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KFC Franchise

June 23, 2008

The Colonel and His Chicken: The Recipe for Franchise Success

The world’ most popular chicken restaurant chain, Kentucky Fried Chicken, more widely known as KFC, had humble origins. What started out as a small cooking operation in a gas station in Corbin, Kentucky, is now part of the Yum! Corporation (the world’s largest restaurant system) with more than 11,000 KFCs in over 80 countries around the world.

Kentucky Fried Chicken was invented by Harland Sanders, who was born in 1890 near Henryville, Indiana. Raised by a single mother, he left home at the age of 12 to work on a farm, and held a series of jobs including painter, streetcar conductor, insurance salesman and service station operator. In 1929, he opened his own gas station in Corbin, Kentucky, where he sometimes cooked meals for his family and an occasional lucky customer. His specialties were southern style dishes his mother had taught him – country ham, homemade biscuits, and of course, pan-fried chicken. He claimed to have a secret recipe for his chicken, and that formula proved to be the key to the future success of his restaurant enterprise.

Word got out about Sanders’ delicious chicken, and in response to demand, he opened a 142-seat restaurant across the street from his original station location. He also added a motel – the first in the state.  To accommodate large volume, he invented a way to pressure cook his fried chicken, and claimed this contributed to the meat’s taste and texture.

Named “Sanders Court and Café” the café growing wildly popular in the region – so much so, that in 1936, the state Governor granted Sanders the honorary title of “Kentucky Colonel.” In 1939, Sanders Court and Café won a designation by Duncan Hine’s Adventures in Good Eating  – putting Sanders on the map for travelers.

World War II and its impact on gas rationing and tourism forced Sanders to close his motel. He intended to re-open after the war, but then got the bad news that a new interstate planned for the area would bypass Corbin, and divert tourist traffic away from his motel and café. Being burdened by debt, he had no choice but to sell the facility.

But the Colonel was convinced his chicken recipe was a winner, so he took to the road to sell his chicken to restaurant owners. His plan was to sign up franchisees who would pay him five cents for each piece of chicken sold that was prepared with his secret recipe. The first Kentucky Fried Chicken franchise was opened by Sanders and Pete Harman in South Salt Lake, Utah in 1952.

By the early 60s, the Colonel’s chicken was sold in over 600 restaurants throughout the US and Canada. The first international Kentucky Fried Chicken opened in 1964 in England. In this same year, having accomplished his goal to get out of debt and start a successful restaurant chain, Sanders sold his company to a group of investors for $2 million (about $10 million in today’s currency). The sale brought Sanders additional riches too – he signed on for an annual salary of $40,000 to act as the company spokesman.

The company went public in 1966 and was listed on the NYSE in 1969.

The Secret to Success

Through the years, the recipe for KFC’s unique tasty chicken has been a closely guarded secret. The original handwritten version is kept in a vault and the company supposedly works with two different spice suppliers for various ingredients so that no one person knows the exact final formula. The Colonel himself promoted the secret recipe as the basis for the crowd-pleasing chicken. He appeared in television commercials, extolling the chicken’s finger-licking taste and the value of families eating dinner together as a way promote KFC’s “bucket” concept along with side dishes to make a complete meal. At one point, he was referred to as  “greatest PR man ever” in Business Week article.

No longer a “one-man operation” KFC grew to 3,400 fast food outlets by 1970. In 1971, it merged with Heublein, Inc., a specialty food and alcohol beverage company. And though the chain had grown so much in a span of less than twenty years, it now faced some stiff competition from other fast food franchises. Heublein made substantial investments to upgrade and modernize the standard red-and-white buildings. Experimentation with other offerings, such as ribs, came up short; so KFC went back to its roots of preparing crispy chicken according to the Colonel’s original recipe.

Harland Sanders died of leukemia in 1980. After the Colonel’s death, the company underwent several mergers and acquisitions. In 1982, Heublein was acquired by R.J. Reynolds; and in 1986, PepsiCo, the operator of Pizza Hut and Taco Bell, acquired Kentucky Fried Chicken.

One interesting and unique development in KFC’s history was the drive to establish successful relations with franchisees. In 1972, the corporation organized the National Franchise Advisory Council to improve the franchising contract. The National Purchasing Co-Op was formed in 1979 to ensure franchisees a better deal on company equipment and supplies. These advisory councils made KFC a more democratic organization that valued input from its franchisees and helped to maintain consistent operations as the company went through various mergers and acquisitions.

Recognized Around the World

When the competition for fast-food customers grew especially fierce in the 80s and 90s, KFC executed a series of creative and successful marketing strategies in response to consumer trends. 1981 saw the launch of a memorable marketing campaign, based on a new catchy motto, “We Do Chicken Right.”  Eventually, the packaging was updated with contemporary graphics, and the Colonel’s image made more stylized. The restaurant name was shortened to the familiar KFC as a way to de-emphasize frying in response to public health concerns. And in 2007, the company introduced a new recipe that has zero transfats per serving in response to the health warnings about the harmful effects of transfats.

KFC claims (though this is disputed by Readymix) to have the first logo visible from space – built from 65,000 square foot tiles, which were placed in the Mojave Desert in Nevada. At one time, Dave Thomas, the founder of Wendy’s, operated several KFC franchises, and is credited with designing the revolving bucket of chicken that once decorated almost all stores.

Though competition in the US was challenging, international growth was explosive for KFC in the late 80s and early 90s.  Asia, where chicken is widely consumed, proved especially profitable with sales growing at about 30 percent a year. 1987 marked a real milestone -- KFC was the first American fast-food chain to open in the Peoples’ Republic of China. In 2007, there were more than 1,800 KFCs operating in over 400 cities throughout China.

In 1997, PepsicCo spun off its fast-food holdings – KFC, Pizza Hut and Taco Bell – to form Tricon Global Restaurants, Inc. That company was acquired by Yum! Brands in 2002, and KFC maintains its status as the dominant fast-food chicken restaurant in the world.

The Colonel was right about his winning recipe, but it wasn’t taste alone that led to success. Shrewd marketing, smart international expansion, and sound business practices underlie the phenomenal global growth of KFC.

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