Drew Maloney: Popeyes chicken sandwich is back — another reason to thank private equity

Popeyes’ new spicy chicken sandwich finally made a comeback this weekend after being “sold out” this summer due to “extraordinary demand.” The return of the popular sandwich reportedly sparked more long lines and frantic Twitter traffic. This was all possible because of private equity.

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Most private equity investors are not household names, but many of the brands they back are. Popeyes is one of them. The Popeyes story is a great example of how private equity helps businesses grow – and, occasionally, produce a better chicken sandwich.

Popeyes was founded in 1972 in suburban Louisiana. The restaurant served spicy, New Orleans-style fried chicken. Popeyes quickly grew into a nationwide chain, with more than 500 franchise locations by 1984. But the company ran into financial trouble, declaring bankruptcy in 1991. That is when private equity first stepped in.

Freeman Spogli, a private equity firm, saw the bankruptcy as an opportunity to turn around the trusted national brand. The firm acquired Popeyes’ parent company, AFC Enterprises, in 1996, investing enough capital to reduce the company’s debt burden. This allowed Popeyes to expand and grow. Operating income at AFC grew by 40 percent in just three years. Freeman Spogli eventually took AFC public in 2001.

Private equity investors and the skilled managers who run these firms regularly revive businesses on the brink of financial collapse, often saving hundreds or thousands of jobs in the process. They instill business discipline and infuse the companies they acquire with much-needed capital, regularly rescuing brands that would otherwise perish.

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Freeman Spogli’s successful investment wasn’t the end of Popeyes’ relationship with private equity. In 2017, Popeyes was acquired by the private equity firm 3G Capital and merged with Restaurant Brands International (RBI), the global restaurant conglomerate that also operates Burger King and Tim Horton’s. Since 2016, RBI shares have more than doubled under private equity’s hands-on leadership.

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In the case of Popeyes, private equity provided the capital the company needed to grow and implemented an innovative menu-development process that eventually produced a crispier chicken sandwich.

Popeyes today has more than 3,000 locations across the country, employing tens of thousands of American workers. Their new chicken sandwiches proved so popular this summer that most locations sold out until November.

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Popeyes is far from the only iconic American business to partner with private equity. If you’ve ever ordered a coffee at Dunkin Donuts, shopped at a Dollar General, watched your favorite show on Hulu, or stayed at a Hilton or Airbnb, you’ve used a product that benefitted from private equity investment and expertise.

TickerSecurityLastChangeChange %
QSRRESTAURANT BRANDS INTERNATIONAL INC.66.48-0.81-1.20%
DNKNDUNKIN BRANDS GROUP76.29+0.55+0.73%
HLTHILTON WORLDWIDE HOLDINGS INC.99.69+0.84+0.85%

From 2013-18, private equity invested more than $3.4 trillion in businesses of all sizes across the United States. These investments helped support the jobs of more than 8 million Americans at private equity-backed businesses.

These investments generate tangible benefits for millions of Americans who do not work at a private-equity-backed business. Private equity investments support the retirements of millions of public- and private-sector workers, including school teachers, firefighters and police officers. In 2018, private equity investments delivered a 10.2 percent return for public pension funds. These returns surpassed those delivered by public equity (8.5 percent), fixed income (4.8 percent), and real estate (4.8 percent).

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Public pension funds across America collectively face a $1.3 trillion shortfall, according to the Pew Charitable Trusts. Private equity investments are critical components of many pension fund investment portfolios as they work to meet their obligations.

Whether you’re waiting in line for a delicious Popeyes chicken sandwich or you’re a teacher working towards a well-deserved retirement, private equity is supporting your community.

Drew Maloney is the president and CEO of the American Investment Council, a lobby group for the private equity industry.