Early franchisees
Sale by Sanders and rapid growth[edit]
KFC popularized chicken in the fast food industry, diversifying the market by challenging the established dominance of the hamburger.[30] In 1960 the company had around 200 franchised restaurants; by 1963 this had grown to over 600, making it the largest fast food operation in the United States.[20] In 1963, Sanders met John Y. Brown, Jr, a young Kentucky encyclopaedia salesman, who explained that he was keen to join the company.[31][32] Sanders instead proposed the sale of the company, as business skills did not come naturally to him, and he lacked an obvious or willing heir among his relatives.[31][33][34]
Lacking sufficient funds himself, Brown convinced the financier Jack C. Massey to provide 60 percent of the acquisition capital, and provided a major contribution himself, with smaller contributions from franchise holder Pete Harman and company officials Lee Cummings and Harlan Adams.[35] Sanders then began to have doubts about selling the company, as some members of his family were against it.[36][37] The group acquired the company in 1964 for US$2 million (around US$15 million in 2013).[11] The contract included a lifetime salary for Sanders and the agreement that he would be the company's quality controller and trademark.[38]
Massey and Brown introduced standardization to the fragmented company.[35] After visiting Pete Harman's operations in Utah, they began to implement the stand-alone take-out model across the entire chain.[35] Franchisees were ordered to delist their own menu items so that they could concentrate on KFC products.[39] The restaurants were re-branded with a distinctive red-and-white striped color pattern andmansard roofs with cupolas.[40] The roll-out of freestanding stores accelerated the company's growth as outlets exclusively selling fried chicken proved to be more appealing to potential franchisees.[21]
Despite selling the company, Sanders retained significant moral authority over executives and franchisees, and made his feelings clear when he disagreed with corporate decisions.[4] When Massey moved company headquarters from Kentucky to Nashville, Tennessee, Sanders was quoted as saying, "This ain't no goddam Tennessee Fried Chicken, no matter what some slick, silk-suited son-of-a-bitch says".[41] He believed that the company had reneged on their contract with him when they opened operations in Canada, arguing that the contract had granted him the exclusive rights to operate there.[42] KFC was forced to renegotiate with Sanders regarding the Canadian activities, as he owned $1.5 million worth of stock and was using it to prevent Massey from listing the company publicly until his points of issue were addressed.[43] Brown and Massey claimed that Sanders only had the rights to process chicken in Canada.[42] After they renegotiated the contract to guarantee Sanders exclusive rights over Canada, he sold his stock to them, and the company went public in 1966.[43] After going public, the company bought out its 600 franchisees, and directly operated them itself.[37] Later that year, Massey resigned from day-to-day management of the company (although he remained as chairman), and Brown announced that headquarters would be moved to Louisville, Kentucky.[41]
By 1967, KFC had become the sixth largest restaurant chain in the US by sales volume, and 30 percent of sales were take-out.[39][40] Brown felt that the company had to expand quickly, or else emerging rivals such as Church's Chicken would steal the company's lead; 863 outlets were opened in 1968.[37] The company's growth pushed its stock value to "stratospheric" levels, according to Reuters, and in 1969 it was listed on the New York Stock Exchange.[36][44] Meanwhile, KFC entered into ventures with other companies. Brown believed that the Colonel Sanders brand could be used to market anything, and launched the "Kentucky Roast Beef" restaurant chain, and "Colonel Sanders Inns" motels.[45][46] The two ventures quickly failed, although the roast beef chain had 100 outlets by 1970.[4][46] That same year, KFC entered a joint venture with the California-based fish and chips chain H. Salt Esquire, which proved more successful, but was sold off in 1980.[47][48]
Massey resigned as chairman of the company in March 1970, and Brown took over his role.[49] The chain had reached 3,000 outlets in 48 different countries by 1970, but expansion
Heublein and strained relations with Sanders; R.J. Reynolds[edit]
Once too large for Sanders to manage, Kentucky Fried Chicken grew to overwhelm John Y. Brown as well.[44] In July 1971, Brown sold the company to the Connecticut-based Heublein, a packaged food and drinks corporation, for US$285 million (around US$1.6 billion in 2013).[53] Brown personally gained around $35 million from the sale.[54] Reuters opined that the takeover probably saved the company from disaster.[44] Heublein planned to increase KFC's volume with its sales and marketing expertise.[55]
Meanwhile, Church's Chicken began taking KFC's market share by offering indoor seating and its "Crispy Chicken" product.[56] KFC introduced its own "Extra Crispy Chicken" in 1972.[57] The introduction of barbecue spare ribs in 1973 caused "tremendous" operating problems.[56] After the product was launched there was a shortage of pork, which pushed prices beyond what customers were willing to pay.[58] When management withdrew the product, they realized that fried chicken sales had been decreasing.[56] Meanwhile, Sanders increasingly regretting selling the company, and his relationship with the new owners had soured.[59] He began to complain of the company's declining food quality to the media:
My God, that gravy is horrible! They buy tap water for 15-20 cents a thousand gallons and then they mix it with flour and starch and end up with pure wallpaper paste ... And another thing. That new crispy recipe is nothing in the world but a damn fried doughball stuck on some chicken.[60]
The outburst prompted a KFC franchisee in Bowling Green, Kentucky, to unsuccessfully attempt to sue Sanders for libel.[12] In 1973, Heublein attempted to sue Sanders after he opened a restaurant in Shelbyville, Kentucky, under the name of "Claudia Sanders, the Colonel's Lady Dinner House".[61] In retaliation, Sanders attempted to sue Heublein for US$122 million (around US$570 million in 2013) over the alleged misuse of his image in promoting products he had not helped develop, and for hindering his ability to franchise restaurants.[62] A Heublein spokesman described it as a "nuisance suit".[62] In 1975, Heublein settled out of court with Sanders for US$1 million (around US$4 million in 2013), and allowed his restaurant venture to go ahead under the reworked name: "Claudia Sanders Dinner House".[61]
Heublein had no previous experience in the operation of fast food outlets.[56] Overconfidence led KFC to fail in such overseas markets as Hong Kong, which the company abandoned in 1975 after two years in operation.[63] Sanders continued to attack Heublein publicly, and in 1976 complained that the company "doesn't know what it's doing" and that it was "downright embarrassing" to have his image associated with such a poor quality product.[64] The 800 company-owned stores had become unprofitable by 1978.[56]
Heublein promoted Michael A. Miles to run the chain in 1977 and Miles is credited with saving the ailing company by instituting its back-to-basics formula.[65] Miles refurbished the stores, and introduced indoor seating and drive-thru windows.[56] Electronic tills produced daily customer counts, inventories and profit and loss statements, so that problems could be identified quickly.[56] KFC expanded internationally in the 1970s and 1980s, particularly in Japan, Australia and the United Kingdom.[66] Miles also lured Sanders back, and listened to his recommendations for the business.[65] Subsequent changes resulted in 30 months of consecutive per store sales increases by late 1980.[56]
Sanders died in 1980 from pneumonia, having continued to travel 200,000–250,000 miles a year up to this time, largely by car, promoting his product.[25][67] By branding himself as "Colonel Sanders", Harland became a prominent figure of American cultural history, and his image remains widely used in KFC advertising.[30]
There were 5,800 KFC outlets worldwide by 1983, located across 55 different countries.[68] That year, General Cinema Corporation acquired 18 percent of Heublein, who, fearing a hostile takeover, approached R. J. Reynolds, the tobacco firm, to act as a white knight and acquire the company for $1.3 billion.[69] That year, Michael Miles resigned as chairman of KFC to take the role of CEO at Kraft Foods, and Richard Mayer took over his role.[70] Reynolds had to contend with the introduction of Chicken McNuggets across the McDonald's chain in 1983; KFC introduced its own brand of chicken nuggets, called "Kentucky Nuggets" in 1985.[71] In 1984, Reynolds dedicated $168 million for capital expansion at KFC.[72]
Early franchiseesSale by Sanders and rapid growth[edit]KFC popularized chicken in the fast food industry, diversifying the market by challenging the established dominance of the hamburger.[30] In 1960 the company had around 200 franchised restaurants; by 1963 this had grown to over 600, making it the largest fast food operation in the United States.[20] In 1963, Sanders met John Y. Brown, Jr, a young Kentucky encyclopaedia salesman, who explained that he was keen to join the company.[31][32] Sanders instead proposed the sale of the company, as business skills did not come naturally to him, and he lacked an obvious or willing heir among his relatives.[31][33][34]Lacking sufficient funds himself, Brown convinced the financier Jack C. Massey to provide 60 percent of the acquisition capital, and provided a major contribution himself, with smaller contributions from franchise holder Pete Harman and company officials Lee Cummings and Harlan Adams.[35] Sanders then began to have doubts about selling the company, as some members of his family were against it.[36][37] The group acquired the company in 1964 for US$2 million (around US$15 million in 2013).[11] The contract included a lifetime salary for Sanders and the agreement that he would be the company's quality controller and trademark.[38]Massey and Brown introduced standardization to the fragmented company.[35] After visiting Pete Harman's operations in Utah, they began to implement the stand-alone take-out model across the entire chain.[35] Franchisees were ordered to delist their own menu items so that they could concentrate on KFC products.[39] The restaurants were re-branded with a distinctive red-and-white striped color pattern andmansard roofs with cupolas.[40] The roll-out of freestanding stores accelerated the company's growth as outlets exclusively selling fried chicken proved to be more appealing to potential franchisees.[21]Despite selling the company, Sanders retained significant moral authority over executives and franchisees, and made his feelings clear when he disagreed with corporate decisions.[4] When Massey moved company headquarters from Kentucky to Nashville, Tennessee, Sanders was quoted as saying, "This ain't no goddam Tennessee Fried Chicken, no matter what some slick, silk-suited son-of-a-bitch says".[41] He believed that the company had reneged on their contract with him when they opened operations in Canada, arguing that the contract had granted him the exclusive rights to operate there.[42] KFC was forced to renegotiate with Sanders regarding the Canadian activities, as he owned $1.5 million worth of stock and was using it to prevent Massey from listing the company publicly until his points of issue were addressed.[43] Brown and Massey claimed that Sanders only had the rights to process chicken in Canada.[42] After they renegotiated the contract to guarantee Sanders exclusive rights over Canada, he sold his stock to them, and the company went public in 1966.[43] After going public, the company bought out its 600 franchisees, and directly operated them itself.[37] Later that year, Massey resigned from day-to-day management of the company (although he remained as chairman), and Brown announced that headquarters would be moved to Louisville, Kentucky.[41]By 1967, KFC had become the sixth largest restaurant chain in the US by sales volume, and 30 percent of sales were take-out.[39][40] Brown felt that the company had to expand quickly, or else emerging rivals such as Church's Chicken would steal the company's lead; 863 outlets were opened in 1968.[37] The company's growth pushed its stock value to "stratospheric" levels, according to Reuters, and in 1969 it was listed on the New York Stock Exchange.[36][44] Meanwhile, KFC entered into ventures with other companies. Brown believed that the Colonel Sanders brand could be used to market anything, and launched the "Kentucky Roast Beef" restaurant chain, and "Colonel Sanders Inns" motels.[45][46] The two ventures quickly failed, although the roast beef chain had 100 outlets by 1970.[4][46] That same year, KFC entered a joint venture with the California-based fish and chips chain H. Salt Esquire, which proved more successful, but was sold off in 1980.[47][48]Massey resigned as chairman of the company in March 1970, and Brown took over his role.[49] The chain had reached 3,000 outlets in 48 different countries by 1970, but expansion Heublein and strained relations with Sanders; R.J. Reynolds[edit]Once too large for Sanders to manage, Kentucky Fried Chicken grew to overwhelm John Y. Brown as well.[44] In July 1971, Brown sold the company to the Connecticut-based Heublein, a packaged food and drinks corporation, for US$285 million (around US$1.6 billion in 2013).[53] Brown personally gained around $35 million from the sale.[54] Reuters opined that the takeover probably saved the company from disaster.[44] Heublein planned to increase KFC's volume with its sales and marketing expertise.[55]Meanwhile, Church's Chicken began taking KFC's market share by offering indoor seating and its "Crispy Chicken" product.[56] KFC introduced its own "Extra Crispy Chicken" in 1972.[57] The introduction of barbecue spare ribs in 1973 caused "tremendous" operating problems.[56] After the product was launched there was a shortage of pork, which pushed prices beyond what customers were willing to pay.[58] When management withdrew the product, they realized that fried chicken sales had been decreasing.[56] Meanwhile, Sanders increasingly regretting selling the company, and his relationship with the new owners had soured.[59] He began to complain of the company's declining food quality to the media:My God, that gravy is horrible! They buy tap water for 15-20 cents a thousand gallons and then they mix it with flour and starch and end up with pure wallpaper paste ... And another thing. That new crispy recipe is nothing in the world but a damn fried doughball stuck on some chicken.[60]The outburst prompted a KFC franchisee in Bowling Green, Kentucky, to unsuccessfully attempt to sue Sanders for libel.[12] In 1973, Heublein attempted to sue Sanders after he opened a restaurant in Shelbyville, Kentucky, under the name of "Claudia Sanders, the Colonel's Lady Dinner House".[61] In retaliation, Sanders attempted to sue Heublein for US$122 million (around US$570 million in 2013) over the alleged misuse of his image in promoting products he had not helped develop, and for hindering his ability to franchise restaurants.[62] A Heublein spokesman described it as a "nuisance suit".[62] In 1975, Heublein settled out of court with Sanders for US$1 million (around US$4 million in 2013), and allowed his restaurant venture to go ahead under the reworked name: "Claudia Sanders Dinner House".[61]
Heublein had no previous experience in the operation of fast food outlets.[56] Overconfidence led KFC to fail in such overseas markets as Hong Kong, which the company abandoned in 1975 after two years in operation.[63] Sanders continued to attack Heublein publicly, and in 1976 complained that the company "doesn't know what it's doing" and that it was "downright embarrassing" to have his image associated with such a poor quality product.[64] The 800 company-owned stores had become unprofitable by 1978.[56]
Heublein promoted Michael A. Miles to run the chain in 1977 and Miles is credited with saving the ailing company by instituting its back-to-basics formula.[65] Miles refurbished the stores, and introduced indoor seating and drive-thru windows.[56] Electronic tills produced daily customer counts, inventories and profit and loss statements, so that problems could be identified quickly.[56] KFC expanded internationally in the 1970s and 1980s, particularly in Japan, Australia and the United Kingdom.[66] Miles also lured Sanders back, and listened to his recommendations for the business.[65] Subsequent changes resulted in 30 months of consecutive per store sales increases by late 1980.[56]
Sanders died in 1980 from pneumonia, having continued to travel 200,000–250,000 miles a year up to this time, largely by car, promoting his product.[25][67] By branding himself as "Colonel Sanders", Harland became a prominent figure of American cultural history, and his image remains widely used in KFC advertising.[30]
There were 5,800 KFC outlets worldwide by 1983, located across 55 different countries.[68] That year, General Cinema Corporation acquired 18 percent of Heublein, who, fearing a hostile takeover, approached R. J. Reynolds, the tobacco firm, to act as a white knight and acquire the company for $1.3 billion.[69] That year, Michael Miles resigned as chairman of KFC to take the role of CEO at Kraft Foods, and Richard Mayer took over his role.[70] Reynolds had to contend with the introduction of Chicken McNuggets across the McDonald's chain in 1983; KFC introduced its own brand of chicken nuggets, called "Kentucky Nuggets" in 1985.[71] In 1984, Reynolds dedicated $168 million for capital expansion at KFC.[72]
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