Colonel Sanders started the Kentucky Fried Chicken at the age of 65. Presently KFC is one of the leading firms in food industry around the world. Over a billion KFC chicken dinners are served featuring the Colonel’s “finger likin’ good” recipe, each year.
At the age of 40 Sanders first started cooking in a service station in Corbin, KY. But soon hundreds of people started coming to the service station for food instead for car service. Soon he shifted to a hotel and restaurant that had a capacity of holding 142 people at a time. With his special cooking techniques, Sanders’ station became well-known and he was acknowledged for his incredible cuisine by the Governor at the time, RubyLaffoonin 1935 when he was made a Kentucky Colonel.In 1939, Colonel Sanders’ restaurant won the top spot on Duncan Hines’ “Adventures in Good Eating.”
In 1952 colonel sanders got good start for his company and devoted the rest of his life in franchising business. By 1964, over six hundred franchised outlets were opened in theUnited StatesandCanadafor his chicken.
The company got listed on the New York Stock Exchange on January 16, 1969, only 3 years after it had gone public on March 17, 1966.Then on July 8, 1971 the company was taken over by Heublin Inc, for $285 million dollars. Soon the company grew to an enormous three thousand and five hundred franchised and company-owned restaurants world-wide.But after being regularly travelling around the globe, Colonel Sanders died of leukemia at the age of 90 in 1980.
Nowadays its part of a bigger company known as Yum Brands.
Advantages To Parent Business
1. Financial:It is another source of income through franchise fee and royalty. Also there is increase in Cash flow, return on investment and profits.
2. Operational:There is smaller centralized control as compared to developing and having locations by company itself. It also ensures consistency, enhanced productivity and better quality. Self-motivation as franchisees invests their own money.
3. Strategic:It helps in dividing risk by having multiple locations through people’s investment. That ensures faster network expansion and a better opportunity to focus on changing market needs.
4. Administrative:With a smaller central organization, the business maintains a more cost effective labor force, no change in important staff members and better recruitment.
Disadvantages To Parent Business
1. Franchisor is required to have enough resources to recruit, train and support the new franchisees.
2. Franchisee may spoil the image of the company if he is not capable of running the franchise perfectly.
3. Also franchisor has to tell all the internal information of the company to the franchisee. So, privacy of company is also at risk.”
“The KFC Marketing team focuses fervently on delivering an unvarying pipeline of mouth-watering meals. They try to search the wants of the customers and bring new innovative products to meet the customer’s standards. Target market is divided on the basis of demographic, geographic and psychographic segments.
The pricing strategy that they follow while entering new market is price skimming. In starting they try to price their product a bit high and target the middle and upper class people. Than after some time they start lowering their prices to focus on middle to lower class people. They do this to get to larger part of the market.
The Marketing team gives more importance to Operations and Product Excellence. They try to find new ways to develop and execute new ideas, as well as assessing the input of the finance in the business. The Marketing team is the primary medium of communication between the company and the customers. The budget of marketing is divided in accordance to the media buying and advertising production to guarantee a year round calendar of innovative news to drive consumers back to our restaurants every time.
Advertising strategies are the same as any other firm but they have their distinctive slogan “finger likin good” which relates to quality of food they provide. KFC usually charges advertisement fee of 5% of the gross revenue to the individual stores. KFC charges a Local advertising fee of 3% and fee equal to 2% of the gross revenue for national advertising fee.
KFC primary raw material is chicken. They are not breed in a normal way. These chickens are kept alive by tubes inserted into their bodies to force blood and nutrients right through their body. They do not have any beaks, feathers as well as feet. Their bone structure is considerably shrunk to get more meat out of them.
This is beneficial for KFC because they do not have to pay a huge quantity for their production costs. There is rarely any plucking of feathers or the removal of the beaks and feet. However this method has been disapproved of by many animal rights organizations and has been upsetting the image of the company. There have been many cases against KFC regarding the treatment of chickens in their farms.
|Initial Franchise Fee||$25,000||$45,000|
|Development Services Fee||Varies||Varies|
|Construction and Leasehold Improvements||$575,000||$915,000|
|Utility Deposits and Business Licenses||$7,000||$7,000|
|Miscellaneous Opening Costs||$5,000||$15,000|
|Additional Funds (3 months)||$13,000||$18,000|
The figures are taken from the KFC website. Please refer to the URL
FINANCIAL ASSISTANCE: The franchisor does not provide any indirect or direct financing. They do guarantee any lease or obligation. KFC is one of the parts of organization named YUM brands.
YUM Capital is a special purpose limited liability company structured under Delaware law, the sole member of which is YUM Capital Funding Corp a non-stock corporation in Delaware. YUM Capital issues commercial paper secured by loans purchased from YUM Capital Funding Corp and made by YUM Capital Funding Corp to franchisees in YUM restaurant brands.
ROYALTY: KFC franchisees have to pay royalty fee equal to 4% of gross revenues or else minimum of $600 per month.
BREAK-EVEN POINT: It is the condition of a company when they are having no profits. In other words when company is just paying all its expenses. If it has to be calculated from sales than a certain number has to be found out at which company is having no profit. An estimated amount of sales revenue for 2010 is 21926 million dollars and the estimated revenue is 1452 million dollars.
So break-even point should be the difference of sales and revenue i.e. 20474 (21926-1452) million dollars. This means company has to earn At least 20474 million dollars to cover up all its expenses.
Human Resource Management
KFC stresses upon the fact that either franchisees or at least one of the managers should complete the training program set-up by the company. But KFC is very strict about asking for employees to complete the training process as per the company’s discretion. Besides basic training if company has certain additional course work or programs they can ask the franchisee, managers and employees to do those too. The training program is generally of 4 days, each having a session of 8-10 hours each day. This kind of training technique helps in growing the efficiency of workers and managers and makes them accustomed with their work hence reducing the likelihood of errors and mistakes. But on the other hand this procedure can be time consuming and can possibly become more costly due to the excessive training that the possible employees have to go through before entering the organization.
KFC Annual report.
This assignment helped in understanding different ways of managing a new business. It made me familiar with the concept of having a franchise business, what are the benefits of having franchise and what are the additional expenses of having a franchise business. Besides that it gave me an opportunity to review franchisees of KFC all over the world and helped me significantly in analyzing all the dynamics involved for having KFC franchise. In future if I want to start my own business I might give a preference to franchise form depending upon the kind of business I want to have.