Kfc Study

SUIBE Consultants, Inc.

Research Findings Report

Team: Nirvana

2013/12/1 Sunday

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Content List

1. Introduction............................................................................................................1

1.1 Background.............................................................................................................1

1.2 Aim..........................................................................................................................1

2. Methodology............................................................................................................2

3. Limitations...........................................................................................................2-3

4. Findings and Analysis.........................................................................................2-7

Revenue

4.1 Decreasing number of visits.................................................................................2-3

4.2 Increasing spending per visit...................................................................................3

Promotion and Strategies

4.3 Attractive 24-hour-open strategy.............................................................................4

4.4 Failure in Internet business..................................................................................4-5

Consumer Satisfactory

4.5 Outstanding Service & Poor Quality of Food.........................................................5

Food Safety

4.6 Higher- than-expected concern in food Security..................................................5-6

4.7 Failure in "Thunder Operation"...........................................................................6-7

Competitors

4.8 Strong competitors..................................................................................................8

5. Conclusion...............................................................................................................9

Appendix...............................................................................................10-12

Abstract

This report aims to elaborate the detailed research results our team has concluded. The background information of this research will be provided in the introduction. Moreover, the methodology adopted and their limitations follows the introduction part. Most importantly, the following findings and analysis part is divided into five issues: revenue, promotion and strategies, consumer satisfactory, food safety and competitors. The data collection and analysis are organized according to these issues. Finally, a brief conclusion is brought out to clarify the main points the report has covered.

1. Introduction

1.1 Background

KFC has been a division of YUM! Brands since 1997 and is presently one of the China's largest fast food chains. Today the company owns and franchises more than 2,200 outlets all over China with annual revenue of $1 million each and profit margins of 20%. KFC China has adapted to the China's local market successfully through a series of marketing strategies, such as offering local-flavour menu items to broaden appeal, extending online ordering transactions and promoting regular sport events.

However, the revenue of KFC in 2013 has fallen off because of two major incidents: the Poultry supply issue and the Avian Flu. Earnings per share declined 15% accordingly in the recent quarter. In addition, KFC faces fierce competition in China from a number of fast food companies including McDonald's, Dico's and numerous Chinese local restaurants. KFC responded to these challenges by strengthening its marketing strategy and launching "Operation Thunder" to win back customers' trust.

1.2 Aim

The objective of this report is to examine the effectiveness of KFC's current marketing strategies and explore people' s responses to food safety issue. Hopefully, the results will contribute to your investment decision.

2. Methodology

Primary data were collected randomly from KFC customers and underground passengers through a well-structured questionnaire (see Appendix 1). This quantitative method was chosen due to its convenience and relatively low cost. It was carried out in the KFC stores, primary schools, and on the underground with a random sample consisted of 19 males and 36 females (females are the major customer of KFC). The response rate was almost 100% because the face-to-face survey was conducted.

3. Limitations

One limitation of this survey is concerned with the small sample size. However, we have tried to find the most representative result by randomly choosing participants and covering people with different demographic features. The other limitation is the irrelevance of answers from children (there are no accompanying parents for us to get information). Since we cannot make sure whether they really understand the questions, their answers may be biased. Nonetheless, in the face-to-face survey, we explain the questions to children in the plainest language to eliminate the bias.

4. Findings and Analysis

Revenue

4.1 Decreasing number of visits

According to Figure 1, the frequency of visiting restaurants does not fluctuate much in the course of a year. The number of the participants who often go to restaurants goes up only by 2, while the number of the participants who very often visit restaurants reduces by 3 to 16.

However, when it comes to KFC, the number of visits last month is not optimitic. There is an obvious decline in the number of the responders who very often visit KFC. The figure dramatically drops to 5. At the same time, the number of the responders who often visit KFC also goes down from 22 to 18.

Furthermore, There is nearly no daypart shift phenomenon among KFC's customers over the last year ( See Figure 2). Most customers stick to their behaviors, which indicates that it is hard to raise frequency simply by swithing their time of visit.

It is concluded that customers tend to visit KFC less often, compared with the level of the overall restaurant industry. This situation is perhaps due to people's increasing health awareness and concerns in KFC's food security.

4.2 Increasing spending per visit

As shown in Figure 3, more than half of the responders state that their spending per visit has risen in the past year. Simultaneously, 34.55% of the responders do not change their spending. Only 10.9% of the responders cut down their expense for the food security problem.

Nevertheless, according to the responders, the increasing spending per visit is not because customers are buying more products, but mainly results from the price inflation. Therefore, KFC fails to promote the real consumption.

Promotion and Strategies

4.3 Attractive 24-hour-open strategy

To our surprise, ‘Open 24 hours' is the most popular one among these eight strategies (See Figure 4). Then breakfast service takes the second place with 13% , which is followed by coupon and discount packages. Free toys, which occupies 7% in total, is at the bottom of the list.

Nowadays, more and more people tend to enjoy their nightlife. ‘Open 24 hours' strategy exactly meets this kind of demand. This may be why the strategy becomes the most attractive. Meanwhile, breakfast service also successes due to the cheap price and large variety.

4.4 Failure in Internet business

Nearly 90% of responders still choose to order in the physical stores (See Figure 5). 8% of responders prefer to order by phone. Only 5% of responders are willling to do it online. Unexpectedly, not a single responder order meals through mobile app.

In short, the internet business of KFC is not successful, which is likely to cause KFC to lose their market