Service Operations

Management Report on KFC

GROUP 3

ABHINAV SINGH
GYANI SANA
KUMARI SATYA
SANYAM KOCHHAR
SAURABH
SWAGATIKA DAS

Acknowledgement

Every project big or small is successful largely due to the

effort of a number of wonderful people who have always
given their valuable advice or lent a helping hand. We
sincerely appreciate the inspiration, support and guidance of
all those people who have been instrumental in making this
project a success.
We, the students of Great Lakes Institute of Management,
are extremely grateful for the confidence bestowed in us and
entrusting our project. At this juncture we feel deeply
honoured in expressing our sincere thanks to Dr. for
providing valuable insights leading to the successful
completion of our project. We would also like to thank him
for his critical advice and guidance without which this project
would not have been possible.

PAGE 1

CONTENTS

1.

Introduction...................................................................................................4

2.

Objective of the Study:................................................................................6

3.

Scope of the Study:......................................................................................7

4.

Methodology:.................................................................................................8

5.

Competition Analysis....................................................................................9

6.

Present System...........................................................................................11

7.

Proposed System........................................................................................13

8.

Recommendations......................................................................................23

9.

References...................................................................................................24

Appendix- I..........................................................................................................25
Appendix- II.........................................................................................................25
Appendix- III.......................................................................................................26
Appendix- IV.......................................................................................................26

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1.Introduction
KFC Corporation is the largest fast-food chicken operator, developer,
and franchiser in the world. KFC, a wholly owned subsidiary of PepsiCo,
Inc. until late 1997, operates over 5,000 units in the United States,
approximately 60 percent of which are franchises. Internationally, KFC
has more than 3,700 units, of which two-thirds are also franchised. In
addition to direct franchising and wholly owned operations, the
company participates in joint ventures, and continues investigating
alternative venues to gain market share in the increasingly competitive
fast-food market. In late 1997 the company expected to become a
wholly owned subsidiary of Tricon Global Restaurants, Inc., to be
formed from the spinoff of PepsiCo's restaurant holdings.
Headquartered in Louisville, Kentucky, it is the world's second-largest
restaurant chain (as measured by sales) after McDonald's, with almost
20,000 locations globally in 123 countries and territories as of
December 2015. The chain is a subsidiary of Yum! Brands, a restaurant
company that also owns the Pizza Hut and Taco Bell chains.
KFC 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 the restaurant franchising concept, and the first "Kentucky Fried
Chicken" franchise opened in Utah in 1952. KFC popularized chicken in
the fast food industry, diversifying the market by challenging the
established dominance of the hamburger. By branding himself as
"Colonel Sanders", Harland became a prominent figure of American
cultural history, and his image remains widely used in KFC advertising.
However, the company's rapid expansion overwhelmed the aging
Sanders and he sold it to a group of investors led by John Y. Brown, Jr.
and Jack C. Massey in 1964.
KFC was one of the first American fast food chains to expand
internationally, opening outlets in Canada, the United Kingdom,
Mexico, and Jamaica by the mid-1960s. Throughout the 1970s and
1980s, it experienced mixed fortunes 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 Heublein, which was taken over by the R.J. Reynolds
food and tobacco conglomerate; that company sold the chain to
PepsiCo. The chain continued to expand overseas, however, and in
PAGE 3

1987, it became the first Western restaurant chain to open in China. It

has since expanded rapidly in China, which is now the company's
single largest market. PepsiCo spun off its restaurants division as Tricon
Global Restaurants, which later changed its name to Yum! Brands.
KFC's original product is pressure fried chicken pieces, seasoned with
Sanders' recipe of 11 herbs and spices. The constituents of the recipe
represent a notable trade secret. Larger portions of fried chicken are
served in a cardboard "bucket", which has become a well-known
feature of the chain since it was first introduced by franchisee Pete
Harman in 1957. Since the early 1990s, KFC has expanded its menu to
offer other chicken products such as chicken fillet burgers and wraps,
as well as salads and side dishes, such as French fries and coleslaw,
desserts, and soft drinks, the latter often supplied by PepsiCo. KFC is
known for its former and current slogan "Finger Lickin' Good", which
was replaced by "Nobody does chicken like KFC" and "So good" in the
interim.

PAGE 4

2.Objective of the Study:

To understand the differentiating key success factors of KFC varying
from its competitors in terms of price, service offered, extensive menu
and number of outlets. KFC has diversified in many geographic
locations, so the way their services have been made adaptive to the
respective geographic areas is one of the areas of our study and what
measures they could take to further enhance their services and
increase their profitability.

PAGE 5

3.Scope of the Study:

For undertaking this project, we plan visit KFC outlets in Gurgaon to
understand their service methodology, methods they have
implemented to keep their labour costs optimized as per low prices for
products charged from customer and what differentiating factors in
terms of service differ them from other quick service restaurants. The
new products launched in Indian market as per needs of local
customers and methods used by the company in terms of service
during peak hours to keep the customer satisfied.

PAGE 6

4.

Methodology:

Stage 1: Correct
the worst
problems in
service

Step 2: Adopt Best Practices (SCM, CRM, Technology Implementation)

an Operation Advantage (Increase

competitive
advantage)
Step 3:CSR
Linkvalue,
Strategy
to Operations
(Enhance customer experience, Better layout, M

PAGE 7

5.Competition Analysis

Mc Donalds serves to 68million customers in 119 countries through

36615 outlets and they generate revenue of $25.41bllion. It is the
largest food chain with the highest revenue generation.
Wendeys serves a niche market of about 30 countries through 6503
outlets. Revenue generation of this food chain is about $1.8billion.
Subway had an entirely differentiated food product which they serve
across to 112 countries through 44882 outlets. Due to limited
customer base though there presence is in 112 countries but their
revenue generation is just about $1.11billion.
Burger King had revenue of about $4.05billion. They are slightly
increasing their presence in Indian as well as foreign market. Currently
they have a presence in about 100 countries.
KFC serves region specific fast food in about 118 countries across the
globe through 18875 outlets. They serve about 12million customers
and generate revenue of $23billion. They are mostly known for Fried
chicken. Initially KFC started with all non-veg product in India but were

PAGE 8

not able to capitalize the market and hence felt the need to change it
strategy. They started serving veg products especially for Indian
region, this change in their strategy had paid off quite well on the
Indian turf.
Though KFC are the second largest food chain as of now but in near
future they might surpass Mc Donalds the current market leader at
least in Indian market.

Market presence in India

In India KFC is losing out because of fewer number of outlets

India being a vegetarian dominated country , KFC needs to have
an extensive menu to increase customer footsteps

PAGE 9

6.

Present System

Supply Chain Management of KFC:

Value chain at KFC is a simple one and it comprises of vendors
supplying raw material which are stored in warehouses and from there
on the material is distributed to various branches.
Raw chicken procured from Venkys, Godrej and Suguna and
vegetables from open market are stored in a cold storage warehouse
and the sauces and other ingredients from HUL are stored in the other
warehouse.
Preparation and packaging of the material stored in the cold storage is
done and distributed as per the requirement at various branches.

Operation line at the branches:

There are different operating lines for Chicken Bucket and Burger at
the branch level in order to serve the customers at a fast pace.
The Chicken Bucket line comprises of a freezer to store the chicken,
from there on the next station is where the next employee in the
kitchen will dip the chicken in the flour and then it moved onto the
oiling and cooking section. The cocked chicken is fried in the UHC dry
chicken machine and then it is finally served to the customer in the
bucket.
The Burger line comprises of 4 stations. The first station is where the
burger base is grilled and then at the next station the tikki is added. At
the third station Cabbage, lettuce and other vegetables are added.
Finally at the fourth station burger is served with the various sauces.
This type of operating line will demand an employee to be trained only
about his work station and hence this type of structure will ensure the
high labor productivity.

PAGE 10

Branch Layout:
Every branch of KFC has to have a specific layout prescribed by the
company itself. The layout encompasses a kitchen, a serving counter, a
store room and a sitting area.
Identical layout helps the customers get accustomed to any branch of
the KFC in no time and hence the entire process from the customer
entering into the KFC branch, selecting and ordering food, having food
to finally leaving the KFC branch happens in efficient and smooth
manner.

PAGE 11

7.Proposed System
Order winners and Order qualifiers
Order winners and order qualifiers are the competitive features of any
organization that the customers examine before making a purchase. So
it is necessary for a company to analyse the same. The following are
the order winners and order qualifiers of KFC.
KFCs order winners and Order qualifiers
KFCs some order winning factors are important than others. For
instance, the unique taste of the fried chicken tops the list and makes
it an important order winner compared to the location of restaurant.
Also the customization of the menu geographically according to the
local taste is very effective and makes it so popular.
Apart from that the opening and closing time and wide range of veg
and non veg items on the menu appeals to a large customer base.
Some basic qualities like quality of the food, consistent taste , quick
take away , lead time and cleanliness and hygiene are the order
qualifiers.
Delights
The order winner, order qualifiers and competitive analysis helps to
draw out a graph describing how the delights could contribute to a
companys sales, profits and customer service. Adding value to
customer experience is considered to be very significant component in
todays business. A service operation which starts to perform
successfully in terms of its delights, could be very profitable. Delights
are novel and also add value to the customers by improving customer
satisfaction. However, delights could be applied at one point of time as
they are very transparent to the competitors and easily imitable.

PAGE 12

Figure -2 Order winners, qualifiers and delights

KFC must focus on its delight as a part of improvement processes. The
following are the few delights recommended to KFC:

Keep a track of Anniversary and birthday dates of customers

Special discount and Complementary cake on special occasions

Customize seating arrangements

challenged customers

Return gifts on orders over particular amount

Treating kids with small gits like balloons and chocolates

Surprise customers with free meal after few number of

purchases. For instance if a customer has been visiting the store
on regular basis, then he should be given a adds on free after the
tenth meal

for

kids

and

physically

PAGE 13

The Importance Performance Matrix

The importance performance matrix is applied of KFC to compare the
factors in terms its importance to customers and performance. Each
contributing factor is positioned according to its scores and rating.

Figure -3 the importance performance matrix

PAGE 14

Urgent Action Zone

This zone holds very critical factors that impacts the consumers
directly. These factors are the major aspects of operation performance
contributing to the business. The following explains the factors set up
in the urgent action zone:

KFC has been facing challenges over its improper usage of

antibiotics in chicken. It is an alarming situation for the brand has
an impact directly on the consumers and also on the business
and hence needs an immediate attention.

These days, people are more health conscious and invest a lot in
healthy lifestyle. KFC uses a lot of excessive oil in the food items.
Even though KFC has a big brand value, it must lower down its oil
usage to promote its healthy lifestyle.

KFC has franchises all over the world and these franchises work
with different suppliers for different raw materials. KFC was
highly criticized for working with unethical suppliers who used
high amount of antibiotics in chicken. There were protest by PETA
in multiple countries like India and the US (The telegraph, 2013).
The celebrities like Pamela Anderson, Sir Paul McCartney, His
Holiness the Dalai Lama and The Rev. Al Sharpton continue to
motivate
people
not
to
eat
from
KFC
(www.kentuckyfriedcruelty.com) .This has a direct impact on the
business thereby losing consumers and lowering its sales. Many
KFC outlets were forced to shut down. In this scenario, KFC
should immediately stop their business with such unethical
suppliers and give contacts to suppliers who follow ethical way of
farming including organic farming.

People are converting into vegetarians to achieve healthy way of

life. KFC must focus on expanding the veg menu depending upon
the region. It must start including the local cuisines in KFC style.
The vegetarians prefer McDonalds over KFC because of the wide
range of veg menu (The economic Times, 2013).

PAGE 15

The Improve Zone

The factors falling in this zone are the non-urgent cases but are
necessary for the brand. The following are few of the factors:

Improve the CSR value: The Company should focus in

increasing the CSR value to enhance its brand value. The
companies with high CSR value has a better image rating there
by contributing to its sales and gaining new consumers. This
factor is placed at a position where it is important to the
customers and also gives a competitive advantage.

Better Layout: The outlets should be redesigned in order to

accommodate kids play zone and also to facilitate the physically
challenged consumers. The brand should display a great amount
of hospitality towards it customers.

Organic farming: KFC must should move towards the organic

food and drinks by growing its own organic farms or working with
suppliers having organic farms. The trend of consuming organic
food and drinks has been increasing from few years. Many fastfood restaurants have started organic farming and are attracting
lots of health-conscious consumers. This factor indirectly impacts
the consumer and hence it is placed at a position of a
comparatively high importance to the consumers and also at
competitive advantage in the market.

Reintroduce Breakfast: KFC is located majorly on high streets,

malls and busy areas. The location is an advantage giving it a
chance to draw customers. It should reintroduce breakfast with
healthy menu. People love to treat themselves on breakfast that
is healthy, quick and easily accessible.

Auditing for quality check: This factor is placed at a position

of medium importance to consumers and high rate of
performance against competitors. The auditing process should be
carried out with the suppliers as well as within the outlets to
ensure hygiene and cleanliness.

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The Appropriate Zone

This zone is the minimum boundary zone for the company to perform
and satisfy its customers.
Factors like home delivery, drive away, take away contribute to this
factors. Also to keep in mind the lead-time of the operations does have
an impact on the customers. For instance, Dominos delivers pizza in 30
minutes and pizza hut takes more than an hour to do the same.
Consumers prefer Dominos over pizza hut for its quick delivery.

The Excess Zone

The factors in this zone contribute to excessive usage of resources
which could be low importance to the customers but has a high
competitive advantage.
Chicken dominates the menu: KFC is known for the chicken recipes
which doesnt give much options to the consumers to select. It must
dilute its menu. KFC has a benchmark for the taste of fried chicken. Its
secret spices are the main attraction. It should continue to hold the
benchmark but should also expand into other options including
regional dishes and other meet products like egg, fish and ham. It must
balance its veg and non-veg menu.
Chicken is fried in batches: This factor is an advantage against
competitors because the fried chicken is always available in the outlet
and helps in lowering the lead-time of the consumers. But it doesnt do
any good to the consumers as it is not freshly fried.
Volume flexibility: KFC stores the frozen chicken in the outlets for a
week .Hence there is a weekly supply of chicken to the outlets. This
gives them the ability to provide extra capacity at short notice.

The Service Operation Strategy matrix

After analysing the various competitive factors of KFC, the focus should
be on the decision areas matching the performance objectives. This is
done by using the following matrix to collaborate the decision areas,
performance objective gaining the market competitiveness. Figure 4
displays various factors which contributes to the intersection of
decision areas and performance objectives.

PAGE 17

Figure 4. The Operation Strategy matrix

PAGE 18

The four -stage model of operation

The four-stage model of operation contribution, designed by Professor
Hayes and Wheelwright of Harvard University, captures the
organizational aims, expectations and aspirations of the operations
function that contributes the ability of any operation to open up
market potentials for the organization. This model is applied to KFC as
shown in the figure 5.

Figure 5- The four stage model of operations contribution

PAGE 19

Stage -1 Internally Neutrality

In this level, the operation is considered as a Necessary Evil because
this is the poorest level of contribution by the operation functions. At
this stage, the organization holds back its competitive attitude. The
expectations on it are to be internally neutral, a position where the
organization corrects its mistakes.

Discontinue working with unethical suppliers

Ensure food safety and zero antibiotics in food

Stage -2 External Neutrality

At this stage, even though the company does not contribute to
competitiveness, it adopts, the industry best practices and ideas from
the rest of the industry. This is expected to be external neutral with
operation strategy similar to its competitors.

Work with ethical suppliers

Increase the usage of organic food

Introduce breakfast and heathy food in the menu.

Grow organic farms

Better layout in stores for kids and physically challenged

customers

Stage -3 Internally Supportive

At this stage, KFC might not be as good as its competitors but the
brand is broadly up to their best. The company tries to achieve this
level by clearly understanding its market position and unambiguously
the very best in the market. They organize and develop their
operations function to be internally supportive.

Enhance customer service delights

Regional and vegetarian menu

Create better working policy and environment for the staff

Flexible working hours.

PAGE 20

Contract with ethical suppliers

Stage -4 Externally Supportive

At this stage, the company sees the operations functions as the
foundation base for its future success. From stage 3, the company has
grown in high competencies to place itself in the future market
conditions.

Wide range of products at competitive prices.

Increase CSR value

Highly responsive to the consumer demand and taste.

Bonding with suppliers

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8.Recommendations
On the basis of above analysis, the following are the important
summarization of recommendations.

KFC faced lot of criticism because of its unethical suppliers who

provided them with chickens with high antibiotics. So KFC should
start working with ethical suppliers and create bonding with
them.

It could also start Master Franchise where all the responsibilities

are given to a single franchise. The master Franchise would be
solely responsible for all the operations. This helps the brand to
focus on other issues rather than concentrating on the supply
chain network.

KFC should start growing its organic farms

Should have wide range of Veg menu along with seasonal and
regional items.

Redesigning the layout to accommodate kids play zone

Increase CSR activities to improve its image and attract

consumers

Recycling process and Technology

efficiency of operations

The auditing process should be carried out with suppliers as well

as within outlets to ensure cleanliness and hygiene

Breakfast menu should be re-customized with healthy menu and

not regular meals

Introduce mobile payment at its stores and launch its own app as
mobile users have exponentially grown

Invest in new technology to improve inventory and scheduling

shifts

investment

to increase

PAGE 22

9.References
a. www.yum.com
b. www.kfc.com
c. http://www.investopedia.com/articles/markets/111015/mcdonald
s-vs-burger-king-comparing-business-models.asp
d. https://www.reference.com/business-finance/kfc-visionstatement-7285bcb4a474915f
e. https://storify.com/mjin1/kfc-market-trends
f. Reuters (2014)
g. https://www.kfc.co.uk/about-us/our-story/

PAGE 23

Appendix- I

Appendix- II
SWOT ANALYSIS

PAGE 24

Financials Figures (Yum India Division)

Year-end
KFC

2015
372

2014
395

2013
341

2012
260

2011
186

Pizza Hut

432

431

359

299

247

Taco Bell

811

833

705

562

436

Total India

PAGE 25

Appendix- III

Appendix- IV

PAGE 26