Table Of Contents
As a customer, you can’t get more of KFC’s fried chicken offered in three varieties, including extra crispy, grilled, or original recipes served at 5,200 restaurants. But, running a KFC franchise is an entirely different experience. You need to make sure your decision is the right one with careful consideration of all the aspects of running a business or restaurant, including:
- The opportunity or risk for growth.
- Financial requirements.
- The impact of the change in eating habits.
- The financial risk and cost of investing in a franchise business.
- And most importantly, evaluating your skills and capabilities.
Hi, this is Dan Rowe from Fransmart. Our website gives you all the information you need to start a successful franchise business. Whether you want to buy a healthy menu Greek franchise, a fast-developing profitable sandwich franchise, franchise opportunity as a Cashpoint, or an award-winning franchise with low risk and capital, we have information on everything. We can also assist you in finding the perfect fit for your skills and experience and how to finance your new franchise.
As an independent source, we bring you information on buying a KFC franchise by researching the KFC Disclosure Document, complaints from franchisees, lawsuits and allegations, financials of the company, and more. While we state that you should be wary of purchasing a KFC franchise, this information is meant to empower you with the knowledge to help you make the best decision.
While Kentucky Fried Chicken(KFC) has come under fire for its unhealthy practices, it has taken steps to be at the forefront of international expansion and modernization available in over 120 countries.
With KFC’s CEO transition comes a focus on digital, which includes redesigning the brand’s website and app to replace its third-party e-commerce site. Compared to 2021’s e-commerce sales, which reached roughly $5 billion, Gibbs said in Q2 2021 that the company is focused on getting $10 billion in sales this year.
KFC US, LLC (KFCLLC) is the franchisor and YUM! Brands, Inc. is the parent company. Franchisees run KFC restaurants that serve both dine-in and take-out chicken and other authorized menu options. Besides, franchisees receive a license to use the following brand-specific symbols and logos. A breakdown of the brand’s specifications, visual cues, layouts, designs, procedures, business models, and other specifics are also provided for franchisees.
Top 4 Reasons Why Not To Buy KFC Franchise
Despite being a well-known restaurant brand, KFC has a few drawbacks. It has also been a source of controversies for a few significant scandals and breaches, making it not the right choice to buy the franchise.
#1 Initial Franchise Investment Cost Is High As Compared To Other Food Chains
| KFC | Chick-fil-A | McDonald’s | Wendy’s | |
| Net worth required | $1,500,000 | $3500,000 | $5000,000 | $2000,000 |
| Liquid capital Required | $750,00 | $3,000,000 | $750,0000. | $5000,000 |
| Franchise Fee((per annum)
|
$45,000 | $10,000 | $60,000 plus GST | $45,000, |
| Total Investment | $1,262,800 to $2,543,000 | $590,000 – $2,025,400 | $1000,000-$2.200000 | $2,000,000 to $3,700,000. |
| Net profit(per annum) | $120,000 | 200,000 | $150,000 | $66,000 |
KFC’s initial franchising costs are about $2.5 million, more than Chick- a- fill and Mcdonald’s. At the same time, the profit earned by KFC franchise owners is less when compared with competitors in the industry. If a franchisee owner opts for a new full-service restaurant, it costs an estimated $1.7 million, while a new express restaurant can be launched for just $600,000. The KFC franchise might seem like it will mean big profits, but its high costs and limited control over operations might not be worth the investment.
To evaluate the accurate profit of KFC franchise owners, watch the video below, which gives you the potential financial model of how much profit is earned by any franchise owners after making investment and operation costs.
#2 Franchisees Are Expected To Adhere To Strict Rules By Brand That Is Tiring For Many Existing Owners
KFC has faced many lawsuits that allege making impetuous decisions regarding advertising. While KFC has denied all allegations, this case shows that such disputes can negatively affect individuals and businesses.
At the same time, for franchisees to operate their locations, they’re restricted by rigid guidelines in the franchise contract, which can become troublesome if they’re not careful.
#3 Franchises Are Popular, But Their Terms Can Be On The Long Side
The Franchisee’s initial term is usually twenty years long, but this can vary from one franchise to another. While most renewals have the same conditions and terms as the initial agreement, some franchisees may have problems agreeing to a new contract with too many differences between it and the original. The long term can lead to many issues, such as legal action, lost revenue, increased costs, and frustrated staff. Moreover, The lengthy term may not be suitable for those who want to buy a short-term franchisee. Besides, upon dissatisfaction, the franchisees have no option other than to continue with the term.
#4 KFC Is Notorious For Its Scandals.
KFC has been involved in several scandals related to safety and hygiene, making several customers lose trust and turn towards brands like Brooklyn Dumplings or Rise Biscuits And Chicken from the food giant. A few of its scandals responsible for negative publicity for a KFC franchise is as follows:
- Tragic Brain Damage case- In 2005, the food chain was sued by a customer and made to pay about $8 million after getting accused of salmonella poisoning in their chicken that resulted in brain damage of a seven-year-old girl child.
- Fecal Bacteria- The random testing in 2015 discovered fecal bacteria in KFC branches across the United Kingdom.
- 2018 Outrage- KFC had to shut the doors of about 600 branches due to chicken shortage.
- Violation of Covid-19 guidelines- Several customers slammed the food chain after discovering it was serving food without adhering to the social distancing guidelines. Besides, some of their staff did not wear gloves or protective face masks while serving the food.
Conclusion
Despite being one of the most prevalent food chain brands, KFC has been involved in many issues worldwide. KFC has been sued and accused of many incidents. However, some of them were fake allegations, while others proved correct.
Besides, the higher initial investment cost, including the franchise fee to open a KFC restaurant location, is nearly $45,000, with approximate initial investment ranging from $1.2 million to $2.5 million is mainly expensive, and the brand is paid a 5% royalty fee on net monthly receipts. Hence, look at the drawbacks to buying a KFC franchise before dealing.
Source:
https://www.bakerdonelson.com/KFC-Rules-the-Roost-but-Franchisees-Govern-the-Coop-04-08-2011
https://www.cbsnews.com/news/way-to-not-make-friends-kfc-says-franchise-owners-lie/
https://www.comparably.com/competitors/chick-fil-a-vs-kfc
https://ddifo.org/franchisees-sue-kfc-to-keep-national-marketing-control/