Popeyes vs Zaxby's: Assessing the Franchise System Before Investment - Essay Sample

Introduction

The existing franchisees are a valuable source of information when it comes to the franchise system because they are able to tell the reality of life as it is like when an investor will join up (Almohri & Chinnam 2017). Popeyes and Zaxby's are huge companies with different portfolios that an investor should look for and there is more to the outside appearance of great performance that they reveal. The investor choosing between the two companies will need to plan a visit and talk to a number of the existing franchisees as they investigate them because it will not end by my recommendations.

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The main reason why an investor would need to hear from the rest of the franchisees is that their attitude towards the franchise system for the company will impact on the decision to be made (Almohri & Chinnam 2017). An investor will want to find that the majority of the franchisees of a specific organization are happy and supportive of the franchisor but it would be good to get other franchisees who are frustrated.

Zaxby's chicken contains the Zax sauce whose inspiration was from the small chicken fingers chain (Jonathan 2013). The company has been on the list of the top 500 franchisors over the past ten years where the highest rank was 82 in the year 2016 and 271 in the year 2014.

Popeyes Louisiana Kitchen Inc. is known to be a large competitor in the Kentucky fried chicken (Bachelder, 2016). Popeyes is a growing company and has continued to impress its consumers and investors can make quite huge amounts from its franchise system (Bachelder, 2016). The company has also continued to take market share. It operates in 47 states among other foreign countries and investors should be aware that such is a wonderful stock and the growth evident can be considered by its name (Bachelder, 2016).

Looking at the history of Popeyes, a keen investor will notice that there was a fall in the stock but it has bounced back and at the moment are up to 6%. Zaxby's, on the other side, is growing fast with the sales being up to 16.6% during the last year (Jonathan 2013). During this year, the company has crossed the $1 billion thresholds to mean that there is more growth expected.

Popeyes is quite an established company, unlike Gatsby that is coming up. Popeyes reported revenue of $54.9 million while that of Zaxby's was $2.9 million. An investor is only interested in the ultimate returns from the company and my recommendation would be to pick Zaxby's because it is an upcoming company that has the potential of making much in a few years to come.

As an investor, it would be important to evaluate the financial position to make sure that investing is the smartest move that they will make (Almohri & Chinnam 2017). For a company like Zaxby's, it would only be good if the investor has enough money to keep them sound from month to month before they can get their returns. I believe that you have a goal to invest in either of the companies and thus would be good to take note of whether you need short-term returns or in the long-term.

Analysis of the two companies shows that they Zaxby's has a high potential of growing to the level of Popeyes as the sales have grown to 16.6% unlike those of Popeyes that have grown to 13.3 per cent (Jonathan 2013). An investor will only trust and take a risk that there will be a high rate of growth for Zaxby's, hence will focus on putting their money for this particular company. Zaxby's invented a good way to capture customers through its salads which have made up to 20 per cent of the company's sales unlike when they started and it only represented 2 per cent of the business. Salads have been a game-changer for Zaxby's which have helped the company gain a much wider appeal across the demographic groups which is incredible. This particular innovation has helped to propel the chain's growth making the company grow in contiguous markets.

The reason to invest in Zaxby's as an upcoming startup is that the investor will crave to be involved in driving the positive change and bringing new solutions to life (Jonathan 2013). Looking at the finances of the investor, the investment projections as well as the retirement needs, investing their portion in a rapidly growing startup like Zaxby's will help achieve the goal as risky as it may be.

Investing in Zaxby's unlike Popeyes can potentially generate uncorrelated outsized returns and there is also the provision of portfolio diversification. Also, the investor will look super smart when their winning startup picks to become the trending topics. It is likely that Zaxby's will be doing quite great according to the percentage sales and the investor will take the credit of being involved in their chains growth. There is also the desire to generate enhanced investment returns for the investment portfolio necessary for retirement. I would recommend that the investor takes chances with Zaxby's and not Popeyes.

References

Almohri, H., & Chinnam, R. B. (2017, August). Deriving Business Recommendations for Franchises Using Competitive Learning-Driven MLP-Based Clustering. In International Conference on Engineering Applications of Neural Networks (pp. 490-497). Springer, Cham.

Bachelder, C. (2016). The CEO of Popeyes on treating franchisees as the most important customers. Harvard business review, 94(10), 33-36.

Jonathan Maze (2013). Zaxby's Booms. Drumming Up Mega Business. Franchise Times. Retrieved from https://www.franchisetimes.com/November-December-2013/Zaxbys-Booms/