KFC Approaching 40th Anniversary in Korea, Accelerates Franchise Business

Currently, All 200 Stores Are Directly Managed
First Franchise Store to Open in Early Next Year
5,500 Visitors at Startup Expo Booth
Lower Startup Costs with Small Store Expansion

KFC is starting a franchise business 40 years after entering the domestic market. Currently, all 200 stores are operated solely as company-owned stores, but the difficulty in reducing selling and administrative expenses such as rent and labor costs has been pointed out as a limitation, leading the company to enter the franchise business to accelerate store expansion. Industry insiders interpret this move as an effort to boost its value by achieving rapid sales growth through store expansion once the franchise business is fully launched.

At the KFC booth set up at the '2023 54th IFS Franchise Startup Expo,' which opened on the 5th of this month at COEX in Gangnam-gu, Seoul, visitors are lining up to receive sample food. Photo by Moon Hyewon

According to related industries on the 16th, KFC is recruiting franchisees with the goal of opening its first franchise store in the first quarter of next year.

To this end, KFC participated for the first time in the ‘2023 IFS Franchise Startup Expo’ held at COEX in Gangnam-gu, Seoul, for three days starting from the 5th of this month to recruit franchisees. During this period, it was recorded that as many as 5,500 visitors came to the booth. The total number of visitors to the entire event over the three days was 28,447, and KFC analyzed that about one-fifth of them visited the booth, indicating high interest from prospective entrepreneurs.

KFC, which entered the domestic market in 1984, has been operated solely under a company-owned store system according to the operational policy of KFC Global headquarters. Currently, the number of KFC stores in Korea is about 200, all operated as company-owned stores.

The company-owned store-centered business has the advantage of uniformly managing and maintaining product quality and store operation methods across all stores, but the difficulty in reducing selling and administrative expenses such as rent and labor costs has been pointed out as a disadvantage.

On the other hand, the franchise business is considered advantageous because it can accelerate the speed of store expansion, making it relatively easier to increase contact points with consumers.

Of course, when switching to a franchise business, issues such as differences in product quality or service at each franchise store can become disadvantages related to ‘franchise store management issues.’

However, as the number of stores increases and more customers are served in various commercial districts, sales increase, naturally leading to improved performance. Therefore, it is interpreted that KFC is accelerating franchising rather than insisting on operating only company-owned stores.

To reduce the burden on franchisees, KFC has introduced ‘Small Box’ stores since last month, designed to allow startups with smaller scale and lower costs than existing stores. This format is explained to be efficient for entering small towns or other commercial districts where opening large stores is difficult.

Professor Seo Yong-gu of the Department of Business Administration at Sookmyung Women’s University said, “If operated only as company-owned stores, the company’s growth is inevitably slow. Therefore, many franchises operate company-owned stores to taste success and then mainly expand by increasing franchise stores.” He added, “Korea is called the ‘Chicken Republic’ due to its high chicken consumption, so there is still growth potential. Moreover, franchisees develop new recipes and propose them to headquarters, which are sometimes adopted and developed into new menus. This highlights the franchisees’ autonomous entrepreneurial spirit and creativity. I think KFC is trying to boldly experiment and challenge itself in Korea with this opportunity.”