FDD Talk 2019: 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 2019 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 2019 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 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of Popeyes Louisiana Kitchen’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• 2018 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, 2018 and not closed at the end of the fiscal year

• 2018 average sales, food and paper costs, labor costs, controllable costs, marketing costs, non-controllable costs, and restaurant operating profits for the 1,250 franchised free-standing Popeyes Restaurants that were continuously operated during the period from December 31, 2017 through December 31, 2018 and submitted properly prepared income statements for the relevant period

Section I – Background Information

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

Successfully Debuted New Chicken Sandwich

1.  On August 12, 2019, Popeyes debuted its much anticipated chicken sandwich at all its U.S. restaurants. The Popeyes Chicken Sandwich features a buttermilk-battered and hand-breaded white meat chicken filet, served on a buttery, toasted brioche bun with two barrel-cured pickles and customers’ choice of classic mayo or spicy Cajun spread.

2.  To celebrate the launch of the new Chicken Sandwich, Popeyes teamed up with Sweet Dixie Kitchen, a trendy brunch spot in Long Beach, California. Sweet Dixie had gone viral in 2017, when customers posted to social media that her restaurant was serving Popeyes fried chicken. The story went viral, people freaked out, and the backlash on social media sparked what was aptly named #POPEYESGATE.

3.  However, Popeyes took the situation in stride and reached out to Sweet Dixie Kitchen’s owner Kim Sanchez to help the chain launch the sandwich. As part of the partnership, Popeyes Chicken Sandwich was available at Sweet Dixie Kitchen on August 8 and 9, a few days ahead of the national release.

4.  According to Bruno Cardinali, head of marketing for North America for the Popeyes brand, “We feel honored that the team at Sweet Dixie Kitchen likes our chicken so much. To acknowledge their admiration, we are granting them special access to pre-launch our new Chicken Sandwich for a few days before we launch it nationally. If you want to try it, be sure to pay them a visit on August 8 and 9. We promise our new sandwich is worth the visit.”

5.  Not surprisingly, the Popeyes Chicken Sandwich was well received by the public and even caused a social media battle with rival chicken chain, Chick-fil-A. Lines snaked around buildings, with customers spending hours just to get their hands on the now coveted chicken sandwich. Some restaurants ran out of product, while others didn’t have enough buns. “Be back soon!” signs were even hung on windows.

6.  Then on August 27, Popeyes announced via its Twitter page that the Chicken Sandwich sold out in just two weeks. Popeyes said that it had made enough supply for seven weeks and had expected the sandwiches to last until the end of September. The chain did reassure customers that the sandwich was only temporarily sold out, but did not give an exact date for when the sandwich would return. Popeyes told Business Insider, “We, along with our suppliers, are working tirelessly to bring the new sandwich back to guests as soon as possible.”

7.  The sold-out status for the Popeyes Chicken Sandwich meant big business for the chain. International Business Times, citing “various sources,” said Popeyes earned anywhere between $20-$23 million from its new chicken sandwich and the buzz that followed. Apex Marketing Group also estimated that Popeyes garnered $23 million in equivalent ad value across digital, print, social, TV, and radio in the 11 days that followed August 12.

8.  Additionally, Placer.ai, a mobile location analytics platform, took to its foot-traffic data to see how this social storm translated to action and direct results. The info was pretty compelling. Looking at the baseline, Popeyes’ restaurant visits over the 12-month period between August 2018 and July 2019 showed consistent and sustained growth. Typically, August is not a robust stretch for Popeyes, with 2018 seeing visit rates consistently dropping below the period’s baseline and 2019 numbers trending down toward the end of July.

9.  However, following the launch of the chicken sandwich, on August 20 and August 21, traffic to Popeyes branches nationwide rose a staggering 67.6 and 103.3 percent, respectively, above the baseline for the summer thus far (June 1 through August 21). As Placer.ai puts it simply, “This is an outrageously high peak.” And it proves that the buzz wasn’t restricted just to social sites. This marketing boom pushed people out of the house and into a location.

Partners with Postmates for On-Demand Delivery

10.  In mid-April 2019, Popeyes announced that it had partnered with Postmates to bring the chain’s fried chicken direct to customers’ doors. With more than 2,000 Popeyes locations in the U.S., customers across the country can have their favorite Cajun dishes delivered.

11.  To celebrate the new partnership, Postmates was giving customers one biscuit for free when they order through the platform. Additionally, Postmates waived the delivery fee on Popeyes orders with the promo code BISCUITS. The promo lasted until April 21.

12.  Dan Mosher, senior vice president, merchant lead for Postmates, said, “Over the years we’ve made hundreds of thousands of deliveries from Popeyes, so we are thrilled to officially partner and work closely with them to continue to drive growth. As the leader in on-demand that completes millions of deliveries per month, we are confident that we will do an incredible job serving such an iconic brand.”

13.  Camila Kataguiri, digital lead for Popeyes, added, “We’re always looking for new ways to connect our customers with our New Orleans inspired menu. Now, we are excited to satisfy guests’ cravings wherever they may be by joining forces with Postmates and its expansive on-demand delivery capability.”

Plans to Open More Than 1,500 Restaurants in China Over the Next Ten Years

14.  In late July 2019, Popeyes announced that it had signed a new agreement to develop and open more than 1,500 Popeyes restaurants in the People’s Republic of China over the next 10 years. Josh Kobza, chief operating officer of Restaurant Brands International (RBI), parent company of Popeyes, said, “We’re very excited to grow the Popeyes brand in the Chinese market. We look forward to bringing our great tasting chicken, biscuits, sides and beautiful new restaurants to our guests in China with our partner, TFI TAB Food Investments (TFI).”

15.  Popeyes is the last of RBI’s brands to enter the Chinese market. Burger King has operated there since 2005 and partnered with TFI since 2012. There are now more than 1,000 Burger King units in China. Tim Hortons inked an exclusive master franchise joint venture agreement with Cartesian Capital Group in July that also calls for 1,500 restaurants throughout China in the coming 10 years. The first unit – in Shanghai – opened late February and features exclusive tea offerings, like Steeped Black Lemon Peach Oolong and Blueberry Roselle.

16.  Korhan Kurdoğlu, vice chairman and CEO of TFI, added, “We are proud to bring this famous brand to China and we look forward to introducing its bold new flavors to our guests. We plan to build on years of experience of growing successful businesses in China and around the world.”

17.  TFI TAB Food Investments is a hefty operator in Turkey and China with more than 2,000 restaurants and 50,000 employees. TFI operates a broad range of concepts across the burger, chicken, sandwich, Italian/pizza, and Turkish food categories, including Burger King and Popeyes in Turkey, and Burger King in China, as mentioned before.

Company History

18.  Popeyes was founded as “Chicken on the Run” in 1972 by Al Copeland in Arabi, Louisiana, a suburb of New Orleans. Copeland wanted to create a chicken restaurant that could compete with KFC (Kentucky Fried Chicken). However, Copeland’s initial try with the fried chicken was a failure after a few months.

19.  Undeterred, Copeland decided to change his fried chicken recipe and sell a spicy, New Orleans Cajun-style friend chicken instead of the more traditional fried chicken he had been selling. Copeland also changed the name of his restaurant to Popeyes, not after the famous cartoon character, but in honor of Popeye Doyle from The French Connection. The rebranding and new chicken recipe paid off and Popeyes was now a hit.

20.  In 1976, Copeland began franchising the Popeyes chicken concept and opened the first franchised store in a different part of Louisiana. A few years later, in the early 1980s, Popeyes debuted its “Love That Chicken from Popeyes” tagline and added buttermilk biscuits to the menu. Around 1984, Popeyes opened its first international restaurant in Canada and by the following year, the chain had grown to 500 locations.

21.  Popeyes continued to grow over the next decade and in 1992, America’s Favorite Chicken Company (AFC Enterprises, Inc.) was formed after the acquisition of Popeyes and Church’s Chicken. The merger happened after Popeyes filed for bankruptcy protection in 1991. Eventually, AFC sold off Church’s, but retained control of Popeyes until it was sold in 2017 to Restaurant Brands International, parent company of Burger King and Tim Hortons, for $1.8 billion. Today, there are Popeyes restaurants in over 30 countries around the world.

Entrepreneur’s Franchise 500

22.  Popeyes Louisiana Kitchen did not rank on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Popeyes Louisiana Kitchen franchise costs, based on Item 7 of the company’s 2019 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 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

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:  2,167
• Net Change:  +138

2018

• Outlets at the Start of the Year:  2,167
• Outlets at the End of the Year:  2,327
• Net Change:  +160

Company-Owned

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

2018

• Outlets at the Start of the Year:  53
• Outlets at the End of the Year:  41
• Net Change:  -12

Section V – Financial Performance Representations (Item 19, 2019 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, 2018 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.

• 38 company-operated free-standing Popeyes Restaurants and 1,510 franchised free-standing Popeyes Restaurants were continuously operated during the period December 31, 2017 through December 31, 2018.

• As of December 31, 2018, there were 163 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. None of those Restaurants permanently closed after being open for less than 12 months.

Consolidated Units