Background History of KFC (Kentucky Fried Chicken)

KFC (Kentucky Fried Chicken) was founded by Colonel Harland

Sanders, an entrepreneur who began selling fried chicken from his

roadside restaurant in Corbin, Kentucky, during the Great Depression.

Sanders identified the potential of restaurant franchising, and the

first "Kentucky Fried Chicken" franchise opened in Salt Lake City,

Utah in 1952. KFC popularized chicken in the fast-food industry,

diversifying the market by challenging the established dominance of

the hamburger. Branding himself "Colonel Sanders", the founder became

a prominent figure of American cultural history, and his image remains

widely used in KFC advertising. The company's rapid expansion made it

too large for Sanders to manage, so in 1964 he sold the company to a

group of investors led by John Y. Brown, Jr. and Jack C. Massey.

KFC was one of the first fast-food chains to expand

internationally, opening outlets in England, Mexico and Jamaica by the

mid-1960s. Throughout the 1970s and 80s, KFC experienced mixed success

domestically, as it went through a series of changes in corporate

ownership with little or no experience in the restaurant business. In

the early 1970s, KFC was sold to the spirits distributor Heinlein,

which was taken over by the R.J. Reynolds food and tobacco

conglomerate, which later sold the chain to PepsiCo? The chain

continued to expand overseas, and in 1987 KFC became the first Western

restaurant chain to open in China.

 In 1997, PepsiCo spun off its restaurants division as Tricon

Global Restaurants, which changed its name to Yum! Brands in 2002. Yum

has proved a more focused owner than Pepsi, and although KFC's number

of outlets has declined in the US, the company has continued to grow

in Asia, South America and Africa. The chain has expanded to 18,875

outlets across 118 countries and territories, with 4,563 outlets in

China alone, KFC's largest market.

Management of KFC

Sanders' First Franchise in 1952

However, in 1952 the Colonel signed on his first franchise to

Pete Harman, who owned a hamburger restaurant in Salt Lake City, Utah.

Throughout the next four years, he convinced several other restaurant

owners to add his Kentucky Fried Chicken to their menus.

Therefore, rather than struggle to live on his savings and Social

Security, in 1955 Sanders incorporated and the following year took his

chicken recipe to the road, doing demonstrations on-site to sell his

method. Clad in a white suit, white shirt, and black string tie,

sporting a white mustache and goatee, and carrying a cane, Sanders

dressed in a way that expressed his energy and enthusiasm. In 1956

Sanders moved the business to Shelbyville, Kentucky, 30 miles east of

Louisville, to more easily ship his spices, pressure cookers, carryout

cartons, and advertising material. And by 1963 Sanders's recipe was

franchised to more than 600 outlets in the United States and Canada.
Sanders had 17 employees and travelled more than 200,000 miles in one

year promoting Kentucky Fried Chicken. He was clearing $300,000 before

taxes, and the business was getting too large for Sanders to handle

New Management for Kentucky Fried Chicken

In 1964 Sanders sold Kentucky Fried Chicken for $2 million and a

per-year salary of $40,000 for public appearances; that salary later

rose to $200,000. The offer came from an investor group headed by John

Y. Brown, Jr. a 29-year-old graduate of the University of Kentucky law

school, and Nashville financier John (Jack) Massey. A notable member

of the investor group was Pete Harman, who had been the first to

purchase Sanders's recipe 12 years earlier.

Under the agreement, Brown and Massey owned national and

international franchise rights, excluding England, Florida, Utah, and

Montana, which Sanders had already apportioned. Sanders would also

maintain ownership of the Canadian franchises. The company

subsequently acquired the rights to operations in England, Canada, and

Florida. As chairman and CEO, Massey trained Brown for the job;

meanwhile, Harland Sanders enjoyed his less hectic role as roving

ambassador. In Business Week, Massey remarked: "He's the greatest PR

man I have ever known."

Within three years, Brown and Massey had transformed the "loosely

knit, one-man show ... into a smoothly run corporation with all the

trappings of modern management," according to Business Week. Retail

outlets reached all 50 states, plus Puerto Rico, Mexico, Japan,

Jamaica, and the Bahamas. With 1,500 take-out stores and restaurants,

Kentucky Fried Chicken ranked sixth in volume among food-service

companies; it trailed such giants as Howard Johnson, but was ahead of

McDonald's Corporation and International Dairy Queen.

In 1967, franchising remained the foundation of the business. For

an initial $3,000 fee, a franchisee went to "KFC University" to learn

all the basics. While typical costs for a complete Kentucky Fried

Chicken start-up ran close to $65,000, some franchisees had already

become millionaires. Tying together a national image, the company

began developing pre-fabricated red-and-white striped buildings to

appeal to tourists and residents in the United States.

The revolutionary choice Massey and Brown made was to change the

Colonel's concept of a sit-down Kentucky Fried Chicken dinner to a

stand-up, take-out store emphasizing fast service and low labor costs.

This idea created, by 1970, 130 millionaires, all from selling the

Colonel's famous pressure-cooked chicken. But such unprecedented

growth came with its cost, as Brown remarked in Business Week: "At one

time, I had 21 millionaires reporting to me at eight o'clock every

morning. It could drive you crazy." Despite the number of vocal

franchisees, the corporation lacked management depth. Brown tried to

use successful franchisees as managers, but their commitment rarely

lasted more than a year or two. There was too much money to be made as

entrepreneurs.