Church’s Texas Chicken 2023

Feb 16, 2023 | Insights, Restaurant Research

Church’s Executive Summary

Church’s Texas Chicken is a 70 year-old chain 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 signature jalapenos to squeeze over the meal) and scratch-made Honey-Butter Biscuits. The brand provides the down-home flavor of a home-cooked, hand-crafted comfort meal as only Church’s can deliver. The concept’s core brand equities include: bold, original flavors; Texan roots (vs. Louisiana for Popeyes’ & Kentucky for KFC); and value. A spicy flavor profile (marinated all-night) brings a hint of Texas heat and resonates with multi-cultural consumers who represent the country’s fastest-growing demographic. Church’s is also about providing abundant portions at an accessible price (particularly as it relates to dark meat options) which work well for home meal replacement. Online customers can leverage order ahead and pay ahead capabilities and the goal is to help off-premise customers avoid having to wait in the drive-thru line. A new CEO has particularly relevant experience overseeing digital & loyalty at McAlister’s with plans for an app & loyalty upgrade. Comps have increased over the last 5 years with post-covid results benefitting from Church’s positioning around comfort food and home meal replacement options accessible at the drive-thru (boxes of chicken travel well, facilitating affordable, large group orders). Also, sales over the last several years benefit from: a move to national marketing; the successful launch of its chicken sandwich; and an increase in digital sales. Having said all this, Church’s lacks scale as the smallest national bone-in chicken player with a Southcentral geographic concentration. Further, an inner city orientation represents a challenge given an extended period of consumer weakness among the lower income demo since the Great Recession which has been since exacerbated by ramping inflationary pressures which are particularly challenging to this demo. This challenge is aggravated by Church’s rather aggressive price increases needed to cover significant chicken cost inflation. The brand is also relatively new to national TV and has less TV share of voice compared to its peers. Also, an abundance of older stores in outdated, low income markets and use of smaller non-traditional sites explains a significant AUV underperformance. Finally, a system worst store-level EBITDAR margin reflects higher food & labor costs. In conclusion, while Church’s is executing around a well-conceived strategic plan, the chain’s performance is currently challenged by ongoing inflationary pressures that are particularly hard on its core low income target market.

Church's Market Share Graph
Church’s Market Share Graph

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