Kfc China Case

KFC in China secret recipe for success, Warren K. Liu

In Beijing on January 15th, 2004, KFC opened its 1,000th restaurant in China, only a few miles from its very first restaurant in China, which opened near Beijing’s Tiananmen Square in November 1987. From one to one thousand restaurants in a little over 16 years is an enviable record. In fact, in the history of KFC, China has the best record of restaurant growth outside its home market of America. No other restaurant company, Chinese or foreign, has achieved such remarkable growth in China to date.

And the success doesn’t stop there. At the end of 2005, nearly 1,500 KFC restaurants could be found in over 350 cities in every province and special administrative region of China except Tibet, outnumbering its archrival, McDonald’s, by a margin of two to one. On average, during 2005 each of these 1,500 restaurants generated US$1 million in revenue and a profit margin of approximately 20 percent.

Despite these setbacks in 2005, KFC maintained its strong leadership position within the Chinese restaurant industry, outpaced the industry growth rate, and widened the gap against archrival McDonald’s KFC’s corporate parent welcomed its Chinese subsidiary’s strong revenue performance and healthy profit margin, both of which have been on a steady rise as a percentage contribution to the corporate total in recent years. To recognize both the past success and future prospect of its China operation, YUM! Brands announced that, effective 2005, the China division would report directly to the corporate office, along with its U.S. division and international division.