KFC has been on a global growth trajectory unlike most other brands, increasing its footprint by 71% ... [+]
January 1 marks the one-year anniversary of Tony Lowings taking over the CEO role for KFC’s global division.
When asked to grade his performance thus far, the 25-year Yum Brands’ veteran modestly answers that he’s just lucky to have inherited a good business.
He’s not wrong.
During its Q3 earnings report in late October, KFC delivered its 17th consecutive quarter of same-store sales growth, including 6% net new unit growth and powerhouse performances from India, Latin America, SOPAC and Russia.
“If you talk about the hard [key performance indicators], the comps and record-level profits, which as of Q3 year-to-date were $767 million in operating profits, it’s been a good year. I’m lucky because we operate in 140 countries all over the world and we have growth all over the world,” he said.
Indeed, KFC has been on a global growth trajectory unlike most other brands, increasing its footprint by 71% in the past six years. By comparison, McDonald’s has grown by 8% in the same amount of time, reports Australian publication, News.com.au. Australia is one of those massive growth stories for the KFC brand, with the company reporting an 8% sales jump in the market during Q3.
Despite these impressive numbers, however, the runway for growth somehow remains quite long. Consider, for example, that KFC has more than 23,000 restaurants in 140 countries, while McDonald’s has 38,000 restaurants. Because of this potential, Lowings has kept his foot on the gas.
“We think we can keep growing. We’ve got growth potential all over the world. It is a mathematical certainty we’ll double our presence and maybe even triple it,” Lowings said. “We always say that two-thirds of KFCs are yet to be built.”
No doubt the company is well on its way. Just last week, for example, KFC announced plans to open more than 20 restaurants in the Baltics throughout the next three years. The company also just entered Madagascar for the first time.
The benefits of having a vast global footprint are abundant and include sharing menu innovations that translate well across cultures. For example, the company’s successful Chizza (like a pizza, but with a fried chicken crust) originated in the Philippines and has since been rolled out to more than 15 additional markets.
In the U.S., the company was the first in the chicken category to introduce a plant-based product. The product sold out in about five hours during its one-restaurant test in Atlanta. Last month, KFC’s Canadian market tossed its hat in the ring with a new plant-based fried chicken sandwich and popcorn chicken in Mississauga, Ontario. Those products sold out in six hours.
Despite a clear demand across the entire industry and global markets, however, Lowings remains a bit conservative about the plant-based category. That’s because he’s confident in the staying power of fried chicken.
“We do see [plant-based] as a bit more than a little fad, but I don’t know if it will be a major component of the business,” he said. “When I joined the business 25 years ago, there were predictions that there were only six or seven years left for fried chicken. Now we’re seeing more competition lean heavily into fried chicken. It’s highly relevant and it’s growing across the world.”
The global fried chicken market is expected to expand at a CAGR of 5.47% through 2025, which certainly bodes well for a global fried chicken brand. It could also explain why other fried chicken brands, like Popeyes, are expanding internationally.
Such competitive pressure doesn’t faze Lowings, however.
“We have a strong brand and, generally, you’ll find that if you’re first to market, you tend to hold on to that for a long time,” he said.
KFC also has scale that benefits the brand, not just with those aforementioned menu innovations, but also–and perhaps more importantly–with operations, that ability to translate front-and-back-of-house efficiencies from market to market. This could add significant value as digital innovations, like click-and-collect and delivery, continue to disrupt the restaurant industry unlike any other time since the introduction of the drive-thru.
The delivery channel alone, for example, is expected to generate $200 billion in sales by 2025 and is a priority in many KFC markets, including the U.S. What this essentially means is a squeeze on operations as employees rush to fulfill more orders from more channels.
Fortunately, for KFC Global, Lowings has an operations mindset, having most recently served as the brand’s president and chief operating officer. As such, the company is navigating these types of changes through what it calls the RED Omnichannel Lab, a project that examines operations and restaurant design both in the front and back of the house. The lab is currently in test in 14 restaurants in four markets–the United Kingdom, France, Poland and, most recently, Dubai.
As Lowings explains, these RED restaurants are about making things easier for both the guests and the employees. For the latter, KFC is testing innovations in drink dispensing, toasting, frying and saucing. The company is also reviewing and testing new back-of-the-house layouts and equipment adjacencies.
Lowings adds these innovations will allow KFC to maintain its RED (relevant, easy, distinctive) strategy put into place a few years ago when Greg Creed was named Yum Brands’ CEO. That strategy includes not only digital and product innovation, but also a strong people and corporate culture.
“That people component is very important to us. Everyone now wants to see corporations acting in a responsible way, whether that means through sustainability or how we treat people. We’ve ramped up that focus in the past 12 months,” Lowings said. “We will continue to execute against that RED framework in every market. That means building a great culture and net new unit base and infusing everything with technology.”
Creed is retiring at the end of this year, but Lowings said KFC will continue to embrace the RED strategy under David Gibbs, who will take over as Yum Brands’ new CEO effective January 1, 2020.
“The more relevant we can make ourselves in each community, the more the brand flourishes in those markets,” he said. “We’re business as usual and we’ll stick to RED for now. It feels timeless, don’t you think?”
