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KFC to launch fast-food chain war

Joseph Han, center, the new managing director of KFC outlets in Taiwan, poses on Saturday at a marketing campaign in Taipei. PHOTO COURTESY OF KENTUCKY FRIED CHICKEN

After being away from Taiwan for a decade, the nation's fast-food pioneer, Joseph Han (韓定國), is back, with a mandate to lead KFC into battle against arch-rival McDonald's.

Han took over the post of the nation's second-largest fast-food chain's managing director from his predecessor, Olga Wu (吳美君), on Dec. 18.

The 55-year-old fast-food franchise veteran is widely seen as the man who can help KFC narrow the market share gap with McDonald's.

Last year, KFC's store expansion and business revenues failed to reach the company's original targets, which the company attributed partly to the worse-than-expected macroeconomic environment.

Early last year, KFC said it planned to double its number of outlets in Taiwan within five years -- meaning at least 250 stores by 2010. McDonald's ran around 350 outlets by the end of last year and aimed to add 10 to 20 new outlets per year in Taiwan within the next three years.

Some help

To accomplish this unprecedented expansion plan, Yum Restaurants (Taiwan) Co (台灣百勝肯德基), which operates the KFC business, hired Yu Guowei (虞國偉), previously responsible for KFC development in China's Zhejiang Province, to serve as the associate director for development in Taiwan.

With Yu's addition to the management team, KFC opened 10 stores last year alone, compared with its earlier slow move of only adding six new outlets over four years due to a lack of expansion experience.

"Our expansion plan was confirmed last year and remains unchanged, unaffected by the change in chief," said Han in his first press conference on Saturday after assuming office.

"There's no cap on Yum's investments in Taiwan but the difficulty in finding good locations will be the major obstacle," he added.

The nation's real estate market has sizzled in recent months, with housing prices soaring but transaction volumes being less impressive. Landlords generally demand rents that are higher than what restaurant operators can afford, greatly squeezing the sector's already thin margins.

He said that landlords and tenants should maintain a friendly partnership as restaurants' contracts usually exceed 10 years. He added that favorable locations would secure stable operations.

The plan

Still, KFC will speed up its expansion plan and build drive-throughs for automobiles and even scooters in big cities and areas between first- and second-tier cities to provide more convenience for consumers.

As more Taiwanese own cars and travel more, drive-through restaurants will become more profitable.

While the nation's car sales plunged 29 percent year-on-year to 366,311 units last year, industry watchers like Sam Wu (吳鴻昇) of Yuanta Core Pacific Capital Management (元大京華投顧) forecast the market to pick up 6.5 percent and exceed 390,000 units this year.

Meanwhile, as the bad consumer loans problem further eases this year, the private-run Taiwan Institute of Economic Research (TIER, 台經院) said its business climate index of the service industry increased 2.76 points to 109.75 last month.

The institute said last week that entrepreneurs in the retail, wholesale and restaurant sectors became more optimistic last month over the nation's economic outlook as domestic consumption is expected to grow 2.83 percent this year from 1.36 percent last year.

Han said that although he was away from Taiwan for more than 10 years, he had kept a close eye on the nation's food and beverage (F&B) market.

Compared with more than 20 years ago, when foreign F&B brands were allowed to enter the local market, the sector is full of energy, creativity and diversification, with more young people joining this industry and a wide array of gourmet TV programs being produced, he said.

"The market has become more exciting and competitive. I feel it poses as a bigger challenge to me than what I faced when I was in China, which people think is a difficult market to develop," Han said.

Looking ahead, KFC was considering introducing new store formats from Singapore, Thailand, Malaysia and some European countries, as well as designing new menus, to stimulate the desire for a bigger market share.

"Taiwan can definitely handle having more KFC stores," Han said with confidence.

Malaysia, with a similar population, has more than 300 KFC outlets, compared with Taiwan's 141.

Australia has had over 600 KFC locations, although its population density is among the lowest in the world, he said, adding that this proved that launching creative marketing strategies and providing fresh and delicious food are key ingredients to expansion.

A graduate of political science from National Taiwan University, Han helped introduce McDonald's to the nation in 1982 and became the US fast-food giant's first senior manager here.

In 1996, he was invited by the Chinese division of Yum Brands Inc (百勝餐飲集團) to serve as chief operating officer, helping expand KFC's territory. China now has 1,800 KFC stores.

In 2003, he was assigned to Thailand as KFC's managing director. Han helped KFC deal with Avian Flu storm and the chain remains Thailand's leading fast-food brand.
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