KFC has its branches in about 150 countries and 22622 outlets making it the 4th largest fast-food restaurant in the world. It was one of the 1st American Fast- Food chains to expand Internationally. It has earned a revenue of about US$27.9 billion as of 2020.
Thus this makes us keen to know the business model of KFC. In this blog, we have listed the detailed business model of KFC which includes the value proposition, key partners, revenue model, cost structure, etc.
Before we start with its business model let us know about KFC as a company.
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.
Today, KFC is a household name and is present worldwide in 25000 + locations. Since 2002, KFC has operated as a sub-brand of “YUM!”, the company that owns other restaurant companies like Taco Bell, Pizza Hut, and many more.
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 he gives permission through means of licenses to others to use his 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.
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 in 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, the music all help to create a lively and upbeat environment that does not make you want to leave and 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, 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 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 in 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 tying 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 2020, it earned around US$ 27.9 billion worth of revenue.
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-
- the cost of equipment, raw material, and ingredients
- operational costs, occupancy costs,
- payments to its various partners
- 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.
- The Individual Customer- this customer is usually a working person who just wants something filling but it shall be quick, affordable, and accessible.
- 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.
- 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.
Let us now see the competitor analysis of KFC.
Business Model of KFC – Competitors
KFC’s strongest competitor is the big M whom no business joint has beaten to date. McD’s affordable pricing, more food options, marketing strategies, a larger number of outlets, and presence have set it apart from the rest.
Subway is known for its fresh sandwiches. Subway has the largest number of outlets in the world thereby contributing to additional sources of revenue.
3. Burger king
and Burger King- popular for its burgers. Burger King spends a huge amount of money on advertising and marketing campaigns. It is also the 4th largest fast-food chain in the world.
The entry of Starbucks has changed the way the world drinks coffee and has impressively made it to the 2nd position in the Worldwide Fast- Food market. Thus this makes it a tough competitor on its ladder in reaching the top of the fast-food chain.
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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