Yet another AFC exec flies coop

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The chief marketing officer for Church's Chicken has resigned, becoming the latest in a line of executives to exit AFC Enterprises amid a corporate accounting scandal and a barrage of shareholder lawsuits.

Ann Stone left her post July 2, the company confirmed. She joined the No. 4 chicken chain a year ago as the company was unveiling a relaunch that replaced its 50-year tagline, "Big Pieces Little Prices," with "Full Flavor, Full Pockets, Full Life."

Franchisees criticized that effort, which included ads showing cartoon characters without heads. In a July 1 story in The New York Times, Church's President Hala Modelmogg said the chain was evaluating the campaign "head to toe." Already, Church's had shifted most of its creative from Omnicom Group's BaylessCronin, Atlanta, to a South African agency, Gecko Motion, Johannesburg.

AFC's Popeyes Chicken and Biscuits has seen its own recent turmoil. In June, Popeyes ended its seven-year run with Interpublic Group of Cos.' Hill, Holliday, Connors, Cosmopulos, New York, following the departures of President Jon Luther and Chief Menu and Marketing Officer Joe Scafido.

Popeyes in late June elevated Tom Whitley to chief marketing officer, from VP-advertising, according to executives close to the company. He is conducting an agency review through Agency I.D., Atlanta.

In February, AFC's Cinnabon named Chris Elliott president, a post he held on an interim basis since June 2002. Chief Marketing Officer Steve McMahon left the chain in January.

A franchisee group is said to have made an offer for Cinnabon, according to one executive. AFC said it's policy is not to "comment on market speculation or rumors."

AFC is in the process of selling its Seattle's Best Coffee and Torrefazione coffee chains to Starbucks Coffee Co. Frank Belatti, AFC's chairman-CEO, on July 8 presented a 100-day plan to turn around the company's three remaining brands. He blamed marketing for woes at Popeyes and Church's at an earlier investment conference, telling analysts that executive and agency shakeouts were "called for."

Same-store sales for the combined chains fell 5% during the first quarter at Church's, Popeyes Chicken & Biscuits, Cinnabon and Seattle's Best Coffee, compared to a 2.3% gain in the earlier year period.

On March 24, AFC said it would restate its financials for fiscal year 2001 and the first three quarters of 2002. AFC stock plunged 20% in very heavy trading. Shortly after, investors began filing lawsuits. A month later the $2.6 billion company said it would also restate results for fiscal 2000, and that it was threatened with being delisted by Nasdaq for failing to file its annual report.

Court Filings

A week later, AFC Exec VP-Chief Financial Officer Gerald Wilkins resigned.

Court filings to the U.S. District Court in Atlanta allege securities fraud by "failing to reveal that AFC had inflated its operating results" by improperly accounting for sales of company-owned stores to franchisees, value of long-lived assets and inventory at Seattle's Best, as well as understating advertising costs.

The suit also alleges that by restating its financials the company "has admitted that its prior financial statements were materially false and misleading when issued."

Their filings include an accusation that some executives capitalized on the overstated figures by selling their stock.

AFC said it's policy is not to comment on pending lawsuits.

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