Cheap fried chicken ought to do well in a recession, you might think. But it's been a mixed bucket -- top chain KFC has suffered sinking sales at U.S. stores, parent Yum! Brands (YUM) recently reported, while AFC Enterprises' (AFCE) Popeyes has grown its sales and profits and raised its outlook.
Here's why Popeyes has thrived in the downturn while KFC has struggled:
- Better-tasting food. Let's start with the obvious: Popeyes chicken and biscuits are really delicious. Their chicken has that Louisiana Cajun-spiced kick to it, where the Colonel's Kentucky herbs and spices seem to have slowly gotten blander through the years. Popeyes biscuits melt in your mouth, while KFC's are merely edible (and only if you slather them with the butter and honey a Popeyes' biscuit doesn't even need). You wouldn't want to see a blind taste-test of the two brands' chicken and biscuits side-by-side with KFC... oh, actually Popeyes recently did a national taste contest with KFC, which Popeyes won.
- Avoided overexposure. KFC has become ubiquitous with too many stores -- particularly in the U.S., where it has over 5,000 of its 15,000 restaurants. By contrast, Popeyes has just under 1,600 domestic stores (of about 2,000 total), avoiding the self-cannibalization problem KFC faces. Instead, Popeyes has been able to successfully position itself as almost the In-N-Out Burger of fried chicken -- a less-available, better-quality treat that folks will drive miles to get.
- Better product innovation. While KFC has been trying without success to get customers to buy versions of its healthier roasted chicken, Popeyes keeps mining its great-fried-chicken vein. Popeyes is unabashedly about exactly what it is: Great fried chicken in the Southern tradition. Popeyes' recent product introduction was Wicked Chicken, which simply delivers an amped-up version of the chain's core fried-chicken product. KFC, on the other hand, grossed out America with the bunless Double Down "sandwich," which wasn't a hit with customers.
- More consistent marketing. Popeyes has just plugged away featuring spicy fried chicken and shrimp in its ads. Next up, it'll launch one of its biggest marketing campaigns ever, based around the taste-test win. For its part, in the past couple of years, KFC has been all over the place with marketing. The company has plugged the Double Down, $1 menu items, and devoted a lot of marketing energy to promoting roasted chicken, including a stampede-inducing Oprah coupon giveaway. Franchise owners are so mad they're suing for control of the marketing campaign, because the schizophrenic marketing and emphasis on healthier chicken hasn't grown sales. Speaking of which...
- Less franchisee discord. When store owners are busy squabbling with the parent corporation over how their restaurants should be marketed, they're not fully focused on making sales. Popeyes' managers seem to be working well with franchise owners, and that usually translates to more sales and profits for everybody.