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    Popeyes Bringing 1,500 Restuarants to China

  • The chicken chain is the last of RBI's brands to enter the massive market.

    Michael Rivera via Wikimedia Commons
    Popeyes domestic same-store sales climbed 0.4 percent in the first quarter.

    In the first quarter of fiscal 2019, Restaurant Brands International chief executive José Cil furthered a Popeyes sentiment executives have touted for some time. “Our global network of proven, well-capitalized operating partners combined with the strength of the brand and product offering gives us conviction that Popeyes can be one of the fastest growing [quick-service restaurant] brands in the world,” he said.

    The previous period, chairman Daniel Schwartz echoed much of the same. He suggested current and future deals would “set Popeyes up to be one of the fastest growing, global [quick-service restaurant] brands in the world.”

    So this hasn’t exactly been a hidden ambition. But in May, when RBI unveiled a massive growth outline at its first investor day in New York City, calling for 40,000 total restaurants globally over the next 8–10 years, Popeyes’ footprint looked as follows, compared to its competition:

    North America:

    • Popeyes: 2,524 restaurants
    • The largest category competitor: 4,718

    Latin America & Caribbean:

    • Popeyes: 119
    • The largest category competitor: 1,302

    Europe, Middle East, and Africa

    • Popeyes: 338
    • The largest category competitor: 5,117

    Asia Pacific

    • Popeyes: 121
    • The largest category competitor: 11,484

    When you really examine the landscape, as mature as Popeyes is brand equity wise, it still possesses tremendous whitespace. It’s one of the key reasons RBI—a company with a proven track record in net restaurant growth—purchased the brand for $1.8 billion on March 27, 2017. It was a significant move because it gave the Burger King and Tim Hortons owner a serious stake in the chicken game. The only other multi-brand competitor on that level was YUM! Brands, with its KFC-Pizza Hut-Taco Bell triumvirate.

    Popeyes opened 216 restaurants the year before RBI jumped in, comprised of 118 domestic and 98 international restaurants. That was on par with the previous year’s 219 total openings. Net, Popeyes opened 158 in 2016 compared to 166 in the prior year.

    As of December 31, 2016, there were 2,725 locations. A year later, there were 2,892. And to close this past fiscal calendar, 3,102.

    In this past quarter, RBI grew its Popeyes restaurant cap by more than 6.5 percent, in line with its unit growth. But the majority of that was stateside.

    RBI announced a deal Tuesday morning that will turn some of that optimism into reality over the next decade. The chain signed a new agreement to develop and open more than 1,500 Popeyes in the People’s Republic of China, RBI said.

    “We're very excited to grow the Popeyes brand in the Chinese market," said Josh Kobza, RBI’s chief operating officer, in a statement. "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."

    What’s interesting here is that Popeyes is actually the last of RBI’s brands to enter the massive Chinese arena. 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 called for 1,500 restaurants throughout China in the coming 10 years. The first unit—in Shanghai—opened late February and featured exclusive tea offerings, like Steeped Black Lemon Peach Oolong and Blueberry Roselle.

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    And you only have to look at that “largest category competitor” figure of 11,484 to measure the potential for Popeyes in China.

    At the end of the first quarter, YUM! Brands’ KFC had 18,547 international restaurants (4,074 in the U.S.).

    Twenty-seven percent of KFC’s system sales came from China, where it has 6,000-plus locations, in the period, an 11 percent jump, year-over-year. That’s a full 10 percent more than the U.S. market, which saw only 2 percent growth.

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

    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.

    Popeyes domestic same-store sales climbed 0.4 percent in the first quarter. They were up 2 percent internationally.

    System-wide sales growth for the first quarter was just under 7 percent, driven by net restaurant growth of about 6.5. Growth in its topline resulted in adjusted EBITDA of $41 million, which was up over 6 percent organically, year-over-year.

    RBI also said Popeyes’ delivery platform was up to nearly 1,300 locations. There were almost none at the beginning of last year.

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