Popeyes CEO dishes on Cajun cookin', recession and health care

By Jeremiah McWilliams

The Atlanta Journal-Constitution

Cheryl Bachelder, chief executive officer of Atlanta-based AFC Enterprises Inc., has shrimp, buffalo nuggets, crawfish and fried chicken on her mind. As she should: Her company operates and franchises about 1,940 Popeyes restaurants in 44 states and 27 foreign countries. The company is looking to add hundreds of restaurants in the next five years.

Bachelder, who came to Popeyes after executive stints at Domino’s Pizza and KFC, is trying to lead the chicken and seafood chain through a bruising period in the fast-food industry. Many customers of Popeyes have lost their jobs and seen their food budgets shrink. Still, Popeyes said more customers visited its restaurants in 2009 than in 2008, and it gained market share in the fast-food industry.

Bachelder talked recently with The Atlanta Journal-Constitution about how Popeyes was pushing through the recession.

Q: You recently shifted to using national advertising, rather than local. What was the reason for that change in strategy, and how has that gone?

A: We're going to continue forward using national media. About half of our restaurants had formed local advertising cooperatives where they promoted the brand on television at a local level. So we had only local advertising as a system. Half of our restaurants had no TV advertising. You have to build out a market and get a critical mass so you can advertise on TV. We were in 44 states, and half of our stores didn't have TV advertising. The efficiency was there to go national. We were able to show our system [of franchisees] that it was more effective. That was a huge change, and at first blush there was not a lot of excitement about it. But [franchisees] got on board, and it worked. When we're on national television, our sales are 5 percent higher than when we are not.

Q: So, you had to do some cajoling to get franchisees on board with the new advertising plan. Is the relationship between the parent company and the franchisees a healthy one?

A: When your sales and profits are up, your relationship is better. We're on the good side of that column. Our guest counts are up. Our restaurant profitability is getting better. But in this economic environment, it is tough sledding. I think our franchises do feel a lot of pressure. It is a tough time to own a restaurant. Health care reform stands to take 3 percentage points out of a franchisee's P&L [profit and loss statement]. These are anxious times to be a franchisee.

Q: About two years ago, Popeyes announced a rebranding to "Popeyes Louisiana Kitchen" from "Popeyes Chicken & Biscuits." What does the change do for your brand, and have customers accepted it?

A: I'm really pleased with our results. It's essentially going back to the DNA the brand was founded on. We came out of Louisiana. It's a fabulous regional cuisine place. That gives us the credibility to do things that no other [fast-food] company can do. Gulf Coast restaurants can do killer seafood. Going forward, there are so many places to go for innovation. I won't run out of ideas until the year 3000.

Q: Are price cuts and promotions sustainable? Do you want to gradually wean your customers off the lower prices so you can increase profit margins?

A: I don't want to wean anybody off from eating at Popeyes. I want them to come as often as they can afford. As long as our guest traffic is positive, we'll continue to do that. I think it would be premature to declare a recovery and back to normal pricing. Teenagers have taken the biggest hit to their disposable income.

Q: After you were named CEO, you said that improving customer service would be key because the urgency of delivery of food at a Popeyes was seen as lacking in too many cases. You have instituted training to speed up service at the drive-through window, and staff have more headsets and timers at their disposal. Have you seen results?

A: We've made good progress on our service. Last year, our overall guest experience improved by 17 percentage points: 64 percent of our guests say our service is a "5″ out of 5. We challenge our restaurants to improve the [food-delivery] time. Our owners are putting incentives in place. Some of our franchisees are putting shifts up against each other, with bonuses at stake. We rank our restaurants, and we publish the list. That's actually pretty motivating because no one wants to be at the bottom of that list.

Q: The new health care law requires chain restaurants to put a lot more calorie information on menu boards. How will the new regulations affect Popeyes?

A: I'm concerned at the increase of government regulation on all levels of our business. I'm starting to wonder if they are going to tell us what color our socks should be. Health care reform is estimated to cost a restaurant 3 percentage points of profitability. If we pride ourselves on being a country that allows people to pursue the American dream, we are making it wicked hard. They are trying to tell us what to eat and how much. That's just un-American. There are already states where calorie labeling is required. It is not something that the customer has requested. It's not something that is going to change your opinion about what to eat tonight. In my opinion, it's overzealous government.