Popeyes Louisiana Kitchen announced that it managed significant savings in its 2010 supply chain costs—a whopping $16 million in savings, in fact.
The company says the savings helped franchisees improve a full percentage point in restaurant operating profit margins before rent over 2009.
Alice LeBlanc, chief global supply chain officer for Popeyes, says the company managed the big savings because of the diligent time it spent with manufacturers and suppliers.
“Our suppliers really came through for us,” LeBlanc says. “[We had] candid, open conversations with our suppliers, talking to them about our overall strategy, where we want to take the brand, and the importance of their contribution in our overall success—if we succeed, they succeed, and vice-versa.”
LeBlanc says Popeyes put together a “cross-functional” team of 8–10 people who regularly met to figure out how to make the supply chain more efficient.
“We met every two weeks, and the first 30 days we brainstormed a lot and came up with initiatives, things that we could tackle,” she says.
LeBlanc says there were four initiatives that the Popeyes team specifically established for cost saving: negotiations with existing suppliers (“anything to do with regular purchasing and negotiation,” she says), identifying secondary suppliers, challenging suppliers to maximize production, and commodities management.
But while the company was able to negotiate the best prices for store operators, LeBlanc says there were many other components that the company did not have control over when it came to saving operators money.
“There’s the logistics piece—the in-bound freight, the out-bound freight—there’s the distributor mark-up … and of course, people can make mistakes,” she says. “So your intentions are good, everything’s great, and then all of a sudden something comes in at a higher price.”
In order to ensure everything worked according to plan, LeBlanc says Popeyes hired a third-party firm to monitor the supply chain.
“The monitoring in itself, just last year, saved us $300,000,” she says.
LeBlanc says the goal for 2011 is to improve half a percentage point in restaurant operating profit margins, and 1 percent for international franchisees (the 2010 savings were for domestic franchisees).
With the economy’s continuing struggles, LeBlanc says Popeyes will be banking on new efficiencies and input from international markets to help it continue to save money.
“It wasn’t easy; the one percentage point, it really took a lot of commitment, a lot of passion, and a lot of motivation,” LeBlanc says. “But it’s one of those things where we need to do it because the importance of profitability to our franchise partners is so critical to the success of our brand.”
By Sam Oches