KFC

Date of Incorporation: 1939

Franchising Since: 1952

Headquarters: Louisville, Kentucky

 

Business Description: KFC outlets prepare and sell chicken, snackables and other approved menu items using the certain trademarks and trade secrets owned by KFC Corporation. The franchisor is KFC Corporation (KFCC) whose parent is YUM! Brands, Inc.

 

Franchise Offer: The licensee will operate a KFC outlet, which are characterized by a unique system which includes special recipes and menu items, distinctive design, décor and furnishings, specifications and procedures for operations procedures for quality control; training and assistance; and advertising and promotional programs.

 

Financial Assistance: Parent company YUM offers two financing programs. Except as described below, KFCC does not offer, directly or indirectly, any arrangements for financing the franchisee’s initial investment or the continuing operation of the KFC business.

  1. YUM Funding Financing Program: Funding is available to finance: (1) the construction of new (multi-brand or single -brand) outlets; (2) the conversion of single-brand outlets into multi-brand outlets; (3) upgrades of outlets as required under the applicable franchise agreement; and (4) the purchase of existing KFC, Pizza Hut or Taco Bell restaurants from YUM.  The maximum amount that may be borrowed by any one franchisee is $5,000,000. The minimum loan amount is $200,000.
  2. YUM Minority Lending Assistance Program: Optional lending assistance program for qualified minorities. The term "minorities" is defined by the United States Small Business Administration for its business development programs at 15 U.S.C. Section 631(f)(1)(C) and it includes African Americans, Hispanic Americans, Native Americans, Indian tribes, Asian Pacific Americans and other minorities. If the franchisee meets YUM's criteria for the Program and YUM agrees to allow the franchisee to participate, then YUM's lending assistance will take the form of YUM guaranteeing 25% of the principal of the franchised business loan up to a maximum of $3,000,000 per loan or franchisee.

 

Training and Assistance: The franchisee, manager and the other employees indicated by KFCC must attend and complete to KFCC's satisfaction the initial training program offered by KFCC on the operation of a KFC outlet. At KFCC’s discretion, other employees must attend and complete the training program to KFC’s satisfaction. Training programs may include written material and classroom instruction.

 

Territory: The franchisee will have a protected territory of the smaller of a radius of 1 ½ miles of the KFC outlet, or an area around the KFC outlet containing 30,000 people. The franchisee’s rights with respect to the protected territory will not be dependent upon achievement of a certain sales volume, market penetration or other performance factors. Within the protected territory, KFCC will not use or permit others to use in selling food products, any of the Marks that the franchisee has the right to use under the franchise agreement, except for (a) special event sales and (b) in some cases, food products (other than chicken in whole pieces) using the name or image of Colonel Sanders. The outlet may only be relocated with KFCC's advanced written approval.

 

Term of Agreement and Renewal: The term of the franchisee agreement is 20 years. Renewal terms are dependent on the franchise agreement signed.

 

Obligations and Restrictions: During the term of the franchise agreement the franchisee or a fully -trained and qualified manager must devote full time to the management and operation of the KFC outlet. The franchisee is responsible for the full performance of the franchise agreement and, if the franchisee is a corporation, one or more of the shareholders may be required to individually guarantee the performance of the obligations under the franchise agreement. The franchisee must sell all Required Products as KFCC periodically designates. The franchisee may not deliver any product from the KFC outlet or anywhere else unless separately approved for delivery and have signed a Delivery Amendment. The franchisee may cater (not including delivery), and make sales at special events only the franchisee complies with KFCC's procedures.

 

Estimated Number of Units: 18,200

 

Investment Tables:

Initial Investment

Free Standing Outlet

Type of Fee Low High
Application & Background Check Fee (per person)
$300 $500
Initial Franchise Fee $45,000 $45,000
Training Expenses $2,500 $9,500
Permits, Licenses, and Security Deposits $50,000 $100,000
Development Services Fee $0 $35,000
Property $400,000 $1,100,000
Building & Site Costs $415,000 $768,000
Equipment, Signage, and Décor, POS & MERIT $280,000 $385,000
Start-up Inventory $10,000 $10,000
Grand Opening Expense $5,000 $5,000
Additional Funds $50,000 $75,000
Total Estimated Expenditure $1,262,800 $2,543,000

 

Ongoing Fees

Type of Fee Amount
Royalty The greater of 5% of gross revenues or a minimum of $825, whichever is greater per month (minimum fee subject to adjustment based upon the Consumer Price Index).
Local Advertising 0.5% of gross revenues (or as agreed to with local advertising co-ops).
National Co-op 4.5% of gross revenues.
Renewal $6,750 (subject to adjustment based upon the Consumer Price Index) if the Letter Agreement is signed. If franchisees signs certain Amendments, they have no right of renewal.
Transfer For existing franchisees $3,375 for first outlet and $1,688 for each additional outlet in the same transaction.
For new franchisees $6,750 for first outlet and $3,375 for each additional outlet in the same transaction.
Audit Entire cost of audit, including expenses of auditing personnel.
Administrative $500 services fee for each transaction in which KFCC processes changes to franchisee’s corporate structure or when processing other approved modifications.
Additional Services $0 - $2,000
Costs, expenses and attorneys' fees Will vary
Indemnification Will vary
Late royalty payments 1- 1.5% per month
Food Standards Consultations (FSC) $265 per follow-up assessment.
Support Services and Software Maintenance for KFCC's MERIT System $160.34 per unit per month.

 Year of FDD: 2013

The above information has been compiled from the FDD of KFC along with other sources.

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