FDD Talk 2018: Popeyes Louisiana Kitchen Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Popeyes Louisiana Kitchen franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Popeyes Louisiana Kitchen franchise, based on Item 7 of the company’s 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Popeyes Louisiana Kitchen franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned Popeyes Louisiana Kitchen outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of Popeyes Louisiana Kitchen’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• 2017 average sales for free-standing, in-line, convenience store, and food court Popeyes Louisiana Kitchen Restaurants (company-owned and franchised) that were open throughout the company’s entire fiscal year ended December 31, 2017 and not closed at the end of the fiscal year

• 2017 average sales, food and paper costs, labor costs, controllable costs, marketing costs, non-controllable costs, and restaurant operating profits for the 1,129 franchised free-standing Popeyes Restaurants that were continuously operated during the period from December 26, 2016 through December 31, 2017 and submitted properly prepared income statements for the relevant period

Section I – Background Information

11 Things You Need to Know About the Popeyes Louisiana Kitchen Franchise

Launches Delivery in Major Markets with Uber Eats

1.  In early May 2018, Popeyes announced that it had signed a deal with Uber Eats to expand its delivery service in New York City, Chicago, Miami, and Washington. Although Popeyes did not disclose how many restaurants would be participating in the service, it did say that “several hundred restaurants” at both Popeyes and sister restaurant Burger King were already testing delivery services. Positive feedback from these test markets encouraged Restaurant Brands International (RBI), the parent company of Popeyes and Burger King, to expand its U.S. delivery efforts.

2.  Chad Crawford, president of Popeyes North America, said, “As seen on social media over the years, we’ve tried to come to the rescue of our loyal guests, celebrities, athletes, chefs, and others who have made their cravings for Popeyes known. Now with Uber Eats, we can provide the same doorstep delivery service to all of them. We’re excited to give our guests the great taste they love with the added convenience of delivery.”

Bringing Brand to Brazil

3.  Around the end of March 2018, Popeyes’ parent company, Restaurant Brands International (RBI), and BK Brasil S.A. (BKB), the master franchisee responsible for the administration and operation of the Burger King brand in Brazil, announced a master franchise agreement to develop and grow the Popeyes brand in that country. Under the agreement, BKB will open more than 300 Popeyes restaurants in Brazil over the next ten years.

4.  Alexandre Santoro, president of Popeyes Louisiana Kitchen, said, “I’m so enthusiastic about this agreement. I believe that the great Louisiana heritage of Popeyes, which mixes passion for food made with high-quality ingredients and bold flavors, made slow but served fast, will be incredibly well received in Brazil. We have chosen a partner who shares our beliefs and values and has an understanding of local tastes and preferences in Brazil, as well as many years of experience in the QSR industry.”

Turning to Value Meals to Stand Out in Crowded Chicken Market

5.  At the end of the third quarter of 2017, Popeyes’ new parent company, Restaurant Brands International, reported that the brand’s comparable same-store sales dropped 1.8 percent in the quarter versus the prior-year period. Popeyes’ sales also declined 2.6 percent in the United States. During a conference call, CEO Daniel Schwartz said that “continued competitive activity” was the reason behind Popeyes’ reduced comps. Despite these decreases, overall, Popeyes’ system-wide sales increased 4.5 percent.

6.  Popeyes now has to compete in a crowded limited-service chicken industry, which includes Chick-fil-A, KFC, Zaxby’s, Bojangles’, Wingstop, Church’s Chicken, El Pollo Loco, and Boston Market. In order to stay relevant, Popeyes has started offering more value deals such as a $5 box that debuted in September 2017, as well as a 10 for $10 chicken deal where guests can get 10 pieces of chicken or handcrafted tenders for just $10.

7.  Schwartz said, “As we continue to refine our marketing calendar for the balance of the year and into next year, we’ll be focused on finding ways to deliver our great products that our guests love at the right price points in a competitive landscape.”

Company History

8.  Popeyes Louisiana Kitchen was founded in 1972 by Al Copeland in Arabi, Louisiana. Copeland wanted to start a fried chicken restaurant to compete with Kentucky Fried Chicken. He initially named the new restaurant Chicken on the Run and sold traditional fried chicken. This first version of Copeland’s business underperformed and he reopened the restaurant a few months later under the name Popeyes (after Popeye Doyle of The French Connection) and started selling spicy, New Orleans-style fried chicken. Copeland’s decision turned things around and he started franchising Popeyes in 1976.

9.  In the early 1980s, Popeyes debuted its tagline, “Love That Chicken,” as well as buttermilk biscuits, which are now a signature item and come with every meal. Also around this time, Popeyes opened its first international location in Toronto, Canada. By 1985, Popeyes had grown to 500 U.S. locations and became the number three quick-serve chicken chain based on number of units.

10.  Over the next decade, Popeyes continued to grow and in 1992, America’s Favorite Chicken Company (AFC Enterprises, Inc.) was formed after the acquisition of Popeyes and Church’s Chicken. Since 2017, Popeyes has been owned by Restaurant Brands International, which is also the parent company of Burger King and Tim Hortons. Today, there are over 2,900 Popeyes restaurants around the world.

Entrepreneur’s Franchise 500

11.  Popeyes Louisiana Kitchen did not rank on Entrepreneur’s Franchise 500 list in 2018.

Section II – Estimated Costs

• Please click here for detailed estimates of Popeyes Louisiana Kitchen franchise costs, based on Item 7 of the company’s 2018 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Popeyes Louisiana Kitchen’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  1,816
• Outlets at the End of the Year:  1,913
• Net Change:  +97

2016

• Outlets at the Start of the Year:  1,913
• Outlets at the End of the Year:  2,029
• Net Change:  +116

2017

• Outlets at the Start of the Year:  2,029
• Outlets at the End of the Year:  2,178
• Net Change:  +149

Company-Owned

2015

• Outlets at the Start of the Year:  65
• Outlets at the End of the Year:  70
• Net Change:  +5

2016

• Outlets at the Start of the Year:  70
• Outlets at the End of the Year:  55
• Net Change:  -15

2017

• Outlets at the Start of the Year:  55
• Outlets at the End of the Year:  53
• Net Change:  -2

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

• The following tables present information about the annual sales and certain operating expenses and profits of certain Popeyes Restaurants that were open throughout the company’s entire fiscal year ended December 31, 2017 and not closed at the end of the fiscal year.

• The tables do not include the performance of 19 Popeyes Restaurants that are located in Puerto Rico and Guam.

Part 1 – Average, High, and Low Annual Sales at Free-Standing Restaurants

• Free-standing Popeyes Restaurants include any type of restaurant other than in-line restaurants, convenience store restaurants, mall restaurants, food court restaurants, and mobile kitchen restaurants.

• 49 company-operated free-standing Popeyes Restaurants and 1,530 franchised free-standing Popeyes Restaurants were continuously operated during the period December 26, 2016 through December 31, 2017.

• As of December 31, 2017, there was 1 company-operated free-standing Popeyes Restaurant and 140 franchised free-standing Popeyes Restaurants that had not been in continuous operation during the trailing 12-month period. Accordingly, Popeyes has not provided any information related to the performance of those free-standing Popeyes Restaurants.

Consolidated Units