Popeyes uses new site selection process to drive growth

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Popeyes Louisiana Kitchen has set its sights on doubling the number of its domestic units, AFC Enterprises Inc. chief executive Cheryl Bachelder said Thursday.

“We see excellent opportunities on the new restaurant development front,” she said during a call following the release of fourth quarter results from parent company AFC Enterprises Inc.

“Unlike other brands that have been around for decades, the Popeyes growth story has really just begun,” Bachelder said.

Popeyes marks its 40th anniversary this year.

Improved performance of new and existing restaurants, resulting in part from new site selection and modeling tools, had garnered increased interest in the quick-service chicken chain from potential franchisees, Bachelder said.

Ralph Bower, whom AFC Enterprises promoted to president of Popeyes’ U.S. division on Tuesday, said new restaurants were reporting average unit volumes of $1.5 million, substantially higher than the systemwide average of $1.1 million. He said that was driven by improved site selection and emphasis on profitability.

In an interview with Nation’s Restaurant News, Bower said the company improved its site selection metrics by gaining a better understanding of their customers.

“In 2008, we went to over 400 of our restaurants and did over 60,000 customer intercepts to figure out who are our customers, where do they live and what is it that draws them to Popeyes,” he said.

That helped them not only to go to the best trade areas for their units, but also to build at the best sites in those areas.

“We got really good at saying ‘no’ when we see locations that don’t meet our expectations. In fact, we probably say ‘no’ twice as often as we say ‘yes,’” he said.

Restaurants opened using the new metrics, with annual average unit volumes of $1.5 million, have doubled their cash-on-cash return rate, which is now in excess of 25 percent, he added.

AFC opened two company-owned restaurants in the fourth quarter, in New Orleans and Indianapolis, a new market for Popeyes and a city Bower said could support at least 20 units.

AFC Enterprises now owns and operates 40 Popeyes units. Those restaurants, except for the new one in Indianapolis, are in New Orleans and Memphis. About half of the restaurants in those markets are company-owned, Bower said.

The company plans another seven to nine corporate restaurants in new and existing markets in 2012, mostly toward the end of the year, he told investors. The new company-operated restaurants would help showcase the business model, as well as improve returns for shareholders, he said.

AFC Enterprises plans to operate all of the Indianapolis restaurants, giving them the opportunity to show franchisees that entering an unpenetrated market and using tools available to Popeyes operators, “can make a lot of money,” Bower told Nation’s Restaurant News.