Popeyes plants its flag in KFC territory: China

Dive Brief:

Popeyes Louisiana Kitchen signed an agreement with TFI TAB Food Investments to develop and launch more than 1,500 Popeyes restaurants in China during the next 10 years, according to a press release.
With this agreement, Popeyes joins Restaurant Business International sister chains Burger King and Tim Hortons in the Chinese market. Burger King has operated there since 2005 and partnered with TFI since 2012. There are more than over 1,000 Burger King restaurants in China.
Popeyes currently operates more than 3,100 restaurants in over 25 countries.

Dive Insight:

With this ambitious expansion plan, Popeyes could disrupt KFC's longtime dominance in China. In 1987, KFC was the first American fast food chain to develop in the market and the brand now boasts more than 5,000 units in 1,100 cities. By comparison, McDonald's has about half of that footprint in China, according to Business Insider.

While KFC was able to leverage the staggering growth of the Chinese middle class and a strong affinity for American brands, things are quickly changing. China's economy is currently growing at its slowest pace in 30 years, according to NPR, and the U.S. tariffs on Chinese goods have incited calls for boycotts on American companies, including both McDonald's and KFC.

Although such headwinds exist, Popeyes has a strong operating partner in TFI Tab Food Investments, which runs more than 2,000 restaurants in both China and Turkey, and an even stronger international partner in parent company RBI. RBI runs 26,000 restaurants in more than 100 countries and U.S. territories, including China. This deal more than doubles Popeyes' current global footprint, displaying the company's confidence in the brand's success in the Chinese market.

Popeyes' fried chicken marinated in Louisiana spices certainly fits the bill of cultural preferences in the market. According to the KFC Global Food Innovation Team, Asian consumers prefer hot and spicy flavors.

It's also worth noting that, despite economic and geopolitical challenges, the fast food industry in China is on a staggering growth trajectory, up 8.9% annually from 2014 to 2019 compared to 3.9% annual growth in the U.S. from 2013 to 2018. This pace illustrates the runway for expansion as the country continues to develop beyond tier one cities like Beijing and Shanghai.

Piggybacking off of KFC's success, a number of chains are tapping into the potential of China. Starbucks plans to open a new store in the market every 15 hours, while McDonald's is eyeing 2,000 more stores. KFC isn't resting on its laurels, either, with Yum China planning to add thousands of new units alongside sister chain Pizza Hut. This next round of expansion, however, will be a little different than in the past, with new competition.