Popeyes is easily one of the most recognizable fast-food chains in America (who doesn’t love fried chicken?). It has one of, if not the best chicken sandwiches in the market. It boasts an impressive market share of 17 percent in the fried chicken industry, second to only Kentucky Fried Chicken. In 2017, it was sold to Burger King (and consequently to its parent company Restaurant Brands International) for 1.8 billion USD. From then on it has posted regular profits and has expanded to almost 3,000 stores across the US. Its annual revenue last year was 256 million. But it hasn’t always been smooth sailing.
Popeyes was founded in 1972 by Al Copeland as “Chicken on the Run”. Copeland grew up in the poor district of Arabi, Louisiana, where he lived with his mother and two siblings. His brother owned a donut chain where Copeland worked for much of his teenage years. When he turned 18, Copeland, fueled by his passion to escape poverty, sold his car to start his donut chain “Tastee Donuts”. He was successful in his enterprise and was constantly looking for more and more opportunities for bigger profits. That was when KFC opened its first location in New Orleans. It immediately caught the attention of Copeland, who began to examine and compare its business model to that of his own. He found that KFC opened for fewer hours, but pulled in almost 4 times the profits than that of his donut franchise. It was clear to him that he was in the wrong industry, fried chicken was where the real money was made. So in 1972, Copeland closed Tastee Donuts and opened “Chicken on the Run”.
It was not successful. After about 8 months of business, business expenses totaled to two thousand per week, while sales only sat at eleven hundred per week. Copeland shut down the business temporarily to rebrand and make some critical changes to the recipe. After rebranding, Chicken on the Run thus became “Popeye’s Mighty Good Chicken”, which specialized in serving chicken with a spicier, Cajun taste. These two changes proved to be successful, as the company managed to double its sales and was now making a profit. In hindsight, there was perhaps the most important reason for Popeyes’s immense success. First, the change in the recipe gave it a spicier, Cajun taste, which gave Popeyes a sense of identity. This was critical when competing against KFC, which dominated the fried chicken market at the time. Second, the name change gave Popeyes a sense of distinctiveness. It was now no longer the generic “Chicken on the Run”.
Popeye’s Mighty Good Chicken continued to grow through the years. It eventually became Popeye’s Famous Fried Chicken in 1975 and they were pulling in revenues of millions per year. By the 1980s, KFC was well in the lead in the fried chicken industry: commandeering over 60% of the market share. Far behind them were two companies with very different histories: Church’s and Popeyes. Unlike Popeyes, Church’s was a more conventional fast-food chain that aimed to beat KFC at their own game, selling only fried chicken. While Popeyes had adapted a signature Louisiana Cajun taste, Church’s did not have the same “home identity”. Despite having twice as many locations in the US as Popeyes, Church’s was struggling to keep things afloat and was rapidly losing market share. This is exactly what KFC wants, while Church’s and Popeyes are at war, they both gradually lose profits and KFC is there to scoop them up.
Then one day, out of the blue, Al Copeland makes an executive decision. He offered to buy out Church’s for a whopping 300 million dollars. The deal was not without rationale, if the sparring between the two companies for 2nd continued, both would end up losing, although it was likely that Popeyes would eventually come out on top. But was 300 million a fair price to pay for a struggling company? After all, even if the deal did go through, Popeyes would still be way behind KFC in the race for first. Any modern businessman would scoff at such a deal. To make things worse, Church’s declined the proposed merger and instead filed a lawsuit against Popeyes accusing them of using insider information (many former Church’s executives were now working for Popeyes) to conduct a hostile takeover of their company. However, in the end Popeyes won out. Whether it was Al Copeland’s charm that did the work or if the executives at Church’s finally came to their senses we will never know, but in 1990, the deal fell through. Popeyes took out nearly 300 million in new debt, on top of the original 100 million they owed to speed up the development of their business. That spelled the beginning of the end. Just one year later in 1991, Popeyes defaulted on 391 million in debt and filed for Chapter 11 bankruptcy protections. Immediately after, Copeland founded America’s Favorite Chicken (AFC) to serve as a parent company for Popeyes until it emerged from bankruptcy. In the next few years, Copeland took some time off to restructure the company. Popeyes surfaced in 2014 and has been going strong ever since then.
So what can we learn from the roller-coaster ride that Popeyes endured? First, a fairly obvious lesson, that it’s impossible to create a company without taking risks and failing. Chicken on the Run posted a loss for several months before rebranding and flipping a profit. Second, it is important to look long-term and examine the true value of things. Was Church’s Chicken, a struggling company going through constant management changes really worth 400 million? Was it worth going into debt to double a relatively small market share in a monopolistic market? Those were all questions that Popeyes failed to answer correctly, and it eventually dragged them into bankruptcy. Finally, we can learn that it is important to capitalize on a popular idea or product. The moment Popeye’s truly became a keystone in the modern fast-food industry was when they introduced their massively popular chicken sandwich back in 2016. The story of Popeyes follows a familiar trend among many companies. What goes up must come down, that is inevitable. It is the legacy you leave that is important.