1 KFC CASE ANALYSIS Case Analysis: KFC's Return To Finger Lickin Good Kai Thng John Brown University BUS 7113: Marketing Strategies; Spring A 2023
2 KFC CASE ANALYSIS Introduction Kentucky Fried Chicken is a worldwide fast-food chain known for its famous fried chicken. Starting from its humble beginnings in North Corbin, Kentucky, KFC corporation is the largest fast-food chicken operator, developer, and franchiser in the world. (Reference for Business, n.d.) Today the company has grown into a massive multinational corporation with more than 25,000 restaurants in over 145 countries and territories spread throughout the globe. In fact, KFC was the first fast food restaurant to be opened in China. (L, 2022). Represented by the iconic Colonel Sanders, an old man with a white beard, wearing a dapper white suit and tie. To learn more about this remarkable global corporation, it is important to learn about the company's origin and history that began with its founder Harland Sanders. Harland Sanders was born on September 9, 1890, in Henryville, Indiana. Sadly, when he was only 5, his father died, which put strain on his family. When his mother remarried as Harland was 12, his stepfather did not want kids so at the age of 13, Harland left home. First, he worked on the farm while trying to go to school, but in seventh grade he dropped out because school was too hard for him. From there he spent the next few years doing various jobs including streetcar conductor, insurance seller, railroad firemen, steamboat operator, tire seller, lawyer, and finally a job at a gas station. At this gas station, he decided to sell food on the side to earn more cash on the side, which is where it came up with his popular fried chicken that is made with its famous and highly secretive 11 herbs and spices. (Verma, 2021) This was the birth of Kentucky Fried Chicken, but it really started taking off when Sanders came up with the idea to franchise his recipe, until there were 600 franchises in the United States and Canada. (Augustyn, n.d.). Fast-forward to Sanders being approached at age 74 to sell the company, which he did with the promise that the investors would establish better quality for the restaurant, never change the chicken's recipe, and allow him to remain the face of the brand. The members of the investor
3 KFC CASE ANALYSIS group who had purchased Kentucky Fried Chicken were composed of John Y. Brown, Jr. a 29- year-old graduate, Nashville financier Jack Massey, and Pete Harman, Sanders' friend who had been the first to franchise his recipe. From there the company took on a new form as it began to become a modern corporation that within three years had stores in all 50 states and with its 1,500 stores and restaurants it was sixth in size among food-service companies. During this stage, franchising remained the cornerstone of the business. Several key steps in the franchise process were the franchisee paying $3000 to "KFC University" to learn all the necessary tools to run a business, then putting up around the $65,000 it cost to start up the business, and finally the company began to develop a uniform classic designed red and white striped building for its restaurants that would appeal to consumers. Another decisive change when Brown and Massey transitioned the restaurant from a sit-down restaurant into a take-out fast food restaurant (Reference for Business, n.d.).In modern times, the company was able to expand overseas and have great success especially in Asia. Having looked at the background history a company, a brief look will be given to understand how KFC is doing financially. In the month June 2022, Kentucky Fried chicken for the three ratios it has on profit margin has a 50.43% as its Gross Profit Margin, a 33.86% for its operating profit margin and finally a net profit margin of 13.69%. The five next profitability ratios have to do with profit in terms of assets and equity. Kentucky Fried Chicken has a total return on assets ratio of 24.69%, net return on total assets ratio of 27.44%, return on stockholder's equity of 31.62%, a return on capital of 44.6%, and finally earnings per share of $4.98. It has a lower but very comparable profit margin ratio to two competitors in its industry McDonald's-58.76%, and Wendy's-55.51%. Its stockholder's equity is comforting 31.62% which is much higher than the 12-15% average for most companies. One of the only concerning ratios
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