KFC’s sources of competitive advantage
KFC is a leading restaurant chain and a part of the Yum brands. With its 25,000 stores operational across 146 countries and territories, the brand is among the leading restaurant chains with a global footprint. The brand is also the leader in the QSR chicken segment. It is run mainly by franchisees. 99% of KFC stores worldwide are operated by franchisees. KFC accounted for more than 50% of the revenue Yum brands generated in 2020. Apart from KFC, Yum Brands also owns Pizza hut, Taco Bell, and Habit Burger Grill.
KFC’s leadership position in the QSR chicken category is a result of its consistent focus on quality, customer service, and menu innovation. Overall, the brand enjoys strong demand and popularity globally. Particularly, in the western markets, the demand for KFC products is very strong. However, it is not without its focus on the customer experience that KFC has successfully gained a strong competitive edge and leadership position in the QSR industry. It also focuses on marketing and is planning faster expansion in the future to maintain its growth momentum.
KFC was founded in Corbin, Kentucky, by Colonel Harland D. Sanders, an early developer of the quick service food business and a pioneer of the restaurant franchise concept.
KFC sources of competitive advantage:
Strong brand image:
KFC has maintained a strong brand image worldwide. The QSR industry has grown and is populated by a very large number of brands. While the US is the leading market for KFC products, the company has expanded its business globally and enjoys a leadership position in several more markets too.
However, brand image is a key driver of demand and popularity in the QSR industry. It depends on several things. A strong brand image requires a heavy focus on quality, service, and marketing, among other things. Apart from that, it leads to higher brand recall and repeat purchases. In the QSR industry, a strong brand image also results in higher brand loyalty. KFC’s focus on quality, menu innovation, and marketing has led to a stronger image in the global market. It has also resulted in higher sales and revenue.
Strong popularity and demand:
KFC enjoys higher popularity and stronger demand in various parts of the globe. In the US, the leading competitors of KFC in the QSR chicken segment include chick-fil-a and Popeyes. However, there is not even a single brand that competes with KFC directly in the QSR chicken segment at a global level. As a result, the company faces little direct competition in most markets excluding the US. Overall, the level of competition from other leading brands that serve substitute products is high. KFC being the single largest brand in the QSR chicken segment enjoys superior demand and popularity as well as customer loyalty.
Strong global footprint:
KFC has expanded its business globally to 146 countries and territories. Its global presence is also a leading source of competitive advantage for the brand. Across the world, there are very few brands that operate in the QSR chicken segment. So, its global presence has helped it reduce the competitive pressure and find faster business growth. It operates 25,000 stores across the world. In the United States, the company operates 3,981 stores.
Supply chain management:
Supply chain management is also a critical source of competitive advantage for the QSR brands. All the leading brands that enjoy a strong competitive moat in the global market have focused on managing their supply chains. KFC’s supply chain has helped it maintain its quality standards and achieve cost-effectiveness. While the brand faced a severe supply chain crisis a few years ago, it has transformed its supply chain strategy since then.
Another critical source of competitive advantage in the QSR industry is marketing. The industry is marked by heavy competition. There are several brands competi/ng for market share in the industry. So, all the leading brands focus heavily on marketing. To achieve faster growth, they invest in menu innovation, customer service and marketing. Apart from digital channels, KFC uses its store and outdoor advertising for promotions. Social media is also a key marketing channel KFC utilizes for promotions and customer engagement. Yum brands spent more than $1 billion on advertising in 2020.
One of the key attractions of KFC is its diversified menu. The company serves a wonderful and diversified menu of mainly chicken items. It has also included some vegetarian items on the menu to attract vegetarian customers. With time, the company has continued to invest in menu innovation to make it more attractive for the customers worldwide. For example, the company introduced a new chicken sandwich in 2021. It is available across all KFC restaurants in the United States. It introduced new items in 2020 as well. THe company keeps expanding and changing its menu composition to suit the changing tastes and preferences of the customers worldwide.
An important aspect of the restaurant business is the customer experience. Superior customer experience leads to higher customer loyalty, superior sales, and higher revenue. Customer experience is a critical factor that affects consumer behavior and leads to repeat purchases. A superior customer experience depends on several factors including customer service, product quality, marketing, technology and in-store experience. KFC has focused on all these areas to offer its customers a superior experience. Its focus on customer experience has transformed into higher sales and superior growth.
Resilient business model:
KFC’s business model is mainly franchisee based or 99% of its stores are operated by franchisees. The company has expanded its business footprint globally. However, it has a strong and resilient business model that responded well during the crisis. Its resilient business model is a leading strength that has helped the company achieve superior sales and revenue.