These days, investors are constantly looking for the next Chipotle Mexican Grill (NYSE: CMG) or McDonald’s (NYSE: MCD).

#-ad_banner-#Well, the good news is that most won’t have to look too far.

It’s not often that investors find a company that owns over 20% of its market, especially in the quick-service restaurant space.

It’s even more surprising when that company has only a billion-dollar market cap. A large part of this reason is that before January of this year, Popeyes Louisiana Kitchen (Nasdaq: PLKI) was known to investors as AFC Enterprises. With the name change, investors now have a better idea of what they are buying.

An Impressive Turnaround In 5 Years
Over the past five years, Popeyes has undergo an impressive restructuring at the hands of CEO Cheryl Bachelder. For 2007 and 2008, same-store sales declined 2% each year. Same-store sales went positive in 2009 and have been positive every year since. As a matter of fact, the most recent quarter marked the 15th consecutive quarter of positive same-store sales.

To accomplish this turnaround, the company implemented a number of initiatives that should continue driving growth. The three main aspects have been improved service, increased advertising, and menu innovations.

At 75% of Popeyes’ locations, drive-thru service is down to 180 seconds on average. This improvement in service makes Popeyes a convenient stop for its customers and keeps them coming back. Without good service, there’s no point in working on other initiatives.

	Flickr/Elvert Barnes
	Popeyes had 2,225 locations at the end of last year, making it the second-largest chicken quick-service restaurant chain behind KFC.

Popeyes’ new ad campaign and focus on the “Louisiana Kitchen” theme has done wonders for the company’s brand awareness. Popeyes’ ad awareness has risen from 14% in 2008 to 24% last year. Its share of the chicken quick-service restaurant market has grown from 14.8% to 20.8% in that time.

The other initiative Popeyes has implemented to keep customers coming back is menu innovation. The company’s newest Cajun-style items have been winners, as well as its limited-time offerings.

Popeyes had 2,225 locations at the end of last year, making it the second-largest chicken quick-service restaurant chain behind KFC, part of Yum Brands (NYSE: YUM).

When you compare Popeyes to KFC, you see that KFC has more than 18,000 restaurants in more than 115 countries and territories. KFC’s global footprint is nine times as large as Popeyes’ — but that’s where Popeyes’ potential lies.

Investors should be most excited about the international opportunities for Popeyes. The reason for this is that the brand is proving to be very popular outside the U.S. International same-store sales rose 4.7% last year, which is the seventh consecutive year of positive growth. In Canada, same-store sales growth has been positive for 25 straight quarters. Same-store sales in Canada were higher by 7.8% last year. In Turkey, same-store sales were up nearly 20%.

In Peru, which Popeyes just entered, the company has only 12 locations. Popeyes is seen as more of an upscale brand in Peru, acting as a status symbol for an emerging economy with rising incomes. There are nearly 30 million people living in Peru, and half are under the age of 25. A small country like Peru illustrates the potential for Popeyes internationally.

Over the past five years, Popeyes has opened 365 new locations, for total companywide growth of 20%. The next five years should bring even greater growth, with 550 locations to be added in the next five years. These 550 additional locations will be put 25% larger than it is today in terms of store count.

Risks to Consider: Any rise in grain prices and chicken feed components could have an impact on profits. Furthermore, as we saw with KFC in China, contamination in the chicken supply not only hurts sales, but brand image.

Action to Take –> Buy PLKI with a price target of $59, upside of almost 37%. That would put shares trading at a price-to-earnings (P/E) ratio of 30, which is still below Chipotle Mexican Grill but in line with Popeyes’ current P/E multiple.

P.S. Popeyes doesn’t yet pay a dividend, but there’s a great way to collect a “dividend on demand” — and buy PLKI at a discount. My colleague Michael Vodicka has all the details… click here to learn more.