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TheStreet Open House

AFC Reports Financial Results For Second Quarter 2012; Raises Fiscal 2012 Earnings Guidance

Stocks in this article: AFCE

On a system-wide basis, Popeyes had 2,049 restaurants operating at the end of the second quarter, compared to 2,000 at the end of the second quarter of 2011. Total unit count was comprised of 1,637 domestic and 412 international restaurants in 25 foreign countries and three territories. Of this total, 2,009 were franchised and 40 were Company-operated restaurants.

Strategic Plan Update

The Company continues to strengthen its competitive position in the restaurant industry and quick service restaurant sector by executing its Strategic Plan which is based on the following pillars:

  • Build a Distinctive Brand
    • We have achieved positive global same-store sales for the ninth consecutive quarter. Our sustained media presence in the second quarter, and the addition of integrated digital media campaigns, coupled with our innovative boneless, seafood and bone-in chicken promotions, once again fueled domestic same-store sales growth.
  • Run Great Restaurants
    • At the end of the second quarter, approximately 14% of the Popeyes domestic system restaurants had incorporated the new Popeyes Louisiana Kitchen re-image. Our goal is to have approximately one-third of our domestic system in the new restaurant image by the end of 2012.
    • Speed of service at the drive-thru continued to improve. By the end of the second quarter, approximately 75% of our domestic system restaurants attained speed of service below our 180 second standard.
    • We revised our Guest Experience Monitor (“GEM”) process in the first quarter and are pleased that we have doubled the number of guest survey responses. For the second quarter, GEM “Overall Delighted” scores were approximately 70%.
  • Grow Restaurant Profits
    • In the first quarter of 2012, our franchisees recorded their highest average profits since we began tracking this metric four years ago despite commodity cost inflation of 2.5%.
    • As with many others in the restaurant industry, Popeyes continued to face commodity inflation in the second quarter. On a full year basis, the Company now expects food costs to increase by approximately 3%, which equates to an approximate 1% negative impact on Restaurant Operating Profit margins.
    • Similar to the first half of 2012, we expect to offset the impact of commodity inflation noted above by continuing to deliver top-line sales growth, and implementing on-going supply chain cost savings and in-restaurant cost controls.
  • Accelerate Quality Restaurant Openings
    • Our development strategies continue to result in sales volumes of new restaurant openings which significantly exceed the system average. Of the 24 domestic restaurant openings through the end of the second quarter, approximately 70% have been in top priority development markets.
    • Our international team opened 12 new restaurants in the second quarter, including our first free-standing restaurant in San Jose, Costa Rica and our first restaurant in Lima, Peru.
    • Company-operated restaurant development remains on track, with between 4 and 6 new restaurants planned for 2012.
  • Create a Culture of Servant Leaders
    • Our initiatives in this new strategic pillar focus on creating a servant leader culture and an employee experience which will consistently deliver a distinctive and positive Popeyes guest experience. We believe this is a unique opportunity to differentiate our brand and elevate our sales and returns by improving the experience of our employees and our guests. We will be providing further updates as part of our Strategic Plan discussions going forward.

2012 Guidance

The Company now expects global same-store sales growth in the range of 5.0%-6.0%, compared to previous guidance of 4.0% to 5.0%. It is important to remember that the Company will be rolling over a very strong 5.8% global same-store sales increase in the fourth quarter of last year.

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