- WHITE PAPERS
KFC's Q1 performance indicates that the company has fully bounced back from its turbulent 2013 driven by a supply chain crisis in China, its largest market.
The business delivered same-store sales growth of 11 percent in the quarter, compared to a 4 percent decline during Q4. During the Yum! Brands earnings call Wednesday, CEO David Novak said the chain has "regained consumer trust and is now beginning to restage KFC into a more useful, contemporary and energetic brand."
To do so, it has introduced a new 15-item menu, and plans to update that menu at least once a year. This idea comes directly from its sister brand Pizza Hut Casual Dining's playbook, where the menu is revamped 20 percent twice a year.
Novak also said there is a stronger focus on the consumer experience.
"(The restage) is built on three pillars — taste, customer experience and digital. We're investing behind each of these so the consumer wins," he said.
The customer-focused initiatives
The digital initiatives include the rolling out of Wi-Fi system wide. It will be available in more than 2,000 restaurants by the end of this year. There is also a new mobile app coming that will provide pre-ordering capabilities with payment.
"This is another example of how we're providing customers with a more contemporary environment ... Consumer first," Novak said. "One of the things we're trying to do this year is bring a lot of fun and excitement back to KFC. This is a very holistic approach we're taking."
Also part of the brand's "restage" in China is a systemwide training program that has been applied to each team member. Novak said this initiative is an investment in the consumer proposition, and the program mirrors Chick-fil-A's training system.
"We want to help people and thank people for coming in, just like they do at Chick-fil-A. The 'it's been a pleasure serving you' — we picked that up from Chick-fil-A and built that into our brand of service experience," he said. "We have to make our customers happy and bring them back again and again. We want to make our customers feel valued."
Long term growth focuses on emerging markets
Novak remains confident in sustaining KFC's Chinese success, as the country is expected to double from 300 million to 600 million by 2020.
"We're clearly in the right place at the right time," he said. In 2014, KFC is expected to open "at least" 700 new stores.
In addition to the Chinese market, KFC will also focus on other global, emerging markets.
"Yum! Brands is the clear restaurant leader in emerging markets and we expect to build upon this position in the years ahead. And we know emerging markets will have their ups and downs, but we remain extremely bullish on long-term prospects in these countries as the consuming class rapidly expands," Novak said.
Emerging markets are expected to grow about three times the rate of developed markets in the near term.
In the U.S., KFC news wasn't as positive, with the chain experiencing a same-store sales decline of 3 percent. CFO Pat Grismer said the company is taking some learnings from successful global businesses and applying them to the domestic system.
For example, in the UK and Australia, sales benefit from portable food offerings, particularly sandwiches.
"We're looking at how we can develop a right sandwich platform and be effective in the U.S. in that arena," Grismer said.