Chicken feng shui Featured

12:04pm EDT October 10, 2005

How do you say chicken in Arabic?

The odds are pretty good that Tom Johnson, chief operating officer for Church’s Chicken, can tell you. Johnson, who oversees international operations for Church’s, has visited 83 countries and is tasked with bringing the brand to the rest of the world.

Founded in San Antonio in 1952, Church’s has more than 1,500 locations in 15 countries, with combined annual sales in excess of $950 million.

Arcapita Bank BSC, Church’s parent company, is committed to international markets and expects 70 percent of the company’s growth to come from foreign locations.

Part of that commitment includes a huge travel budget. Johnson spends 280 to 300 days a year out of the country, flying nearly 600,000 miles a year. That travel is an absolute necessity, he says, for making sure franchisees feel comfortable with the company.

“The international business is a relationship business, with as much importance on the relationship between the principals on both sides as the commercial terms,” Johnson says. “Americans do not usually have the best reputation out in the world, so being in front of franchisees in person shows we care enough about them to come to their home country versus just using phones and e-mails.”

That effort to make a personal connection has helped Church’s develop a number of markets around the world. The expansion plan calls for focusing on regions in which the company already has a strong base — in Latin America and the Caribbean — then increasing its presence on other continents. The company can easily build on its existing markets because the distribution systems are already set up, leaving leadership to focus on increasing sales.

North America may be the company’s foundation, but Johnson is making sure it doesn’t neglect the rest of the world. In recent years, Church’s has pushed into the Middle East, initially into Kuwait, then into Oman, Qatar, Bahrain, United Arab Emirates and Saudi Arabia, all countries that welcome Western businesses.

“The region is a very large one for all of the [fast food] chains that are in it, and the desire for alternative brands to the ones that have been there for 20-plus years is strong,” Johnson says. “We were approached by several qualified groups within the region, did consumer product testing to gauge acceptance of our menu offerings, and based on the results, started development with some of the qualified groups.

“We have very strong sales there, and we offer an alternative people like, and it’s very easy to set up our supply lines.”

And it doesn’t hurt that everything imported from the United States comes into those countries duty-free, which makes the supply line easier to manage than in other parts of the world.

That’s a plus, because the most challenging aspect of operating overseas is managing the supply chain, Johnson says. It has gotten easier over the last 25 years because as more American companies have overseas operations, there are opportunities to work with other chains. But sometimes you have to find local suppliers.

“For the [Persian] Gulf region, everything is imported from the U.S. duty-free, thus, it is easy,” Johnson says. “In other regions of the world, you cannot economically import, so finding local producers and distributors is a challenge. It’s something that we pay a lot of attention to on a daily basis.”

Another way to help manage supply chain issues is to partner with other fast food chains.

“Around the world in different locations, we have co-branded, share franchisees and facilities with Burger King, Papa John’s Pizza, Little Caesar’s and with Subway,” Johnson says. “There are some places in the world where we share franchise partners or share facilities or share supply lines.”

Two ears, one mouth
A mentor once advised Johnson that the best way to learn about franchising is “‘to walk in, close your mouth and open your ears, and do a lot of listening before you talk,’” Johnson says.

Part of that education is learning about local customs, and Church’s is focused on making its restaurants palatable to non-Americans.

“We are almost 100 percent halal in our food,” Johnson says. “It’s a way to get a Muslim certification that your food doesn’t contain alcohol, doesn’t contain pork products and that it is prepared and butchered in the right way. It ensures that Muslim people aren’t offended by what they eat. We are probably 90 percent that way and moving to 100 percent that way internationally.”

Sensitivity to cultures and customs around the world is very important to Church’s and a key ingredient to its success. But it’s more than just understanding local tastes and rituals.

“Every region of the world or every country of the world, if it’s big enough where we operate, we hire local people on our payroll to work for us as our operations support people,” Johnson says. “I tell them they have one foot on the Church’s side of the fence and one foot on the franchisee side of the fence. It’s their job to help us understand a lot of the cultural and language issues, and at the same time, be able to translate what’s important to us from a corporate standpoint to our franchisees.

“We’re 100 percent franchised outside the U.S., so we’re all locally owned. Any country we go to — be it Indonesia, South Africa, Kuwait — the franchise is owned by a local person. We also strive, and are usually successful, in supplying 100 percent of the needs of the restaurant, constructionwise and productwise, locally. We’ll help set up factories and train people to make all of our products, so there’s no importing. Basically, we’re a locally owned business using local products. So when people come to work for us, they’re working for a local person who happens to have an American franchise.”

Church’s reputation and longevity have given the company an advantage in terms of finding those restaurant operators.

“We are contacted about the brand availability by some that have seen it in other territories and were impressed, some that were looking for a chicken brand to compete with local brands or other franchise systems and others that are looking at a variety of [fast food] brands and look at all that are available,” Johnson says. “We get some interested parties from referrals of existing franchise partners. We also utilize the services of the U.S. Commercial Service to recommend qualified groups to us within a territory we are interested in. On occasion, we have used the services of business consultants who introduce us to interested parties.”

With local operators in place, Church’s is less likely to offend its customers as a result of American ignorance of local mores. Issues can be as simple as making sure the colors used in the restaurants or the names of menu items aren’t offensive.

“For our project in China, we’ve had our trademarks and our names — we took them through the normal consumer testing — but then we gave them to a feng shui master to make sure they wouldn’t be offensive,” Johnson says. “(In Indonesia), we operate as Texas Chicken there because in Islamic countries, the word Church’s can be offensive to Islamic people.”

Johnson made the Asian market a focus for the company for the same reason restaurants pick locations in the United States — foot traffic.

“We have been able to figure out a great investment model and operating model that makes sense in Indonesia,” he says. “The Chinese, Indians and Japanese do a lot of business in Indonesia; there is a lot of manufacturing that takes place. So you have a lot of people come there, travel back and forth, and get ideas.

“It’s a good model for us to use from a consumer standpoint, the check average and average spend-per-person standpoint and an operating model. A lot of the things that we do in Indonesia — being mall-based with smaller footprints — are the kinds of things that you need in the other countries.”

Johnson has also led the charge into South Africa and Nigeria. There is one part of the world, however, that Johnson is not bullish about.

“Noticeably absent from my discussion is anything in Europe,” he says. “We feel, based on the labor situation, the cost of doing business there and regulatory interference, that it’s much easier and much more profitable to go into other parts of the world. We don’t have anything open in Europe. We have some ongoing limited discussions on some places in Europe, but it’s not a primary focus for us.

“It’s not that we wouldn’t take advantage of a great opportunity, there just aren’t that many great opportunities there compared to the rest of the world.”

Because the company is not married to a specific venue, Johnson is able to pursue alternatives to the freestanding store model to take advantage of any opportunity.

“We have a great team of architects at Church’s,” Johnson says. “We build in airports, bus stations, we have mobile units that drive around and get parked at places like beaches, we have big, 300-seat free-standing (sites). Our venue people can really work on that. I’ve got operations people all over the world providing support.”

And when Johnson is ready to pursue an opportunity, he knows he must act quickly.

“Because the quick-service restaurants are so much more profitable and take such a smaller investment, it happens a lot faster,” he says. “I’m always living one or two years down the road. The team that I have working for me ... they’re dealing with the day-to-day stuff that is going on in the business. I’m dealing with what do we have to have done to be ready for the next year, the year after, because whether it’s hiring people or getting resources that we need, I really need to think ahead so I have them in place when the need comes for them.”

An increasing pool of successful entrepreneurs from across the globe has made Church’s expansion goals easier to achieve.

“I think the job is easier now because we’re dealing with smarter businesspeople,” he says. “Twenty years ago, it was an emotional decision. Somebody was educated in the U.S., they went back to their country — ‘I want to bring this brand here.’ They’d call up an American company. They’d say, ‘I’ll write you a check. You send me the brand.’ We’d go, ‘Yes.’ They’d take the brand, and they might or might not make it.

“Nowadays, it’s businesspeople we deal with, very successful businesspeople, and they don’t make emotional decisions. They want to know how much will it cost and how much can I make. You’ve got to be able to answer those questions.”

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