KFC SWOT Analysis

SWOT Analysis of KFC (Kentucky Fried Chicken)

KFC has seen a lot of growth in the past few years in the Asian markets. China has remained at the centre of this growth story. In 2015 and 2016, the number of KFC restaurants in China has increased rapidly. It was also the first Quick Service Restaurant brand to have entered China in 1987. Now, it has more than 5000 restaurants there and is planning to increase their number. Moreover, the brand has innovated its menu to add variety and freshness.

KFC has also grown its global presence and had more than 15000 restaurants operating in more than 120 countries. 85% of its new restaurants were operated by the franchisees in 2015. It is the leading brand in the portfolio of Yum Brands which is growing its global presence through KFC, taco bells and Pizza hut at a sharper rate.  In 2015, KFC alone generated $16 billion in system sales. Here is a SWOT analysis of KFC listing its strengths, weaknesses, opportunities and threats.

Strengths:

Strong global presence with more than 15000 restaurants

KFC has a strong global presence with its more than 15000 restaurants running worldwide in 2015. Its Parent brand Yum! also has an impressive global presence. KFC is a franchise led brand and globally it has managed a strong brand presence.

Fast growth in Asia

In Asia too, the brand has seen very fast growth, with China being at the centre of its Asian expansion story. It opened 743 restaurants in China in 2015 and was planning to open 600 more in 2016. Overall, it has more than 5000 restaurants open across more than 1100 cities in the country. China holds strong long term potential and KFC is working aggressively to exploit it.

Strong financial performance

Globally, the financial performance of KFC has been strong. While the other brands under Yum! have also performed well during the past few years, KFC alone generated $16 billion in system sales in 2015.  Its performance in Russia, Central and Eastern Europe has also remained strong. Russia has been particularly good in terms of sales and revenue from 2011 onwards.

Significant lead over competing brands

In the Chinese market, KFC has acquired significant lead over the competing brands. Not just in China but in other emerging markets too KFC has been able to acquire a significant lead over its competitors.

Variety in menu:

KFC’s menu has grown increasingly diverse over the past few years. Apart from the non-veg items, it has also included vegetarian items in its menu to lure more customers. Its lunch box and meal items have also acquired great popularity.

Weaknesses:

Food quality related issues

Food quality has always been a major issue for the fast food brands whether it is KFC or McDonalds. In past KFC has faced significant criticism over its use of trans fats in the cooking of non-veg items.  For the modern customers health is a priority. They are looking for products cooked in safe and hygienic oils without any trans-fats. The fats in its fast food items, still continues to trouble KFC. Since it deals in chicken items mainly, its menu is bound to remain calorie heavy.

Franchisee operations related issues.

Franchisee operations related issues are also common across quick service restaurant brands. It is not just about KFC but such troubles are also common at Burger King and McDonalds. Disputes related to the Menu and operational issues have always troubled the franchisee owners and remained a reason of disagreement and discontent for both the management and franchise owners.

Opportunities:

Tremendous growth potential in the emerging markets

The emerging markets are full of growth potential. Russia and China hold long term potential for KFC. Moreover, there is still a large scope for opening new restaurants in these emerging markets. In its top 12 emerging markets excluding China, KFC still has only one restaurant per million people.

Innovative menu for health conscious generation

The millennial generation is highly health conscious. However, KFC’s menu has generally been loaded with calories. Including more low calories items can prove profitable for the brand.

Focus on low cost and healthy items

The preference of the consumers has changed. Apart from healthy food, they want better customer service and at a price that does not burn their pockets. KFC must focus on increasing the number of low cost and healthy items to grow its sales fast.

Threats:

Competition from other fast food brands globally

Despite having grown very fast during the past few years, it is still not at number one. The competitive challenge from McDonalds and other brands is significant. Other brands are also innovating their menu in diverse ways to grow their market share and customer base.

Millenial preferences

The preferences of the millennial generations are vastly different from the baby boomers. The changing demographics are also creating new pressures on the fast food brands. The millenials want great customer service along with excellent food quality at low prices.

Rising operational, labor and raw material costs

The costs of operation, labor and raw material are rising globally. Waste management and environmental responsibility have become important areas requiring attention on priority. All these factors including compliance to food quality laws increase the operational costs for the QSR brands. WAste management and environment related challenges are also proving costly.

Stronger dollar

Economic fluctuations also create significant pressures for the international brands like KFC. The dollar has grown stronger since the recession which means reduced profits for the international brands like KFC.

Food quality challenge

Food quality is an important challenge before KFC.  In the past also, it has faced significant criticism over the quality of oils it uses for cooking its food. Health and food quality related laws have also grown more stringent globally and this is a major challenge before fast food brands like KFC, McDonalds, Burger King and others.

[‘SWOT’ is an acronym for Strengths, weaknesses, opportunities and threats. It is a powerful strategic management tool that can help to know one’s important strengths and weaknesses and to exploit the opportunities. It can also help counter the threats. Strengths and weaknesses are internal factors and opportunities and threats external. So basically, SWOT is a tool designed to help you reduce your weaknesses and counter the threats. This can improve the business’ chances of success.  Companies conduct a SWOT before they embark on a new strategy or before they make an important business move like investing in a new project.]

Sources:-

YUM Brands 2015 Annual Report.