With over 5,000 branches, KFC is American fast food’s biggest success story in China, beating out other competitors like Burger King and McDonald’s for the biggest share of the Chinese market. According to the head of Ronghua at the time, it failed because of “a lack of the kind of well-developed system that KFC possesses which oversees every detail of the business, from making the product, to service, to site, to staff training and management.” This was possible in part because when foreign investment regulations relaxed further in the early 1990s, KFC decided to abandon its Chinese JV partners and struck out on its own. The company also faced another challenge in shifting consumer perceptions: As Chinese consumers became wealthier and worldlier, their perception of KFC moved closer to that of Americans. Internally, it was also “Just in time” for KFC. Just west of Qianmen is China’s first Kentucky Fried Chicken. A few things did not change. This is the first of several historical case studies that illustrate how important aspects of Chinese political economy have evolved over the first 40 years of the country’s Reform and Opening policies. KFC was described in 2012 by Bloomberg Businessweek as a "muscular player" in developing regions, specifically Africa, China, and India while noting its falling market share in the US to rivals such as Chick-fil-A and Popeyes. IBIS’ report estimates that the fast food industry in China will generate $177.6 billion in 2019, up almost 8 percent from 2018. We also use third-party cookies that help us analyze and understand how you use this website. This statistic shows the 10 most valuable fast food chains worldwide in 2019. The company already had experienced failures in Hong Kong and Taiwan, which meant they were more ready for China. In fact, the Qianmen location served as both a gathering place for the student demonstrators to hold meetings and later as a makeshift barracks for PLA soldiers who were ordered to “clean up the square.” Soon after the upheaval, the Qianmen restaurant was one of the first Western businesses to reopen, citing “contractual obligations” (KFC had paid upfront for a ten-year lease). It has 2,500 restaurants and a market share of only 5.6%. In Shanghai, KFC heavily promoted birthday parties and hosting children’s birthday celebrations have become a tradition in KFC. This is far from KFC China’s strategy. But both state and commercial media tamped down these protests and urged nationalists to redirect their anger. Because they were so new, they stood out. This is far from KFC China’s strategy. Sign up for our newsletter and receive expert marketing tips to make you a better marketer! Kentucky Fried Chicken has more than 5,600 locations in China alone, making it by far the most dominant American fast-food chain in the country. "KFC is the clear leader in Western [fast food brands]" in China, Yum's then-CEO David Novak told investors in 2012. Yum China was spun off … KFC China has a set of ‘classics’ that are consistent globally, but many of the items are only available short-term and highly customized. The history of American fried chicken in China is a prism through which we can examine a key aspect of China’s reform and opening over the last 40 years—the dramatic changes in consumer markets and the services industry. Combos for kids employ toys as selling points. Your privacy is important. It varies from country to country. Government decided to loosen the control of the economy and encouraged Foreign investment, hence opening of Special Economic Zones. As a result, same-store sales for Yum Brands’ China Division (of which KFC represented around 75% of the operating profit) declined 13% in 2013, 5% in 2014, and 4% in 2015. From 1987 to 1992, consumer’s disposable income tripled. The large selection of menu items is meant to appeal to the Chinese style of eating, in which groups of people share several dishes. Infusing KFC into a brand that would be perceived as a part of china. KFC couldn’t keep its business model under wraps for too long, however. Processes and supply chains are much harder to copy than logos and slogans. China is now the brand’s biggest global market, making up more than a quarter of global KFC sales. The novelty was wearing off. CEO Greg Creed also called out Japan and Indonesia, which reported double-digit comps at 15 and 12 percent, respectively. Developing fast logistics and supply chain organizations. The traditional franchising strategy, in markets where political risk and cultural unfamiliarity exists, certainly would reduce financial risks. In commemorating the various milestones in China’s progress since reform and opening began in 1978, the official Chinese media proudly touts KFC as one of the many important “firsts.”. Thus, some companies set up shop far away from competitors to enjoy a larger market share. KFC (Kentucky Fried Chicken) is one of the American multinational restaurant chain created by Harland David Sanders in Louisville, Kentucky state in 1930, which mainly sold high caloric fast foods, such as Fried Chicken, hamburgers, French fries, egg tarts, soda and so on. Eye on 2022 (Part 2): Rising Stars in Beijing, Eye on 2022 (Part 1): Rising Stars in the Provinces, Party Committees in the Private Sector: Rising Presence, Moderate Prevalence. It covers the major large and medium sized cities like Beijing, Guangzhou, Tianjing, etc. Moreover, KFC showed that low cost alone does not necessarily win the market—Chinese customers were willing to pay a premium for a superior product and a unique experience. KFC wants to expand its market share in China with a remarkable speed and it identified 16 key cities as its base. Each KFC outlet was much larger than those in the US (typically twice the size) to allow for bigger kitchens and to provide space for customers to dine and linger. KFC is a top brand but it has so many strong competitors. Trailblazers like KFC imported to China best practices on how to manage a restaurant chain, build a nationwide supply chain, and maintain high levels of customer service and dining experience. Local food companies and services also create tensions for the KFC. Your access to, and use of this website, is subject to the Terms of Use, which can be read in its entirety, products tailored specifically to Chinese customers. Local partners are a common strategy for Multi-national brands when entering a new market. Figure 2. In 2017, Yum China recorded revenue growth from $4.7 billion to $5 billion on the back of 408 new store openings (with a 9% increase in system sales). But KFC’s business appeared neutral, and both sides of a bitter political dispute were happy to appropriate its space. KFC China bet big and early by expanding rapidly outside of major cities, whereas competitors like McDonald’s tended to focus their initial efforts on the key metropolises. Political and sociological underpinnings were also critical to KFC’s success. Figure 3 below compares the last three years of KFC China revenues. In that year, the brand value of Starbucks amounted to 46 billion U.S. dollars. Subway has more than 42,000 restaurants in over 100 countries. By 1988, the Qianmen branch was already KFC’s top-selling location among the restaurant’s 9,000-odd outlets. For example, KFC spicy chicken is a touch spicier in chili-loving provinces like Sichuan and Hunan. Chinese KFCs were also early adopters of now-ubiquitous offerings like home-delivery and 24-hour service. By Paul Tassi Senior Contributor Feb 3, 2021 Top-notch customer service and clean environment (which was rare for mid-priced restaurants back then) lured them in. In his book KFC in China: Secret Recipe for Success, Warren Liu, a onetime KFC executive, believed that the company’s foresight, despite the risks, to enter the Chinese market so early continued to generate “substantial competitive advantage” for decades. “KFC’s early failure in Hong Kong and Taiwan served as valuable and inexpensive lessons in preparation for its entry into China,”, 90% of Yum outlets in China are company-owned compared to only 12% in US, A photo posted by Clarice Tanisha Halim (@claricehalim), A Brand’s Definitive Guide to Social Media Listening. KFC's roots trace back 90 years when Harland Sanders, who operated a service station in Corbin, Kentucky, started cooking for hungry travelers who stopped in for gas. While not exactly technology transfer in the pure sense, this kind of knowledge transfer is of equal importance in building successful operations in new markets. 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