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KFC has new strategy to expand its market share

One of the major foreign fast-food chains in Taiwan -- Kentucky Fried Chicken (KFC) Taiwan said yesterday, the company is planning to enlarge its market share by using the franchise business model.

"Franchising is the most efficient strategy for market expansion," Peter Bassi, president of Tricon Global Restaurant Inc, said yesterday.

Tricon Global Restaurant is the parent group of KFC, Pizza Hut and Taco Bell in Taiwan.

According to Bassi, two-third of the 10,800 KFC outlets around the world are franchised. KFC operates 124 stores in Taiwan, which are all run directly.

"It's a win-win business model, as franchisees can take advantage of brand reputation and know-how for a quick start-up, while the parent company can save on operating costs," he said.

Rather than opening a brand new store, the KFC franchisee gets to take over an existing KFC restaurant.

"Investors don't have to start from scratch and the learning curve will be shortened," said Tony Tang (唐惠良), director of Tricon Inc Taiwan.

To become an owner of a KFC outlet in Taiwan, the applicant has to pay an ownership fee and take a 20-week training course.

"Taking the US$3,600 franchise fee, operating costs and equipment purchases into consideration, our lowest offer is about NT$10 million," Tang said.

A chain-store industry pundit says the franchise concept is a viable business model.

"Store operators usually work harder because they are owners and not employees," said Yuan Shih-min (袁世民), secretary general of the Taiwan Chain Store and Franchise Association (台灣連鎖加盟協會).

"According to one of our studies, when direct-owned operators make their business a franchise, sales often initially grow by about 15 percent per month."

But adopting the franchise business model should be done with caution.

"Without efficient and strict supervision, the parent company's brand image might be damaged," he said. "The main priority in operating a successful franchise is quality control."

Customer service, store display, packaging and food flavor should be consistent, he said.

"If customers can't detect any variances in service between direct-owned and franchise outlets, your business will definitely be successful," Yuan said.

McDonald's Taiwan began offering franchise opportunities years ago. It now has 12 franchises and 345 outlets in Taiwan.
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