The Best Business Diversification Strategy in 2024

Why a Diversification Strategy is Critical to Success

When growing your business, having a solid plan in place is crucial. However, recognizing when and what new strategy you need can be challenging, that’s why case studies are so important. Here, we will examine Popeyes Chicken as a compelling case study to highlight the significance of a business diversification strategy.

Firstly, business diversification refers to strategic planning that revolves around increasing company revenue by expansion through products and/or services. Diversification can lead to strategy in business growth and stability.

Many chain restaurants, including McDonald’s, Wingstop, and Red Lobster, have successfully expanded their reach by placing their products on grocery store shelves. This approach allows them to retain and attract customers outside of their physical locations, thereby enhancing their customer base and revenue.

Considering Popeyes’ position as one of the leading chain restaurants, providing customers with the opportunity to enjoy their delectable chicken at home could be a great business boost.

This expansion has the potential to not only increase their reach but also drive revenue growth. With effective diversification strategies, Popeyes can maximize its presence and attract more customers searching for delicious chicken options.

A Quick History of Popeye’s

Popeyes, originally named “Chicken on the Run,” was created by Al Copeland in Louisiana in the 1970s. However, just four days later, the name was changed to “Popeyes Famous Chicken.”

In his pursuit to expand, Copeland decided to franchise his business. By the late 80s, Popeyes had not only grown regionally but also nationally and globally, boasting 500 locations.

Eventually, Copeland sold Popeyes to a newly founded company called AFC. In 2008, AFC rebranded the restaurant as “Popeyes Louisiana Chicken,” the name we know today.

Currently, Popeyes is owned by Restaurant Brands International (RBI, a food conglomerate that acquired the brand in 2017. This conglomerate also owns three other major food brands: KFC, Tim Hortons, and Firehouse Subs.

Currently, Popeyes operates around 50 company-owned stores while boasting over 3,000 franchised stores. However, compared to its sister company, Burger King, which has a staggering 10,000 stores, Popeyes primarily relies on franchisees to run its operations. Franchisees heavily rely on different entrepreneurs running stores under the company.

Considering this, it would be highly beneficial for Popeye’s to shift its focus on diversification with product expansion.

What is Their Optimal Diversification Growth Strategy?

An optimal way for Popeye’s to achieve business growth is to ultimately create new ways for existing customers to purchase additional items whilst also allowing new customers to discover the brand. Let’s look at some actionable steps.

1. Market Research and Analysis

Following Chick-fil-A’s footsteps, a brand often compared to Popeyes, they have already ventured into bottling their customers’ beloved sauces and have even confirmed plans for introducing salad dressings soon.

This growth strategy is also working through the rise of food influences and social media chefs. This new marketing avenue is untapped for Popeyes, and by placing their products in front of millions, the business growth is exponential.

Both Popeyes and Chick-fil-A have a similar number of store locations, yet Chick-fil-A manages to generate higher annual revenue—a clear-cut showcase of the benefits of a business diversification strategy, along with better customer service.

Given the general decline in foot traffic reported by many restaurants in recent years, it becomes increasingly crucial for businesses like Popeyes to explore avenues that offer convenience to customers and ensure a consistent revenue stream moving forward.

2. Analyze and Capitalize on Existing Success

Sometimes there’s already a product or service that has proven success but needs a revamp. This is where their seasoning and sauces can come into play! Popeyes is known for its flavorful seasonings, and one of its popular condiments is the Cajun Sprinkles.

Imagine walking down the spice aisle and seeing “Popeye’s Chicken Cajun Sprinkles” – it would attract a significant amount of customers, as this is the brand’s main attraction. This versatile product could be a game-changer in the kitchen and could easily replace an all-purpose Cajun seasoning.

Next, that golden, crispy skin is what makes Popeyes’ chicken genuinely irresistible. Taking a page from Hooters’ book, selling their batter in stores could be a brilliant move. Many people already buy Hooters’ batter, and Popeyes could easily tap into that market as well.

3. Ideas and Development

Now it’s time to brainstorm and plan out our diversification strategy. Looking at what they’ve already deveolped and how to revamp it is key.

As we’ve already mentioned in our comparison with Chick-fil-A, the best start is to begin bottling up their delicious sauces, specifically Sweet Heat.

This sauce is a fan favorite, but they took it a step further by collaborating with Megan Thee Stallion on the “Hottie Sauce.” While it’s a glorified Sweet Heat, many people loved it, and it brought even more attention to their unique sauces.

With Popeye’s unique sauce flavors of Sweet Heat, Blackened Ranch, and Mardi Gras Mustard, they can simultaneously introduce new taste experiences to customers both locally and globally while allowing their existing customers to purchase their favorite sauces for use at home.

Circling back to the “Hottie Sauce”, this is where they can pick up on the ideas and development of a new product.

4. Test Drive

Before diving deep into a new business avenue, doing a pilot run is key to testing the market.

Many food businesses will sell their products within their business, which cuts out distributing fees to outside stores. This is where Popeye’s can start to test their products with customers.

Offering bottled sauces and packaged seasonings directly to buying customers can be a quick key performing indicator (KPI) of the market.

Step 5 – Scaling and Marketing

Once we do our test run, we can move into scaling up and pushing out our product. Early we spoke on social media marketing; this would be an optimal time to collaborate with food influencers to showcase their new products. Showing customers how these products could be used in their everyday meals is key to this diversification strategy.

Also, with Popeye’s only having just over 5,000 stores, this business diversification strategy to enter into packaged goods, could makeup for the lack of locations.

The optimal diversification growth strategy is clear. Venturing into selling their products in grocery stores could be the next big step for Popeyes, considering their already established popularity and unique offerings.

Final Thoughts:

When it comes to your business, whether it’s stagnating, struggling to attract new customers, or failing to boost the bottom line, a business diversification strategy should be a consideration.

What is holding Popeyes back is its critical need for more revenue diversity. None of their brands have products in stores, unlike many of their competitors, in combination with a quarter of the locations of more prominent brands.

To increase their revenue and reach business growth again, a business diversification strategy that focuses on placing their products on shelves, leveraging food influencers and social media chefs, and growing their number of locations will find success.

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