Kentucky Fried China: Colonel Sander’s Success in the East
Kentucky Fried Chicken (KFC), a fast food restaurant chain best known for its “finger lickin’ good” appraisal, has not only perfected fried chicken, but has also found a recipe for success in China’s market.
Since opening its first restaurant in Tiananmen Square (Beijing) in 1987, three years before McDonalds opened its first restaurant in China, KFC has opened an average of more than one new restaurant a day, expanding its franchise to a total of 3,700 locations all across the country. KFC’s success in China can be attributed to China’s favorable reception of the company’s irresistible Original Recipe yet, there’s much more to the story of Colonel Sander’s triumph in the east.
After facing intensive competition from McDonalds in China’s four largest cities—Shanghai, Beijing, Guangzhou, and Tianjin—KFC made the decision to build up its presence in China by using 16 key cities as a foundation from which it would expand rapidly. Starting with outlets in these smaller alternative cities, KFC was able to develop the nationwide presence that we see today.
Unlike the traditional model of KFC outlets in the United States and other developed markets—a limited menu, low prices, and an emphasis on customers opting for take-out—KFC operates in China with the purpose of serving the local needs. In other words, Yum! Brands, the restaurant company that owns KFC and other chains such as Pizza Hut and Taco Bell; structured its business model through the process of localizing the product. Yum! Brands hired Chinese managers with the intentions of developing partnerships with local companies as well as using their insight on what regional dishes and flavors appeal most to domestic consumers.
As a result of reinventing and rebranding its products, KFC China now typically has 50 plus items compared with about 30 in the United States. Additional items that directly cater to local tastes include congee (a Chinese-style breakfast porridge that often contains pork, pickles, mushrooms and preserved egg), Beijing Chicken Roll with scallions and seafood sauce, and Sichuan-style Spicy Diced Chicken.
In addition to unique dishes, the redesigned menus also feature different spice-levels depending on region. This effort to redesign and completely rebrand in China has helped establish the fast food chain’s image as being delicious and safe, high quality and fast, nutritious and balanced, healthy living, and rooted in China.
Another perfect example of this business model unique to China is Pizza Hut, a company that also is a subsidiary of Yum! Brands. For one, it must be noted that Pizza Hut in Chinese, Bi Sheng Ke, is transcribed to mean “Must Succeed Customer.” Unlike the American restaurant chain in the United States, Pizza Hut has remodeled its product and layout completely in China.
Instead of being the typical restaurant chain intended to host children’s birthday parties, casual meet ups, and last minute weekday dinner spots, Pizza Hut China offers a “five-star dining experience at a three-star price.”
With a contemporary and stylish interior décor and an expanded menu that includes lavish appetizers and entrées such as salmon rolls and lamb shanks; the marketing team at Yum! Brands have done an excellent job in redesigning a fast-food restaurant catered to a newly-affluent Chinese middle class. As a result, Pizza Hut is now the number one Western casual dining brand in China with 1,100 restaurants in nearly 300 cities.
For KFC, another reason why the restaurant has achieved phenomenal success is because of its own distribution system that the managers decided to create when the franchise first started in China. By building warehouses and operating a fleet of trucks, KFC has established its own distribution business, in order to ensure that the supplies circulating its expanding network would be secure.
Despite a recent food safety scandal concerning expired meat being sold in KFC, McDonalds, and Starbucks all throughout Shanghai; Yum! China has been recognized as a leader in food safety. Yet, this is not the first time that KFC has failed to meet health and safety regulations with its product. In late 2012, KFC’s China operations found itself battling allegations that its chickens contained high levels of antibiotics. Yum! Brands responded by highlighting the steps that the restaurant chain’s parent company were taking in order to combat these issues via graphics placed throughout its outlets. These graphics displayed the steps implemented to ensure the integrity of the chicken.
Over the years, KFC has also established a favorable relationship with the Chinese government which, undoubtedly, has been a contributing factor to its success. Having influence over the policies enforced in the food service industry has been a powerful tool for Yum! Brands, as the company has a voice for whenever China writes new laws concerning food safety regulation. As mentioned in a previous insight post regarding guanxi, “maintaining deep-rooted relationships is now not just an advantage, but a necessity for the survival of all businesses.” It appears that Colonel Sanders has a clear understanding of what it means to have guanxi in China.
Today, Yum! Brand now operates approximately 4,600 KFC outlets in over 950 cities, making it the number one foreign brand in China. From the tropical southern island of Hainan to the North Korean border, KFC has developed a ubiquitous presence in China that appears to be exponentially growing. With a consuming class expected to double from 300 million to more than 600 million people by 2020, China appears to be the ideal market for any restaurant chain looking to expand and succeed globally. KFC’s “Finger Lickin’ Good” Original Recipe may always be one of the universe’s most sought-after food secrets however, KFC has shared a couple of ingredients that are necessary to succeed in China’s market.