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KFC's Success Recipe in China

According to a study conducted by AC Nielsen in 30 cities of China, KFC was recognized by Chinese consumer as ¡° the most frequently dining place¡±. 

In November 2000, KFC had set up 400 outlets in China. In October 2001, the number grew into 500. It reached 600 in February 2002. KFC has opened 1,200 outlets in over 200 cities across China at the end of 2004, leaving other competitors far behind. 

Yum s operating profits in China exceeded $200 million in 2004 ¡ª more than half the company s international profits. "For many companies, China is a hope and a dream ¡ª maybe a very realistic hope and a dream ¡ª but for Yum it s reality today," said Joe Buckley with Bear Stearns & Co. "It s an important piece of the company that still has plenty of growth potential ahead of it."

What we should learn from KFC¡¯s success? AS we know that one can¡¯t success for no reason.

KFC¡¯s site selection policy

Site plays a key role in the success of business. KFC attaches great importance to the selection of restaurant¡¯s location, and it almost succeeded in every selection. Site selection decision usually should be made by two committees in KFC: regional company and the headquarter. 

KFC follows these procedures in site selection: Division and selection of business circle 

1.Division of business layout

Before KFC entering a certain city, they will buy and collect information about this city from some related departments and professional research companies. When they have collected complete information, the division job begins. 

They use marking system to divide business circle. e.g. If there is a big shopping mall in this area with volume sales of 10 million, it will get 1 score and 5 scores if the sales are 50 million. The score climbs higher with one more bus line and subway line. The marking standard is worked out with years¡¯experience which is reasonably accurate. 

The business circle is divided into several categories according to the scores. Take Beijing for example. There are various business circles in Beijing, such as municipal business area (Xidan and Wangfujing), district business area, community area, community-business area and tourist area etc. 

2.Selection of business layout

In selection of business circle, you should take both the restaurant¡¯s market position and the stability and maturity of the business circle into account. You choose different business circle with different market position and consumer group.  

3.Find the consumer accumulation zone in this business circle.
Within each business circle, there must be a major consumer accumulation zone. KFC¡¯s policy is to occupy the major zone or a location very nearby.

KFC¡¯s supplier

The localization of supplier

100% of KFC¡¯s chicken come from domestic factories and 85% of food packaging material is provided by domestic suppliers.

KFC applies two policies in the localization of supplies. Firstly, to help the suppliers form into a large scale. The active measures takes by KFC enable the 25 domestic chicken suppliers to become the leaders in the chicken industry. Secondly, to localize foreign suppliers. KFC keeps encouraging its foreign suppliers to build factory in China. Over the years, KFC succeeded in bringing 17 foreign suppliers to China. 

Evaluation of supplier with STAR SYSTEM

The supplier often say, ¡°If a factory passes the KFC star system evaluation, then it can get ISO9002 quality verification easily.¡± KFC¡¯s star system started to be put into practice in China in 1996. The system substantially improves suppliers¡¯ quality.   
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KFC¡¯s training and stimulus system

KFC invests a large amount of money and manpower in strict and scientific training for employees every year, which allows aspired youths to become outstanding management talent of restaurants. Every employee including service staff, manager and managerial staff will get different sets of training. In order to help managerial staff obtain professional fast-food restaurant management knowledge, KFC established a special training center. Since its establishment, over 2,000 managerial staffs from across the nation have been given nearly 1,000 training courses. Over the past 16 years, KFC trained 200, 000 staffs and spent more than 240 million yuan on training project. 

KFC possesses good stimulus system. KFC puts a high premium on standout employees. Excellent service staff is selected out every month and gets rewarded. Diverse contests are held each month, such as champion of promoting new products and master hand of chicken cooking. Through these activities, staffs get more familiar with their business. 

KFC is flexible in selection of personnel, paying attention to personal capability. Employee start as student service staff and then become formal service staff after examination. Outstanding service staff will be promoted to star trainer, golden star trainer, group leader and manager assistant. Therefore, everyone has their own development room in KFC, as long as they show the capability. 

KFC is like a big family and all staffs stay together like brother and sister. They are good at teamwork and always keep communicating and cooperating with each other. 

KFC is keen on public service

KFC has long-term investment on education by supporting the education of Chinese children and teenagers. According to statistics, over dozens of years, KFC has contributed 65 million yuan to public service through direct or indirect way. In September 2002, KFC and China Youth Development Foundation cooperated in establishing a China KFC foundation with a total initial fund of 38 million yuan to support excellent but poor university students for a long term.

By taking part in public service activities, KFC advertised its corporation image as well as cultivate potential consumer groups and employees by osmosis.

KFC¡¯s franchise model

KFC positioned its franchise format as ¡°not begin from zero¡±. They ask franchisee to buy an existing profitable outlet instead of opening a new outlet by themselves after paying the initial fee. The franchisees don¡¯t need to do the heavy work such as select location, recruit and train employee, among which site selection being the key issue, but KFC has done it for its franchisee.¡¡¡¡

Franchisee can blend into KFC¡¯s operation system quickly and easily by taking over a mature restaurant, which to a large extent guarantee the successful chance. This is the most secure and smart way for KFC and franchisee.

In consideration of the great challenge of developing franchising in big cities, now KFC is only available for franchisees in regions where non-farmer populations are between 150,000 to 40,000 and annual per capita consumption is over 6,000 yuan. To finance the fund, franchisee can sell 30% of the stake.

KFC¡¯s localized recipe

Fast food used to be regarded as junk food. KFC has made great efforts in promoting the concept of balanced diet and healthy life.

Over the years, KFC has added many new selections on the menu, paying special attention to add-up of vegetable and high nutritional food. 

KFC often stays steps ahead of McDonald in upgrading products. With a careful and continuous study of Chinese taste, since the year 2000, KFC has began creating Chinese style food by combining their food with China¡¯s rich catering culture and tradition and diverse flavors in different Chinese regions. KFC presents long-term or temporary Chinese-customized products each month. The Chinese-flavor recipe is popular among consumers and wins high comment. 
   
With its 1,200 successful outlets, Yum! has provided foreign and domestic restaurants with useful experience of setting food in China and making a long-term development in this huge market. 

Photo from Baidu

Source:  
Editor: Grace
Date: 2005-4-4 14:28:00

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