Do you want to start a KFC business franchise and want to know the fees, agreement, details? If YES, here’s how much it cost to buy a KFC franchise for sale.
The world has always loved fried chicken, and the first person to make a business out of it turned out to have one of the biggest businesses of all time. This is basically the story of KFC, except that this fast food has a more inspiring story behind it.
KFC was founded by Colonel Harland Sanders in 1930 after he has gone through a series of failures and life challenges. Sanders began selling fried chicken from his roadside restaurant in Corbin, Kentucky during the Great Depression and afterwards opened the first Kentucky Fried Chicken. The company started franchising in Utah in 1952.
KFC is an American fast food restaurant chain that specializes in fried chicken and other offerings. KFC popularized chicken in the fast food industry, diversifying the market by challenging the established dominance of hamburger. Headquartered in Louisville, Kentucky, it is the world’s second-largest restaurant chains after McDonald’s, with almost 20,000 locations globally in 123 countries and territories as of December 2015.
Buying a KFC Franchise for Sale and How Much It Cost
Details to Note When Intending to Acquire a KFC Franchise
- Brand Offerings
KFC Outlets prepare and sell chicken, snackables and other approved menu items using trademarks and trade secrets owned by KFC Corporation. Their side dishes often include French fries, coleslaw, barbecue baked beans, corn on the cob, mashed potato, bread rolls and American biscuits. Salads include the bean salad, the Caesar salad and the garden salad. In a number of territories, KFC sells onion rings.
- The KFC Franchise
KFC Corporation is franchised by KFCLLC, whose parent brand is YUM! Brands, Inc. The KFC Franchise gives franchisees a license to use KFC trademarks, trade names, service marks, logos and commercial symbols the franchisor periodically authorizes, including the “KFC” and “Kentucky Fried Chicken” marks. They are also given the right to use their business formats, methods, procedures, designs, layouts, standards and specifications.
Table of Content
Financial Requirements for a KFC Franchise
- Total Estimated Expenditure – $1,442,550 to $2,771,550
- Cash Investment – $750,000
- Net Worth – $1,500,000
- Franchise Fee – $45,000
- Royalty – 4% to 5% of Gross Revenue or a minimum of $1,260, whichever is greater
- Application & Background Check Fee (per person) – $300 to $500
- Deposit Fee – $20,000
- Option Fee – $25,000
- Training Expenses – $7,000 to $10,000
- Permits, Licenses, and Security Deposits – $50,000 to $100,000
- Real Property – $400,000 to $1,100,000
- Building & Site Costs – $534,000 to $930,000
- Equipment, Signage, and Décor, POS & MERIT – $329,000 to $476,000
- Start-up Inventory – $10,000
- Grand Opening Expense – $5,000
- Insurance – $7,250 to $10,050
- Transfer to an Existing KFC LLC Franchisee – $4,200 for the first Outlet and $2,100 for each additional Outlet in the same transaction.
- Additional Refresh/Training – $3,000
- Support Services and Software Maintenance for KFCLLC’s MERIT System – $173.15 per unit/per month
Training of KFC Franchisees
KFC Franchisees must of necessity attend and complete the initial training program offered by KFCLLC on the operation of an Outlet. All training programs are usually held at KFCLLC’s designated national, regional or divisional offices or other places as the franchisor may designate.
Franchisees are allowed to assign a key operator to complete the Key Operator Restaurant Training. In addition, other employees of the franchisee are required to attend and complete the training program to KFCLLC’s satisfaction.
The training programs include computer-based training through its Learning Zone program, written materials, on-the-job training at other Outlets and classroom instruction. The individual who is selected to undergo the Key Operator Restaurant Training will then be required to train other employees at the Outlet.
The franchisor may require franchisees and their employees to attend and complete additional and ongoing refresher training courses, programs and seminars at such times and locations that KFCLLC reasonably requires.
Territory Granted KFC Franchisees
KFC Franchisees are usually not granted an exclusive territory. But if the franchisees are in compliance with the Franchise Agreement, they will have a protected territory of the smaller of
- (i) A radius of 1.5 miles of the Outlet, or
- (ii) an area around the Outlet where 30,000 people reside, or, in the case of a metropolitan area containing more than 100,000 people, within which 30,000 people reside or work (that is a Protected Territory).
The franchisee’s rights to the Protected Territory will not be dependent upon achievement of a certain sales volume, market penetration or other performance factors. In other words, if a protected territory is granted, then it cannot be changed even if sales drop or increase.
Within the Protected Territory, KFCLLC will not use, or permit others to use in selling food products, any of the marks that franchisees have 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. Franchisees may only sell Approved Products at the Outlet except for;
(i) Catering and special event sales and
(ii) Delivery sales made only in accordance with KFCLLC’s catering and special events procedures and under a form it requires.
Obligations of KFC Franchisees and their Restrictions
The KFC franchise agreement mandates that a franchised outlet must have a qualified manager, and the said manager has to devote full time to the management and operation of the outlet. If franchisees are a corporation, entity, partnership or have more than one owner, they must also designate a ‘Control Person,’ who is the individual with the authority to and actively direct the business affairs of the Outlet.
Individual owners and individual owners’ spouses must also sign the Guaranty or Spousal Consent (as applicable) in their individual capacities. Franchisees must sell all Required Products as the franchisor periodically designates.
Franchisees are allowed to cater and make sales at special events, only if the said franchisees meet the franchisor’s catering and special event procedures; and in the case of catering and special event sales involving delivery, sign an addendum required by KFCLLC.
Term of Agreement and Renewal
The length of the initial franchise term is 20 years. If the franchisee meets KFCs requirements, they are allowed to renew, but may be asked to sign a contract with materially different terms and conditions than the original contract.
Financial Assistance for KFC franchisees
The YUM Minority Assistance Program covers financing for new minority franchisees purchasing an existing Outlet, purchasing an existing Company-Owned Outlet, or developing a New Outlet.
YUM will guarantee 25% of up to $12,000,000 of the principal of the franchised business loan, up to a maximum of $3,000,000 per loan or franchisee. It should be noted that meeting all the requirements for the loan is no guarantee that a franchisee would be granted the YUM Minority Lending Assistance Program loan.
In addition, YUM can discontinue the YUM Minority Lending Assistance Program at any time. Except the above explained lending assistance programme, KFCLCC does not offer, directly or indirectly, any arrangements for financing a franchisee’s initial investment or the continuing operation of the KFC business.
Things to Consider When Thinking of Opening a KFC Franchise
- You must be ready to open other franchises
Yum Brands which are the owners and franchisers of KFC focuses on multi-branding and expansion, so they require their franchisees to carry on their dreams. This then implies that if you are ready to open a KFC, then you should also be ready to open another YUM Brand franchise to place alongside it. This they believe would help to draw in groups of people who want a wide selection of food options.
- You must aim to open more than one KFC sites
Also in line with their expansion strategies, Yum Brands ideally looks for ambitious entrepreneurs who want to own at least three KFC franchises. Your ability to purchase more than one KFC franchise makes you more appealing to Yum Brands and it also increases your long-term income potential.
- You must have between $1 million to $2 million for your KFC and sister franchises
To own a KFC franchise, you must be ready to own other franchises and that can cost you anywhere between $1 million to $2 million. You may have to find a third-party lender for your initial investment because you cannot handle it alone.
- Access KFC requirements
KFC requires franchise owners to have a net worth of $1 million and liquid assets of at least $360,000. Without this, then it may do you no good to apply. Additionally, you must have experience in food service or have a partner with experience in food service.
- You need to wait for a month for answers
To start you franchise application, you have to go to the Yum Brands franchising website and click on “Getting Started” to submit a questionnaire and contact information. After the submission, you have to wait about a month while Yum Brands assesses your qualifications to own a KFC and another multi-branded franchise.
You must have a draft of an operating plan by the end of this time period, so begin working with accountants and business partners before you contact Yum Brands.
- The entire approval and planning process will likely take about a year
If you are approved, interviews will be set up with Yum Brands officials and Yum Brands can help you choose a site and a partner franchise for your KFC franchise. To start off your franchise would take up to a year while the company puts things in order for you.
A Brief Overview About KFC Franchise
- Founder – Colonel Harland Sanders
- Year of inception – 1930
- Year of franchise – 1952
- Headquarters – Louisville, Kentucky
Harland Sanders was born in 1890 and raised on a farm outside Henryville, Indiana. Sanders lost his father at the age of five and his mother started to work at a canning factory to enable her take care of her children. This left Sanders, as the eldest son, to care for his two younger siblings. At the early age of seven, his mother taught him how to cook for his siblings seeing that she was always busy.
By 2015, the company was struggling with competition, having lost business to other retailers and being surpassed by Chick-fil-A as the leading chicken retailer three years previously. To combat this, the company planned to revamp its packaging, decor and uniforms, as well as expanding its menu.
In 2012, KFC UK invested £9 million to install ovens in all of its outlets, so that it could offer griddled chicken, and palm oil was replaced by rapeseed oil in the fryers. In 2013, KFC rolled out Lavazza coffee across all of its UK outlets. As of December 2013, there were 784 KFC outlets in the united kingdom.
British turnover was around £684.5 million in 2013, and about 70 percent of their outlets are run by franchisees, with the remainder being company owned. The company employs 24,000 people, with around 400 of their sites being drive-through outlets. Average outlet turnover was between £1 and £1.5 million.
In December 2012, the chain was criticized in China when it was discovered that a number of KFC suppliers had been using growth hormones and an excessive amount of antibiotics on its poultry in ways that violated Chinese law.
In 2017, KFC was fined £950,000 after two workers were scalded by boiling hot gravy. The company admitted to charges of failing in a duty of care to employees, and was ordered by Teesside Crown Court to pay fines of £800,000 and £150,000 to the workers.
In 2017 KFC paid 500,000 HUF (1900 USD) to a charity chosen by a journalist, who was beaten by the security guard of a KFC in Budapest, Hungary.
But in all, KFC has been weathering the storms and managing to surmount all the criticisms that were pelted at them such that as at 2017, the chicken restaurant chain was estimated to have had a brand value of 13.52 billion U.S. dollars, making it the fourth largest fast food brand in the world.