Church’s Chicken might not yet be king of the roost in the international fast-food industry, but the Atlanta-based fried chicken chain is clawing its way into profitable quick-service restaurant markets all over the world.
Legally called Cajun Operating Co., Church’s currently serves up its more than 50-year-old brand of crispy fried chicken in 400 foreign locations throughout 17 countries outside the U.S.
In the Americas and the Caribbean, the Church’s brand, derived from the name of founder George Church, still stands. Everywhere else, the company flies the banner of Texas Chicken, hearkening back to its place of founding while avoiding the possibly negative connotations associated with the word “church” abroad.
Such cultural senstivity is paramount at a time when slimming profit margins and market saturation in the U.S. make overseas operations an essential addition to any restaurant’s portfolio, according to Harsha Agadi, a native of India and the company’s CEO.
Zack Kollias, a senior vice president heading up Church’s development abroad, told GlobalAtlanta that an aggressive plan for 2008 will help Church’s to spread its wings even further on the global scene.
Mr. Kollias recently returned from a trip to the U.K., where Church’s acquired Dixie Fried Chicken, another chicken concept there. Dixie’s some 50 existing locations will be overhauled and converted into Texas Chicken franchises by the end of 2008.
A Texas Chicken store opened recently in Abu Dhabi, United Arab Emirates, part of a plan to double the company’s 14 stores in the Middle East this year and add 20 more in 2009. The company already has stores in Jordan, Kuwait and Saudi Arabia.
“We’ll quickly in the Middle East move from a small business to a large business in the next 24 months,” said Mr. Kollias, who also traveled to Amman, the capital of Jordan, recently.
In December, a franchisee opened the first two Texas Chicken locations in Russia with the rights to open 100 more. Although it’s still difficult to work in Russia for all the governmental red tape, Church’s sees Russia as a potentially huge market.
“I think there’s a growing middle class with more disposable income which is, in our case, hungry for an opportunity to spend that money,” Mr. Kollias added.
The next big Texas Chicken launch will take place in India. The first Texas Chicken franchise in the world’s second-most-populous nation will open in the city of Hyderabad this summer.
Mr. Kollias believes the company will be able to establish a strong foothold there and sees India as a much more promising market than China, where Church’s/Texas has no current stores.
Recent company history and industry trends suggest it’s an opportune time for Mr. Kollias to keep flying the Church’s/Texas banner in other countries.
Church’s reached $1 billion in sales in 2006 and now has 1,800 total restaurants, some two years after Arcapita Inc., an international investment firm based in Bahrain that also has an office in Atlanta, bought Church’s from AFC Enterprises Inc. for $390 million in December 2004.
As Arcapita’s head of corporate investment in the U.S., Stockton Croft led that transaction from the company’s Atlanta office. He said Church’s already had more than 300 international stores at the time of the purchase, and Arcapita thought it could accelerate that expansion.
“If they didn’t have the international experience, we wouldn’t have been very interested,” said Mr. Croft, who added that his company’s base in the Middle East has helped Church’s growth in that country. An Arcapita investor in Saudi Arabia opened the first Texas Chicken franchise there.
Mr. Croft said that Church’s executives call the Arcapita purchase the company’s “independence day.” AFC owns Popeyes Chicken, another chain that has enjoyed global success. When they shared a parent company, emphasis on Popeyes’ cajun roots limited Church’s spicy menu offerings, Mr. Kollias said.
Church’s, which was founded in 1952 in San Antonio, moved outside the U.S. with locations in Canada, Mexico and Indonesia in the late 1970s.
The international endeavor started as a novel concept but has now become an essential business move.
Americans now eat out for about half of their meals, which bodes well for the sustainability of restaurants here but makes it difficult for the company to achieve a dramatic upswing of growth, Mr. Kollias said.
“The U.S. market is clearly a mature market when it comes to the (quick-service restaurant) segment, not that there’s no room to build more stores, and not that there’s not going to be population growth in the U.S., but there’s certainly less opportunity to grow here,” he said. “A lot of times to grow here you’re taking share from someone else.”
But succeeding on the international frontier requires proficiency at globalization’s incumbent balancing act: localizing products and services without sacrificing company ideals.
In some frigid areas of Russia, for instance, Texas Chicken’s suppliers have to work not to allow the chicken to freeze on its way to the store, in compliance with Church’s mandate to serve never-frozen chicken, Mr. Kollias said. In Puerto Rico, desserts and specialty drinks sweeten Church’s revenues, accounting for almost a tenth of sales, a much higher proportion than in markets where the palate is less suited to saccharine delights, like Trinidad and Tobago.
In the island nation, Church’s has to raise the “heat level,” kicking in some extra spiciness to suit the local taste, Mr. Kollias said.
And in markets outside the Americas, even the Texas Chicken name stands out as a visible monument to cultural flexibility.
But no matter the slight variations in product offerings, consistency in supply chain, branding and strategy is what matters, Mr. Kollias said.
“You can add desserts and spices and still stay true to what the concept is,” he said.
Mr. Kollias’ cultural sensitivity and restaurant expertise is derived from his family history and a lifetime of working in the industry in the U.S. and abroad.
He jokes that because of his Greek heritage, it was inevitable that he would end up working with food. His parents ran Dairy Queen franchises in Chicago, and he spent many years there accumulating his on-the-ground knowledge of restaurant operations.
Before coming to Church’s in 2005, Mr. Kollias worked for Planet Hollywood in France and the U.K. as well as Hard Rock Café in Mexico City, among other assignments. He also lived in Greece and Poland. He speaks Greek, Polish, Spanish and a little French.
Mr. Kollias, though competitive, admits it will be next to impossible to catch up with Church’s biggest adversary in worldwide markets, KFC Corp.
The Louisville, Ky.-based giant’s restaurants in China alone trump the amount Church’s has in its entire worldwide system. Altogether, KFC has more than 11,000 restaurants in more than 80 territories and countries, according to information on the KFC Web site.
But Church’s has designs on becoming a “strong No. 2” in markets like the U.K. A key effort toward that end is to build mass exponentially rather than in a linear fashion.
“The strategy for the U.K., which we haven’t used as a concept, is to acquire a local chain and flip them into our concept,” Mr. Kollias said. That strategy would also come in handy in China, which despite KFC’s 2,000-store stronghold is still one of the world’s best markets for quick-service chicken concepts.
According to 2006 numbers compiled by QSR Magazine, Church’s ranked fifth in systemwide sales revenue in the QSR chicken segment, and two other Atlanta companies also cracked the top five.
Atlanta-based Chick-fil-A’s $2.2 billion in sales in 2006 puts it second behind KFC, the segment leader by far with $5.3 billion.
Chick-fil-A currently has no international stores. Popeyes, which ranked third in 2006 on sales of more than $1.5 billion, has less stores abroad than Church’s but has a broader scope, spanning 24 countries to Church’s 18.
