Popeyes Executive Summary

Popeyes is the 2nd largest player in the $1B+ QSR chicken segment with 34% market share, just behind KFC’s 36% share and more than Wingstop, Bojangles’ & Church’s combined. Its iconic “Love that Chicken from Popeyes” tagline emphasizes the emotional bond of loyal customers towards the brand’s unique positioning around a flavorful Louisiana heritage (slow cooking, served fast) that extends beyond fried bone-in chicken to sandwiches, nuggets, tenders and seafood (particularly shrimp). The chain’s core bone-in chicken is infused with a Louisiana-inspired seasoning dry rub that is applied to fresh chicken which marinates for 12 – 72 hours and is then hand-breaded. Popeyes’ hugely popular chicken sandwich helped launch the chain’s social media marketing success, attracting new customers who also tend to shop the entire menu. Value is addressed with an extensive use of monthly promotions offering individual deals and family bundles (which are cost-effective at feeding families and large groups) spanning multiple price points. Going forward sales tailwinds include: the continued popularity of its chicken sandwich; a drive-thru format (with double drive-thrus added at 50% of new restaurants); cost effective family bundles of comfort food; growth in digital & delivery; and a strong development pipeline (benefitting from new building options) which helps address the #1 reason for non-visitation (the lack of a nearby location). Having said all this, we note the chain’s recent comp weakness and going forward sales headwinds which include: significant chicken cost inflation which challenge the chain’s value equation; vulnerability of the brand’s core lower income demo to ongoing stagflation/recession; and a sharp increase in chicken sandwich competition. In conclusion, while Popeyes enjoys a very strong brand positioning, even as sales moderate from its famous chicken sandwich spike, the current economic challenges for its core lower-income demo combined with huge chicken cost inflation represents a notable sales challenge for an unknown duration.