Financing

Popeyes is taking a 'hard look' at its kitchen operations

The fast-food chicken chain is looking to improve operations after new products have added complexity in recent years. And it is looking to its international operators for inspiration.
Popeyes kitchen
Popeyes is trying to ease the impact of the complexity added to the kitchen since the addition of the chicken sandwich. / Photograph: Shutterstock.

In 2019, Popeyes added a chicken sandwich to the menu that added a huge amount of sales to its restaurants and brought in a lot of new customers.

But it also added something else: More complexity to its kitchens. The same was true later when the company added chicken nuggets.

To fix this, the company is looking to make serious operations improvements in its kitchens. And it is looking for inspiration from some of its newer international locations.

“We’re taking a very hard look at the kitchens,” said Josh Kobza, CEO of Popeyes parent company Restaurant Brands International. “In some of our newer restaurants in Spain and India, there’s a clear vision of the world that’s much calmer, easier to operate.”

Popeyes is a different restaurant chain than it was just a few years ago. The brand largely focused on bone-in chicken for years, with a certain amount of success, until it began selling that chicken sandwich.

The result was the strongest quarter for any publicly traded restaurant chain in history in the fourth quarter of 2019, with 38% same-store sales growth. Increases sustained themselves over the course of the following year, even amid the pandemic. Popeyes brought in a new type of customer who visited more often at lunch, something it hadn’t done much before.

To double down on this, Popeyes added other products, notably Chicken Nuggets in 2021. “If you go back five years, if you think about it, all we served was bone-in chicken and strips,” Kobza said. “We’ve doubled the number of proteins with filets for the sandwiches and nuggets. That’s added a lot of complexity, trying to manage all four.”

That has likely played a role in a slowdown in results over the past two years. Popeyes generated 3.4% same-store sales growth in the first quarter, its best performance in more than two years. Before that, the chain had not had quarterly same-store sales of more than 1.5% in the previous nine quarters, including a stretch in which it reported negative numbers in six of seven quarters.

Last year, while system sales rose 4.7% in the U.S., according to Restaurant Business sister company Technomic, its average unit volumes declined more than 1%, to $1.76 million. While that is still higher than most of its bone-in chicken rivals, it’s clear the brand lost some momentum.

Operations isn’t the sexiest part of the restaurant business, but it’s an important one. And numerous chains this year are focusing on operations as they work to overcome difficulties arising from labor shortages that hit the industry in 2022. Several restaurant chains, such as McDonald’s and Popeyes sister company Burger King, are working to improve operations this year.

The company wants to improve profitability in the coming years. Popeyes’ goal is to increase restaurant-level EBITDA, or earnings before interest, taxes, depreciation and amortization, to $300,000 by the end of 2025. Executives believe that starts with making its kitchens easier to operate.

“We know guests love our food when we get it right, but frankly, it isn’t easy to do,” Kobza told investors on the company’s first-quarter conference call Tuesday. “We know restaurants drive much higher sales, traffic and profitability when they have great operations. This part of the plan is designed to help more restaurants be in that top tier.”

Popeyes executives visited several international markets over the past six months to learn best practices to bring back to the U.S. business.

That includes variations on kitchen equipment and design, Kobza said, operations procedures and digitization. For instance, they may have software for production management that can help fry cooks and take away much of the work they have to do to keep pace with demand.

“The good news is that we have a pretty clear and complete blueprint of how Popeyes can be easier to run from international markets such as Spain, France and the U.K.,” he said, noting that the company is “now testing these elements in the U.S., and believe many will become core to our operating plan over the next year.”

The international locations can be that example because they’re newer. “The reason the international versions are so insightful is they came at it with a blank slate,” Kobza said. “It’s been really insightful how they set up the kitchen from scratch instead of adding equipment later.”

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