Popeye's 2006 Annual Report Download - page 4

2 AFC ENTERPRISES, INC.
There is a good reason why we
chose accelerating growth as the
theme for this year’s annual report.
Put simply, it is an apt metaphor
for the winning performance of our
AFC team in 2006. Propelled by the
momentum generated in 2005, 2006
was a year of accomplishment for
Popeyes® — fueled by new restaurant
openings, a growing development
pipeline, new product news, a new
advertising campaign, positive
same-store sales, and strong support
from our Popeyes operators around
the globe.
2006 results
2006 turned out to be a very
successful year for Popeyes. At year-
end, our Company revenues had
grown approximately 7 percent to
$153 million, yielding an operating
profit of slightly over $45 million
and net income of $22.4 million,
or $0.75 per diluted share. We’ve
spoken in the past about our two
primary strategies for accelerating
Popeyes growth — driving average
unit volume and accelerating new
restaurant development in both
domestic and international markets.
We saw positive momentum in both
of these areas in 2006. Popeyes
domestic system average unit
volume increased by 4.6 percent to
slightly over $1 million in 2006. This
improvement was driven by domestic
same-store sales growth of 1.6
percent, closure of underperforming
restaurants, and the fact that our
new freestanding restaurant sales
are annualizing at approximately
$1.3 million.
Maintaining momentum
At Popeyes, our positioning comes
down to five simple words: “It’s all
about the food.” Our operators know
that; our employees know that; the
marketplace knows that; and I hope
after reading this annual report, you
will, too. In 2006, we introduced a
new advertising campaign, “Food
with ’Tude™,” based on the brand’s
superior quality and an array of flavorful
menu items. It was a message that
resonated with our core consumer
demographic, who, as gasoline and
other living expenses increased,
were beginning to tighten their
belts. Our core customers are still
watching their spending carefully and
consequently, demanding more value
from every Quick Service Restaurant
(QSR). Our food-focused positioning
and strong line-up of new product
concepts help us deliver it.
An emphasis on quality, limited
time offers, including our seafood
offerings of Butterfly Shrimp, Catfish
and Popcorn Shrimp and our new
Sweet Heat® boneless wings, as well
as a continued focus on our core
traditional chicken offerings, played
an integral part in brand growth over
the past two years. Going forward,
we will continue to strengthen sales
through a focus on value propositions
and new product news that reinforce
our brand heritage. New, appealing
menu items — such as wings and
onion rings, catfish strips, popcorn
chicken and spicy new sauces that
complement all of our menu items
— will help drive traffic into our
restaurants. We plan to continue
our strategy to mix our messaging
to include our best in class chicken,
chicken strips, flavored nuggets and
seafood items, all of which feature
our unique spices and sauces that
are only available at Popeyes.
Driving new growth
During fiscal year 2006, the Popeyes
system opened 142 new restaurants,
a 15.4 percent increase year-over-year
in openings, with net new openings
of 46 units. More importantly,
the development team has put in
place a robust pipeline to support
approximately 20 percent more new
domestic and international openings
in 2007. We expect increased new
openings and fewer closings to
double the number of net openings
for 2007. Our franchisees continue
To Our Stakeholders
Frank J. Belatti, Chairman