Detailing the Business Model Of KFC from End-to-End

About KFC 

Colonel Harland Sanders, the founder of KFC, initially used to sell fried chicken from his roadside restaurant in Kentucky, USA. Colon Sanders, the founder of KFC kept the recipe of his trademark chicken a secret. 

KFC changed the way Americans ate chicken and posed a serious threat to the existing hamburger culture. Seeing the overwhelming response, Sanders decided to expand further by adopting the franchisee business model.    

Kentucky Fried Chicken (KFC), is a global fast-food chain that is widely known for its delicious fried chicken. Its headquarters is located in Louisville, Kentucky, in the United States. Founded by Colonel Harland Sanders in the 1930s, this brand is renowned for its secret blend of 11 herbs and spices, which makes their chicken irresistibly flavorful and crispy.

Sanders initially used to sell fried chicken from his roadside restaurant in Kentucky, USA. He kept the recipe of his trademark chicken a secret. KFC changed the way Americans ate chicken and posed a serious threat to the existing hamburger culture. Seeing the overwhelming response, Sanders decided to expand further by adopting the franchisee business model.    

Today, KFC’s distinctive red-and-white logo and finger-licking good chicken have made it a beloved household name with a global presence spanning more than 25,000 locations. Since 2002, KFC has operated as a subsidiary within the “YUM!” corporate family, which also owns several other well-known restaurant chains like Taco Bell and Pizza Hut, among others.

What’s new with KFC

Check out some current news about KFC:

Big Boro Eats

The KFC Youth Foundation launched a program “Big Boro Eats” to provide food aid and education to youngsters in Middlesbrough. The major aim of this initiative was to address the pressing issue of youth deprivation, with almost a third of children living in income-deprived households. The program was conducted for seven consecutive weeks from 24th July to 8th September. It included several activities such as teaching food-related skills, budgeting, and nutrition. Through this, they successfully created a safe and inclusive space for young people to develop life skills. This was a huge step towards establishing a permanent KFC Youth Foundation center in Middlesbrough.

Partnership with Deion Sanders and his family

KFC has partnered with NFL legend and University of Colorado Boulder head football coach Deion “Prime Time” Sanders and his family to promote their latest menu innovations, including new Kentucky Fried Chicken Nuggets. The Sanders family, who are longtime KFC fans, collaborated with the brand in various promotional activities. This partnership highlights the tradition of enjoying KFC as a family during meal times, with Coach Prime and his five children appearing together in promotional content. 

Drone delivery

In a recent cricket match between Australia and South Africa, a drone delivered a KFC chicken bucket to South African cricketer David Miller mid-match, creating an innovative and entertaining moment. The video was shared by the official handle of South Africa’s national cricket team. David Miller expressed his delight at the unique experience, praising KFC for their creative delivery method. The use of drones to deliver indicates a potential future trend in improving convenience and speed in food delivery services.

Target Audience of KFC

Below is a buyer persona for KFC which will help us understand the target audience.

Let us now start reading in detail about the business model of KFC.

Business Model of KFC

KFC’s management cannot oversee all the operations of its outlets over the world by sitting in one city. Thus, KFC adopted the Franchise Model as its Business Model just like the other fast-food restaurant joint did.

The franchise model is used when the parent company has a unique product and gives permission through means of licenses to others to use its logo, brand name, operating methods, etc. An agreement needs to be signed where the franchisee agrees to strictly adhere to the conditions laid down by the parent company. 

Let us now see step by step the different pasts under the business model of KFC.

Business Model of KFC – Value Proposition

Let us see the below-listed value proposition of KFC:

1. High-quality food

As their tagline says “Nobody does chicken like KFC”. KFC makes sure that the quality is not compromised in any manner in any franchise all over the world. All the raw material goes through thorough quality checks. The food is always clean and fresh and prepared from scratch by the cooks in the kitchen. 

2. Prices

KFC makes sure that most of its items can be afforded by the fast-food eating population. However, the prices vary from location to location due to import duties, etc. They also have Super Meals, Buddy Meals, and Combo Meals that can fit your budget and value for money. 

3. Ambiance and staff

KFC ensures that the vibe of the restaurant is very family-friendly. The layout, the decor, and the music all help to create a lively and upbeat environment that does not make you want to leave but instead makes you want to spend more time with your loved ones. 

4. Variety of options 

KFC is constantly trying to come up with new and innovative ways to serve its customers’ needs. Although KFC specializes in non-vegetarian food, it makes sure to add a couple of items that cater to its vegetarian audience too. They try to come up with new dishes that satisfy the local tastes of the people of that location keeping its original roots intact. Eg. Tandoori Chicken Zinger in India, Scoff EE Cup in the UK, and Porridge in China.  

5. Brand name and loyalty

KFC is very popular and known worldwide for its food and services. It has created a long-standing loyalty from individual customers and families. Its iconic recipes comprising a secret blend of “11 herbs and spices” make you want to go back again and again.

Let us now see the different key partners of KFC.

Business Model of KFC – Key Partners

Handling such a huge business is not an easy job. One needs constant support on various fronts from the people specialized in that field so that the business operates smoothly and efficiently. The partners that make up the heart of the KFC Business Model are: 

1. Franchise Partners 

Franchise partners are very crucial to KFC’s success. Since they operate the restaurants they can make or break the brand image and identity. Thus, KFC shall make sure that it gives franchising licenses to only those food companies and private business owners whom they trust and they feel will be able to abide by the standards and rules. 

2. Suppliers and Vendors 

These partners supply the restaurants with raw materials, ingredients, equipment, and all those things that are necessary for the operating and day-to-day functioning of the business. It is crucial to tie up with only those suppliers that can provide good quality goods and services. 

3. Marketing Partners 

KFC needs to tie up with influencers on social media, celebrities, sports teams, commercial brands, advertising agencies, and other organizations that help to create a desire for the product, pique the interest of the customers, generate leads, and eventually lead to a sale. 

4. Delivery and Distribution Partners 

KFC needs constant support from its logistics partners, delivery agencies, home delivery services, etc that will help to streamline the process and enhance the customer experience. 

Let us now see the revenue model of KFC.

Business Model of KFC – Revenue Model

KFC earns most of its revenue from the sale of food and drinks to its customers (both online and in-store). It also earns from its franchise agreement through its licensing fees. As of 2022, KFC earned around US$ 31.116 billion worth of total revenue. The annual revenue for 2022 was 6.8 billion, which was estimated to be a 3.92% growth from 2021.

Let us now see the cost structure of KFC.

Business Model of KFC – Cost Structure

KFC’s pricing cannot be the same in every country. The price depends on various factors like- 

1. the cost of equipment, raw materials, and ingredients
2. operational costs, occupancy costs, 
3. payments to its various partners 
4. advertising costs, marketing costs, etc. 

Let us now see the customer segments and marketing strategy of KFC.

Business Model of KFC – Customer Segments and Marketing Strategy

KFC targets three main customer segments. 

1. The Individual Customer- this customer is usually a working person who just wants something filling but it shall be quick, affordable, and accessible. 
2. Families- KFC is a very family-friendly place. The staff too is trained in such a way that will make families feel at home. There is also a separate play area for young children and small toys in the meals. 
3. Group Events- Be it a birthday party, an office get-together, or any celebration, KFC is your ultimate go-to destination. 

Sander’s picture is still used today for marketing purposes. It is considered to be KFC’s international symbol of hospitality. 

Business Model of KFC-Channels

KFC primarily caters to its customer base through a vast network consisting of over 25,000 outlets strategically located worldwide. This expansive network extends its reach to approximately 145 countries and territories across various continents, including North and South America, Asia, Europe, the Middle East, and Africa. They have dedicated and friendly sales and service staff who are readily available to assist the customers.

In addition to this, KFC offers the convenience of online ordering through their website or app. Customers can select their preferred dishes, place orders, and even schedule a delivery at their convenience. KFC has its own team of delivery drivers to ensure that food arrives at the doorstep. This option is great for those who prefer to order from the comfort of their homes.

Let us now see the competitor analysis of KFC.

Top 5 Competitors of KFC

1. McDonalds: McDonalds is the world’s largest fast-food restaurant chain. It’s widely known for its yummy burgers, crispy fries, and refreshing drinks. People love to go there for a quick and tasty meal, and they have lots of different choices on their menu. McDonald’s is a place where one can enjoy delicious food with friends and family.
2. Starbucks: Starbucks is a famous coffee chain found all around the world. They are the second largest competitors of KFC and they are known for their wide range of coffee and specialty drinks, like lattes and frappuccinos. People often visit Starbucks to enjoy a cup of coffee or to work/study in a cozy environment.
3. Burger King: Burger King is a fast-food restaurant chain recognized globally. They are famous for their flame-grilled burgers and a menu that includes items like the Whopper and chicken sandwiches. Burger King provides a convenient option for people looking for tasty burgers and fast meals.
4. Subway: Subway is a global fast-food restaurant chain specializing in customizable sandwiches and salads. They offer a wide variety of fresh ingredients and bread choices, allowing customers to create their own sandwiches or choose from a menu of pre-designed options. Subway is known for its “Eat Fresh” slogan and is a popular choice for quick and healthy fast food options.
5. Pizza Hut: Pizza Hut is a global pizza restaurant chain recognized for its diverse menu of pizza offerings. They offer a wide selection of pizzas, including classics like pepperoni. Pizza Hut often offers delivery and dine-in options, making it a convenient choice for pizza enthusiasts worldwide.

Before we conclude let us have a look at an example of a failed campaign that faced customer backlash.

Example of a Failed Campaign

The KFC Coupon Fiasco

To market their newly revealed grilled chicken, KFC joined forces in 2009 with Oprah Winfrey. As a part of this business partnership, Oprah was to promote KFC’s offer of a free two-piece grilled chicken meal. Having underestimated Oprah’s influence, KFC was flabbergasted when an estimated 10 million people downloaded the coupon for the free meal online.

KFC customers felt cheated and infuriated when they were told they couldn’t receive the free chicken they were promised.

Not having enough of the product to meet the demand, KFC had to actually turn customers away and in some locations, close early. KFC was forced to drop the deal and apologize to its frustrated clientele.

Conclusion 

On the overview of the business model of KFC, we have can clearly see that the company utilized its business model very well and has been growing at a wide range.

In its value proposition, it has high-quality food, affordable prices, a variety of products, and brand name and loyalty which plays a crucial role in the growth of the business. It has different partners in the market which help it grow in the market like franchise partners, suppliers and vendors, marketing partners, and distribution partners.

It has a well-distributed cost structure which constitutes the cost of equipment, raw material, and ingredients, operational costs, occupancy costs, payments to its various partner’s advertising costs, marketing costs, etc. 

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