|Name||KFC Corporation (NYSE: YUM)|
|Industry||Quick Service Restaurant|
|CEO||Tony Lowings , Successor: Sabir Sami (01/2022)|
|Revenues||$2.272 Billion, 2020; $2.491 Billion, 2019|
|Net income||$0.9 Billion, 2020; $ 1.05 Billion, 2019|
|Competitors||Chick-Fil-A, Inc., Cajun Operating Company, Popeyes Louisiana Kitchen, Inc. McDonald’s, Burger King, Subway|
KFC is a global quick-service restaurants chain operator and franchiser with head office in Louisville, Kentucky. In 1930, Colonel Harland Sanders founded KFC (Kentucky Fried Chicken) and sold to PepsiCo in 1986, and today, after a spin-off from PepsiCo, it is a subsidiary of Yum! Brands, Inc. KFC product portfolio includes Colonel’s recipe fried chicken, sandwiches, signature combo, chicken on the bone, chicken stripes, bowls, deserts and box meals (Burrell, 2020; Bloomberg, 2021). According to Forbes (2021), the brand value of $8.3 million and it is ranked as the 96th global most valuable brand.
Table of Contents
KFC Strengths 2021:
- Colonel trademark recipe and signature bucket:
KFC has a trade secret of colonel sander’s original chicken recipe which includes ’11 herbs and spices. The original recipe is unidentified to the public. The paper bucket is an iconic feature for KFC to serve the signature fried chicken. In 1957, the first KFC chicken bucket was sold and today, the bucket generates 35% of total sales for KFC (KFC, 2021).
- Global restaurant and franchise network.
According to Yum Brands (2021), KFC has 25,000 restaurants in more than 146 countries. According to YUM annual report (2020), 84% of KFC restaurants are located in international markets and 99% are operated through franchises. In 2020, the franchise units were 24,710 (4% increase from 2019) and company-owned restaurants were 290 (16% decrease from 2019).
- Unique business culture and store design.
The four pillars of KFC business proposition are (1) leveraging unrivalled culture, people capabilities and talent, (2) unmatched operating capabilities to deliver the best customer experience, (3) building an easy, relevant and distinctive brand and (4) achieving iconic restaurant brands. The core format of dine-in restaurants and Drive-Thru include brand-inspired material and colour applications, specific architecture and theme to infuse brand personality and joyful love for chicken (Yum Brands, 2021).
- KFC huge success in China.
Jacobs (2021) pointed out that KFC has 5000+ restaurants in China and with a 5% market share it dominates the fast-food landscape. The success of KFC in China is based on the locally adapted menu including Dragon Twister, egg tarts and rice porridge (congee) has helped the company to capture a large market share (Insead, 2021).
KFC Weaknesses 2021:
- Persistent supply chain risks and customer backlash.
KFC has issued supply chain disruption and food shortages warning in the UK which prompt customer response #kfccrisis on social media. Adam (2021) stated that the fast-food chain tweeted that certain food items such as cups, lids, and chicken would not be available because of transportation disruptions. In 2018, KFC had a disruption of the supply chain in the UK when the company had to close its 750 restaurants nationwide after the failure of the delivery contract with DHL (Pooley, 2019).
- Unhealthy and fatty food image.
KFC uses a lot of cooking oil in frying the chicken. Chan, et al (2020) discussed that Oily and salty food can cause multiple health issues such as pressure and fats. Health-conscious customers prefer low-calories and non-oily food and KFC chicken has a negative perception in the healthy food segment.
- Failure in India and Israel.
In the global market, the KFC lacks cultural awareness which has failed in Israeli and Indian markets. In India, the company has failed to identify target groups and understand the taste and preferences of customers. Likewise, KFC did not adapt to the local culture in Israel. In India, the company is tuck with selling hot and spicy food only rather than a secret recipe (Saini, 2020)
- Franchise risks.
KFC has reputation and performance from franchise lack of compliance with operating procedures. The issues related to operations result in discontent and disagreement between franchise and management. In past, there have been issues related to technology, royalties, branding, and franchisees failure to meet corporate standards (KFC, 2021)
- Market risks in foreign markets.
KFC has been subject to financial regulatory enforcement in India for violation of foreign exchange and failure to satisfy the conditions such as minimum investment, operating approvals and remittance limitations (Yum Brands, 2021).
KFC Opportunities 2021:
- Plant-based Meat menu.
According to Cision US (2021), the Plant-based Meat market to reach $13.9 Billion by 2027 which presents new business opportunities for the company. Comprehensive new options for customers, in particular, would help the brand to increase sales and business growth.
- Health-conscious customers.
The health-conscious segment of the customers who prefer less fatty and salty food would increase business revenues. Aranca (2021) analyzed that the inclusion of food items with low calories, fewer fats and sugar while maintaining the taste would attract a new segment of customers and get more profits.
- Lean supply chain management.
Lean supply chain management would enable KFC to add value for the customer through lower waste (eliminating non-value activities). The lean approach would minimize disruptions and focuses on predictability and reliability (Fortune, 2021).
KFC Threats 2021:
- Food quality challenges and scandals.
KFC has food quality challenges and scandals that affect brand reputation and performance. For instance, the oil quality and laws related to food quality have become stringent in different countries. Furdyk (2020) stated that the numerous scandals include animal cruelty, expired meat, and mutant chicken which have a negative effect on sales and customer opinion.
- Supplier risk.
Levitt (2020) analyzed that KFC has experienced supplier problems and poor performance in the supply chain. For example, KFC admits that chickens experience painful inflammation because of poor welfare conditions among the suppliers. For example, one-third of supplier farms in Europe suffered from painful inflammation called dermatitis which prevents the birds from walking.
- Intense competition.
KFC has intense competition from McDonald’s, Starbuck, Subway, Chick-Fil-A, Popeyes, Louisiana Kitchen, and other players in the quick-service restaurant industry. The innovative menu offering from competitors such as chicken and sandwiches, combo meals, Nutrition and Allergens, and Chipotle Mexican Grill affect the customer base and market share of the company (Statista, 2021).
- Brand imitation risk.
The unauthorised third parties and the former franchise may use KFC intellectual property to dilute brand image and damage brand concepts and goodwill. The brand dilution, customer confusion, and goodwill would impact sales and results of operations (Vincent, 2019).
KFC SWOT Analysis Conclusion:
The challenges for KFC are supply chain risk, reputation, and franchise risks as well as strong competition in the market. However, KFC has strong brand equity and dynamic capabilities to tackle the business threats and exploit opportunities for business growth and brand reputation. KFC has resources and networks to support the company’s plans for future growth and success in the quick-service restaurant industry.
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- Chan, Chia Yi, et al (2020). The Challenges of Healthy Lifestyle: KFC case
- Cision US (2021). Plant-based Meat Market Size To Reach $13.8 Billion By 2027.
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- Levitt, Tom (2020). KFC admits a third of its chickens suffer painful inflammation.
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- Saini, Leo (2020). Why KFC Failed in Israel.
- Statista (2021). Most valuable QSR brands worldwide in 2021.
- Vincent, Georgina (2021). KFC cheekily calls out chicken shop imitators in latest campaign.
- Yum! Brands (2021). Annual Reports .