ATLANTA, Jan. 23 /PRNewswire-FirstCall/ -- AFC Enterprises, Inc. , the franchisor and operator of Popeyes(R) Chicken & Biscuits, reported operational results for its fourth quarter which began October 2, 2006 and ended December 31, 2006.
Fourth Quarter Operating Results
Total domestic same-store sales decreased 3.1 percent in the fourth quarter of 2006, compared to an increase of 6.9 percent in the fourth quarter of 2005. Excluding the hurricane relocation markets, which comprise approximately 20 percent of the domestic system, same-store sales for the fourth quarter would have decreased 1.4 percent. Same-store sales for company-operated restaurants for the fourth quarter decreased 7.6 percent. This decrease reflects the rollover effect of unusually high same-store sales of re-opened company-operated restaurants in New Orleans in the prior year during the periods following Hurricane Katrina. Popeyes total domestic same- store sales increase of 1.6 percent for fiscal 2006 was consistent with the Company's prior guidance, compared to an increase of 3.3 percent for fiscal 2005.
The Popeyes system opened 50 restaurants during the fourth quarter of 2006, compared to 43 restaurant openings during the same period in 2005. These openings included 36 domestic restaurants and 14 international restaurants. Total global openings for fiscal 2006 slightly exceeded expectations with 142 openings, compared to 123 openings for fiscal 2005. These openings included 100 domestic restaurants and 42 international restaurants. During fiscal 2006, the Company had 94 restaurant closures, resulting in 48 net restaurant openings compared to 21 net openings in fiscal 2005. Fiscal 2006 closures consisted of 35 units domestically and 59 units internationally, which included 45 Korean closures.
At fiscal year-end 2006, the Company had 1,822 franchised restaurants and 56 company-operated restaurants, including 20 company-operated restaurants in the New Orleans market. Popeyes franchised restaurants included 1,503 domestic restaurants and 319 restaurants in international markets.
The Company's projections for general and administrative expenses for fiscal 2006 remain consistent with previous guidance at approximately $48 million.
Fiscal 2007 Operating Guidance
The Company reaffirms that total domestic same-store sales for fiscal 2007 are projected to be in the range of 1.5-2.5 percent. In the first quarter, same-store sales growth is expected to be slightly negative and is expected to strengthen throughout the year, as the rollover effect of hurricane markets diminishes and the Company's new products, operational improvement efforts and promotional strategies continue to gain additional traction.
In fiscal 2007, the Company expects total new restaurant openings to be 165-175, with domestic openings consisting of approximately 60 percent of the total. Excluding company-operated restaurants that remain temporarily closed due to Hurricane Katrina, the Company projects total restaurant closures for fiscal 2007 to be 70-80, including 30-40 closures in Korea. Net openings in fiscal 2007 are expected to be in the range of 85-105, compared to 48 net openings in fiscal 2006.
During fiscal 2007, the Company also anticipates re-opening 2-3 additional restaurants in the New Orleans market. The Company will continue to assess the New Orleans market conditions to determine if or when additional restaurants will be re-opened. The Company continues to be actively engaged in discussions with its insurance carriers to recover its hurricane losses related to business interruption and property losses, and expects settlement to occur in fiscal 2007.
The Company's general and administrative expenses in fiscal 2007 are expected to be in the range of $48-$50 million, an increase over fiscal 2006 due to additional strategic investments in marketing for national cable advertising, and additional field support to be used for accelerating domestic development, and improving operations and training.
Beginning in fiscal 2007, the Company intends to issue full year earnings guidance, and will provide sales information and operational updates against that guidance on a quarterly basis only. Consistent with industry trends and practice, the Company will no longer issue mid-quarter operational updates. The Company intends to provide initial earnings guidance for fiscal 2007 at the time the 2006 Annual Report on Form 10-K is filed.
AFC Enterprises Chief Executive Officer Ken Keymer stated, "We continue to be pleased with the health of our development pipeline, and expect that the addition of new franchise sales professionals will help support our plans for even higher growth in the future. Despite the challenging sales comparisons we are facing in the earlier part of the year, our team is confident that the new advertising campaign that will launch in February, combined with tested value offerings and a stronger line-up of new product concepts, will deliver improving same-store sales growth and stronger operating results in 2007."
Corporate Profile
AFC Enterprises, Inc. is the franchisor and operator of Popeyes(R) Chicken & Biscuits, the world's second-largest quick-service chicken concept based on number of units. As of December 31, 2006, Popeyes had 1,878 restaurants in the United States, Puerto Rico, Guam and 24 foreign countries. AFC has a primary objective to be the world's Franchisor of Choice(R) by offering investment opportunities in its Popeyes Chicken & Biscuits brand and providing exceptional franchisee support systems and services. AFC Enterprises can be found on the World Wide Web at http://www.afce.com/.
AFC Contact Information
Investor inquiries:
Cheryl Fletcher, Director, Finance & Investor Relations
(404) 459-4487 or
Forward-Looking Statement: Certain statements in this release contain "forward-looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management's current expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. These forward-looking statements are subject to a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: competition from other restaurant concepts and food retailers, the loss of franchisees and other business partners, labor shortages or increased labor costs, increased costs of our principal food products, changes in consumer preferences and demographic trends, as well as concerns about health or food quality, instances of avian flu or other food-borne illnesses, the need to continue to improve our internal controls, adverse effects on operations from Hurricane Katrina, the Company's ability to recover related losses from its insurers and the economic impact on consumer spending in markets affected by Hurricane Katrina, the loss of senior management and the inability to attract and retain additional qualified management personnel, limitations on our business under our 2005 Credit Facility, failure of our franchisees, a decline in the number of franchised units, a decline in our ability to franchise new units, slowed expansion into new markets, unexpected and adverse fluctuations in quarterly results, increased government regulation, adverse effects of regulatory actions arising in connection with the restatement of our previously issued financial statements, effects of increased gasoline prices, general economic conditions, supply and delivery shortages or interruptions, currency, economic and political factors that affect our international operations, inadequate protection of our intellectual property and liabilities for environmental contamination and the other risk factors detailed in our 2005 Annual Report on Form 10-K and other documents we file with the Securities and Exchange Commission. Therefore, you should not place undue reliance on any forward- looking statements.
