Popeyes: Efforts to build consumer demand working

High opening sales volumes of new Popeyes units, some in new markets, are encouraging signs that the brand has broadened its demographic base and can expand further in the U.S., AFC Enterprises officials said Thursday.

“We have the chance to at least double in size,” said Ralph Brower, president of the U.S. division for Popeyes, during the company’s second-quarter earnings call. “We’re underpenetrated in almost every market around the country.”

Popeyes restaurants built in 2012, which have a new design prototype, are currently averaging annualized volumes of about $1.6 million, officials said, which compares favorably to the systemwide average unit volume of $1.2 million.

“This continuing trend reflects our selection of superior sites and the extent to which our brand-building efforts have created pent-up demand for Popeyes in new and underpenetrated markets,” chief executive Cheryl Bachelder said during the call, noting that for years, AFC has focused on accelerating the opening of quality restaurants.

The Atlanta-based company opened 28 net Popeyes locations in the second quarter, compared with nine a year earlier. AFC also opened two company-owned Popeyes in Indianapolis, bringing the systemwide total of company-operated restaurants to 47.

AFC expects to open between eight and 10 corporate locations this year.

Also in the second quarter, Popeyes converted and refranchised eight of the 26 restaurants it acquired in 2012 in Minnesota and California from a bankrupt KFC franchisee. A total of 13 of the locations are now refranchised as Popeyes restaurants, and officials said the balance of those conversions would take place through the rest of 2013.

Bachelder noted that Popeyes’ successful entry into Minneapolis, where it had one unit before the acquisition, could bode well for further domestic expansion. “We could not be more pleased with the customer response to our presence in Minneapolis,” she said. “While it is early, and often we see some sales leveling out over time, our restaurants in that market are trending well above the national average sales volumes and are exceeding our return expectations.”

Charlotte and Indianapolis would be two other markets of focus for Popeyes, though executives did not say whether AFC would refranchise locations in those territories. “We go into these markets with the plan to operate them as company restaurants and maximize the return as company restaurants,” chief financial officer Mel Hope said.

Bower added that Popeyes is not looking for additional new markets for company-owned restaurants at this time, but the company sees plenty of opportunity for more units in Charlotte and Indianapolis.

Bachelder added that the units in Charlotte, Indianapolis and Minneapolis are serving the purpose intended by the company. “We’re building on great real estate and hiring great people, so these markets are really developing the story to encourage our franchisees to more rapidly build out the other priority markets in the country,” she said. “And that’s exactly what’s happening today.”

AFC Enterprises reported that net income and revenue both rose more than 20 percent in the second quarter.

Franchisees operate 2,106 of Popeyes’ 2,153 restaurants. The brand operates in the United States and 31 foreign markets.

Contact Mark Brandau at [email protected].
Follow him on Twitter: @Mark_from_NRN