The chicken sandwich battlefield may be brutal, but it is a boon for retail.
Chick-fil-A’s feathers were ruffled over the summer after Popeyes Louisiana Kitchen introduced a new chicken sandwich. Popeyes’ combination of a crispy chicken breast, thick-cut pickles and aioli-smeared brioche bun drove massive foot traffic and attention from even highbrow New Yorker and Boston Globe food writers who claimed it was a worthy, less politically active adversary to Chick-fil-A’s own popular brand of fried poultry.
It also gave a traffic boost to a normally slow month of business for the chain. While August is not usually a strong sales month for fast food, visits to Popeyes during the height of its sandwich popularity rose 68% and 103% on Aug. 20 and 21, respectively, above the summer’s baseline foot traffic average, according to foot traffic analytics platform Placer.ai. Chick-fil-A didn’t have a similar traffic spike.
Popeyes eventually sold out of the sandwich, and other companies like McDonald’s plan to release their own version of the crispy meal.
Popeyes’ summer of the sandwich has boosted the chain’s profile to new customers, as well as developers who may not have previously looked to do a deal with the company.
“For us, we look at credit quality, use of space and future viability when signing a tenant. A final part is if they’re an exciting brand,” First Washington Realty Senior Vice President and National Director of Leasing Wright Sigmund said. “This now checks a box that the brand didn’t previously have.”
While Popeyes retools its strategy for significantly higher-than-expected sandwich sales, retail experts say the chicken wars are a normal part of food retail evolution.
“There’s always growth in the food sector and a re-creation of the foods you have available,” said Gregory Tannor, an executive managing director and principal at Lee & Associates in New York City who specializes in retail leasing. “Over the years, you’ll see people reimage themselves into different concepts for food. It’s no different than the poke craze going on.”
Pinkberry was essentially born as a high-end, tart-flavored play on TCBY. Chopped and Sweetgreen have turned salads into big business. But the chicken craze is on a grander scale.
Chick-fil-A has vaulted up fast-food rankings in recent years to become the third-largest U.S. fast-food chain (behind McDonald’s and Starbucks) in terms of sales.
The chain leads the $34.4B fast-food chicken industry with a nearly 28% market share, according to market research firm IBISWorld. Popeyes comes in third (after KFC) with a 10.8% market share. An average Chick-fil-A restaurant made $4.6M in 2018, or more than three times what second-ranked competitor KFC brought in on a per-store basis.
Chris Potter, Flickr
Sales and per-store revenue like that are hard to ignore, especially with the overall fast-food chicken industry revenue growing 8.4% annually for the last five years, according to IBISWorld.
Popeyes’ parent company, Restaurants Brand International, indicated plans to shift strategy and significantly expand the company worldwide after acquiring it in 2017 for $1.8B. Then-CEO Daniel Schwartz said at the time of the acquisition that Popeyes’ future growth would tie to customer satisfaction and franchise profitability.
RBI’s Popeyes, Burger King and Tim Hortons collective restaurant footprint is expected to grow from 26,000 stores currently to more than 40,000 globally, the company announced in May. The growth is tied to forecasts showing the company’s coffee, burger and chicken markets to grow between 5% and 6% annually for the next five years.
The company plans 1,500 new Popeyes in China alone over the next decade, RBI announced in July. RBI didn’t respond to Bisnow’s request for comment in time for publication.
With about $1.4M in U.S. per-store sales in 2018, the chain has a way to go before it catches up with Chick-fil-A.
First Washington, based in Bethesda, Maryland, specializes in grocery-anchored shopping centers, and Sigmund said having an exciting, quick-service restaurant on a pad site in front of the main retail strip helps drive cross-shopping to surrounding retailers. Between 30% and 40% of visitors to a pad site restaurant will then shop elsewhere at the retail center, Sigmund said.
While he doesn’t expect Popeyes to suddenly vault over Chick-fil-A in sales, Sigmund does think the summer chicken sandwich war gives the chain the opportunity to refresh its brand and elevate its exposure to new customers and developers.
“I don’t think we have a Popeyes as a tenant, but maybe now we should,” he said with a laugh.
Chick-fil-A’s spicy chicken sandwich
Prior food fads like cupcakes and frozen yogurt have come and gone, with the frozen yogurt industry seeing a 5.6% annual decline between 2013 and 2018, according to IBISWorld.
But Sigmund and Tannor think the chicken craze is a durable one, both due to the low cost of serving chicken compared to other foods and because it is generally seen as a staple food item.
IBISWorld predicts the fast-food chicken industry is in a growth stage of its life cycle and will have a 7.7% annual growth rate at least through 2024, well above the forecast 2% U.S. growth rate in gross domestic product in the same time.
The only headwind may be if Popeyes’ chicken sandwich shortage becomes an industry-wide problem.
“Hopefully we just don’t go through a chicken shortage,” Tannor said. “Otherwise, we’re all clucked.”
September 10, 2019 by Cameron Sperance, Bisnow Boston on Bisnow.com