Harshitha K.

HU22MGMT0700190

KFC: Kentucky Fried Chicken

Company ESSENTIALS OF FINANCIAL
MANAGEMENT PROJECT
Introduction
KFC is a global fast food chain specialising in fried chicken. Colonel Harland Sanders
and Pete Harman founded this company on 24th September 1952, in Salt lake city, Utah, United
States. The chain is a subsidiary of Yum! Brands, a restaurant company that also owns the Pizza
Hut and Taco Bell chains. It is the world’s second-largest restaurant chain after McDonald’s, with
22,621 locations globally in 150 countries as of December 2019. KFC made fried chicken a
popular choice at fast food restaurants. Before KFC, mostly hamburgers were sold. KFC’s chicken
is so tasty, they have a famous saying: “It’s finger lickin’ good!” They also say “Nobody makes
chicken better than KFC” and “It’s just really good!”

Purpose
Choosing KFC for my project could almost cover all business aspects and is easy to
understand all the concepts given under the project. Doing this project made me learn and
explore new concepts that would contribute to any businesses’ financial analytics. Also this
project has given me a great experience of professional report-making. I’ve done this project by
basing all the chapters of my course, which eventually helps me get perfect with this course. Also
I’ve learned many differences between various similar concepts.

Industry
This global fast food chain comes under restaurants (Food industry). Fast food are type of
restaurants that offer quick service and convenience to customers. So KFC has chain of these
companies. It is called global because it known world-wide.
KFC primarily operates in the **retail industry**, focusing on selling food directly to
consumers at its own restaurants or franchised outlets. While it might source ingredients in bulk
or have limited wholesale relationships with suppliers, these activities are ancillary to its core
retail function. The vast majority of its revenue comes from selling individual meals and catering
orders rather than large quantities of goods to other businesses.

Therefore, although there might be some small aspects of its operations that touch on
wholesale, KFC ultimately belongs firmly within the retail sector, satisfying the immediate needs
of hungry customers, one finger-lickin’ good chicken wing at a time.

Products & Services

KFC, known for its fried chicken, offers a diverse menu. Some key products include:

1. Original Fried Chicken : KFC's signature fried chicken, seasoned with the secret
blend of 11 herbs and spices.
2. Extra Crispy Chicken: An alternative to the Original Recipe, Extra Crispy Chicken is
known for its extra crunchy coating.
3. Chicken Tenders: Strips of boneless chicken, often served with dipping sauces.
4. Chicken Sandwiches: KFC provides a range of chicken sandwiches, featuring
variations like the Classic Chicken Sandwich or Spicy Chicken Sandwich.
5. Bucket Meals: Various combinations of chicken pieces, sides, and biscuits, typically
served in buckets for sharing.
6. Twisters and Wraps: Portable options with chicken, lettuce, and sauce wrapped in a
tortilla.
7. Sides: KFC offers a variety of sides, including mashed potatoes with gravy, coleslaw,
macaroni and cheese, and green beans.
8. Biscuits: Soft, flaky biscuits are a classic accompaniment to KFC meals.
9. Desserts: Some locations offer desserts like apple pies, cookies, and chocolate cake.
10. Beverages: Beverages are liquid drinks that people consume for refreshment or to
quench thirst these include Soft Drinks, iced tea, coffee, lemonade, milkshake.

Financial Analysis
KFC Ltd reported earnings results for the full year ended March 31, 2023. For the full
year, the company reported sales was JPY 13,031 million. Net income was JPY 1,052 million.
Basic earnings per share from continuing operations was JPY 142.95.
 What is company’s revenue?
KFC’s annual revenue is $6.8B. KFC’s revenue growth from 2009 to 2022 is -36.86%.
KFC has 820,000 employees, and the revenue per employee ratio is $8,344. Its peak quarterly
revenue was $2.0B in 2022. Its peak revenue was $13.6B in 2012. Its annual revenue for 2021
was 6.6B, 16.49% growth from 2020. Its annual revenue for 2022 was 6.8B, 3.92% growth from
2021.
Annual Data

The graph shows that the financial performance of the company over a five-year period.
The company’s sales, operating profit, net income, net margin, and operating margin are all
plotted on the same graph.
The company’s sales have grown steadily over the five-year period, from ¥20,000 million
in 2018 to ¥30,000 million in 2023. Its operating profit has also grown, but at a slower rate than
sales. Net income has grown even more slowly than operating profit.
The company’s net margin, which is net income as a percentage of sales, has remained
relatively stable over the five-year period. Its operating margin, which is operating profit as a
percentage of sales, has declined slightly.
Overall, the graph suggests that the company is growing, but that its profitability is not
growing as quickly as its sales. This could be due to a number of factors, such as increasing
competition or rising costs.

Company Overview
KFC, or Kentucky Fried Chicken, is a global fast-food restaurant chain specializing in
fried chicken. Founded by Colonel Harland Sanders in 1930, KFC has become one of the world’s
largest and most recognizable fast-food brands. The company is known for its secret blend of 11
herbs and spices, which is a key component of its original recipe chicken.
1. Founding: KFC was founded in Corbin, Kentucky, USA, and its original franchise model
began in the 1950s.
2. Global Presence: KFC operates in numerous countries and territories worldwide, making
it one of the largest fast-food chains on a global scale.
3. Menu: While famous for its fried chicken, KFC’s menu also includes various chicken-
related items, such as sandwiches, wraps, salads, and side dishes like mashed potatoes
and coleslaw.
4. Franchise Model: KFC primarily operates on a franchise model, with individual
franchisees running their own outlets under the KFC brand.
5. Parent Company: KFC is a subsidiary of Yum! Brands, which also owns other well-
known fast-food chains like Pizza Hut and Taco Bell.
6. Iconic Image: The company is associated with the image of Colonel Sanders, whose
likeness and persona are key elements of the brand’s marketing.
7. Innovation: KFC has introduced various menu innovations over the years, adapting to
changing consumer preferences, including healthier options and plant-based alternatives.
8. Revenue: KFC is a privately held company owned by Yum! Brands, so its detailed
financial data isn't publicly available. However, Yum! Brands does release some
aggregate financial information for its restaurant chains, including KFC. According to
their latest annual report, KFC's global system sales were $26.3 billion in 2022.
9. Expenses: KFC's main expenses are likely related to food costs, labour costs, rent, and
marketing. The specific breakdown of these expenses is not publicly available, but you
can find some estimates and industry averages through market research reports or
financial analysis websites.
10. Profit Margins: KFC's profit margins are also not publicly available. However, analysts
estimate that the company's operating margin is around 10%. This means that for every
$10 of revenue, KFC makes $1 in profit before taxes and interest.
11. Overall Financial Health: Based on the limited information available, KFC appears to be
in a relatively healthy financial position. The company has a strong brand, a large global
footprint, and consistent revenue growth. However, there are also some challenges that
KFC faces, such as competition from other fast-food chains and concerns about the
healthiness of its menu.
Findings
1. Global Reach and Recognition: KFC boasts over 22,600 locations in 150 countries,
making it a truly global brand. This vast reach offers a unique perspective on various
aspects like:
Cultural adaptations: Analyse how KFC adapts its menu and branding to local tastes and
preferences. For example, KFC in India offers vegetarian options, while KFC in Japan features
unique flavours like sakura teriyaki chicken.
Economic impact: Explore KFC’s role in the global economy, its impact on local employment
and food sourcing, and its contribution to cultural exchange.

2. Rich History and Enduring Legacy: Colonel Sanders’ story, from humble beginnings to
franchising his fried chicken empire, is one of entrepreneurial spirit and perseverance.
You can delve into :
The Colonel’s impact: Analyse how Colonel Sanders’ image and marketing persona contributed
to KFC’s success. Explore the evolution of his branding and its cultural significance.
KFC’s historical milestones: Research key events in KFC’s history, such as the introduction of
the “Bucket O’ Chicken” or its expansion into new markets.

3. Business Acumen and Adaptability: KFC’s continued success hinges on its understanding
of the market and its ability to adapt. You can explore:
Competitive landscape: Analyse KFC’s position in the fast-food industry, its competition from
other chains, and its strategies for differentiation.
Evolving consumer preferences: Discuss how KFC addresses changing health concerns by
offering healthier options, embracing technology like online ordering, and catering to diverse
dietary needs.

4. Ethical Considerations and Social Impact: KFC’s size and influence come with certain
responsibilities. You can investigate:
Sustainability practices: Analyse KFC’s efforts in terms of ethical sourcing, waste reduction, and
environmental sustainability
Community involvement: Explore KFC’s initiatives in local communities, such as supporting
farmers, providing scholarships, or engaging in disaster relief efforts.
Executive Summary
KFC, the iconic American fast-food chain, presents a multifaceted portrait of global brand
success, historical depth, and constant evolution. From its humble beginnings in a Kentucky
roadside restaurant to its present-day status as a multi-billion dollar global phenomenon, KFC
offers a rich tapestry for detailed analysis.

A Legacy Rooted in Flavour:

The Colonel’s Secret Weapon: KFC’s core strength lies in its legendary fried chicken,
marinated in the 11 herbs and spices shrouded in Colonel Sanders’ mystique. This unique flavour
profile sets KFC apart and retains customer loyalty over generations.
Beyond the Frying Pan: While fried chicken remains the star, KFC has expanded its
menu significantly. Grilled options, chicken strips, sandwiches, wings, and even vegetarian
offerings in some markets cater to diverse dietary preferences and global palates.
Cultural Chameleon: KFC demonstrates remarkable adaptability, tailoring its menu and
branding to local tastes and customs. From vegetarian options in India to unique flavours like
sakura teriyaki chicken in Japan, KFC’s menu reflects cultural sensitivity and market awareness.

Analysis on KFC Company

Harshitha 190

KFC-Kentucky Fried Chicken

KFC Founded on1952, North Corbin, Kentucky, United States. Presently, KFC
is among the best chicken restaurants recognized globally. It has in excess outlets of 21,000 in
more than 130 countries and regions globally.
 KFC is operated partly as equity, and partly as a franchised model with the
reports as late as December 2018, 98% of its restaurants are operating as franchises. The
corporation is part of Yum! Brands, which has its headquarters in Louisville, Kentucky. Besides
having has over 43,5000 restaurants, operating in more than 135 countries and regions. The two
main strategic intents of any entity are profitability and solvency. Profitability refers to the
capability of an entity to ascertain profits, while solvencies can be defined as the capability of a
firm to offset its obligations.

A financial ratio is a widely adopted technique in financial analysis.

Methodology

It is defined that ratio is the fractional relationship of one number to another. On

the other hand, it defines ratio analysis as a “tool of financial analysis where a meaningful
relationship is derived between the financial statement components”. Ratio analysis if adapted to
proportionality express the relationship between figures in a financial statement.

The key purpose of this ratio is to identify key areas that require further
investigation. They are used proportionately in understanding the firm and its environment.
Greater insights are achieved by computing and analysing several related ratios for a business
entity. Hence, in this study, ratio analysis was conducted for KFC. The data was obtained from
three years compilation of KFC’s financial statements from 2017-2019.

Liquidity Ratios of (KFC LTD)

Liquidity ratio analysis allows a company to measure its ability in managing

short-term obligations. It mainly highlights if an entity can offset its liabilities should they arise.
In this paper, we apply the Current ratio, Cash ratio, and Quick ratio to analyses if KFC Inc has
the necessary liquidity.

Current Ratio

This measures the capability of a firm to offset short term debts and meet
unexpected cash demands. For the past three years, KFC has maintained an average value of
more than 1.6 of its current ratios. This implies KFC has a good position in meeting short-term
obligations should they fall due.

Quick Ratio of (KFC LTD)

This ratio discloses the extent of cash and other current assets to be readily
converted into cash in meeting the firm’s short-term obligations. From the data, KFC can convert
its current assets into cash easily, with 2019 recording the highest value, which is a good
indication

Cash Ratio of (KFC LTD)

This ratio shows the capacity of a company to offset its short-term

obligations with its cash and cash equivalents. Compared to other liquidity ratios like quick ratio
and current ratio, this is Moe stricter measure since it focuses on a company’s most liquid assets-
cash and cash equivalents.
 The company does not show a positive indication of its position to use cash and cash
equivalents to meet its short-term obligations. In 2018, it could only meet 22% of its short-term
obligations. In 2019 however, it could only meet 50% of its short-term demands.

Activity Ratios of (KFC LTD)

Inventory Turnover

One can see that KFC has a positive trend in inventory turnover over
the 3-year period. A higher value of inventory turnover means that KFC is efficient in
purchasing and selling its inventory.

Receivables Turnover

The company reported fluctuations in its receivable’s turnover, with 2018

recording the lowest value at 3.77, even though it is within acceptable limits. A higher value was
achieved in 2017 and reduced slightly in 2018. This implies that KFC collects its receivables
about 5 times a year or twice in every 110 days.
 Total Asset Turnover

This is the third measure. Total Assets are resources used by a business entity to
obtain more sales. This means that a higher value of total assets significantly increases sales.
Considering this, the highest ratio denotes a high investment of total assets which can be
recovered by sales.

The data shows that KFC is reporting a decreasing trend in its total asset turnover,
meaning that KFC has lower recovery on the investment into fixed assets in the 3year period.

Debt Ratio

This is a financial leverage ratio used to measure a portion of a company’s

resources concerning assets that are funded by debt. In the 3 years, the company is managing
its debt ratio, with a decreasing trend at the lowest recorded in 2019. This low ratio implies that
KFC is more stable and has longevity potentials since it has a lower overall debt.
 Times Interest Earned Ratio

Times interest earned ratio is used to evaluate a company’s capability to

continually service its debts. This ratio indicates if a firm is may be run into financial challenges.
In the past years, KFC has shown improving trends in servicing its debt. In 2019, at 182.97, it
means that KFC is positioned to meet interest obligations since its annual interest obligations
are lower than its earnings.

Profitability Ratios of KFC Ltd.

 Return of Equity

Return on Equity is used to measure how efficiently a company can use

shareholders’ money to generate revenue and achieve prospects of growth. KFC has a declining
trend since 2017, attaining the lowest ratio in 2019. A lower ratio means that the company is not
using the investor’s fund effectively. The falling ROE may be an indication that KFC has a less
efficient usage of its equity capital.

Return on Assets

This is a profitability ratio indicating how a firm can manage its assets
efficiently to generate profits in a given period. This ratio is essential to both the investors and
the management to 12 determine how efficiently the firm can convert its investments in assets
into profits. KFC reported the highest value of ROA in 2017, which implies that it could convert
the proceeds used in acquiring assets into net income efficiently. However, between 2018-2019,
the company-maintained ROA value meaning that it has started gaining control of its
investments in fixed assets to earn profits.
 Profit Margin of KFC Ltd.

This evaluates the amount of net income earned with a single dollar of sales.
It is generated by a comparison of a firm’s net income sales and net sales. Obtained by
comparing the net income and net sales of a firm. The profit margin for KFC has demonstrated a
declining trend in the past years. 2017 denoted the highest value of 0.08, while the lowest
recorded in 2019 at 0.06. A reduction in profit margin compared to the previous periods signals a
reduction in operational efficiency and profitability. A decrease of 0. 06 in 2019 from 0.07 in
2018 means KFC recorded a decline in its efficiency by 0.01%

In 1955, confident of the quality of his fried chicken, the Colonel devoted himself to
developing his chicken franchising business. Less than 10 years later, Sanders had more than 600
KFC franchises in the U.S. and Canada, and in 1964 he sold his interest in the U.S. company for
$2 million to a group of investors including John Y. Brown Jr.

Under the new owners, Kentucky Fried Chicken Corporation grew rapidly. It went public
in

1966, was listed on the New York Stock Exchange in1969 and eventually was acquired
by PepsiCo, Inc. in 1986. In 1997, PepsiCo, Inc. spun-off of its quick service restaurants-
including KFC-into an independent restaurant company, Tricon Global Restaurants, Inc. Today,
the restaurant company (now YUM! Brands, Inc.), is the world’s largest in terms of system units
with nearly 32,500 in more than 100 countries and territories.
 Working Capital

A positive working capital indicates a company has sufficient resources to cover its short-
term obligations. In this case, KFC Ltd has a positive working capital of $6,604,730, suggesting
they have some flexibility to meet their short-term debts.

Liquidity Ratios

Liquidity cushion ratio

A liquidity cushion ratio greater than 1 indicates that a company has sufficient
current assets to cover its current liabilities. In this scenario, with a ratio of 0.731, the company
may not have enough readily available assets to immediately cover all its short-term debts

Ex Dividend Date, Yield & History

Conclusion

The company is more stable and has a better return on investment. The company showed
concerns in areas of cash flow, debt, and capital debt even though it has higher growth rates and
shows an upward trend. The company has as attracted a huge clientele, due to its exemplary
performance and efficiencies of its services, KFC has managed to adopt an attractive workforce
base in most of its outlets, which has improved efficiency and management in its services. The
top management takes a keen interest in their financial statement analysis, using
information derived from all their assessment in making top decisions, either increasing
operating efficiency, improving its chains, and establishing new opportunities. Besides, data
derived from financial ratio analysis exposes threats that the business may face, and develop
mechanisms on how can be able to absorb shocks

And improve their quality in service provision.