KFC

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KFC
TypeSubsidiary
IndustryFast food restaurant
Founded1930 in North Corbin, Kentucky (original); 1952 at 3900 South State St, Salt Lake City, Utah (franchise)
Founder(s)Harland Sanders
Headquarters

1441 Gardiner Lane, Louisville, Kentucky, United States (Operational Headquarters)[1]

1209 North Orange St, Wilmington, Delaware, United States (Incorporation)[1]
Number of locations17,000 (2011)[2]
Key peopleDavid C. Novak, Chairman and CEO of Yum! Brands[3]
Roger Eaton, Chairman and CEO of KFC
ProductsFried chicken, chicken burgers (chicken sandwiches [US]), wraps, French fries, soft drinks, salads, desserts, breakfast
RevenueUS$ 15 billion (2011)[4]
Employees190,000[5]
ParentYum! Brands
Websitewww.kfc.com
 
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KFC
TypeSubsidiary
IndustryFast food restaurant
Founded1930 in North Corbin, Kentucky (original); 1952 at 3900 South State St, Salt Lake City, Utah (franchise)
Founder(s)Harland Sanders
Headquarters

1441 Gardiner Lane, Louisville, Kentucky, United States (Operational Headquarters)[1]

1209 North Orange St, Wilmington, Delaware, United States (Incorporation)[1]
Number of locations17,000 (2011)[2]
Key peopleDavid C. Novak, Chairman and CEO of Yum! Brands[3]
Roger Eaton, Chairman and CEO of KFC
ProductsFried chicken, chicken burgers (chicken sandwiches [US]), wraps, French fries, soft drinks, salads, desserts, breakfast
RevenueUS$ 15 billion (2011)[4]
Employees190,000[5]
ParentYum! Brands
Websitewww.kfc.com

KFC (Kentucky Fried Chicken) is a fast food restaurant chain headquartered in Louisville, Kentucky, United States, which specializes in fried chicken. An "American icon", it is the world's largest fried chicken chain and the second largest restaurant chain after McDonald's as measured by sales, with over 17,000 outlets in 115 countries and territories as of December 2011.[2][4]

KFC was founded by Harland Sanders, who began selling fried chicken from his roadside restaurant in Corbin, Kentucky during the Great Depression. Sanders was an early pioneer of the restaurant franchising concept, with the first "Kentucky Fried Chicken" franchise opening in Utah in the early 1950s. Its rapid expansion saw it grow too large for Sanders to manage, and he eventually sold the company to a group of investors. As "Colonel Sanders", his image was still used for branding purposes, and he worked as a goodwill ambassador for the company until shortly before his death. KFC became one of the first fast food chains to go international, opening outlets in England, Mexico and Puerto Rico by the mid 1960s. In the early 1970s, KFC was sold to the spirits firm Heublein, who were taken over by the R.J. Reynolds conglomerate, who sold the chain to PepsiCo. Throughout the 1970s and 1980s, KFC experienced mixed success at home as it went through a series of corporate owners who had little or no experience in the restaurant business, although it continued to expand in overseas markets. In 1987 KFC became the first Western restaurant chain to open in China. KFC has since expanded rapidly in China, and the country is now the company's most profitable market. PepsiCo spun off its restaurants division (also including Pizza Hut and Taco Bell), as Tricon Global Restaurants, which later changed its name to Yum! Brands.

The chain primarily sells fried chicken pieces and variations such as chicken sandwiches and wraps, salads and side dishes such as French fries and coleslaw, desserts and soft drinks, often supplied by PepsiCo. Its most famous product is pressure fried chicken pieces, seasoned with Sanders' "Original Recipe" of 11 herbs and spices. The exact nature of these ingredients is unknown, and represents a notable trade secret. KFC is famous for the slogan "finger lickin' good", which has since been replaced by "Nobody does chicken like KFC" and "So good".

KFC has been the target of an ongoing campaign by the animal rights organization PETA, although KFC executives have protested that the chain is unfairly singled out for criticism. The chain has also been accused by Greenpeace of contributing to the destruction of the world's rainforests with unsustainably sourced cardboard and paper packaging. In 2012, in China, the company was found to have been buying poultry that had been raised with excessive levels of growth hormone and antibiotics. This resulted in a restaurant boycott by a large number of Chinese.

History

Origin

Harland Sanders was born in 1890, and raised on a farm in Henryville, Indiana.[6] His father died when he was five years old, forcing his mother to work at a canning plant, and leaving her eldest son to care for his two younger siblings. From the age of seven, Sander's mother taught him how to cook.[6] After leaving the family home at the age of twelve he passed through several professions, with mixed success. In 1930 he took over a gas station on U.S. Route 25 just outside North Corbin, a small city on the edge of the Appalachian Mountains in south eastern Kentucky.[7] It was here that he first served to travellers the recipes that he had learned as a boy: fried chicken, and other dishes such as steaks and country ham. Originally using his own dining room table, he eventually opened a dedicated dining area called Sanders Court & Café. By 1936 this had proved successful enough for Sanders to be given the honorary title of Kentucky Colonel by Governor Ruby Laffoon. The following year he expanded his restaurant to 142 seats, and added a motel he purchased across the street.[8]

Sanders was dissatisfied with the 30 minute duration it took to prepare his chicken in an iron frying pan. In 1939, the first commercial pressure cookers were released onto the market, predominantly designed for steaming vegetables. Sanders bought one, and modified it into a pressure fryer, which he then used to fry chicken.[9] As well as production time falling to be comparable with deep frying, the new method produced flakier, moister chicken.[8] In 1940 he finalised what came to be known as his Original Recipe of 11 herbs and spices.[10]

Franchising

The first KFC franchise, located in Salt Lake City

The Sanders Court & Café generally served travelers, often those headed to Florida, so when the route planned in the 1950s for what would become Interstate 75 bypassed Corbin, Sanders sold his properties and traveled the U.S. to sell his chicken to restaurant owners. The first to take him up was his friend Pete Harman in South Salt Lake, Utah, the operator of one of that city's largest restaurants; together, they opened the first "Kentucky Fried Chicken" outlet in 1952.[11] In the first year of selling the product, restaurant sales more than tripled, with 75 per cent of the increase coming from sales of fried chicken.[12] For Harman, the addition of fried chicken was a way of differentiating his restaurant from competitors; in Utah, a product hailing from Kentucky was unique, and evoked imagery of Southern hospitality.[13] Don Anderson, a sign painter hired by Harman, coined the name "Kentucky Fried Chicken".[13]

Sanders, sometimes accompanied by his wife, would travel the country in his car looking for potential franchisees. They would wear traditional Southern garb, and it was at this time that he first began wearing his famous white suit and string tie, and referring to himself as "Colonel". Independent restaurants would pay four cents on each chicken as a franchise fee, in exchange for Sanders' "secret blend of herbs and spices" and the right to feature his recipe on their menus and use his name and likeness for promotional purposes.[14] Meanwhile, Harman created the company's first training manual and product guide.[13] Harman also trademarked the phrase that would become the company's slogan, "It's finger lickin' good".[14] It was Harman who in 1957 first bundled 14 pieces of chicken, five bread rolls and a pint of gravy in a paper bucket to offer families "a complete meal" for $3.50 ($29 in 2013 dollars).[13][15] He says he took on the project as a favor to Sanders, who had called on behalf of a Denver franchisee who didn't know what to do with the 500 buckets he had bought from a traveling salesman.[13]

In 1958, Sanders gifted the rights to franchise KFC in Florida to his eldest daughter Margaret, as a wedding present.[16] Dave Thomas was a franchisee from the mid-1950s, and he developed the rotating bucket sign that came to be used at many KFC locations.[17] Thomas encouraged Sanders to appear in the KFC television commercials, helped him simplify the chain's menu of over 100 items to just fried chicken and salads, and was an early advocate of the take-out concept that Pete Harman had pioneered.[14] Thomas sold his shares in 1968, becoming a millionaire in the process, and went on to found the Wendy's restaurant chain.[17]

Sale by Sanders

Kentucky Fried Chicken logo used between 1952 and 1978

By 1964, Kentucky Fried Chicken was being sold in over 600 franchised outlets in both the United States and Canada. Sanders sold the entire KFC franchising operation in the same year for $2 million ($14,987,124 in 2013 dollars), payable over time at a three per cent interest rate, to a group of investors headed by John Y. Brown, Jr and Jack C. Massey.[18] The sale included a lifetime salary and the agreement that he would be the company's quality controller and trademark.[19] According to Massey, when the offer was first touted to Sanders it was difficult to know how he felt about the deal: he would dismiss it one day and talk about it the next day as if it was inevitable.[20] Massey knew that Sanders placed faith in astrology, and waited until Sanders had a particularly positive and dramatic horoscope before making a definitive offer.[20] Massey went into Sanders' office and made him a written offer. Sanders looked at the figure, opened up his drawer, read his horoscope, and agreed to sell.[20]

Sanders later became disenchanted with the deal, telling the Washington Post, "I don't like some of the things John Y. done to me. Let the record speak for itself. He over-persuaded me to get out".[21] Massey and Brown changed the restaurant's format from the diner-style restaurant envisioned by Sanders to a standalone fast-food take-out model.[22] Giving all their restaurants a distinct red-and-white striped color pattern, the group opened over 1,500 restaurants, including in all 50 U.S. states, and several international locations.[22] Freestanding stores led to a faster growth rate for the chain because specialized operations of this kind proved easier to sell to would-be franchisees.[14] Massey and Sanders did not like each other, and the Colonel grew incensed when Massey decreed that company headquarters would be in Nashville, Tennessee, and not in Kentucky.[23] He bellowed, "This ain't no goddam Tennessee Fried Chicken, no matter what some slick, silk-suited sonofabitch says".[23] Brown did not like the idea either, but Massey owned 60 per cent of the company and wanted company headquarters to be near his home.[23] Brown claims that he brought order and efficiency to a chaotic management structure, and treated the increasingly disgruntled Sanders with tact and patience.[23] In 1966, Sanders' nephew Lee Cummings left the company after the sale to found the Lee's Famous Recipe Chicken chain.[24]

In 1966, at Massey's insistence, the company went public. By this time Sanders had come to regret his decision to sell, and exchanged his $1.5 million worth of stock for exclusive rights to the company's Canadian activities.[25] Later that year Massey resigned from the company and Brown announced that headquarters would be moved to Louisville, Kentucky.[23] According to Sally Denton, Massey left the venture with a "sour taste in his mouth", and refused to discuss the former partnership publicly.[21] By 1967, KFC had become the sixth largest restaurant chain in the U.S. by sales volume.[22] By 1968, Kentucky Fried Chicken was the largest fast food business in America and in 1969 it was listed on the New York Stock Exchange.[20] The company's amazing growth pushed its stock value to "stratospheric" levels, according to Reuters.[26] Massey resigned as chairman of the company in March 1970, and Brown took over his role.[27] In August 1970 Sanders and his grandson Harland Adams resigned from the board of directors. Sanders denied there was a rift, stating: "[I] realized that I was someplace I had no place being. ... Everything that a board of a big corporation does is over my head and I'm confused by the talk and high finance discussed at these meetings".[28] The increasingly chaotic operations were demonstrated by the company's global expansion. KFC management described the international strategy as "throwing some mud against the map on the wall, and hoping some of it would stick."[29] The Japanese market was opened after just two weeks preparation in 1970, and was a massive failure, losing $400,000 and throwing away more chicken than it sold.[29]

Heublein takeover

Harland Sanders in character as "The Colonel"

The company, once too large for Sanders to handle, grew too much for John Y. Brown as well. After just a few years on the stock exchange, the company had overreached itself.[26] In July 1971 Kentucky Fried Chicken was taken over by Connecticut-based Heublein, a specialty food and alcoholic beverage corporation, for $285 million ($1,635,529,992 in 2013 dollars).[30] Reuters opined that the takeover probably saved the company from disaster.[26] Heublein planned to increase Kentucky Fried Chicken's volume with its marketing expertise. A Texas firm, Church's Chicken, began making inroads into KFC's market share with "Crispy Chicken". KFC responded in 1972 when it introduced "Extra Crispy Chicken".[31] In 1973 Heublein introduced barbecue spare ribs, which sold well, but caused "tremendous" operating problems.[32] When management withdrew the product, they realised that fried chicken sales had been decreasing.[32] Meanwhile, relations with Sanders had soured. He was a perfectionist, and increasingy regretted having had to sell his company.[33] He began to complain of the company's declining food quality to the media:

My God, that gravy is horrible. They get tap water, mix it with flour and starch and end up with pure wallpaper paste. Another thing. That new crispy recipe is nothing in the world but a damn fried doughball stuck on some chicken".[34]

The outburst prompted a KFC franchisee in Bowling Green, Kentucky to unsuccessfully attempt to sue Sanders for libel.[35] In 1973 Heublein attempted to sue Sanders after he opened a restaurant in Shelbyville, Kentucky under the name of "Claudia Sanders, the Colonel's Lady Dinner House".[36] In retaliation, Sanders attempted to sue Heublein for $122 million ($574,931,174 in 2013 dollars) over the alleged misuse of his image in promoting products he had not helped develop, and for hindering his ability to franchise restaurants.[37] A Heublein spokesman described it as a "nuisance suit".[37] In 1975 Heublein settled out of court with Sanders for $1 million ($4,319,109 in 2013 dollars), allowing Sanders' restaurant venture to go forward as "Claudia Sanders Dinner House" and continued his role as goodwill ambassador.[36]

Overconfidence saw KFC's first international failure, when the company withdrew from Hong Kong in 1975, after just two years in operation.[38] Sanders continued to attack Heublein publicly, and in 1976 complained that the company "doesn't know what it's doing" and that it was "downright embarrassing" to have his image associated with such a poor quality product.[39] Michael Miles was promoted by Heublein to run the chain in 1977 and is credited with turning around the ailing company by instituting a back-to-basics formula.[40] One of Miles' most notable strategies was to lure Sanders back onside, and to listen to his recommendations for the business.[40] Miles also embarked on an extensive store refurbishment program, as outlets had become dated and run-down.[40] Sanders died in 1980 from pneumonia having continued to travel 200,000-250,000 miles a year up to this time, largely by car, promoting his product.[12][41]

Sale to PepsiCo

In 1982, Heublein was purchased by R. J. Reynolds, who had to contend with the introduction of Chicken McNuggets across the McDonald's chain in 1983. KFC introduced its own brand of chicken nuggets, called "Kentucky Nuggets" in 1984. In July 1986, Reynolds sold KFC to PepsiCo for a book value of $850 million ($1,802,185,792 in 2013 dollars).[42] Reynolds sold the chain to pay off debt related to its recent purchase of Nabisco and in order to concentrate on its tobacco and packaged food business.[43] Dan Koeppel of ADWEEK believed that the chain had been suffering from corporate neglect, menu stagnation and mixed marketing messages, whilst Nancy Giges of Advertising Age felt that the chain had been "smartly revived" by R. J. Reynolds.[44][45] KFC chairman Richard Mayer felt that Reynolds had treated their restaurants division as a "hobby".[46] PepsiCo made the chain a part of its PepsiCo Worldwide Restaurants division alongside Pizza Hut and Taco Bell, and it was anticipated that they would bring their merchandising expertise to the firm.[43] At the time of the takeover, 1,000 of 6,500 total KFC stores sold Pepsi.[45] PepsiCo was able to switch 1,650 company owned stores to Pepsi products with immediate effect.[45] Whereas KFC management had previously allowed franchisees to serve any soft drink they wished, PepsiCo stated that it hoped it would be able to convince franchisees to stock Pepsi products.[45] Despite this, PepsiCo chairman D. Wayne Calloway stressed that soft drink preference was not a factor in the company's takeover of KFC.[45] Overseas operations often flourished whilst ignoring or even defying orders from Louisville headquarters: management attempted to force KFC Japan to switch from corn and cottonseed oil to cheaper palm or soybean, but Japanese management refused to compromise the quality of their product with a lesser quality oil.[47]

Zinger chicken burgers in India.

By July 1987, the "Chicken Little", an inexpensive chicken slider made from dark meat, and aimed at capturing the lunchtime market, was introduced across KFC's U.S. stores.[48] Sales were reportedly disappointing, despite a $31 million advertising campaign.[49] In 1989, new management was installed, with John Cranor III replacing the outgoing Richard Mayer as division chairman.[50] Cranor announced a new contract for franchisees: PepsiCo could takeover weak franchises, existing restaurants would not be safeguarded against competition from new outlets, and PepsiCo would have the right to increase royalty fees.[51] There was an uproar from franchisees, who fought against the contract, and the issue was not resolved until 1996. PepsiCo was accused of behaving in an imperious manner towards franchisees, who it believed were holding back the firm's progression, whilst the franchisees believed they had been the backbone of the company during a succession of indifferent corporate owners.[44] KFC sales internationally were booming, particularly in Japan, whilst U.S. sales were struggling, with the local division being the weakest link in PepsiCo's restaurants division.[50] The chain had to contend with rise of grilled chicken as Americans became increasingly health conscious, through the growing El Pollo Loco restaurant chain, and with the introduction of Burger King's BK Broiler, a grilled chicken burger, both of which were poaching sales from the company.[50] Delays in product development, franchisee disputes and cramped kitchens prevented the chain from rolling out its own grilled product.[44] In August 1990, PepsiCo announced plans to roll out a home delivery service at all 5,000 U.S. outlets by January 1991, without informing franchisees beforehand.[44]

In 1991 the KFC name was officially adopted, although it was already widely known by that initialism.[52] Kyle Craig, president of KFC U.S, admitted the change was an attempt to distance the chain from the unhealthy connotations of "fried".[53] The early 1990s saw a number of successful major product launchs throughout the chain, such as spicy "Hot Wings", popcorn chicken, and the "Zinger", a spicy chicken fillet burger, for international markets.[54] In 1993, rotisserie style chicken, under the name "Colonel's Rotisserie Gold", was introduced at over 30 per cent of U.S. outlets.[55] It proved to be a costly failure: a $100 million investment was undermined by faulty ovens.[56] Despite new developments, the chain's growth stagnated between 1988 and 1994.[57] Some product launches, such as skinless chicken, designed to appeal to more health-conscious customers were outright failures, increasing overheads and helping operating profits decline by 37 per cent in 1991, after customers failed to accept the unfamiliar texture.[58][59] Meanwhile, KFC had increasing interests overseas: by 1992, slightly under half of all sales came from international markets.[60]

By 1994, KFC was again struggling after competitors such as McDonald's had introduced value menu offerings.[61] Two executives with marketing backgrounds were charged with the task of turning around the ailing company.[62] Roger Enrico was appointed as the CEO of PepsiCo Worldwide Restaurants, and David C. Novak was appointed President of KFC.[62] After repairing the company's relationship with its franchisees by dropping the most objectionable terms of Cranor's proposed contract, Novak oversaw ten fiscal quarters of consecutive KFC growth.[57] He introduced successful new products such as the chicken pot pie and marinated chicken, the chain's first major new product launches for almost two years.[61] Weaker selling items, such as corn muffins, were removed from the menu.[56] Meanwhile, Enrico scaled back the increasing competition between KFC and it sister companies Taco Bell, which had begun offering its own chicken products, and Pizza Hut, which KFC had attacked in its marketing.[56]

Tricon/Yum! Brands

In August 1997, PepsiCo spun off its restaurants division as a public company valued at $4.5 billion ($6,514,925,373 in 2013 dollars) in order to pay off short-term debt and because, as one PepsiCo executive admitted, "restaurants weren't our schtick".[63][64] Jeffry Krug, an employee, argued that an important reason why the PepsiCo takeover of KFC struggled was due to cultural differences between its New York executives and KFC's Louisville employees.[65] The new company was named Tricon Global Restaurants, and at the time had 30,000 outlets and annual sales of $10 billion ($14,477,611,940 in 2013 dollars), making it second in the world only to McDonald's.[66] In July 1997, the Twister wrap was launched in most KFC U.S. stores.[67] It was the first KFC chicken item to be served cold, and it used fried chicken that would otherwise have been thrown away by stores.[68] It failed to take off in the U.S., and was withdrawn by May 1998.[69] After a revamped Twister wrap became a success in Australia, the product began to be rolled out internationally. The new Twister was served hot, and used the "Crispy Strip" chicken strips, peppery mayonnaise, lettuce and tomato.[68] In January 1998, the "Tower Burger", a fried chicken fillet burger with the addition of a hash brown, was first launched in the United Kingdom.[70] By 1998, the majority of KFC franchisees had agreed to stock PepsiCo soft drink products.[71] In September 1999, the chain launched a $75 million advertising campaign for its new range of chicken burgers, which was aimed at capturing the lunchtime market.[72] The Triple Crunch, Triple Crunch Zinger and Original Recipe were fried, whilst the Tender Roast and Honey BBQ were not.[72] The campaign was KFC's most expensive to date.[72]

Tricon was renamed Yum! Brands in 2002. In 2002, the chain had to contend with Burger King's launch of the Chicken Whopper.[59] In just three months, the Chicken Whopper became Burger King's most successful launch of all time, with sales of 50 million.[59] From 2002 to 2005, KFC experienced three years of weak sales, when underinvestment in product development left the brand looking "tired and poorly positioned", according to Restaurant Research, an independent consultancy.[64] The worldwide avian flu scare of 2005 temporarily decreased sales by as much as 40 per cent.[73] KFC responded in 2006 by adding a cheap, small chicken burger to the menu called a "Snacker", which is easier to eat than chicken on the bone, and proved to be one of the chain's most successful product launches to date.[64] In international markets, it introduced the "Boxmaster", a meal sized wrap in a box. It also began a back to basics makeover of the brand image, bringing back the full "Kentucky Fried Chicken" name at some outlets, returning portraits of Colonel Sanders to prominence, and once more promoting the cardboard buckets of chicken it had briefly abandoned in the 1990s.[64]

Protesters demonstrating outside a KFC restaurant in Royal Oak, Michigan

Since the turn of the twenty first century, fast food has been extensively criticised for its animal welfare record, its links to obesity and its environmental consequences.[74] Eric Schlosser's book Fast Food Nation (2002) and Morgan Spurlock's film Super Size Me (2004) reflected these concerns.[13] Since 2003, the animal rights group People for the Ethical Treatment of Animals (PETA), have been protesting KFC's treatment of the animals used for its products with the Kentucky Fried Cruelty campaign. PETA states that they have held more than 12,000 demonstrations at KFC outlets since 2003 because of alleged mistreatment of chickens by KFC suppliers.[75] In 2004 an employee at a Pilgrim's Pride KFC supplier in West Virginia filmed chickens being kicked, stamped on and thrown against a wall by workers.[76] On one day he filmed workers making a game of throwing chickens against a wall; 114 were thrown in seven minutes.[77] A supervisor walking past said, "Hold your fire", and, once out of the way, told the crew to "carry on".[77] The employee also saw workers "ripping birds' beaks off, spray painting their faces, twisting their heads off, spitting tobacco into their mouths and eyes and tying their legs together for 'laughs'".[78] The plant had won KFC's "Supplier of the Year" award in 1997.[77] After officials at KFC saw the videotape they said they would seek dismissal of the workers, inspect the slaughterhouse more often and end their relationship if the cruelty was repeated.[77] Pilgrim's Pride said it was "appalled" by the tape, and the video resulted in three managers and eight hourly workers being fired and KFC suspending their business with the plant.[77][78] KFC responded by issuing a press statement arguing that the PETA campaign mischaracterised the company as being responsible for raising and processing its chickens and questioning why PETA singled out KFC amongst fast food chains when 85 per cent of the facility's output went to competitors.[79]

In 2006 Greenpeace accused KFC Europe of sourcing the soya bean for its chicken feed from Cargill, who had been accused of clearing large swathes of the Amazon rainforest in order to grow the crop.[80] In May 2012, Greenpeace accused KFC of sourcing paper pulp for its food packaging from Indonesian rainforest wood.[81] Independent forensic tests showed that some packaging contained more than 50 percent mixed tropical hardwood fibre, sourced from Asia Pulp & Paper.[82][83] More than 60 companies have ended their contracts with APP, including Nestlé, Unilever, Danone, Xerox and HarperCollins.[84] KFC claimed: "From a global perspective, 60% of the paper products that Yum! (our parent company) sources are from sustainable sources. Our suppliers are working towards making it 100%".[85] APP argued that mixed tropical hardwood fibre "can be found easily in recycled paper, or it can come from the legal and sustainable harvesting of trees in primary rainforest. It can also come from tree residues that are cleared, after a forest area has become degraded, logged-over or burned, as part of a sustainable development plan. APP has strict policies and practices in place to ensure that only residues from legal plantation development on degraded or logged-over forest areas and sustainable wood fiber enters the production supply chain".[82]

In April 2010, the Double Down sandwich was launched. Criticised as an unhealthy product, it featured two pieces of fried chicken in lieu of a conventional bread bun. In 2012, Interbrand valued the KFC brand at just under $6 billion.[86] Interbrand lauded KFC's promotional activity on social networking sites such as Facebook and Twitter.[86] In December 2012, the chain was struck in China when it was discovered that a number of KFC suppliers had been using growth hormones and an excessive amount of antibiotics on its poultry in ways that violated Chinese law.[87] In February 2013, Yum! CEO David Novak admitted that the scandal had been "longer lasting and more impactful than we ever imagined".[87] The issue is of major concern to Yum!, which earns almost half of its profits from China, largely through the KFC brand. In the same month, it was reported that KFC's projected growth in Africa was being stymied by the lack of reliable poultry suppliers on the continent.[88] The Ghana franchise was importing all of its chicken from China, whilst the Nigerian franchise was selling fish products, as it is illegal to import chicken into Nigeria.[88]

Operations

  Countries with KFC restaurants

KFC is a subsidiary of Yum! Brands, one of the largest restaurant companies in the world. Whilst Yum! does not offer individual figures for its restaurant brands, KFC's 2011 sales revenue was around $15 billion.[4] KFC has its headquarters in Louisville, Kentucky, United States, in a building on 1441 Gardiner Lane known colloquially as "The White House" due to its resemblance to the Washington D.C. building.[89] KFC is incorporated in the U.S. state of Delaware.[1] As of 2011, there were over 17,000 KFC outlets in 115 countries and territories around the world: almost half are in the United States and China, with the latter accounting for 49 per cent of revenue.[90] KFC was described in 2012 by Bloomberg Businessweek as a "muscular player" in developing regions, specifically Africa, China and India, while noting its falling market share in the United States to rivals such as Chick-fil-A and Popeyes.[91] As well as dine-in and take-out, many KFCs offer a drive-through option.[92] In some markets KFC also offers a delivery service.

China

A KFC in China, displaying the 1997 – 2006 logo

KFC pioneered Western-style fast food in mainland China when it opened its first outlet in Beijing in 1987.[93] It is the largest Western restaurant chain, with 4,200 branches, and China is one of the only countries in the world where McDonald's is not the dominant fast food chain.[94][95] Clifford Coonan of the Irish Times described the chain as "by far the most pervasive symbol of Western culture in China."[94]

KFC believes it has been successful in China because it has adapted its menu to suit local tastes, offering such items as rice congee, egg custard tarts and tree fungus salad, with an average of 50 different menu items per store.[96][93] The chain is helped by the fact that fried chicken has been a staple Chinese dish since antiquity, whereas rival chain offerings such as hamburgers are foreign and unknown. The chain has adapted to the market in other ways: the average Chinese KFC is twice as large as an American outlet.[97] Warren Liu, a former vice-president of Tricon Global Restaurants argues that, "being the first – the pioneer into these remote corners of China – has continued to provide KFC with a substantial competitive advantage."[93] 90 per cent of Chinese sites are company owned, in contrast to just 11 per cent internationally.[61] The chain immediately set itself apart in the late 1980s when it hired managers from emerging Asian economies rather than import Americans.[93] KFC was also forced to create its own distribution infrastructure, as none existed.[61] After this start, the chain's continued growth in the region can be largely credited to Yum! chief executive David Novak, who expanded 100 stores in 1997 to 4,800 in 2013.[97]

Since 2006, Yum! has operated the East Dawning chain, which incorporates Chinese cuisine alongside the traditional KFC menu items.[98] In 2008, David Novak said that he envisions eventually operating more than 20,000 restaurants in China, saying: "We're in the first inning of a nine-inning ball game in China".[96] In November 2011, Yum! acquired Little Sheep, a Mongolian restaurant chain specialising in hot pot.[97] In December 2012, the chain was hit by allegations that its suppliers injected antiviral drugs and growth hormones into poultry in ways that violated food safety regulations.[99] This resulted in the chain severing its relationship with a supplier, and agreeing to "actively co-operate" with a government investigation into its use of antibiotics.[93] KFC's China sales in January 2013 were down 41 per cent against the previous year.[94]

United States

A co-branded Taco Bell/KFC in Morrisville, North Carolina

The basic model for KFC in the United States, not necessarily duplicated elsewhere, is a focus on low prices, a limited menu (29 items on average) and an emphasis on takeout.[61] In the U.S., many KFC locations are co-located with the other Yum! Brands restaurants, Taco Bell and Pizza Hut.[92] Often, these locations behave like a single restaurant, offering one menu with food items from both restaurant brands.[100] The first such combination, a KFC-Taco Bell, opened in Clayton, North Carolina in 1995.[101] Some locations were also opened as combinations of KFC, Taco Bell and Pizza Hut; this experiment has been described as a "failure" and was satirized in the film Young Adult (2011) as a "Kentacohut".[91]

Since its founding, Sanders and KFC used cottonseed or corn oil for frying, but in the 1980s the company began to switch to cheaper oils such as palm or soybean.[102] In the 2000s it became apparent that these oils contain relatively high levels of trans fat, which increases the risk of heart disease. In October 2006, KFC said it would begin frying its chicken in trans fat-free oil in the U.S.. This would also apply to their potato wedges and other fried foods, however, the biscuits, macaroni and cheese, and mashed potatoes would still contain trans fat. Trans fat-free soybean oil was introduced in all KFC restaurants in the U.S. by April 2007.[103]

Low U.S. sales in 2008 were blamed by David Novak on a lack of new ideas and menu items.[104] Kentucky Grilled Chicken was launched in Spring 2009, although this only stemmed the sales decline temporarily.[105] In 2010 Novak announced a turnaround plan that included improving restaurant operations, introducing value items and providing healthier menu options.[105] Advertising Age noted that chicken restaurant chain Chick-fil-A was winning market share from its larger rival.[106] In 2011 Bloomberg referred to KFC USA as "an also-ran to McDonald's Corp".[107] In 2012, Carol Tice of Forbes described how many of the KFC outlets are "aged and uninviting", and that the chain "hasn't introduced an exciting new food item in ages".[108] Some analysts have speculated that KFC will spin off its ailing U.S. operations.[91] In the United States, the company is divesting control of company-owned restaurants to franchised operations, with the intention of reducing overall company ownership to 5 per cent of sites from the 35 percent of the previous decade.[91]

United Kingdom and Ireland

There are 840 KFC restaurants in the UK and Ireland, making it one of the largest international KFC operations.[109] It employs over 8,000 people in the UK, with the restaurant ownership split 40 per cent equity and 60 per cent franchised.[109] In the UK, KFC sells 60,000 metric tonnes of chicken annually, 60 percent of which is produced in the UK and delivered fresh to outlets, a minimum of three times a week.[110] The remaining 40 per cent is sourced from Europe, Thailand and Brazil.[111] All of their Original Recipe chicken is sourced within the UK.[111] Chicken is purchased from the four largest suppliers in the UK, including 2 Sisters Food Group.[112][113] KFC claim that their Original Recipe chicken is no different from a chicken that can be bought in the supermarket.[114] Frying oil is sourced from a AarhusKarlshamn facility in Hull.[115] The majority of KFC products, including their bread, beans, sauces and salads when seasonally available, are sourced from the UK.[116] The most popular menu item in Britain is the mini fillet burger with annual sales of more than 19 million, followed by snack box popcorn chicken (14 million) and the boneless meal for one (12 million sales plus).[117] The chain has sold Lavazza coffee since 2009.[118]

England had the first overseas franchise for Kentucky Fried Chicken in 1964. England also had the first overseas branch, which opened in Preston in the North West in May 1965, and was the first American fast food restaurant chain in the country, pre-dating the arrival of McDonald's, Burger King and Pizza Hut by almost a decade.[119] In the early days most business was done after 8pm, when the primary customers were young men arriving from the pub.[7] Non essential trans fats were removed by 2007.[120] System sales were over $1 billion in the UK and Ireland in 2009, having more than doubled in the past 5 years, serving over 100 million meals per year.[109] In 2011, chains across the UK and Ireland ceased to use palm oil and switched to rapeseed oil to reduce saturated fats across its range by 25 per cent.[121] The oil now has reduced food miles, as it is sourced from Kent instead of Asia.[121]

In May 2007, KFC UK requested that the Tan Hill Inn in North Yorkshire refrain from using the term "Family Feast" to describe its Christmas menu, as it is a trademarked term owned by the company.[122] KFC quickly backed down however after the story received national press attention and negative publicity for the chain.[123] A similar occasion occurred in 2009 regarding a small takeaway in Scotland using the "Family Feast" term.[124] The takeaway refused to cease using the term, and KFC backed down after the story attracted widespread media attention.[124]

India

The first Indian KFC was opened in the city of Bangalore in June 1995.[125] This resulted in protests from the left wing, anti-globalisation and environmental campaigners, as well as local farmers, who protested the chain bypassing local producers.[126] Many Indians protested the onslaught of consumerism, the loss of national self-sufficiency, and the disruption of indigenous traditions.[127] The protests came to a head in August 1995, when the Bangalore outlet was repeatedly ransacked.[125] The Bangalore outlet demanded, and received, a police van permanently parked outside it for a year.[126] M. D. Nanjundaswamy claimed that KFC would adversely affect the health of the impoverished, by diverting grain from poor people to make the more profitable animal feed.[128] Former environment minister Maneka Gandhi joined the protestors.[128] KFC was also accused of using illegally high amounts of monosodium glutamate (MSG) and frying its food in pork fat.[129] A store in Delhi was closed by the authorities, purportedly for health reasons, but more likely to avoid a repetition of the Bangalore incident. KFC eventually abandoned the Indian market, not returning until 1999, with a new Bangalore outlet.[130] This was the sole KFC in India until 2004, when the chain began to expand.[130] As of December 2012, there are 280 KFCs in the Indian market.[131] As well as the standard KFC offerings, the chain sells a chickpea burger and hot wings with chilli lemon sprinkles.[132]

Developing markets

The company continues to grow in Asia. KFC Holdings is the franchisee of over 640 KFC restaurants in Malaysia, Singapore, Brunei, Cambodia and India and is publicly quoted on the Bursa Malaysia.[133] In Indonesia it is the largest Western restaurant chain, with over 420 branches, and one of the few countries where McDonald's is not the dominant chain.[95] The first outlet opened in Jalan Melawai, Jakarta, in 1979.[134] Since then, the chain has grown to hold an estimated 32 per cent market share, and product items include spaghetti, wraps and chicken porridge.[135] The master franchisee is PT Fastfood Indonesia, which is listed on the Jakarta Stock Exchange.[134]

As of 2013, there are almost 900 KFCs in Africa, where the company hopes to grow from long-established markets such as South Africa, Egypt and Morocco, and where Ghana, Kenya and Nigeria have recently experienced their first KFC openings.[136] 660 of the outlets are located in South Africa however. In 2012, KFC operated 577 restaurants across 36 countries in the Caribbean and Latin America region.[137]

Products

A Vietnam KFC shrimp burger in 2007

KFC's primary product is pressure-fried pieces of chicken made with the "Original Recipe" seasoning mix. It is marinated, dipped in a flour and egg based mixture, and breaded with flour before being fried. This is usually available in two or three piece individual servings, or in a family size cardboard bucket, typically holding between 6 and 16 pieces of chicken. Chicken pieces include drumstick, thigh and keel, a backbone based breast cut.[138] The chicken is not cooked to order, and is instead kept warm in ovens until it is sold.[139] If it is not sold within 90 minutes, it is discarded, under KFC's "hot & fresh" policy.[139]

The company also sells chicken burgers (including the Zinger and the Tower burgers), wraps ("Twisters" and "Boxmasters") and a variety of finger foods, including crispy chicken strips and hot wings.[140][141] "Popcorn Chicken" is one of the most widely available KFC products, and consists of small pieces of fried chicken.[59] A number of locations sell grilled chicken, often under the "Brazer" line. In some locations, chicken nuggets are sold, sometimes using the "Kentucky Nuggets" trademark.[142] Some locations sell chicken livers and gizzards.[143] Value dishes are sold under the "Streetwise" name.[144] Some KFC outlets also offer an "All You Can Eat" Buffet that features some of the foods offered. Though not all outlets carry them, many do offer such an option, such as Salt Lake City, Utah; Riverside, California; Wheeling, West Virginia; and Greenville, South Carolina.[145]

KFC adapts its menu internationally to suit regional tastes, and there are over three hundred KFC menu items worldwide.[61] In Asia there is a preference for spicy foods, such as the Zinger chicken burger.[146] A number of territories sell fried seafood products.[147]

Side dishes often include French fries, coleslaw, barbecue baked beans, corn on the cob, mashed potato, bread rolls and American biscuits.[148] Salads include the bean salad, the Caesar salad and the garden salad. In a number of territories, KFC sell onion rings.[149] In Asia, rice based side dishes are sold. In Malaysia, chicken meatball soup is sold. In the U.S., potato wedges are sold instead of French fries.[150]

Because of the company's previous relationship with PepsiCo, Yum! Brands had a contract to supply Pepsi soft drinks until the end of 2012.[151] Most territories still supply PepsiCo products, but exceptional territories include South Africa, the Philippines, Malaysia, Turkey, Romania, Greece, Israel and Sri Lanka, which stock drinks supplied by the Coca-Cola Company.[152][153][154] In Peru, the locally popular Inca Kola is sold.[155] In a number of Eastern European locations, beer is offered, in addition to soft drinks.[156][157]

An own brand dessert is the soft serve ice cream product known as "Avalanche", which contains chocolate bits.[139] The Krusher/Krushem range of frozen beverages containing "real bits" such as Kit Kat, Oreo and strawberry shortcake, is available in over 2,000 outlets.[158] Apple pie is a popular dessert worldwide, but other items include sundaes, tres leches cake in Peru, and Ben & Jerry's ice cream in Germany and the Netherlands.[159]

In 2012 the "KFC am" breakfast menu began to be rolled out internationally, including such items as pancakes, waffles and porridge, as well as fried chicken.[160]

Secret recipe

KFC Original Recipe fried chicken

Sanders' Original Recipe of 11 herbs and spices is one of the world's most famous trade secrets.[161] It is a benchmark by which KFC differentiates its product from those of its competitors.[111] It is not patented, because patents eventually expire, whereas trade secrets can remain the intellectual property of their holders in perpetuity.[162] Sabra Chartrand of the New York Times describes the recipe as one of the company's most valuable assets.[161] It is believed that Sanders only ever shared the recipe with his wife Claudia and Jack C. Massey.[163] Early franchisee Pete Harman credits the chain's popularity to the recipe and the product, and John Y. Brown cites the "incredibly tasty, almost addictive" product as the basis of KFC's staying power.[164]

A copy of the recipe, signed by Sanders, is locked in a high-tech safe inside a vault with walls two feet thick in KFC's Louisville headquarters, along with 11 vials containing the recipe's herbs and spices.[91][165] According to Yum! Brands, portions of the secret recipe are known by a select few among its executives, but only two people in the entire organization know it in its entirety.[166] A third executive knows the combination to the safe where the handwritten recipe resides.[167] A limited number of KFC employees know the identities of the three executives, who are not allowed to travel together on the same plane or in the same car for security reasons.[167] One of the two executives said that no one had come close to guessing the contents of the secret recipe, and added that the actual recipe would include some surprises.[111] To maintain the secrecy of the recipe, half of it is produced by one KFC supplier before it is given to McCormick, who add the second half.[168] A computerized process is then used to blend the mixture.[168]

In September 2008 the handwritten recipe was temporarily moved to an undisclosed location whilst KFC revamped the security at its headquarters. In February 2009 the recipe returned to a more secure, computerized vault guarded by motion detectors and security cameras.[169] Reportedly, the paper has yellowed and the handwriting is now faint.[41] Allen Adamson, managing director of brand consultancy Landor's New York practice, remains unconvinced about the contribution of the secret formula aspect.[168] He argues: "The story may still be part of these companies' folklore, but I'd be surprised if more than two per cent buy the brand because of it".[168]

Sanders had deviated from fried chicken recipes of the time by cooking his chicken under pressure.[170] His patented process saw the chicken fried at 350 °F (180 °C) to 400 °F (200 °C) for the first minute or so and then lowering it to 250 °F (120 °C) for seven minutes.[170] Prepared bags of the seasoning mix are sent to franchises, where it is combined with a flour, powdered egg, dried milk and salt breading mix in store.[171]

Advertising

Colonel Sanders was a key component of KFC advertising until his death in 1980. He made several appearances in various B movies and television programs of the period, such as What's My Line? and I've Got a Secret.[172] Despite his death, Sanders remains a key symbol of the company. Throughout the early 1990s, KFC hired actors such as Henderson Forsythe to portray the Colonel in its advertisements.[173] However, consumers failed to embrace the look-alike and the tactic was abandoned.[173] From May 1998, an animated version of the Colonel, "boisterously" voiced by Randy Quaid, was used for television advertisements.[71] KFC chief concept officer Jeff Moody said they "provide a fresh way to communicate our relevance for today's consumers".[174] The animated Colonel was dropped in 2001 in the U.S., and in 2002 in the UK.[175] In 2012, a UK advert entitled "4000 cooks" featured an actor made up to look like Sanders.

The company is famous for the "It's finger lickin' good" slogan, which originated in the 1950s.[176] After a KFC television advertisement featured Dave Harman (brother of Pete) in the background licking his fingers, a viewer phoned the station to complain.[176] The main actor in the advertisement, a KFC manager named Ken Harbough, upon hearing of this, retorted: "Well, it's finger lickin' good".[176] The phrase stuck and went on to become one of the best-known slogans of the twentieth century.[176] The trademark expired in the United States in 2006, and was replaced in that market with "Follow your taste" until 2010.[177] In 2011, the "finger lickin' good" slogan was dropped in favor of "So good", to be rolled out worldwide.[176] A Yum! executive explained that the new slogan was more holistic, applying to staff and service, as well as food.[178]

The first KFC logo was introduced in 1952 and featured a "Kentucky Fried Chicken" typeface and a logo of the Colonel. It was replaced in 1978 with a similar logo, albeit with a similar typeface and a slightly different Sanders logo. The "KFC" initialism logo was introduced in 1991, and the Colonel's face logo was switched from brown to blue ink.[44] A change in 1997 added a smiling Colonel prominently to advertising. The new Colonel image was different, a more thinly lined, less cartoonish and more realistic representation of Sanders. Since 2005, an updated version of the original 1950s logo has been used at some outlets.[179] In 2006 the Colonel logo was updated, replacing his white suit with an apron, bolder colors and a better defined visage.[180] According to Gregg Dedrick, president of KFC's U.S. division, the change, "communicates to customers the realness of Colonel Sanders and the fact that he was a chef".[180]

The advertising agency Young & Rubicam was KFC's agency of record in the United States from 1976 until the end of 2000.[181] KFC would hire a different agency to reach black audiences, such as Mingo-Jones.[182] Mingo Jones coined the "We do chicken right" slogan, which was later adopted across the chain as a whole throughout the 1980s and early 1990s.[183] In 1994, Ogilvy & Mather became KFC's international agency of record.[184] From 1997 to 1999, Ogilvy & Mather used celebrities to endorse KFC products in television advertisements in the UK, such as Ivana Trump, Tara Palmer-Tomkinson and Ulrika Jonsson.[185] After this campaign, the agency began to simply adapt Y&R's American campaigns for a British audience.[175] In late 2002, BBH was appointed KFC's UK agency.[186] In 2003, the "Soul Food" campaign was launched, aiming to capture the young urban market with music from 1960s and 70s black America.[186] By 2005, this believed to have been a failure, and KFC UK's marketing director left the company amid speculation that the U.S. head office was unhappy with the campaign.[186] Marketing subsequently moved towards a more family orientated line.[186]

See also


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