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  • Mcdonald's, Big Mac, Burger King's Whopper and Pizza Hut's Deep Pan

  • Pizzathe American fast food industry has been built on iconic menu

  • offerings that have enticed millions around the globe.

  • In the summer of 2019, another cultural phenomenon took place.

  • The launch of Popeyes' chicken sandwich was an inflection point for the

  • fast-food company and kicked off what industry insiders have referred to

  • as the "Chicken Sandwich Wars".

  • Chicken has been having a moment for quite some time now.

  • So, you know, it's hard to say that this, you know, this one sandwich

  • changed the trajectory of QSR chicken, but it certainly changed the

  • trajectory for Popeyes.

  • Hype around the chicken sandwich, and a lighthearted Twitter spat with

  • Chick-fil-A turned the menu item into an overnight sensation.

  • In November of 2019, Popeye's location alone sold more than 3,500

  • chicken sandwiches in a day.

  • And since then, sales at the company have surged,

  • I'd say so, it's the next sort of category, again, goes back to the

  • buckets of chicken that were invented as a whole meal solution that that

  • travel well.

  • In other words, the food doesn't degrade over time as much as, say,

  • french fries or hamburgers.

  • So it was that next category.

  • It was also created to be shared like pizza.

  • It's meant to be shared, and so there's a value proposition there for

  • the family. So can a simple chicken sandwich save a company that once

  • filed for Chapter 11 bankruptcy protection and is trailing two major

  • rivals, Chick-fil-A and KFC?

  • Popeyes Louisiana Kitchen got its start in the early 1970s in New

  • Orleans. Founder Al Copeland grew up poor in the Big Easy, dropped out

  • of high school at 16 and in 1971 opened Chicken on the Run.

  • Despite some early setbacks, Copeland went on to reinvigorate the menu

  • to include spicier, Louisiana Cajun-style recipes and eventually reopen

  • the restaurant under the name "Popeye's Mighty Good Fried Chicken,"

  • after Gene Hackman's character, Popeye Doyle in the movie "The French

  • Connection." The menu was a hit.

  • Copland opened a second location a year later, and by the late 1980s,

  • Popeyes ballooned to more than 100 company-owned stores, and 620

  • franchises.

  • Looking to expand further, in 1989, Copeland gambled big buying rival

  • Church's Fried Chicken for $400 million, making the new company the

  • second largest fast-food chicken restaurant in the U.S.

  • behind chain Kentucky Fried Chicken.

  • But even in the number two slot, the chain struggled.

  • The deal eventually soured, and by 1991, the company filed for Chapter

  • 11 bankruptcy, due in part to the remaining debt from the earlier

  • buyout. Copeland stepped down as CEO and sold his 84 percent ownership

  • of the company for $31 million.

  • By 1994, the reorganized company, America's Favorite Chicken, had more

  • than 1800 company owned and franchised restaurants worldwide.

  • The chain looked to diversify, acquiring Seattle Coffee Company and

  • Cinnabon. The plan was a flop, and within a few years, Popeyes decided

  • to double down on chicken and offloaded both companies, Cinnabon at a

  • major loss. In March 2001, Popeyes made its debut on the Nasdaq, opening

  • up at $19.50 a share.

  • By 2004, the company decided to go all in on Popeyes, so it downsized

  • even more, selling off its Church's Chicken restaurant for $390 million

  • dollars. By 2017, shares had soared to close at almost $79.

  • That same year, Restaurant Brands International, the owner of Tim Hortons

  • and Burger King, added Popeyes to their roster.

  • What's exciting about Popeyes is we have the opportunity to double our

  • footprint in the US and grow rapidly internationally so there is no

  • better growth runway in front of a chain than Popeyes.

  • In 2008, the chain took the name Popeyes Louisiana Kitchen and at the end

  • of 2019, Popeyes had more than 300 venues worldwide, making it the

  • second largest chicken chain by total number of restaurants.

  • For much of Popeyes' history, its Louisiana style menu featured items

  • like fried chicken, chicken tenders and fried shrimp.

  • But after nearly 50 years in business, in August 2019, the chain rolled

  • out its first ever nationwide chicken sandwich.

  • The launch, the biggest menu change since the restaurant added crawfish

  • three decades earlier, and the ensuing social media debate, sent

  • shockwaves through the fast-food industry.

  • A few days after its debut, Chick-fil-A tweeted a thinly veiled critique.

  • Popeye's response: y'all good?

  • The tweet were the opening salvo in what industry insiders refer to as

  • the "Chicken Sandwich Wars."

  • As I've seen it dubbed the tweet that changed the quick service

  • restaurant industry last August.

  • Until then, you know, they were a solidly performing, middle-of-the-road

  • chain that, you know, that certainly was doing all right, but you know,

  • that nobody would say, hey, you know, they are really setting themselves

  • apart. We were really excited about the launch of the chicken sandwich.

  • We spent a lot of time working on on a best-in-class sandwich.

  • The heritage of Popeyes has always been about culinary excellence.

  • And so we felt we had something really special for a simple but amazing

  • ingredients, a chicken fillet, Yvonne pickles and mayonnaise.

  • And we were ready for something big.

  • And then we broke the Internet in early August and that created a craze

  • that we haven't seen, I haven't seen in more than two decades in the

  • business. While Popeyes, Chick-fil-A, Wendy's and Shake Shack traded

  • barbs on Twitter, Popeyes nearly doubled its Twitter followers to

  • 180,000. More importantly, the company saw sales surge almost 10 percent

  • at stores open more than a year in the third quarter of 2019, compared

  • to less than one percent growth in the same period the year prior.

  • With lines out the door, about two weeks after the launch, the chain ran

  • out of chicken sandwiches.

  • One analyst estimated that while in stock, Popeyes sold about a thousand

  • chicken sandwiches per store a day.

  • And that the sandwiches alone accounted for 30 percent of sales.

  • And it wasn't just Popeyes that saw battlefield gains in the chicken

  • sandwich wars. According to food traffic analytics performer, Placer

  • Labs, over a typical summer weekend, Popeyes, Chick-fil-A, Zaxby's and

  • KFC receive about 8.3 million visitors.

  • At the peak of the chicken sandwich wars, the chains collectively had

  • over ten million visitors.

  • We launched our great tasting chicken sandwich last year in August.

  • Then, as you well know, we had to pull it back because of a number of

  • challenges, including supply.

  • And then we relaunched it in November.

  • And it's been a big part of our many since then.

  • And what it's done, it's brought a lot of new folks into the business, a

  • lot of folks that that hadn't really tried Popeyes or only tries it once

  • every 35, 40 days.

  • By November 2019, the Popeyes chicken sandwich, made of a chicken breast

  • fillet hand-battered and breaded in buttermilk coat, and served on a

  • British bun with either spicy or regular mayo, was back in action.

  • I think what Popeye's has done is created a sandwich that some people say

  • is better than Chick-fil-A some people say it's on par with.

  • There's very few people that say it's worse than, or significantly worse

  • than Chick-fil-A. And so they backed up their social media firestorm

  • with a really good product that people wanted.

  • As of August 2020, Popeyes sold more than 203 million chicken sandwiches.

  • The company reported second quarter same-store sales in August 2022,

  • grew nearly 25 percent.

  • The fast-food chicken market in the U.S.

  • is a $32 billion industry dominated by a handful of big players,

  • according to Technomic, including Chick-fil-A, KFC and Popeyes.

  • In 2019, Chick-fil-A had sales of $12.6 billion, making it not only the

  • largest chicken fast-food restaurant in the U.S., but also one of the

  • largest restaurant chains by systemwide sales behind McDonald's and

  • Starbucks. For comparison, Popeyes, the 19th largest U.S.

  • chain, according to the Nation's Restaurant News, pulled in $3.8 billion

  • in sales in 2019.

  • Closed on Sundays, Chick-fil-A first opened in Atlanta, Georgia, in

  • 1967.

  • As of September 2020, the brand had more than 2,400 restaurants across

  • the U.S. The key to the restaurant's success?

  • According to analysts, Chick-fil-A benefits from having quality food,

  • stellar customer service and unlike most other fast-food franchises,

  • limiting most operators to just one store.

  • So Chick-fil-A has got a number of things going for them, right.

  • And obviously, first and foremost, for any quick service restaurant is

  • the food. Their food is phenomenal in any rating that we or other

  • research firms have done, always indicate that Chick-fil-A's food is

  • phenomenal. But guests that go into Chick-fil-A are treated to people

  • that are trained to be polite, that say thank you and please and and,

  • you know, all of these things that get hammered into them.

  • And part of that is driven by the way they're structured.

  • Their franchisees structure is such that really most franchisees only

  • want to run one restaurant.

  • And so they're not torn between six or eight or 10 restaurants.

  • They're really on-site operators and are dedicated to growing and

  • improving the operations in the service at that one restaurant.

  • That focus has driven sales volume per store at Chick-fil-A significantly

  • higher than rivals KFC and Popeye's, according to analysts.

  • Their in the $5-6 million range per store.

  • Whereas a KFC might be the $1-2 million range.

  • I think Popeye's is approaching $1.7 million.

  • The performance in the way they've been able to grow and outperform the

  • rest of the industry really is beyond precedent in anything that you can

  • look at. With the exception maybe now of at least over the last several

  • years, with the exception of Popeye's and how they've been growing.

  • KFC was bought by PepsiCo for $850 million in 1986.

  • And in 1997, PepsiCo spun off its then struggling fast-food business,

  • launching Pizza Hut, Taco Bell and KFC into a new publicly traded

  • company that would later be renamed Yum Brands.

  • By 2019, KFC had more than 2,400 restaurants, 83 percent of which were

  • located outside of the U.S.

  • Though it's seen growth internationally in the years leading up to 2020,

  • the company has faced fierce competition in the U.S.

  • and at the same time struggled to reinvent its chicken sandwich.

  • Up to 2011, KFC was the leader in market share in the U.S.

  • limited service chicken segment.

  • A year later, Chick-fil-A was in the top spot.

  • But like other fast-food chicken restaurants, KFC has seen sales surge

  • during COVID-19.

  • In July 2020, Yum Brands reported that second quarter U.S.

  • same-store sales at KFC were up almost seven percent.

  • And to compete against rivals, the company tested an upgraded version of

  • its chicken sandwich in the summer of 2020, according to industry

  • insiders. Well, KFC went through a transformation period where they

  • invested the company invested its own capital in turning around the

  • business. You know, they reformulated the menu, they, you know, invested

  • in digital technologies.

  • And really, it's become, during this COVID crisis, it's actually become

  • a hotspot for lack of a better term.

  • But it may be Popeyes that has benefited the most.

  • Popeyes reported same-store sales rose twenty five percent in the second

  • quarter, ending June 30, 2020.

  • During the same period, Restaurant Brands International's other

  • businesses reported same-store sales at Burger King fell 13 percent, and

  • Tim Hortons declined 29 percent.

  • For decades, burgers have been one of the top choices for consumers at

  • restaurants across the U.S.

  • Americans ordered an 8.6 billion burgers in the year ending February

  • 2019, compared with four billion chicken sandwiches.

  • But according to the NPD Group, the chicken sandwich is only getting

  • started. The big story over the past 30 or 40 years has been the rise of

  • chicken consumption.

  • Chicken went in the late 1970s from being a minority meat, at least

  • relative to beef and pork to now.

  • Today, it's the most consumed meat in the United States.

  • One reason Americans have consumed more chicken: affordability.

  • Over the past several decades, the availability of chicken has increased

  • dramatically as consolidation in the meat processing industry has

  • allowed companies like Tyson Foods, Pilgrim's Pride and Sanderson Farms

  • to increase production while at the same time keeping costs low.

  • So the industry in chicken is much more vertically integrated, which

  • means that you have companies say, like Tyson, that own most of the

  • supply chain. They've been able to improve genetics, improve feed,

  • improve housing situations, and that's really been able to pull down the

  • price of chicken quite considerably.

  • And while low prices have kept consumers coming back for more,

  • perceptions of health and wellness have led to carnivores choosing white

  • meat over red meat.

  • Organizations like the World Health Organization and the U.S.

  • Department of Health have linked red meat with cancer and heart disease

  • Particularly in the 80s and 90s, there was a lot of concern among

  • consumers about the consumption of fat and cholesterol and chicken

  • really benefited from from these concerns on the part of consumers

  • because chicken was consumed, you know, perceived as a healthier

  • alternative, a less fatty alternative.

  • And hamburger chains are looking to take a bite out of Popeyes' newfound

  • success, too. In August 2020, Wendy's added a new spicy crispy chicken

  • sandwich to its four dollar value menu.

  • And according to Telsey Advisory Group, fast-food giant McDonald's is

  • expected to launch a new crispy chicken sandwich sometime in the next

  • year. Going forward, I mean, McDonald's is not...is looking at this and

  • saying, well, we have a pretty good chicken business as well.

  • So McDonald's is just sitting back and letting everybody take share.

  • They, we expect them to launch a chicken sandwich early next year.

  • They've tested a number of different versions.

  • The last I heard was they maybe settled on a version that they're going

  • to roll out. So we expect big things from that.

  • And analysts say chicken chains like Popeyes could face a greater threat

  • from a potentially cheaper and healthier source of protein.

  • New alternative meat products like plant-based meat or the emergence of a

  • lab-based meat products.

  • They are more expensive now, but could someday be cheaper to produce.

  • One provocative way to think about this is that over the past 20 or 30

  • years, chicken has displaced beef and pork on our dinner plates by being

  • perceived as more healthy and as by being more affordable.