Church’s is a 70-year-old brand (Southcentral geographic concentration) that enjoys strong brand equity built around its hallmark hand-breaded, fried chicken made in small batches throughout the day (that can be spiced with jalapenos squeezed on top) and scratch-made Honey-Butter Biscuits. Core brand equities include its bold, original flavors, Texan roots and a spicy flavor profile (marinated all-night) which brings a hint of heat and resonates with the fast-growing multi-cultural consumer demo. Church’s is about providing abundant portions at an accessible price which works well for home meal replacement and value is provided by affordable dark meat box offers (thighs & legs) which are typically advertised in the windows. A brand upgrade began in 2019 with new menu boards, uniforms, packaging and an increased digital presence. Comps have steadily increased with post-covid results benefitting from positioning around comfort food and home meal replacement options accessible through the drive-thru (boxes of chicken travel well, facilitating affordable, large group orders that have become the norm over the last couple of years). Also, sales beyond 2020 benefit from the successful launch of its chicken sandwich and enhanced digital capabilities (order ahead & pay ahead). The brand is challenged by a lack of scale as the smallest national bone-in chicken player with a historical target market that includes lower income, urban families and value oriented young adults. A lower income orientation could become an issue given the unknown impact of ramping inflation on this demo. While an abundance of older stores in outdated, low-income markets (corresponding to a 70-year-old system) and use of smaller non-traditional sites drives a significant AUV underperformance, unit economics are notable given system high unit sales and an in-line EBITDAR margin. In conclusion, Church’s is executing around a well-conceived strategic plan that works well in today’s operating environment so long as its target market can survive the ongoing inflation scare.
