KFC grew in the U.S. for the first time in 17 years in 2021

The chain lost its status as the country’s biggest chicken concept. But eight years of same-store sales growth, new remodels and an improved outlook has the company looking forward.

KFC added 10 net new locations in the U.S. in 2021. It’s not much for a 4,000-unit brand. But for the venerable chicken chain, such movement was nearly two decades in the making.

It had been 17 years, in fact, since the last time the company finished a year having opened more locations than it closed. The growth followed an eight-year run of same-store sales growth and came during one of the best years in decades, thanks to its new chicken sandwich.

The company is hardly satisfied with its one year. The chain plans to double the pace of its new-unit development this year. “We’ve got the largest new-unit pipeline heading into a year that we’ve had in over a decade,” Brian Cahoe, chief development officer for KFC U.S., said in an interview.

A fair number of those new locations will be of a new concept the brand is testing, a Next Gen restaurant concept designed to prioritize digital, drive-thru and curbside orders while providing operators with a flexible design. The company has five such locations open and franchisees are signing up for more.  

“We were working on this idea a little bit before the pandemic hit us,” Pradnya Bendre, director of architecture and design for KFC U.S., said in an interview. “We then evolved our designed to make it more centered on evolving consumer behavior, with the preference shifting more toward digital first.”

KFC helped pioneer the concept of franchising in the U.S., as founder Colonel Sanders sold his fried chicken recipe to entrepreneurs around the country. For a time, it was the country’s biggest restaurant chain. It was still the country’s biggest chicken concept 17 years ago.

But consumer tastes shifted. They gravitated toward handheld chicken sandwiches, chicken nuggets and chicken fingers and away from the bone-in, family-style meals in which KFC specialized. Consumers at the same time gravitated toward spicer food, of the variety sold by the chain’s smaller rival, Popeyes Louisiana Kitchen.

The chain also had a number of weak locations and struggling franchisees that often warred with the brand. The Great Recession exacerbated these problems, leading many companies into bankruptcy. Some of them were forced into that action by the brand itself, which for a time believed it needed to close weaker units to improve its overall restaurant stock.

KFC’s U.S. unit count shrunk as a result of all this. It operated more than 5,400 locations in 2005. By 2020, it was down to fewer than 4,000. U.S. system sales shrunk from $5.2 billion in 2006 to a low of $4.4 billion in 2017.

By contrast, two much smaller rivals took off. Chick-fil-A had less than half KFC’s system sales in 2006. That ballooned to nearly $14 billion in 2020. Popeyes, meanwhile, grew system sales from $2.1 billion to about $4.8 billion—nearly the same size as KFC.

Meanwhile, China became KFC’s largest and most vital market. The country now accounts for 26% of KFC’s global system sales, compared with 17% in the U.S.

KFC's U.S. unit count

Source: Technomic

Yet the company has deployed a long-term strategy for revitalizing its domestic business. It began focusing on marketing, using Colonel Sanders in a variety of different fashions—from using different actors and comedians to play the character to making him into a bearskin rug. It also worked on attention-getting new products, such as Beyond Fried Chicken.

“Our focus was on brand positioning,” Cahoe said. “Bringing the colonel back, bringing his spirit into our ads and branding, focusing on the quality of products.”

It introduced a new prototype, with bright red stripes and images of Sanders, called American Showman. Some 70% of the brand’s locations have been remodeled, Cahoe said. And the company began pushing more digital initiatives and last year introduced a “Quick Pick-Up” service designed to relieve drive-thru times.

It also introduced its own chicken sandwich, which helped system sales at the brand grow 7% last year.

All these efforts worked to generate sales momentum. Same-store sales have grown for eight straight years. The pandemic did help some, reintroducing consumers to the concept of the family meal. KFC sold a lot of buckets of chicken in 2020 and continued selling them last year. So did the refreshed asset base. Consumers, after all, prefer getting their food from nicer restaurants.

Yet it’s taken some time to convert that sales momentum into unit growth. The company had been planning for this move in 2020, but the pandemic interrupted such plans, delaying new unit builds. But now that development is on track, the company was able to speed up construction enough that its years of declines ended.

Franchisees, meanwhile, have more incentive to build. There are fewer KFCs for sale. And operators who want to grow have to build. “The buy versus build equation is coming more in line,” Cahoe said. “There are less opportunities for acquisition and more for organic growth.”

The company now believes it has the ability to speed up that growth. It is targeting more urban locations, including three urban locations built with the Next Gen concept. The chicken sandwich has also given the brand plenty of momentum, giving consumers more reasons to visit KFC beyond the dinner times that it has specialized in for so long. “Unit-level economics are improving as we go, which helps speed the development engine,” Cahoe said.

The Next Gen concept should help. Bendre said the concept is flexible, giving operators more options for growth. It has a more efficient kitchen, which should assist with digital orders—not to mention labor challenges. And it has better wayfinding, so drive-thru or Quick Pick-Up customers know where they’re going.

“We want to make sure our Next Gen assets stay relevant for years to come,” she said. “So they stand the test of time.”

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