Kentucky Fried Chicken: History, Growth, and Strategy

Colonel Sanders: Origins and Early Career

Colonel Harland Sanders, the founder of Kentucky Fried Chicken, had a lasting impact on fast food — a segment he helped create. The Colonel, who became known throughout the world for his white suit, string tie, and Kentucky-colonel goatee, is credited by industry leaders with being a brilliant marketer and a man of exacting standards who understood food and knew how to whet the nation's appetite. One of the most compelling facts about the Colonel — who inspired many entrepreneurs during his life and after his death in 1980 — is that he did not start the business that made him a legend until he was 66. At that age, as a newcomer to the multi-unit restaurant business, he had ideas that remain fresh today. His innovations included selling busy mothers buckets of chicken to take home so they could put a complete dinner on the table with little fuss, and using a character — his own image as a Kentucky Colonel — to sell a product.

On September 9, 1890, Harland David Sanders was born in Henryville, Kentucky. In 1895 his father Wilbert died, leaving his mother with three children. While his mother worked in town, Harland took care of his younger brother and sister and learned to cook. He lost his first job as a farmhand for daydreaming, and after realizing he had disappointed his mother, he vowed never to do it again.

In 1925, after a variety of jobs, Harland opened a Standard filling station in Nicholasville, Kentucky. The filling station did well until the Great Depression hit. In the summer of 1930, Shell Oil gave Harland their Corbin station rent-free. It was successful, and to serve customers better, Harland began serving dinner. Soon people were stopping just to eat his country ham or fried chicken with mashed potatoes. His filling station and restaurant thrived, and Harland decided to expand.

In the spring of 1937 he decided to go into the motel business. Along with his filling station and superior restaurant, he added a tourist court of equal quality. The motel was profitable from the start, and Harland then expanded the restaurant to its final capacity of 142 seats. In 1939 he opened another Sanders Court in Asheville, North Carolina, but it never performed as well as the original in Corbin.

The pressure cooker was invented in 1939, and in 1941 Harland purchased one. He began to experiment with it to cook chicken using a recipe he obtained from a friend in Corbin, and eventually perfected a method of cooking chicken quickly. In recognition of his contribution to the state's cuisine, Governor of Kentucky Ruby Laffoon bestowed on him the honorary title of Colonel in 1949. Sanders let his white hair grow full, grew a mustache and goatee, began wearing white suits at all times, and insisted on being called "Colonel." He continued to refine his recipe for fried chicken until he arrived at the final version that satisfied him. By the end of the decade, his restaurant was mentioned in Duncan Hines' Adventures in Good Eating.

After World War II, the Colonel's restaurant was booming. Then the federal government announced plans to build an interstate highway bypassing Corbin. The Colonel was forced to sell his operations at auction to cover his debts. He was 66 years old and left with a monthly $105 in Social Security checks.

Building the KFC Brand Through Franchising

Sanders had given out his first franchise in 1952 to Pete Harman, and by 1956 had more than a dozen. Harland had met restaurateur Pete Harman in Salt Lake City and cooked the Harman family a meal. Pete Harman was so impressed that he opened the first franchise, and in 1954 Harland began traveling to sell franchises to others. Harman, already a successful businessman, is credited with creating systems and marketing strategies that carried the business through its first years. Harman's company is also credited with coining the phrase "Kentucky Fried Chicken," introducing the takeout bucket, and originating the winning slogan "finger lickin' good." As one account describes it: "Harman was hooked after a few bites. Soon, his restaurant was promoting the dish, called Kentucky Fried Chicken. The chicken became an instant hit that August of 1952 as customers lined up outside the Salt Lake City eatery to take home dinners by the bucketful. For $3.50, they got 14 pieces of chicken, mashed potatoes, rolls, and gravy."

The Colonel felt it was time to actively franchise his regionally famous fried chicken across the country. He did this by driving from restaurant to restaurant and cooking chicken for owners and employees. If they liked it, they would add it to their menu and pay the Colonel a few cents for every piece of Kentucky Fried Chicken sold. By the beginning of 1958, Kentucky Fried Chicken restaurants began to dot the landscape, and by 1963 the Colonel had over three hundred outlets and had become a celebrity.

However, he was growing tired and began looking to sell the business. John Y. Brown, Jr. — who later served as governor of Kentucky from 1980 to 1984 — and Jack Massey bought Kentucky Fried Chicken, Inc. for $2 million, one of the great bargains in business history, a move Sanders later regretted. "Kentucky Fried Chicken took flight under Brown and his partners. By 1971, when they sold the company for $285 million to Heublein Inc., it had more than 3,500 franchised and company-owned restaurants."

Why did Harland Sanders sell the company he had built from nothing? By all accounts he regretted the decision in later years, but that must be judged in light of the company's subsequent success. Sanders was undeniably tired — in 1964 he was 74 years old, and his life had not been easy. He was eager to reduce the burden of day-to-day operations and initiated a search for potential buyers. It is questionable whether he had the stamina and business background to take the company where it could go. Brown and Massey did. Sanders received a fair price based on the company's value at the time, and he most likely did not foresee how successful his startup would become.

Both Brown and Massey understood the importance of the Colonel and hired him as a public relations man and goodwill ambassador. Harland soon appeared on national television and in national commercials. The Colonel remained part of the enterprise he helped launch, traveling some 250,000 miles a year, visiting new and existing units, offering advice and criticism, and becoming a world celebrity. The Colonel's image was a vital asset in the selling of KFC.

Corporate Acquisitions and Ownership Changes

Brown and Massey grew the business throughout the United States, reporting a gross income of $15 million, and in 1966 took the company public by listing it on the New York Stock Exchange. The Colonel was allowed to purchase the first 100 shares. Brown attributed the company's success to its emphasis on take-home dinners resembling the kind a mother would make — a revolutionary concept in the restaurant industry. The company also capitalized on Sanders' popularity: "The colonel always looked the part of the Southern gentleman, wearing his trademark white suit and black string tie while pitching chicken or dishing out homespun wisdom on television shows."

The year 1969 was crucial in the company's history, marking the first major penetration into international markets outside North America through the acquisition of franchises in England and Japan. By 1971, there were more than 2,400 franchises and 600 company-owned restaurants spread throughout the United States and 47 other countries.

1971 became another pivotal year with the sale of KFC to Heublein for $285 million. This was Heublein's first significant entry into the restaurant business, and it did not go smoothly. By 1977, restaurant quality had declined and the Colonel was upset. Only about 20 new restaurants were being opened per year. In response, Heublein implemented a new strategy emphasizing clean restaurants, product consistency across franchises, and better service, and older franchise buildings were remodeled.

In 1982, R.J. Reynolds Inc. (RJR), seeking to diversify beyond the tobacco business, acquired Heublein for $1.2 billion. KFC was profitable and growing again, but Colonel Sanders never saw the end result of Heublein's late-1970s strategy — he died in 1980. RJR continued to run KFC as an autonomous business for several years. In 1985 it acquired Nabisco, and in 1986, in preparation for a subsequent move to take RJR Nabisco private, it sold KFC to PepsiCo Inc. for $840 million, over the objections of former Heublein chairman Stuart Watson. That same year, the Colonel Sanders Technical Center in Louisville, Kentucky was established.