Competition | August 2016 | By Daniel P. Smith

How Popeyes Clawed Its Way to Chicken Elite

Popeyes Louisiana Kitchen reclaimed its heritage and its momentum—just in time to take on KFC.
US fast food restaurant chain Popeyes grows into national business success.
After several initiatives refreshed Popeyes’ brand and menu, the company has positioned itself to become one of the dominant chicken chains. Popeyes Louisiana Kitchen

Back in early 2008, Popeyes Chicken & Biscuits languished in quick-service mediocrity.

A new management team led by Cheryl Bachelder, a one-time president of rival KFC, had been charged to steady the 1,900-unit company, but a litany of internal and external pressures complicated the task.

Same-store sales, average unit volume (AUV), and transaction counts had suffered years of declines, and those downward trends placed the company at odds with its franchisees, many of whom considered the Atlanta-based company mismanaged and self-serving. As if that wasn’t enough, the Great Recession struck, spurring a precipitous drop in consumer confidence that further challenged gains.

Then, in March 2008, Popeyes founder Al Copeland, who had built the fried chicken–peddling chain from a single unit into a global enterprise of some 800 units, died at the age of 64. Though Copeland had not directed the brand for more than 15 years, his death seemed a symbolic public blow to a brand clamoring for good news—any good news.

“The brand hadn’t been managed well,” says Dick Lynch, one of Bachelder’s early management hires and the company’s chief brand officer, “and we needed to get back on track.”

And that’s exactly what Popeyes did. In the last eight years, the chain has become a reinvigorated, lively force in the quick-service game, shifting its results, public perception, and its future prospects.

In 2015, Popeyes added nearly $700 million in systemwide sales for the year—leapfrogging Papa John’s to enter the top 20 in the QSR 50—and captured same-store sales gains of 5.7 percent at its domestic units, the seventh consecutive year of positive comp sales. The enterprise also reached two new development milestones: opening a record 219 restaurants in 2016—125 of them in the U.S.—and crossing 2,500 total units, an army of restaurants scattered across the U.S. and more than two dozen other nations around the globe.

For the once-sluggish chain, one Bachelder herself described as “tired, dirty, and slow,” things are looking up.

But the road to recovery was far from smooth.

Earning its way

In 1972, Copeland opened Chicken on the Run in Arabi, Louisiana, a New Orleans suburb on the eastern edge of the Mississippi River. Within months of opening, lackluster sales prompted Copeland—a one-time local doughnut magnate unafraid of bold ideas—to change course. He altered his eatery’s menu from traditional Southern-fried chicken to spicy, New Orleans–style chicken and also installed the Popeyes moniker, a nod to Jimmy “Popeye” Doyle, the detective character in The French Connection portrayed by Gene Hackman.

By the mid-1980s, Popeyes was a growing phenomenon. The chain boasted more than 500 units, including restaurants outside the U.S., and had become the third-largest quick-service chicken chain.

But Copeland’s ambitious appetite proved too mighty. In 1991, his company was forced into bankruptcy after his 1989 purchase of rival Church’s Fried Chicken soured. The company reorganized as AFC (America’s Favorite Chicken) Enterprises shortly thereafter.

Throughout the 1990s and into the 21st century, Popeyes struggled to find solid footing. It acquired and then sold brands like Seattle’s Best Coffee and Cinnabon. It lacked direction and purpose amid a revolving door of CEOs, as well as persistent sales, profit, and store-traffic declines. Franchisees became increasingly frustrated.

When Bachelder was appointed CEO in 2007, the company was drowning in a surging wave of missteps.

“It was the land of silos,” says Amy Alarcon, Popeyes’ vice president of culinary innovation, who joined the company in 2007. “Franchisees looked at us with plenty of suspicion, and we had to break through that noise and unite.”

Bachelder and her leadership team responded by introducing a Strategic Roadmap designed to fuel results, unify the brand, re-establish trust with franchisees, and propel the brand’s floundering marketplace standing.

There was the launch of new products, including snack items and lighter alternatives to the core bone-in chicken offering; a store remodeling project; new menuboards; and a new advertising agency. The multi-million-dollar efforts were designed to drive traffic and stop consistent same-store sales declines.

“We weren’t a national advertiser in 2008, and were only in about 30 percent of the U.S.,” Lynch says, calling the company’s advertising spend “completely inefficient.”

Soon after, Annie, a fictional character played by actress Deidrie Henry, became the brand’s new spokeswoman, a position designed to share blunt talk about Popeyes’ authentic and tasty food. There was also a revised name, as Popeyes dropped its “Chicken & Biscuits” tag in favor of “Louisiana Kitchen,” an effort to celebrate the brand’s heritage of Louisiana-inspired home cooking.

“We wanted to tell the brand’s story and give Popeyes brand relevance … and that started with bringing the brand back to its Louisiana roots and making it authentic. We believed we couldn’t tell our brand story without a new brand identity,” says Lynch, who developed brand strategy and innovation plans for concepts like Burger King, Ruby Tuesday, and Buffalo Wild Wings before his arrival at Popeyes in 2008.

Above all, however, leadership needed to restore the trust of its franchisees, a relationship that had withered and weakened amid consistent instability.

“Franchisees had every reason to be unhappy, and we needed to demonstrate we could get the brand back on track,” Lynch says.

Indeed, Popeyes’ leadership was focused on regaining its franchisees’ trust. Lynch recalls long and robust discussions among leadership about the brand’s core customer. Was it the consumer, investors, or franchisees? “We decided it was our franchisees, and we needed to understand how our franchisees were making money and how we could help them make more,” he says. “If they were happy, then everything else would take care of itself.”

Everything became about the brand and driving its success with franchisees top of mind, Lynch says. There were operational introductions like a guest satisfaction monitor, increased food-safety assessments, and a store-level scorecard that measured key metrics like sales, profits, employee turnover, and guest experience. “We looked to better understand store-level profitability, cost savings, and traffic drivers,” he says.

On the guest experience side, for instance, store managers received customer satisfaction reports along with action plans to rectify issues. If the store received a low score for, say, hot food, then the system would point out specific interventions such as checking certain elements of kitchen equipment or more closely monitoring hold times to drive improvement.

Popeyes’ leadership also inspired its culinary team to be creative and innovative, so long as new creations featured ingredients or cooking techniques authentic to Louisiana. The company’s culinary brain trust responded with six to eight limited-time offerings every year, including popular options like Wicked Chicken and Rip’n Chick’n, which captured imaginations and customers.

“We had a laser-sharp focus on translating the personality of Louisiana into our food so that our products could tell the story of our brand,” Alarcon says, adding that Popeyes’ culinary resolve “has come to define us, separate us, and lift us away from our competitive set.”

Eager to inject Louisiana’s bold, flavorful, and creative personality into its food—weaving in the French, German, African, Italian, and British influences that pepper the region’s robust culinary scene—Popeyes’ culinary team hit other home runs with LTOs like Chicken Waffle Tenders—a portable and affordable product—and Red Stick Chicken, in which chicken strips were marinated in Tabasco sauce and cayenne before being battered and deep-fried.

The culinary creativity further spurred the chain’s resurgence, reinforcing Popeyes’ Louisiana brand heritage and providing the quick serve a strong point of differentiation.

Building on the momentum

Same-store sales and profitability began ticking upward in 2009 as the brand’s marketplace positioning became more clear and distinctive. Franchisees, once a largely disgruntled group, hopped on the bandwagon—“The alignment with our franchisees is more powerful than anyone will ever know,” Lynch says—and there was collective movement around a simply stated yet ambitious brand purpose: “Food that ignites our desire to serve.”

“We all rallied behind those words and focused on our roadmap,” Lynch says.

In 2014, Forbes called Popeyes the “KFC Killer” and credited the chain for “crushing rivals with a mix of upscale marketing and unapologetically greasy comfort food that customers—and investors—can’t resist.”

The sentiment continues to ring true. In 2008, Popeyes’ AUV sat at $1 million. Today, it’s more than $1.4 million. In 2008, Popeyes’ stock price sat as low as $3.50 a share. Today, the ticker for Popeyes hovers near $60.

“It’s pretty remarkable how [Bachelder] and her team have turned things around given how disjointed things were eight to nine years ago,” says analyst Alton Stump of Cleveland-based Longbow Research. “You have a system today that’s closely aligned, and everybody is on the same page to generate the best returns they possibly can.”

The core components of Popeyes’ recent renaissance—the focus on its Louisiana heritage, new product proliferation, and franchisee relations—remain very present in 2016 as Popeyes aims to continue its brand-building efforts and record-breaking results.

“It’s an enduring strategy,” Lynch says. “We’re working to create a legacy of systems, protocols, policies, and values that live beyond us.”

Earlier in 2016, the company identified a collection of bold, long-term goals to be achieved over the next seven to 10 years, including driving U.S. restaurant AUVs from approximately $1.4 million to $2 million, increasing franchisee profitability from $340,000 to $500,000 per restaurant, and growing Popeyes’ global unit count from 2,500 to 4,000 restaurants.

To accomplish these ambitious objectives, Popeyes’ new Strategic Roadmap focuses even more so on its Louisiana heritage, which leaders continue to see as Popeyes’ key brand differentiator. It also focuses on routine operational excellence at the restaurant level as a means to increase traffic counts.

Popeyes is also doubling down on its people, which leadership sees as critical to driving profitability. Earlier this summer, the chain rolled out an employee engagement system in which about 60,000 crew members answered questions about their engagement with the brand and their individual restaurants. The company is now in the early stages of action planning against that data, thoughtfully and earnestly seeking concrete ways to increase employee engagement.

“This is different and new territory for us,” Lynch says of the employee engagement push, “but crucial for our continued success.”

The company’s three strategic pillars—Louisiana, operational excellence, and its people—will soon be enabled by ONE Technology, an initiative to build a common technology platform for the entire Popeyes system.

“All of these programs need to be supported and facilitated by technology, both guest and employee facing, that seek to make lives better,” Lynch says.

Stump says the technology piece is critical for Popeyes, which still has room to grow on both unit count—where it trails chicken category leader KFC by some 1,700 units—and AUV, where Chick-fil-A more than doubles Popeyes’ output.

“Popeyes’ collection of data from franchisees over the years, something the brand wasn’t doing before [Bachelder’s] arrival, has helped the franchisees generate better returns and pick better sites, and ONE Technology is the next step here,” Stump says. “Popeyes has to get down to one POS system, not the 40 or so they have now.”

Bachelder, meanwhile, will continue to lead the charge as CEO after inking a new multi-year employment agreement with Popeyes’ board of directors earlier this year.

“One of Cheryl’s greatest talents is that she knows the right questions to ask at the right time,” Lynch says of his longtime colleague. “Best of all, she creates an environment in which these questions are addressed creatively and constructively.”

Stability at the top, combined with a clear plan for the future, provides Popeyes leadership plenty of confidence that the momentum of the last eight years will continue.

“We know it doesn’t get any easier, that the mountain keeps getting steeper and steeper,” Lynch says, “but we’ve had our turnaround and don’t want to do another. Everyone—our corporate staff, our franchisees, our crew, our customers, and [Wall Street]—understands what we were here to do, and that’s to continue our growth trajectory.”

Comments

I am the Senior Executive VP Marketing for the biggest restaurant group & food service company in the middle east. I am impressed with the leadership and strategy of Cheryl Bachelder in turning around Popeye's restaurants in the us. Would like to have her email, to discuss and share few thoughts. I am the KFC brand leadership that helped taking it into an undisputed position, and I believe I can help Popeye's take a real positive roll in our area. If she is interested. Thank you.

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