Jubilant Foodworks Rating: Buy, execution to be key to pact with Popeyes

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Updated: March 30, 2021 8:45 AM

It will allow firm to tap into fast-growing QSR chicken segment; new aggression and portfolio approach is impressive; ‘Buy’ retained

jubiliant food worksJUBI has signed an exclusive Master Franchise Agreement with Restaurant Brands International (RBI), to own and operate Popeyes stores in India, Bangladesh, Nepal and Bhutan.

JUBI has won exclusive franchise rights for Popeyes brand in India, Bangladesh, Nepal and Bhutan. Popeyes is a leading QSR Chicken brand with 3,400 stores globally. JUBI would now tap into the fast-growing, under-penetrated QSR chicken market in India that is dominated by KFC at present. We expect JUBI to open 250 Popeyes stores in five years; if executed well, it can garner valuation of about $1 bn in five years. We like JUBI’s new-found aggression and portfolio approach and will keep an eye on investments in talent and technology to make a successful transition.
JUBI bags exclusive franchise rights for Popeyes brand

JUBI has signed an exclusive Master Franchise Agreement with Restaurant Brands International (RBI), to own and operate Popeyes stores in India, Bangladesh, Nepal and Bhutan. Further details around tenure of MFA, royalty/fees and store opening commitment are not disclosed. Popeyes is the world’s third largest QSR Chicken brand with system sales of $5.1 bn in 2020 across 3,400+ stores globally.

Popeyes menu comprises of fried chicken, fried shrimp and a signature chicken sandwich. Launched in Aug 2019, Popeyes chicken sandwich was sold out in the US in two weeks. Popeyes has, since then, embarked on an aggressive global footprint expansion spanning China, UK, Mexico and South Asia.

Popeyes would allow JUBI to tap into the fast-growing QSR Chicken market

The market opportunity for QSR Chicken in India is 70% that of Pizza/Burger QSRs as category’s core positioning does not cater/appeal to the country’s ~25% vegetarian population. That said, KFC India somewhat competes against Burger and Biryani (through rice bowls). KFC India dominates the category with 460 stores and system sales of ~`14 bn (FY2020). KFC’s unit economics and payback period is a notch below Domino’s but much better than Burger chains. QSR chicken is a high growth, under-penetrated category with low competitive intensity. It remains to be seen how well JUBI successfully localises the menu to successfully compete against KFC.

We like JUBI’s new-found aggression and portfolio approach

JUBI is on an aggressive portfolio augmentation journey with the launch of in-house brands (HK and Ekdum!), strategic/financial investments in DP Eurasia and Barbeque Nation and MFA with Popeyes. If executed well, JUBI may eventually enjoy an unparalleled platform/network benefits (common ordering platform (Super App), better defence against food delivery aggregators, procurement and delivery synergies). We will keep an eye on initiatives JUBI takes to strengthen organisation capabilities (investment in talent, technology and processes) to make this transition.

 

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