You are on page 1of 10

Introduction:

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 overall after McDonald's, with over 17,000 outlets in 105 countries and territories as of December 2011. 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. Despite this, his image was still used as branding (as "Colonel Sanders"; Sanders had been made a Kentucky colonel after the success of his initial restaurant), and he worked as a goodwill ambassador for the company until shortly before his death. Throughout the 1970s and 1980s, KFC had 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 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. 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. 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 with contributing to the destruction of the world's rainforests with unsustainably sourced cardboard and paper packaging.

History:
a) Origin: Born and raised in Henryville, Indiana, Harlan Sanders passed through several professions in his lifetime, with mixed success. Sanders first served his fried chicken in 1930 in the midst of the Great Depression at a gas station he owned in North Corbin, a small city on the edge of the Appalachian Mountains in south eastern Kentucky. The dining area was named Sanders Court & Caf and was successful enough for Sanders to be given the honorary title of Kentucky Colonel in 1936 by the Kentucky Governor Ruby Laffoon. The following year Sanders expanded his restaurant to 142 seats, and

added a motel he purchased across the street. When Sanders prepared his chicken in his original restaurant in North Corbin, he prepared the chicken in an iron frying pan, which took about 30 minutes to do, too long for a restaurant operation. In 1939, Sanders altered the cooking process for his fried chicken to use a pressure fryer, resulting in a greatly reduced cooking time comparable to that of deep frying. Not only did production speeds increase but the method produced flakier, moister chicken. Between 1939 and 1940 Sanders devised what came to be known as his Original Recipe of 11 herbs and spices. b) Franchising: The Sanders Court & Caf generally served travelers, often those headed to Florida, so when the route planned in the 1950s for what would become Interstate 75 bypassed Corbin, he sold his properties and traveled the U.S. to sell his chicken to restaurant owners. The first to take him up on the offer was his friend Pete Harman in South Salt Lake, Utah, the operator of one of the city's largest restaurants; together, they opened the first "Kentucky Fried Chicken" outlet in 1952. The restaurant's sales in the first year more than tripled, with 75 per cent of the increase from fried chicken sales. For Harman, the addition of fried chicken was a way of differentiating his restaurant from his competitors; in Utah, a product hailing from Kentucky was unique, which made it seem special. A sign painter hired by Harman coined the name "Kentucky Fried Chicken". Harman produced the company's first training manual and product guide. He also trademarked the phrase that would become the company's slogan, "It's finger lickin' good". It was Harman who in 1957 first bundled 14 pieces of chicken, five rolls and a pint of gravy in a paper bucket to offer families "a complete meal" for $3.50 ($29 in 2012 dollars). 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. At the time Harman sold his first bucket meals, the chain was little more than a network of independent restaurants that paid pennies per order for Sanders' "secret blend of herbs and spices" and the right to feature his recipe chicken on their menus and use his name and likeness for promotional purposes. The popularity of the bucket meals ultimately made it feasible to open free-standing KFC restaurants, according to Harman, "by giving you enough volume to justify a manager and pay the overhead". Freestanding stores led to a faster growth rate for the chain because those specialized operations proved easier to sell to would-be franchisees. An early franchisee from 1962 was Dave Thomas, who created the rotating bucket sign that came to be used at most KFC locations in the US. Thomas encouraged Sanders to appear in the KFC television commercials, helped him to 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. Thomas sold his shares in 1968, becoming a millionaire in the process, and went on to found the Wendy's restaurant chain.

c) Sale and rebranding: By 1964, Kentucky Fried Chicken was sold in over 600 franchised outlets in both the United States and Canada. Sanders sold the entire KFC franchising operation in 1964 for $2 million ($14,987,124 in 2012 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. The sale included a lifetime salary and the agreement that he would be the company's quality controller and trademark. 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 as if it were inevitable the next.[19] Massey knew that Sanders believed in astrology and waited until Sanders had a particularly positive and dramatic horoscope before making a definitive offer. 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 it. Sanders apparently 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". Massey and Brown changed the restaurant's format from the diner-style restaurant envisioned by Sanders to a standalone fast-food take-out model. Giving all their restaurants a distinct red-and-white striped color pattern, the group opened over 1,500 restaurants, including locations in all 50 U.S. states and several international locations. The concept caught on because it was the best chicken most people had ever tasted and took a dish that had been a Sunday dinner treat and made it an everyday staple. 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. He bellowed, "This ain't no goddam Tennessee Fried Chicken, no matter what some slick, silk-suited sonofabitch says". Brown did not like the idea either, but Massey owned 60 per cent of the company, and Brown 40 per cent, and Massey wanted company headquarters to be near his home. Brown claims that he brought order and efficiency to a chaotic management structure, and treated the increasingly disgruntled Sanders with tact and patience. The outburst prompted a KFC franchisee in Bowling Green, Kentucky to unsuccessfully attempt to sue Sanders for libel.[31] 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".[32] In 1974 Sanders counter-sued Heublein Inc for $122 million ($574,931,174 in 2012 dollars) over the alleged misuse of his image in promoting products he had not helped develop, and for hindering his ability to franchise restaurants. A Heublein spokesman described it as a "nuisance suit". In 1975 Heublein settled out of court with Sanders for $1 million ($4,319,109 in 2012 dollars), continued his salary as goodwill ambassador and allowed his restaurant venture to go forward as "Claudia Sanders Dinner House".

d) Recent events From the turn of the twenty first century, fast food was extensively criticized for its animal welfare record, its links to obesity and its environmental consequences. Eric Schlosser's book Fast Food Nation (2002) and Morgan Spurlock's film Super Size Me (2004) reflected these concerns. 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. 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. On one day he filmed, workers made a game of throwing chickens against a wall; 114 were thrown in seven minutes. A supervisor walking past the pile of birds on the floor said, "Hold your fire", and, once out of the way, told the crew to "carry on".[37] 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'". The plant had won KFC's "Supplier of the Year" award in 1997. 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. The company that owns the slaughterhouse, the Pilgrim's Pride Corporation, the second-largest poultry processor in the US, said it was "appalled" by the tape. The video resulted in three managers and eight hourly workers being fired and KFC suspending their business with the plant. KFC responded by issuing a press statement arguing that the PETA campaign mischaracterized 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.

Operations:
KFC is headquartered in Louisville, Kentucky, United States in a building on 1441 Gardiner Lane. KFC is incorporated in the US state of Delaware. KFC is a subsidiary of Yum! Brands, one of the largest restaurant companies in the world. In 2011 it earned an estimated $9.2 billion in sales revenue. As of 2011, there were over 17,000 KFC outlets in 105 countries and territories around the world: almost half of the total are in the United States and China, and China accounts for 49 per cent of the company's revenue.[61] KFC was described in 2012 by Bloomberg Business week a "muscular player" is developing regions, specifically Africa, China and India. We can get some good & useful ideas about KFC operations in Different nations:

United States: In the United States, KFC's largest chicken supplier is Tyson Foods, who dominate the industry, with other major suppliers including Pilgrim's Pride and Perdue. In the USA, many KFC locations are co-located with the other Yum! Brands restaurants, Taco Bell and Pizza Hut. Many of these locations behave like a single restaurant, offering a single menu with food items from both restaurants. The first such combination, a KFC-Taco Bell, opened in Clayton, North Carolina in 1995. 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". 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. 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 United States. 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 American KFC restaurants in the U.S. by April 30, 2007. Low US sales in 2008 were blamed by David Novak on a lack of new ideas and menu items. Kentucky Grilled Chicken was launched in Spring 2009, although this did not stem the sales decline for long. In 2010 Novak announced a turnaround plan that included improving restaurant operations, introducing value items and providing healthier menu options. In 2011 Bloomberg referred to KFC USA as "an also-ran to McDonald's Corp". Some analysts have speculated that KFC will spin off its failing US operations. United Kingdom and Ireland: 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 a decade. In the early days most business was done after 8pm, when the primary customers were young men arriving from the pub. 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. That year, KFC UK was awarded second place in Britain's Top Employers and was in the top 50 of Britain's Great Places to Work. 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 and cut food miles by sourcing from Kent instead of Asia. There are 840 KFC restaurants in the UK and Ireland, making it one of the largest international KFC operations. The KFC business employs over 8,000 people in the UK with the restaurant ownership split 40 per cent equity and 60 per cent franchised. In the UK, KFC sells 60,000 metric tones of chicken annually, 60 percent of which is produced in the UK and delivered fresh to outlets, a minimum of three times a week. The remaining 40 per cent is

sourced from Europe, Thailand and Brazil. All of their Original Recipe chicken is sourced within the UK. Australia: The first Australian KFC was built in Guildford on the western suburbs of Sydney in 1968, and by 2010, there were 600 outlets. In 2010, an advertisement was broadcast in Australia whilst a Test cricket series was being played between the Australia and the West Indies, showing an Australian cricket fan feeling awkward when surrounded by West Indies fans, and sharing a bucket of KFC to befriend them. The advertisement was criticized in some quarters of the US after it was posted on YouTube, as it was misinterpreted to reference a racial stereotype of African Americans enjoying fried chicken. KFC Australia acknowledged that it was "misinterpreted by a segment of people in the US", and as a result withdrew the advertisement from further broadcast. Australian commentators had noted that the racial stereotype did not exist in Australia and the cricket fans in the advertisement were not African American, but West Indian. In May 2012, KFC Australia switched from palm to canola oil, which is sourced from Australian farmers. India: The first Indian KFC was opened in the city of Bangalore in June 1995. This resulted in protests from the left wing, anti-globalization and environmental campaigners and local farmers, who believed that KFC was bypassing local producers for specific suppliers. Many Indians protested the onslaught of consumerism, the loss of India's self-sufficiency, and the disruption of India traditions. The protests came to a head in August 1995, when the Bangalore outlet was ransacked at least twice. The Bangalore outlet demanded, and received, a police van permanently parked outside it for a year. 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. Former environment minister Maneka Gandhi joined the protestors. KFC was also accused of using illegally high amounts of monosodium glutamate (MSG) and frying its food in pork fat. China In China, where KFC first opened in 1987, it is the largest Western restaurant chain, with over 4,000 branches, and China is one of the only countries in the world where McDonald's is not the dominant fast food chain. KFC believes it has been successful in China because it has adapted its menu to suit local tastes, offering such items as fish, porridge and egg tarts. From 2006, as well as KFC, Yum! also operate the East Dawning chain which incorporates Chinese cuisine alongside the traditional KFC menu items. In 2008, Yum's chief executive, David Novak, said that he envisions eventually operating more than 20,000 restaurants in China. "We're in the first inning of a nine-inning ball game in China".

Other international operations In Quebec, KFC styles itself PFK (Poulet Frit la Kentucky) in a strategy to avoid prosecution under Bill 101. In June 2008, KFC Canada agreed to PETA's demands for better welfare standards, including favoring suppliers who use controlled-atmosphere killing (CAK) of chickens, and other welfare standards as well as introducing a vegan burger at 65% of its outlets. PETA has called off its campaign against KFC Canada, but continues to demonstrate against KFC elsewhere in the world. The highest volume unit KFC in the world is in Paris' Les Halles area. Volumes in France are higher as France's fast-food customers tend to prefer full meals with desserts, which brings the average sale to between 6 and 8 (about $8 to $10.50). The 100th French outlet opened in 2010. 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. In Indonesia, where it first opened in 1979, it is the largest Western restaurant chain, with over 420 branches, and Indonesia is one of the only countries in the world where McDonald's is not the dominant chain.

Products:
Sanders' "Original Recipe" of 11 herbs and spices remains a trade secret, and is a benchmark by which KFC differentiates its product from those of its competitors Pete Harman credits the chain's popularity to the recipe and the product, and John Y. Brown credits the "incredibly tasty, almost addictive" product as the basis of KFC's staying power.[95] It is believed that Sanders only ever shared the recipe with his wife Claudia, Pete Harman and his wife, and Jack C. Massey. A copy of the recipe, signed by Sanders, is kept in a vault in corporate headquarters, along with 11 vials containing the recipe's herbs and spices. 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. A KFC Original Recipe fried chicken third executive knows the combination to the safe where the handwritten recipe resides. Only a handful 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. 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. 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. Reportedly, the paper has yellowed and the handwriting is now faint. Sanders had diverged from other common fried-chicken recipes by varying the amount of oil used with the amount of chicken being cooked, and starting the cooking at a higher temperature (about 400 F (200 C)) for the first minute or so and then lowering it to 250 F (120 C) for the remainder of the cooking time. 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. Allen Adamson, managing director of brand consultancy Landor's New York practice, remains unconvinced about the contribution of the secret formula aspect. 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". KFC adapts its menu internationally to suit regional tastes. There are over 300 KFC menu items worldwide, from a chicken pot pie in the United States to a salmon burger in Japan. In Asia there is a preference for spicy foods, such as the Zinger chicken burger. KFC's primary product is pressure-fried pieces of chicken made with the "Original Recipe". The company also sell chicken burgers, wraps and a variety of finger foods, including chicken strips, wings, nuggets, and popcorn chicken. Popcorn chicken consists of small pieces of marinated, breaded and fried chicken. Grilled chicken products are available in 4,000 outlets. Side dishes vary regionally, but often include coleslaw, french fries or potato wedges, barbecue baked beans, corn on the cob and American biscuits. Because of the company's previous relationship with PepsiCo, Yum! Brands has a lifetime drinks supply contract to supply Pepsi products. An own brand dessert is the soft serve ice cream product known as "The Avalanche". An own brand drink is the Krusher/Krushem which are frozen beverages containing "real bits", available in 3,700 outlets. In 2012 the KFC breakfast menu began to be rolled out internationally.

Advertising:
The "It's finger lickin' good" slogan originated in the 1950s. A viewer had complained after an advertisement featured Pete Harman in the background licking his fingers. Its star, a KFC manager called Ken Harbough, responded: "Well, it's finger lickin' good". The phrase stuck and went on to become one of the best-known catchphrases of the 20th century. The trademark expired in the United States in 2006, and was replaced in that market with "Follow your taste" until 2010. In 2011, the 50 year old "finger lickin' good" slogan was dropped in favor of "So good", to be rolled out worldwide.

Cultural impact:
Virtuoso guitarist Brian Carroll, better known under his stage name Bucket head, is famous for wearing a KFC bucket on his head while on stage, and sometimes has a little plastic doll of Colonel Sanders with him.

KFC SWOT Analysis:


a) Strengths: Brand Equity is the major strength of the company. It is second largest fast food sellers in the world, first being McDonalds. Recognized and experienced all over the world and have strong markets in UK, Thailand, Japan, Korea, China, Mexico and Middle East. KFC franchises and licensing fees earn huge revenue for the company. Secret and trade mark of the recipes had maintained its supremacy in the fast food world. The company is holding over 50% shares in the fast food industry because of its global brand recognition. The company has deep concerns to hygiene, availability of the fresh products to the customer and establishing the environment friendly approach. Profits of the company increases by almost $ 1 billion each year.

b) Weaknesses: Least concerned about the importance of research and development industry. Quality comprise on few of its franchises that is harming the brand name and its image. Inflexibility of prices makes it unaffordable to middle class people. Unequal entrance of the franchises to different markets at one time especially in United States has tremendously decreased its growth rate. Unable to work out for their original ideas, the thick paper bags used by the company were initiated by Wendys restaurant. c) Opportunities: Entrapping and tempting the young customer between 18 to 24 years of age. Reliability of the chicken meat used as the people are scared of diseases from eating cows meat internationally. Replacing home meals very speedily. Increased and efficient services specially home delivery and office orders. Updating the restraints with facilities like play stations for kids, LCDs and booking the outlets for parties. Induction of new products other than chicken including fish in almost all the items in which chicken is present, corns, salads etc, in fact the whole menu is balanced and attracts the customers considerably.

Trying to position itself strongly in the markets of South America, with a view of increasing market value as well as share.

d) Threats: High rates on the prices as compared to the other brands selling same items may cause the customers shift. Less economical packages and deals are being offered in comparison of its biggest competitor McDonalds, which work on the strategy of seasonal induction of tempting deals. Shift of customer demand to more healthy and fresh food, avoiding the all fried items. Less variety of products pose a threat to the company, as they have very few products other than their portfolio Fried chicken.

Conclusion:
After this brief discussion about KFC we can say that KFC has been known to be a leader in the chicken restaurant segment with an annual sale of more than a billion dollars. The KFC as a brand is well established in the dining out as well as delivery service provider in the fast food industry. Despite the entrance and presence of many competitors in the fast food industry the company was able to retain its large loyal customer base because of its unique offering. Due to this reason the KFC ranks highest when it comes to chicken restaurant chains, convenience restaurants and variety food provider. KFC currently has more than fifty percent of the market share in fast food industry and the new entrants are finding it very difficult to capture any of its share. Over the years KFC has gained enormous recognition as a reputable brand for fast food and has globally positioned itself well in the industry.