No ‘disjointed’ growth for Church’s Chicken
For a brand competing against the likes of McDonald’s and KFC in international expansion, Church’s Chicken knows it can’t contend with their sheer size. Instead, the brand is driven to be both smart and flexible as it’s ramped up its international growth in recent years.
“Disjointed flag-planting” is the term Tony Moralejo, executive vice president of global development, uses when describing how Church’s international expansion operated when he first joined the brand in 2013. He explains this is a strategy some brands are susceptible to following as they target global growth, but it works poorly for a brand wanting a long-term, sustainable international presence.
“We didn’t have what I would say was a comprehensive defined expansion strategy ... it felt opportunistic and less strategic,” Moralejo says.
Operations in 25 countries
Since joining Church’s Chicken in 2013, Moralejo has worked to expand to countries such as Laos and Pakistan, which complemented some of the markets Church’s already inhabited, helping its brand recognition. For a brand just beginning to roll out a more significant international expansion, Moralejo realized it was important to be as strategic as possible in selection of expansion countries and the business partners in those countries.
After a revived expansion effort in recent years, Church’s, or Texas Chicken as it’s known in many of its international markets, reached its 500th international restaurant in September 2016. The brand looks to open 65 new international restaurants in 2017 alone.
Church’s operates in 25 countries, and is looking forward to openings in Laos, Pakistan, and Bahrain. The company, Morelejo explains, is focusing on countries throughout Asia, the Middle East, Eastern Europe and South America. The Middle East in particular, he notes, has become a pivotal area of expansion for Church’s because of its strong consumer market that’s increasingly interested in quality, quick-service foods.
To compete with the heavy hitters who already own a majority of the market share in these areas, Church’s works hard to develop its market presence one restaurant at a time.
“We can’t win on marketing strength. We don’t have as many restaurants as they do, we don’t have the marketing dollars that they have,” Moralejo says. “Where we find ourselves finding success is on service and product.”
Moralejo says Church’s spends the first two to three years in a region working closely with the franchisee to establish an effective marketing strategy, one he says creates an emotional connection with potential customers who may be completely unfamiliar with the brand.
While access to real estate and resources is important for potential international franchisees, Moralejo says the best candidates tend to have experience building a brand in a new market.
“The most successful franchisees that we have are those that know how to build a brand,” Moralejo continues. “That requires patience, forethought and a lot of passion.”
Franchisees have to spend some time getting to know Church’s/Texas Chicken before getting exclusive rights. Moralejo stresses that Church’s doesn’t allow full rights for master franchisees in a country until they’ve operated at least 25 to 30 units.
With aggressive international expansion, legal issues tend to pile up, especially for Craig Prusher, Church’s new executive vice president and chief legal officer as of January. “When it comes to international expansion, you really can’t separate the legal from the business, it’s all kind of intertwined,” Prusher says.
Protection of intellectual property is crucial for the brand abroad, especially when it moves into a new country. “We have to make sure if the relationship isn’t successful, that we don’t lose our rights to trademarks and other IP rights in various countries,” Prusher says.
Church’s has to tailor its menu to fit various international cultural differences as well, especially for countries such as India, a possible expansion site for the company, that are mostly vegetarian.
“There are a lot of segments within India that do consume a lot of chicken. Obviously we structure our development market in India to focus on those territories first in mind,” Moralejo says.
Working through supply chain issues is a significant challenge for Prusher, Moralejo and the rest of the Church’s team. The brand has to locally source almost all of its chicken; also, countries such as Indonesia, which has 72 Church’s restaurants, require a majority of goods to be exclusively sourced within the country.
As they work to become one of the major international players in franchised fast food, Moralejo says Church’s is positioned well, as last year marked a record for the brand in international openings.
“Interest in both Texas and Church’s Chicken internationally is at the highest level it’s been for the brand,” Moralejo says. “It’s full steam ahead.”