Popeye's 2014 Annual Report Download - page 20

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Our Business Strategy
The Company’s Strategic Roadmap focuses exclusively on growing the value of our single brand, Popeyes Louisiana Kitchen,
through franchising with the best franchise owners to grow the Popeyes footprint globally and operating a select number of our
own restaurants. Franchising is our primary focus and our franchisees are our number one customer. As such, our primary objective
is to deliver sales and profits by offering excellent investment opportunities in the Popeyes brand and providing exceptional support
systems and services to our franchise owners who sign long-term franchise agreements.
In 2008, the Company's Strategic Roadmap was launched with four organizing pillars to its strategy which are used to set
priorities and allocate resources. These pillars are:
• Build a Distinctive Brand
• Create Memorable Experiences
• Grow Restaurant Profits
• Accelerate Quality Restaurant Openings
Our consistent execution against these four pillars has delivered strong, sustainable results over the last seven years. We will
continue to execute against these core strategies as we evaluate future strategic investments in the areas of human capital and
international expansion.
Human capital investments will reside in a new fifth pillar to our roadmap entitled - Develop Servant Leaders. This pillar will
focus on providing top tier support to our systems restaurants while growing the capabilities of restaurant leaders throughout our
global system. Our goal is to create a culture of servant leadership to improve employee engagement, and, in turn, provide a guest
experience as legendary as our food.
We will also make additional international investments to accelerate our unit growth. Our primary focus will be the traditional
franchising model, supported with an investment in brand-building media to create strong Popeyes brand awareness and trial. This
media investment has proved to deliver strong results and returns. We will also consider direct capital investments where
opportunities exists to jump-start new international markets and to unlock new unit growth, as we have done previously in the
U.S. markets of Indianapolis and Charlotte.
Additionally, we will continue to make select, strategic investments in domestic company-operated restaurants to lead the system
on matters such as real estate selection, store design and layout, and people practices.
After funding our strategic initiatives, we expect to return excess operating cash flow to our shareholders. We also have the
opportunity to adjust our capital structure and take greater advantage of our borrowing capacity to first fuel our strategic growth
opportunities and then to opportunistically repurchase shares of our common stock. We envision moving our consolidated total
leverage ratio from the current 1.4 to a range of 2.5 to 3.5 over the course of the next two to three years.
Our Agreements with Popeyes Franchisees
Our strategy places a heavy emphasis on increasing the number of restaurants in the Popeyes system through franchising
activities. As of December 28, 2014, we had 340 franchisees operating restaurants within the Popeyes system, and several preparing
to become franchisee operators. Our largest domestic franchisee operates 132 restaurants and our largest international franchisee
operates 109 restaurants. The following discussion describes the standard arrangements we enter into with our Popeyes franchisees.
Domestic Development Agreements. Our domestic franchise development agreements provide for the development of a
specified number of Popeyes restaurants within a defined geographic territory. Generally, these agreements call for the development
of the restaurants over a specified period of time, usually three to five years, with targeted opening dates for each restaurant. Our
Popeyes franchisees currently pay a development fee ranging from $7,500 to $12,500 per restaurant. Typically these development
fees are paid when the agreement is executed, and are non-refundable.
Domestic Franchise Agreements. Following the execution of a development agreement, we enter into franchise agreements
with our franchisees that convey the right to operate a specific Popeyes restaurant at a site to be selected by the franchisee and
approved by us within 180 days from the execution of the franchise agreement. Our current franchise agreements generally provide
for payment of a franchise fee of $35,000 per location.
These agreements generally require franchisees to pay a 5% royalty on net restaurant sales. In addition, franchisees must
contribute to national and local advertising funds. Payments to the advertising funds are generally 4% of net restaurant sales. Some
of our institutional and older franchise agreements provide for lower royalties and advertising fund contributions.