KFC in China

KFC
Subsidiary
Industry Restaurants
Genre Fast food restaurant
Predecessor Sanders Court & Café
Founded
Founder Harland Sanders
Headquarters

1441 Gardiner Lane

Louisville, Kentucky

United States

Number of locations
 19,952[1] (2015)
Key people
Products
Revenue US$23 billion (2013)[3]
Parent Yum! Brands
Website

www.kfc.com

KFC (the name was originally an initialism for Kentucky Fried Chicken) is a fast food restaurant chain that specializes in fried chicken and is headquartered in Louisville, Kentucky, United States (US). It is the world's second largest restaurant chain (as measured by sales) after McDonald's, with 18,875 outlets in 118 countries and territories as of December 2013. The company is a subsidiary of Yum! Brands, a restaurant company that also owns the Pizza Hut and Taco Bell chains.

KFC is the largest restaurant chain in China, with 5,003 outlets as of 2015.[4]

According to research by Millward Brown, KFC was the most powerful foreign brand in China in 2013.[5]

History

KFC became the first Western fast food company in China after its first outlet opened in Qianmen, Beijing, in November 1987.[6] The operation was a joint venture, with a 60 percent stake held by KFC, 27 percent by the Beijing Tourist Bureau and 13 percent by Beijing Food Production.[7] In early 1988, Bank of China took a 25 percent stake in the venture, and KFC's original stake was diluted to 51 percent.[7]

Warren Liu, a former vice-president of Tricon Global Restaurants (KFC's former parent company) argued that, "being the first ... has continued to provide KFC with a substantial competitive advantage."[6] By 1988 the Beijing outlet had the highest volume sales of any KFC in the world.[7]

Instead of importing American managers, KFC hired management from rising Asian economies such as Taiwan.[6] Existing Chinese distribution infrastructure was poor or non-existent, so KFC created its own, which ensured high quality standards.[8] The chain had an early advantage against its Western fast food rivals, as fried chicken has been a staple Chinese dish since antiquity, whereas hamburgers were foreign and relatively unknown.[9]

By 1994, there were 28 KFC outlets in China, including seven in Beijing.[10] By 1997, there were 100 outlets.[11]

In 2008, CEO David Novak announced plans to open more than 20,000 restaurants in China, saying: "We're in the first innings of a nine-innings ball game in China."[12]

At the start of 2008, the chain added its first Chinese street food snack to its menu, the youtiao.[13] The street snack menu was expanded in 2010 with the addition of the shaobing.[13] In August 2010, KFC China announced its biggest product launch to date: the Rice Bowl, which heralded the arrival of rice as an accompaniment across the chain.[13]

2012-14 supply issues

In December 2012, the chain faced allegations that some of its suppliers injected antiviral drugs and growth hormones into poultry in ways that violated food safety regulations.[14] This resulted in the chain severing its relationship with 100 suppliers, and agreeing to "actively co-operate" with a government investigation into its use of antibiotics.[6]

KFC China sales in January 2013 were down 41 percent against the previous year.[15] In May 2013, Businessweek speculated that KFC may be "losing its touch" in China.[16] Recovery has been slower than Yum! expected, with same store sales continuing to decline as late as October 2013, although the rate of decline is slowing.[17] Leslie Patton of Businessweek also highlighted increased competition in the fast food category from competitors.[17] To counter sluggish sales, the menu was revamped in 2014.[18] In April 2014, Yum! announced that first quarter KFC sales had risen by 11 percent in China, following a 15 percent fall in 2013.[19]

In July 2014, Chinese authorities closed down the Shanghai operations of the OSI Group, amidst allegations that it had supplied KFC with expired meat.[20] Yum! immediately terminated its contract with the supplier, and stated that the revelation had led to a "significant [and] negative" decline in sales.[21]

Operations

Sam Su is chairman and CEO of Yum!'s Chinese operations.[22]

The Zinger burger is the highest selling menu item.[23] KFC has adapted its menu to suit local tastes, with items such as rice congee, egg custard tarts and tree fungus salad, with an average of 50 different menu items per store.[6][12] Another item is the Dragon Twister, a wrap that includes fried chicken, cucumbers, scallions, and duck sauce,[24] similar in preparation to Peking duck.

Chinese outlets are typically two to three times larger than American and European outlets; many are open 24 hours a day and provide home delivery; and two new menu items are released each month.[11] 78 percent of Chinese sites are company owned, compared to 11 percent internationally.[25]

Further reading

References

  1. ↑ "Restaurant counts" (PDF). Yum! Brands. p. 111. Retrieved September 1, 2016. As of year end 2015, KFC had 5,003 units in China, 372 units in India and 14,577 units within the KFC Division.
  2. 1 2 3 "Yum! Brands: Senior Officers". Yum! Brands. Retrieved September 8, 2013.
  3. ↑ Iconic Global Brand (PDF). Louisville: Yum! Brands. 2014. p. 98. Retrieved September 1, 2016.
  4. ↑ "Yum! Brands, Annual Report 2015" (PDF). yum.com. Retrieved 2016-04-17.
  5. ↑ Walshe, Peter (July 25, 2013). "Top 20 foreign brands in China". Retrieved April 5, 2014.
  6. 1 2 3 4 5 Kaiman, Jonathan (January 4, 2012). "China's fast-food pioneer struggles to keep customers saying 'YUM!'". The Guardian. Retrieved January 4, 2012.
  7. 1 2 3 Paul W. Beamish; J. Peter Killing (1 January 1997). Cooperative Strategies: European Perspectives. Lexington Books. p. 117. ISBN 978-0-7879-0815-7.
  8. ↑ David E. Bell; Mary L. Shelman (November 2011). "KFC's Radical Approach To China". Harvard Business Review. Retrieved January 31, 2013.
  9. ↑ David L. Kurtz; Louis E. Boone (January 9, 2008). Contemporary Business: 2009. Cengage Learning. p. 389. ISBN 978-0-324-65384-7. Retrieved March 28, 2013.
  10. ↑ Jing, Jun (2000). Feeding China's Little Emperors: Food, Children, and Social Change. Stanford University Press. p. 117. ISBN 978-0-8047-3134-8. Retrieved September 27, 2013.
  11. 1 2 Silverstein, Michael J.; Singhi, Abheek; Liao, Carol; Michael, David (September 11, 2012). The $10 Trillion Dollar Prize: Captivating the Newly Affluent in China and India. Harvard Business Press. pp. 126–8. ISBN 978-1-4221-8706-7. Retrieved January 28, 2013.
  12. 1 2 Shen, Samuel (May 5, 2008). "Kentucky Fried Chicken banks on China". New York Times. Retrieved September 11, 2012.
  13. 1 2 3 Thorniley, Tessa. "KFC in China: How a US giant created a 'local' brand". WARC.
  14. ↑ Waldmeir, Patti (December 20, 2012). "Yum investigates poultry allegations". Financial Times.
  15. ↑ Coonan, Clifford (February 12, 2013). "Scare takes bite out of KFC's sales". Irish Times. Archived from the original on February 13, 2013. Retrieved February 12, 2013.
  16. ↑ "KFC Loses Its Touch in China, Its Biggest Overseas Market". Businessweek. May 16, 2013. Retrieved September 27, 2013. |first1= missing |last1= in Authors list (help)
  17. 1 2 Patton, Leslie (November 13, 2013). "Yum's China Sales Fall Less Than Estimated as KFC Decline Slows". Businessweek. Retrieved November 13, 2013.
  18. ↑ Wong, Venessa (March 27, 2014). "To Start Fresh in China, KFC Goes for a Menu Makeover". Businessweek. Retrieved March 28, 2014.
  19. ↑ "KFC owner Yum Brands' profit boosted by China recovery". BBC News. April 23, 2014. Retrieved April 23, 2014.
  20. ↑ Hornby, Lucy (July 21, 2014). "McDonald's and KFC hit by China food safety scandal". Financial Times. Retrieved August 22, 2014.
  21. ↑ Ramakrishnan, Sruthi (July 30, 2014). "Yum says China food safety scare hurting KFC, Pizza Hut sales". Reuters. Retrieved August 22, 2014.
  22. ↑ "Yum! Brands: Senior Officers". Yum! Brands. Retrieved September 8, 2013.
  23. ↑ Speaker Series: David C. Novak on YouTube
  24. ↑ Wolf, Barney (May 2012). "David Novak's Global Vision". QSR Magazine. Retrieved March 12, 2013.
  25. ↑ Yum! Annual Report 2013 (PDF). Louisville: Yum! Brands.
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