Entry modes and ownership strategy
While nearly 90% of Yum!’s U.S. stores are run using this business model where independent operators manage the locations, KFC China chose to directly own over 90% of its restaurants instead
What is Franchising?
In KFC’s early years in China, foreign companies were required to have local partners. What type of business arrangement did this requirement create?
What is a joint venture?
During the expansion to China, KFC did this rather than franchising restaurants.
What is owning?
KFC expanded its menu in China far beyond its traditional U.S. menu. About how many items did a typical KFC China menu include?
What is 50 items?
In its early years in China, government regulations forced foreign companies like KFC to enter the market using this type of partner arrangement
What is a Joint Venture?
In KFC’s normal franchising model, KFC provides its brand and business system to independent restaurant operators. What is KFC called in this relationship?
What is the franchisor?
KFC did this to support its rapid growth in China.
What did develop a vast logistics and supply chain organization?
KFC adjusted the level of this in its food because customers in Shanghai preferred milder dishes, while those in Sichuan wanted it stronger.
What is spice level?
Yum! used KFC’s established supply chain and logistics network in China to expand concepts like Pizza Hut and East Dawning, demonstrating this strategy of using another company’s existing distribution channels and experience to sell products abroad.
What is piggybacking?
After China began allowing fully foreign-owned businesses, KFC shifted toward operations it owned completely. What is a foreign company that is wholly owned by its parent company called?
What is a subsidiary?
This was KFC's strategy for adapting its brand to the Chinese market.
What is turning the band to be perceived as part Chinese?
This traditional Chinese rice porridge was added to KFC's menu and became its #1 selling item.
What is congee?
Franchised restaurants usually pay the parent company an ongoing percentage of their sales called these fees. KFC China avoided these by owning its restaurants directly.
What are royalties?
Yum! planned to take majority ownership of the Chinese restaurant chain Little Sheep by increasing its stake from 27% to 93%. What type of market-entry strategy is this?
What is an acquisition?
This is one way KFC maintained high standards for the restaurant.
What is extensively training employees in customer service?
Rather than positioning itself only as a fast food chain, KFC wanted customers to view them in this way.
What is a brand part of the local community?
In the U.S., restaurant chains rely on these facilities and companies to properly store, handle, and deliver food. When KFC entered China, these were not widely available to support KFC's needs, so KFC had to build its own network.
What are distributors/distribution centers?
KFC’s usual franchise model allows independent operators to use its brand and business system in exchange for ongoing payments. What are these payments called?
What are royalties?
KFC rapidly expanded into these areas.
What is small and mid-sized cities?
KFC's Chinese restaurants were roughly twice the size of those in the U.S. which granted more space in the kitchen and dining room. What cultural behavior did this accommodate?
What is customers dining in?