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Popeyes uses new site selection process to drive growth

Popeyes uses new site selection process to drive growth

Popeyes Louisiana Kitchen has set its sights on doubling the number of its domestic units, AFC Enterprises Inc. chief executive Cheryl Bachelder said Thursday.

“We see excellent opportunities on the new restaurant development front,” she said during a call following the release of fourth quarter results from parent company AFC Enterprises Inc.

“Unlike other brands that have been around for decades, the Popeyes growth story has really just begun,” Bachelder said.

Popeyes marks its 40th anniversary this year.

Improved performance of new and existing restaurants, resulting in part from new site selection and modeling tools, had garnered increased interest in the quick-service chicken chain from potential franchisees, Bachelder said.

Ralph Bower, whom AFC Enterprises promoted to president of Popeyes’ U.S. division on Tuesday, said new restaurants were reporting average unit volumes of $1.5 million, substantially higher than the systemwide average of $1.1 million. He said that was driven by improved site selection and emphasis on profitability.

In an interview with Nation’s Restaurant News, Bower said the company improved its site selection metrics by gaining a better understanding of their customers.

“In 2008, we went to over 400 of our restaurants and did over 60,000 customer intercepts to figure out who are our customers, where do they live and what is it that draws them to Popeyes,” he said.

That helped them not only to go to the best trade areas for their units, but also to build at the best sites in those areas.

“We got really good at saying ‘no’ when we see locations that don’t meet our expectations. In fact, we probably say ‘no’ twice as often as we say ‘yes,’” he said.

Restaurants opened using the new metrics, with annual average unit volumes of $1.5 million, have doubled their cash-on-cash return rate, which is now in excess of 25 percent, he added.

AFC opened two company-owned restaurants in the fourth quarter, in New Orleans and Indianapolis, a new market for Popeyes and a city Bower said could support at least 20 units.

AFC Enterprises now owns and operates 40 Popeyes units. Those restaurants, except for the new one in Indianapolis, are in New Orleans and Memphis. About half of the restaurants in those markets are company-owned, Bower said.

The company plans another seven to nine corporate restaurants in new and existing markets in 2012, mostly toward the end of the year, he told investors. The new company-operated restaurants would help showcase the business model, as well as improve returns for shareholders, he said.

AFC Enterprises plans to operate all of the Indianapolis restaurants, giving them the opportunity to show franchisees that entering an unpenetrated market and using tools available to Popeyes operators, “can make a lot of money,” Bower told Nation’s Restaurant News.

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The United States makes up the vast majority of Popeyes’ operations, with 1,627 units. But modest growth plans are underway internationally, as the company works to improve performance, gain market share and grow in certain markets, Bachelder said. Andrew Skehan, who was named Popeyes’ international chief operating officer last summer, is developing international strategies.

Modest growth would still mean another 60 restaurants oversees in the next year, increasing the number of international units by about 15 percent, Bachelder told Nation’s Restaurant News.

“That’s modest in that we’re not going at 100 miles an hour,” she said. “We’re moving smartly where we think the returns will be good for franchisees.”

Popeyes currently has a strong presence in South Korea, Turkey and Canada, and a smaller presence in the Middle East, Southeast Asia and Central America.

Since Popeyes’ entrées mostly consist of chicken and shrimp with rice, the menu holds broad appeal internationally, where those foods are very popular, Bachelder said.

She credited Richard Lynch, who in December was promoted to chief global brand officer, for leading the transformation of U.S. branding with innovative new menu items and marketing.

That branding emphasizes Popeyes’ Louisiana heritage and limited-time offers, such as its Wicked Chick’n, Dip’n Chick’n and Rip’n Chick’n, as well as the current butterfly shrimp limited-time offer.

Limited-time offers have helped improve brand awareness, which has more than doubled in the past few years, she said.

Key initiatives in 2012 include reimaging domestic restaurants, which began last year with new designs in select markets to reflect the chain’s Louisiana heritage, Bower said.

Renovations, which cost less than $100,000 on average, began with some company owned and a few franchised restaurants. In 2012, the company is targeting 600 restaurants for a new look, Bower said. Renovations should be completed systemwide within the next two to three years, Bachelder said.

Same-store sales gains from the fourth quarter of 2011 had been sustained during the first quarter of 2012. But Bachelder warned that rising gas prices would affect sales.

“We believe there’s a very high correlation between gas prices and restaurant traffic,” she said.

Nonetheless, AFC Enterprises predicted 2012 same-store sales growth of between 3 percent and 4 percent and net new restaurant openings of 60 to 100 units.

The company anticipated an increase in profit of between 10 percent and 13 percent this year.

Contact Bret Thorn at [email protected].
Follow him on Twitter: @foodwriterdiary

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