-unit openings to range from 40 to 80 in fiscal 2011, compared with 39 net openings last year. The company expects to open 120 to 140 new units globally, while closing 60 to 80 stores.

In the first quarter, Popeyes opened 32 restaurants and closed 14 restaurants, resulting in 18 net openings compared with five net openings in the same period last year.

At the end of the first quarter, Popeyes had 1,997 restaurants, including 1,587 domestic restaurants and 410 international units. The vast majority of Popeyes’ units are franchised, with franchisees owning 1,959 and the company operating 38.

Cutting costs and service times

Bachelder expressed concern about the impact of rising food costs. AFC saw food costs rise 6 percent in the first quarter, primarily the result of higher commodity costs for corn, soy, flour and cooking oil.

AFC said in a statement it would look to offset a projected 4 percent to 5 percent increase in food costs this year by growing sales, selectively raising menu prices, and identifying supply-chain and in-restaurant cost controls.

The company also plans to move to new offices in Atlanta, which will provide 40 percent more office capacity while cutting the cost per square foot by 20 percent.

Bachelder said Popeyes also is reducing service times with a systemwide adoption of speed-of-service initiatives. She said average weekly drive-thru times have improved by about 30 seconds.

“We want to be best in class,” she said. “This is an area in our business we’ll always be working on.”

Contact Alan Snel at [email protected].
Follow him on Twitter: @AlanSnelNRN

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