The Global Fast-Food Industry

Colonel Harland Sanders signed up his maiden prerogative in Salt Lake City, Utah in 1952. In 1956 he inter intensify the Corbin, Ky. eating house he owned, and began traveling crossways the linked States to sell unused licenses. Later that class he sold his first spheric right in Canada. By 1960 on that point were more than cc Colonel Sanders Recipe Kentucky heat crybaby (KFC) outlets. In 1963 revenues were oer $ euchre million and the spell of outlets had change magnitude to everywhere 300. In 1974 at the age of 74, he sold the task to Jack Massey and keister brownish for $2 million, one of the ample bargains in bloodline narrative. The Colonel stayed on with the confederacy in a ceremonial role, oft cartridge clips helping to open new franchises.Brown and Massey grew the business doneout the unite States over the contiguous some(prenominal) stratums and in 1966 as wellk the lodge public, listing it on the forward- minding York Stock Ex revision and t he Colonel was allowed to purchase the first 100 lucks. The course of instruction 1969 was a decisive one in the history of the company with the first major(ip) penetration into world-wide marts outside conjugation America by acquiring franchises in England and japan. By 1971, in that location were more than 2400 franchises and 600 company-owned restaurants spread throughout the United States and 47 another(prenominal) countries.1971 became another find year in company history with the sale of KFC to Heublein. This was Heubleins first world-shaking entry into the restaurant business and it did not go smoothly. By 1977 restaurant timbre had declined and the Colonel was upset. Only to the highest degree 20 new restaurants were being opened per year. In response, Heublein en delineated a new outline accent clean restaurants, product consistency across franchises and better service. Old franchise buildings were remodeled.In 1982 R. J. Reynolds Inc. (RJR), in an attempt to diversify beyond the tobacco business, acquired Heublein for $1.2 billion. KFC was profit fitted and growing again, just Colonel Sanders never saw the end essence of Heubleins strategy in the former(a) 1970&8243s, because he died in 1980. RJR keep ond to harmonize KFC as an autonomous business for some(prenominal) years. In 1985 it acquired Nabisco and in 1986, in forwardness for the subsequent jaunt to take RJR Nabisco private, it sold KFC to PepsiCo Inc. for $840 million, over the objections of former Heublein chairman, Stuart Watson. Also this year the Colonel Sanders Technical Center in Louisville, Kentucky was established.The science by PepsiCo was a significant go point in the companys history. In previous achievements by Heublein and RJR, KFC had been lock awayd as a separate entity, although in unalike ways. Heublein tried to use its own managers to operate KFC, bandage RJR adopted a whole hands take out approach. PepsiCo was looking to the acquisition of KFC to create some synergy in spite of appearance its other operations. Recently restructured into three major divisions, nutty drink, snack foods and restaurants, PepsiCo could cross-pollinate surrounded by divisions, for instance by selling its flabby drinks in restaurants. PepsiCos enculturation was overly much different than KFC. PepsiCo placed a severe emphasis on employee performance, while KFCs culture was more laid-back in the southern tradition.In 1991 a change was made that was to defecate unmotivated consequences. Kentucky Fried Chicken decided to change their sur account to KFC for several backgrounds, according to the meshwork site Snopes.com,A move to change yellowish because KFC planned to offer a varied menu that included other types of food. (The Boston Chicken corporation took the resembling approach for the same reason, changing their stir of their retail food outlets to Boston Market.)A desire to eliminate the word fried, which has interdict connot ations to the increasingly health-conscious consumer market.A recent rationalise towards the abbreviation of long commercial titles, as demonstrated by other companies employing brief forms of their names, such as The International tin of Pancakes (IHOP) and Howard Johnsons (HoJo).As a result of this name change, rumors later began circulating throughout the cyberspace that the government had forced KFC to change its name because it was no longer using fearfuls. jibe to the rumor, KFC was producing a genetically altered weakly interacting massive partitionicle with more than the normal amount of appendages. In spite of the fact that some of these claims, such as chickens without beaks, feathers or feet, are beyond scientific capabilities, the rumors contain persisted. everyplace the abutting several years, KFC continued to prosper and bear up under changes. It refocused its strategy to increase the traffic in individual franchises by expanding the menu to orison to a l arger group of consumers. In 1993 the company added non-fried chicken to menus in the U.S. and Australia, and in 1994 KFC officially opened its 9,000th restaurant in the world, in Shanghai, mainland China, and announced a $200 million investment over the next four years for 200 restaurants in 48 Chinese cities.1995 saw the door of Colonels Crispy Strips and Chunky Chicken commode Pie. The first KFC restaurant in capital of the Russian Federation was opened. In 1996 KFC introduced unsanded Roast chicken pieces and brought back one of the worlds most recognise packages, the set, and in 1997 the company introduced Honey BBQ-flavored Tender Roast, Spicy Buffalo Crispy Strips and Chicken Twister, which are wrapped up chicken and vegetables.In spite of all these innovations and improvements, PepsiCo had pose increasingly unhappy with the restaurant division. senescent facilities were requiring much of the parent companys revenue to be spent on remodeling restaurants and thereby neg lecting investment in the soft drink and snack food businesses. In an attempt to return to its roots, PepsiCo spun off the full restaurant division into a publically traded company, Tricon Global eaterys in October 1997. In may 2002, with the acquisition of A&W and Long John Silvers, Tricon changed its name to Yum. whizz of the main strategic issues presented in this casing is the question of whether or not KFC should continue to expand planetaryly and where. Since the early years of its inception, KFC has been involved outside the United States, having expand to Canada in 1956 and then in a major move in 1969, to Japan and England. As of 2000, of the thirty- volt largest fast-food chains, KFC was second lone(prenominal) to McDonalds in the figure countries penetrated. It is an arena where KFC has had grand success and should continue to be involved.As of 2001 KFC had more than 500 outlets in China compared to only about 400 for McDonalds. KFC scold McDonalds to China b y five years, opening their first outlet in Beijing in 1987. Market surveys in China by AC Nielson have indicated a preference for KFC over McDonalds, two in terms of products and the outlets themselves. In addition, the Chinese have cultural bias in favor of chicken over beef. This is for certain an country where KFC should continue to exploit its proceeds.Latin America is another global area where KFC has a strong bearing. In the fundamental American, Caribbean and Mexican area, KFC is very competitive with McDonalds and Burger King in terms of yield of outlets. It has a peculiarly strong presence in Mexico and the Caribbean. Only in the grey part of Latin America does KFC affect sharply behind McDonalds.With the advent of the North American Free Trade obligation (NAFTA) the surroundings has changed in Mexico. A stabilising factor is that one of KFCs major suppliers, Tyson Foods, has major chicken facilities in Mexico. The political environment has changed with the el ection of Vicente Fox. KFCs already strong presence should be expand aggressively. They should also use this base in Mexico as a means of investing capital to further expand the franchise base throughout South America, in order to negate a first-mover advantage by McDonalds and Wendys. Franchise outlets wait less capital than company-owned restaurants, and are thereof a quick way in which to expand.Anther strategic issue face KFC is the decision to franchise or expand by company-owned restaurants and whether to refranchise. The original strategy of Colonel Sanders and his immediate successors was to franchise and not build company-owned restaurants. This allowed them to grow quicker than they would have if KFC had primarily invested in company-owned restaurants. This strategy continued until the purchase of KFC by PepsiCo. Because of a clash in corporate culture between KFC and PepsiCo, and the presence of a strong franchisee group within KFC, PepsiCo embarked on a strategy of repurchasing weaker franchises and running them. At the time of the spin-off of KFC and the restaurant division into Tricon Restaurant Group in 1994, the percentage of company-owned restaurants was about 40%.After the spin-off, Tricon management began to discase of more of the company-owned outlets. This was the result of a change in attitude on the part of Tricon management. They did not believe in unconditional control of all aspects of the local business and were willing to admit that the franchisees knew the local business better than they did. By the year 2000, the number of company-owned outlets had dropped to 27%.As shown in the trick out analysis below, there are a number of factors in the outdoor(a) environment that KFC should consider when formulating and implementing strategies. Some of the more important aspects are brand name cognizance, global market expansion, shrinking resources obtainable to outlets and attacks by activist groups such as PETA.On the positive side, the brand name awareness is a tremendous asset for KFC. The move in 1996 to bring back the bucket was one of the best decisions in its history. Likewise, global market expansion presents an enormous chance to KFC to grow. They should build on their existing internationalistic base and continue to grow franchises.On the negative side, KFC, along with other fast-food companies, is facing a shrinking of the available probable outlet locations. The proliferation of fast-food outlets in this country has absorb many of the prime locations. This is another reason to justify continued oversea expansion, where many prime spots remain. Just as potential locations have dwindled, so too has the labor pool. In spite of increased unemployment since 2000, there is still a occupation attracting workers in the eighteen to twenty-four year old range.An interesting aspect of the external environment that has negatively impacted KFC has been the acetous attacks on KFC by People for the est imable Treatment of Animals (PETA) and other similar groups. A number of celebrities have joined the commove against KFC, which is focused on trying to force them to change the process of defeathering chickens. KFC has consistently refused to disturb with the animal rights group for years, but because of concerns of losing market grant in the inner city, has recently attempted to mediate this dispute through the offices of hip-hop mogul Russell Simmons and the Reverend Al Sharpton.Examining the list of top fifty U.S. fast-food restaurants for those sectors and companies that magnate be good investments we observe several companies that have a ascendant purview in their section. McDonalds has a 35% market divvy up among sandwich chains, pizza Hut has a 44% share among pizza chains, KFC a 55% share among chicken chains, Golden Corral a 32% share among grill retort chains and Dunkin Donuts a 43% share among non-dinner concepts. Each of these companies would seem to be a good i nvestment over the secure term because of that dominant position in their sectors. In addition, financial data available for these companies confirm that the reason each is dominant in their sector is because they consistently arouse above average financial returns.KFC continues to have a bright outlook for the future. It is well-positioned two domestically and international for continued growth. opus it is unlikely ever to overtake McDonalds, either in the domestic or overseas market, it is dominant in certain countries such as China and Mexico, and should be able to leverage this advantage to fend off other competitors, like Wendys and Burger King. Over the next five years look for KFC to have a strong number two position in the industry, particularly if it can address the problems with activist groups.