Kentucky Fried Chicken was founded by Harland Sanders in 1930 when he inaugurated the first Sanders Court & Café in Corbin, Kentucky. After six years of success, Sanders was awarded the Kentucky Colonel position for supplying extensive resources to his community. By 1952, his business had outgrown itself. It had expanded to such an extent that he decided to grant KFC’s first franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… to his friend, Pete Harman. In turn, he opened the first KFC franchise later that year in Salt Lake City, Utah. Throughout these 68 years, the franchise has expanded to over 20,000 stores in 145 countries which are committed to spreading the unique Colonel Sanders chicken dinners both domestically and internationally. KFC is currently headquartered in Plano, Texas, and is run by CEO, Sabir Sami. As of 2021, KFC has 3900+ locations across the USA.
The Food and Beverage industry in the USA accounts for 13% of all manufacturing employment in the country. Around 1.46 million people are employed in this industry A particular form or branch of economic or commercial activity. Subindustries are often referred to as categories on Vettedbiz.com. Food franchises make up to 36% of the total franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… establishments in the USA and it is expected to create 1.6million more jobs by 2027. The annual growth rate The Growth Rate is the percentage change of total franchise units from one year to the next. A higher Growth Rate signifies an expanding… in the industry is around 2% and the EBITDA E+I+T+D+A Net earnings + Interest expense + Income tax expense + Depreciation + Amortization or Operating income + Depreciation and amortization EBITDA is the… multiplier is around 3x. KFC is part of Yum! Brands, Inc., which includes Pizza Hut and Taco Bell. YUM! has over 53,000 restaurants in 157 countries and territories under the name of KFC, Taco Bell, Pizza Hut, and The Habit Burger Grill systems. Over 98% of their restaurants are franchised locations.
In the US market, KFC’s same-store sales The total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. went up 12% in Q4 and 13% for all of 2021 (both on a two-year basis).
% B/(W) | % B/(W) | |||||||
---|---|---|---|---|---|---|---|---|
2021 | 2020 | |||||||
2021 | 2020 | 2019 | Reported | Ex FX | Reported | Ex Fx | Ex FX and 53rd Week in 2019 | |
System Sales The total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. | $31,365 | $26,289 | $27,900 | 19 | 16 | (6) | (5) | (5) |
Same-Store Sales Growth % | 11 | N/A | (9) | N/A | N/A | |||
Company Sales | $596 | $506 | $571 | 18 | 12 | (11) | (9) | (8) |
Franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… and property revenues | 1,557 | 1,295 | 1,390 | 20 | 17 | (7) | (6) | (5) |
Franchise contributions for advertising and other services | 640 | 471 | 530 | 36 | 30 | (11) | (10) | (9) |
Total revenues | $2,793 | $2,272 | $2,491 | 23 | 18 | (9) | (8) | (7) |
Company restaurant profit | $106 | $67 | $87 | 58 | 48 | (24) | (24) | (22) |
Company restaurant margin % | 17.7% | 13.2% | 15.3% | 4.5 ppts. | 4.3 ppts. | (2.1) ppts. | (2.4) ppts. | (2.4) ppts. |
G&A expenses | $377 | $346 | $346 | (9) | (7) | – | (1) | (1) |
Franchise and property expenses | 74 | 91 | 89 | 18 | 20 | (2) | (2) | (3) |
Franchise advertising and other services expense | 627 | 465 | 520 | (35) | (29) | 11 | 9 | 8 |
Operating Profit | $1,230 | $922 | $1,052 | 33 | 29 | (12) | (12) | (11) |
% Increase (Decrease) | |||||
---|---|---|---|---|---|
Unit Count | 2021 | 2020 | 2019 | 2021 | 2020 |
Franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… | 26,643 | 24,710 | 23,759 | 8 | 4 |
Company-owned | 291 | 290 | 345 | – | (16) |
Total | 26,934 | 25,000 | 24,104 | 8 | 4 |
In 2021, KFC did 33% better worldwide in terms of operating profit compared to 2020 while it reduced General & Administrative (G&A) expenses by 9% system-wide. This came at a profit margin of 58% for the franchisor in the entire KFC system that spans the globe.
The initial KFC Franchise Fee is $135,000 to $540,000 and is called the Development Fee. You have to pay this upfront fee when opening a KFC franchise.
The estimated total investment necessary to begin the operation of a KFC Franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… ranges from $1,440,600 to $3,163,550. The following costs are part of the upfront costs included in the initial investment The amount of funds necessary to begin operations of a business or franchise including the first three months of operation. for a KFC. Many of these are one-time fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy a KFC franchise in 2022.
Type of Expenditure | Amount | To Whom Payment is to be Made |
---|---|---|
Development Fee | $135,000 to $540,000 | KFCLLC or its designated parents or affiliates |
Additional Funds AFN = Projected increase in assets spontaneous increase in liabilities any increase in retained earnings Known as AFN or additional funds needed It is… – 3 months | $0 | |
TOTAL | $135,000 to $540,000 | |
Background Check Fee | $350 to $500 per person | Third Party |
Deposit Fee | $20,000 | KFCLLC or its designated parents or affiliates |
Option Fee | $25,000 | KFCLLC or its designated parents or affiliates |
Training Expenses | $5,000 to $8,000 | KFCLLC or its designated parents or affiliates or Third Party (such as airline or hotel) |
Permits, Licenses & Security Deposits | $50,000 to $100,000 | Third Party |
Real Property | $400,000 to $1,100,000 | Third Party |
Building & Site Costs | $534,000 to $1,300,000 | Third Party |
Equipment, Signage, Décor, POS & MERIT | $329,000 to $500,000 | Third Party |
Start-up Inventory The value of the total finished and unfinished goods and materials the business holds for future sale. | $10,000 | Third Party |
Grand Opening Expense | $5,000 | Third Party |
Insurance | $7,250 to $10,050 | Third Party |
Miscellaneous Costs | $5,000 to $10,000 | Third Party |
Additional Funds | $50,000 to $75,000 | Employees, Third Party |
Total Estimated Expenditure | $1,440,600 to $3,163,550 |
You need a minimum net worth Value of all the non-financial and financial assets of a business buyer. There is usually a minimum net worth requirement to qualify as a… of $1.5 million and liquid assets worth over $750,00 to start a KFC franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business…. However, KFC notes, “Requirements are commensurate with ownership level and may be significantly higher from minimum requirements based on the size of the transaction.”
Type of Fee | Amount | Remarks |
---|---|---|
Royalty | 4% to 5% of Gross Revenue The total amount in dollars made in the business before expenses are deducted. See also Sales. or a minimum of $1,350, whichever is greater, per month (minimum fee subject to adjustment based upon the Consumer Price Index). | – |
National Co-Op | 4.5% of Gross Revenue. | The Franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… Agreement states that KFCLLC will not require you to pay more than 5% of Gross Revenue for advertising purposes. |
These fees are pretty standard for a franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… like KFC.
Ownership | Count | Average Net Sales The total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. | Median Net Sales | Average Cost of Product | Average Cost of Product as % of Net Sales | Average Cost of Labor | Average Cost of Labor as % of Net Sales |
---|---|---|---|---|---|---|---|
Company-Owned | 39 | $1,374,888 | $1,296,190 | $412,094 | 30.0% | $441,113 | 32.1% |
Franchisee Owned | 2,972 | $1,348,059 | $1,279,276 | ||||
All Single-Brand Outlets | 3,011 | $1,348,407 | $1,280,615 |
Initial investment The amount of funds necessary to begin operations of a business or franchise including the first three months of operation. (midpoint) | %Profit margin of average franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… sales The total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. | Estimated Profits | Time to recoup investment |
---|---|---|---|
$2,302,075 | 10% | $127,927 | 20.5 years |
$2,302,075 | 15% | $191,891 | 13.5 years |
$2,302,075 | 20% | $255,855 | 11.5 years |
Based on the median sales The total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. provided by KFC’s franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… locations, at an average of a 15% profit margin it will take around 13.5 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment.
Many factors affect the sales, costs, and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace. The presence of other fried chicken stores; the extent of market penetration and brand awareness that KFC stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
To assign a valuation multiple for KFC franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… industry A particular form or branch of economic or commercial activity. Subindustries are often referred to as categories on Vettedbiz.com as well as selling price multiples for larger systems where more transaction data is available.
Under $1 Million Net Sales The total amount in dollars made in the business before expenses are deducted. See also Gross Revenue.
$1 Million – $5 Million Net Sales
Over $5 Million Net Sales
When you go to sell a KFC franchise based on the median multiple of .34 and net sales in 2021 of $1,279,276, it would sell for $434,953. This is significantly lower than the midpoint investment of $2,302,075.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
Fiscal years ended December 27, 2021, December 28, 2020 and December 30, 2019 | |||
---|---|---|---|
2021 | 2020 | 2019 | |
Revenues | |||
Franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… and license fees | $194,194 | $181,266 | $175,228 |
Franchise contributions for other services | 28,023 | 17,888 | 9,587 |
Total revenues | 222,217 | 199,154 | 184,815 |
Costs and expenses: | |||
Provision (recovery) for expected credit losses | (257) | 12 | 77 |
Franchise and license expenses | 862 | 10 | 19 |
Total costs and expenses | 605 | 22 | 96 |
Operating profit | 221,612 | 199,132 | 184,719 |
Interest A payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at… income Income, also known as earnings or profits, is money that a person or a business receives in return for working, providing a product or… | 3 | 11 | 56 |
Net income | $221,615 | $199,143 | $184,775 |
KFC is a very profitable When the earnings in a given period of time is more than the expenses in a business. business for the franchisor with retained earnings Total earnings received by a business based on the U.S. Income Tax Return. The financial numbers of these earnings depend on the type of… of $221 million in 2021. Compared to $184 million in 2019, they saw an increase of 20% from 2019 to 2021. This is a good indication of high growth as a company overall.
KFC’s U.S. digital sales The total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. soared 70%, year-over-year, driven by its delivery service channel and e-commerce platform that launched nationwide early last year. In Q4, KFC also introduced “Quick Pickup,” where guests walk in and grab mobile orders out of cubbies. It is starting to launch “next-gen” locations, where everything is digital, contactless, and if you’re lucky, you might see a double drive-thru lane.
KFC calls it their “re-colonization” strategy to start increasing the number of locations and start expanding across the U.S.A.
As KFC continues to focus on a higher emphasis on customer service, it recently opened a next-generation concept location in Painted Post, NY.
As of today, 25% of upcoming builds are next-gen restaurants. These locations pack digital integration into a small footprint.
KFC recently extended delivery partnerships with DoorDash, Uber Eats, and Postmates. Clearly, it doesn’t expect third-party delivery to go out anytime soon. Streamlining the process will improve the speed of service, decrease contact, and prevent bottlenecks in the system as drivers wait for orders to come out.
Location type | Year | Locations at the Start of the Year | Locations at the End of the Year | Net Change |
---|---|---|---|---|
Franchised Outlets | 2019 | 3,980 | 3,969 | -11 |
2020 | 3,969 | 3,860 | -109 | |
2021 | 3,860 | 3,872 | +12 | |
Company-Owned Outlets | 2019 | 55 | 56 | +1 |
2020 | 56 | 47 | -9 | |
2021 | 47 | 47 | 0 | |
Total Locations | 2019 | 4,035 | 4,025 | -10 |
2020 | 4,025 | 3,907 | -118 | |
2021 | 3,907 | 3,919 | +12 |
Over the last three years, KFC’s franchises have been in decline. The numbers went from 4,035 stores at the start of 2019 to 3,919 stores at the end of 2021. However, this is not a bad sign and KFC is a behemoth in the industry A particular form or branch of economic or commercial activity. Subindustries are often referred to as categories on Vettedbiz.com in today’s day and age and is going nowhere.
KFC offers a ton of fried chicken-related dishes. From its signature Zinger burgers to chicken popcorn, chicken wings, and boneless strips, its menu offerings are extensive.
No stranger to having to innovate to position itself strongly in new, international markets, KFC Thailand offers shrimp doughnuts; Singapore, egg tarts; Australia, a nacho box, the Double Down Dog (a hot dog wrapped in a bun-sized piece of fried chicken), and the Mac ‘n Cheese Zinger (with a bun made of mac ‘n cheese); and its strongly vegetarian menu that they had to develop for the majority vegetarian Indian market.
They have also offered extremely eccentric products at times like the KFC Firelog which is a fried-chicken-scented log.
YUM’s history started when PepsiCo acquired Pizza Hut and then Taco Bell in 1977 and then 1978. In 1986, KFC was then sold to PepsiCo. It went on to acquire Chevys Fresh Mex, D’Angelo Grilled Sandwiches, and the American Division of East Side Mario’s. These chains were then sold when Pepsi exited the restaurant market.
Yum! was created in 1997 under the name of Tricon Global Restaurants, Inc. as the parent corporation of KFC, Pizza Hut, and Taco Bell. It selected Louisville as its HQ.
In 2000, Tricon Global, along with Yorkshire Global, tested multi-branded locations which turned out to be a huge success. By 2002, the test consisted of 83 KFC/A&Ws, 6 KFC/Long John Silver’s, and 3 Taco Bell/Long John Silver’s. In March 2002, they merged to form Yum! Brands. In the same year, Yum! began testing co-branding locations pairing Pizza Hut with Pasta Bravo, Back Yard Burgers, and A&W. An East Dawning test cafeteria-style restaurant was opened in Shanghai in 2004. East Dawning is the fusion of KFC with Chinese-style cuisine and in 2007, 8 East Dawning Restaurants were in operation.
In 2011, Yum! sold Long John Silver’s and A&W to focus on KFC, Pizza Hut, and Taco Bell. The same year, they agreed to purchase the Chinese hot pot chain Little Sheep for HK$4.56 billion. In 2012, KFC opened a location on the West Bank, becoming the first American Fast Food chain to do so. In the first quarter of 2015, Third Point Management and Corvex Management separately acquired an unspecified stake in the company.
The current CEO of Yum! Brands is David Gibbs. Former CEOs include Greg Creed and David C. Novak. Since 2006, Yum! Brands has served as the corporate sponsor of the Kentucky Derby. On October 20, 2015, Yum! Brands announced that it intended to separate into two independent, publicly-traded companies. Yum China was spun off on November 1, 2016.
YUM’s stock A stock (also known as equity) is a security that represents the ownership of a fraction of a corporation. This entitles the owner of… has grown steadily since 2016. When compared to the market benchmark for its industry A particular form or branch of economic or commercial activity. Subindustries are often referred to as categories on Vettedbiz.com, the S&P Consumer Discretionary, it has not grown as fast. However, its growth has still outpaced the S&P 500.
In 2020, YUM received an approximate 5% minority interest A payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at… in Devyani International Limited, an entity operating KFC and Pizza Hut franchised units in India.
(in millions, except per share data) | 2021 | 2020 | 2019 |
---|---|---|---|
Revenues | |||
Company sales The total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. | $2,103 | $1,810 | $1,546 |
Franchise A franchise is when a business (franchisor) allows a party (franchisee) to acquire its know-how, procedures, processes, trademarks, intellectual property, use of its business… and property revenues | 2,900 | 2,510 | 2,660 |
Franchise contributions for advertising and other services | 1,578 | 1,332 | 1,391 |
Total revenues | 6,584 | 5,652 | 5,597 |
Costs and Expenses, Net | |||
Company restaurant expenses | 1,725 | 1,506 | 1,235 |
General and administrative expenses | 1,060 | 1,064 | 917 |
Franchise and property expenses | 117 | 145 | 180 |
Franchise advertising and other services expense | 1,576 | 1,314 | 1,368 |
Refranchising (gain) loss | (35) | (34) | (37) |
Other (income Income, also known as earnings or profits, is money that a person or a business receives in return for working, providing a product or…) expense | 2 | 154 | 4 |
Total costs and expenses, net | 4,445 | 4,149 | 3,667 |
Operating Profit | 2,139 | 1,503 | 1,930 |
Investment (income) expense, net | (86) | (74) | 67 |
Other pension (income) expense | 7 | 14 | 4 |
Interest A payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at… expense, net | 544 | 543 | 486 |
Income before income taxes | 1,674 | 1,020 | 1,373 |
Income tax provision | 99 | 116 | 79 |
Net Income | $1,575 | $904 | $1,294 |
In 2021, YUM had a comprehensive income Income, also known as earnings or profits, is money that a person or a business receives in return for working, providing a product or… of $1.57 million up from $1.29 million in 2019. This represents a 21.7% growth in net income for the food behemoth. To raise these funds, they issued a lot of promissory notes as detailed below:
Issuance Date | Maturity Date | Principal Amount (in millions) | Interest A payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at… Rate: Stated | Interest Rate: Effective |
---|---|---|---|---|
October 2017 | November 2037 | $325 | 6.88% | 7.45% |
October 2013 | November 2023 | $325 | 3.88% | 4.01% |
October 2013 | November 2043 | $275 | 5.35% | 5.42% |
September 2019 | January 2030 | $800 | 4.75% | 4.90% |
April 2020 | April 2025 | $600 | 7.75% | 8.05% |
September 2020 | March 2031 | $1,050 | 3.63% | 3.77% |
April 2021 | January 2032 | $1,100 | 4.63% | 4.77% |
The annual maturities of all Short-term borrowings and long-term debt as of December 31, 2021, excluding finance lease obligations of $64 million, and debt issuance costs and discounts of $93 million are as follows:
2022 | $68 |
2023 | 398 |
2024 | 87 |
2025 | 692 |
2026 | 1,606 |
Thereafter | 8,424 |
Total | $11,275 |
This puts YUM in a consolidated debt of $11.27 billion as of today. Its financials are strong, but the credit they are operating on might start matching its net cash inflows. Interest A payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at… expenses on Short-term borrowings and Long-term debt were $551 million, $558 million, and $519 million in 2021, 2020, and 2019, respectively.
Yum!’s digital sales The total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. reached a single-quarter record of $4 billion in Q3 2020. More than 35,000 of its restaurants globally now offer delivery, which is an 11 percent rise from 2019.
KFC offers people the opportunity to be a part of a business that has established The year a Business for Sale was established. If the business has been running for a minimum of ten years, Vetted Biz will qualify… itself firmly in the industry A particular form or branch of economic or commercial activity. Subindustries are often referred to as categories on Vettedbiz.com. Fried chicken and KFC are terms that are becoming synonymous in parts of the U.S.A. and the world. KFC is a strong franchisor and depending on location, you might make much more than the median sales The total amount in dollars made in the business before expenses are deducted. See also Gross Revenue..
While this may be the business for you, make sure to also check out other businesses offered on Vetted Having put someone or something through a careful examination. At Vetted Biz, we put franchises and businesses through a careful examination and benchmarking of… Biz and in the Food and Beverage Industry.
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