The Colonel conquers China

KFC in China: Secret Recipe for Success

by Warren Liu; John Wiley & Sons; US$19.95

Readers may wonder whether a man who helped KFC develop its China market can write an objective book on the firm’s success here. But Warren K. Liu, who played a key role in KFC’s local operations in the late 1990s, presents a solid case in KFC in China: Secret Recipe for Success.

From 1997 to 2000, Liu served as vice president of Tricon, the predecessor of Yum! Brands, parent company of KFC. He joined the company 10 years after KFC opened its first restaurant in China.

It has since become the country’s largest restaurant chain – foreign or domestic – in terms of revenue, profit and number of outlets. It has about 2,000 restaurants nationwide, twice as many as its rival McDonald’s, which entered the market three years after it did.

Although Liu isn’t oblivious to KFC’s setbacks and future challenges in China, he believes the company did a better job of making itself into "an American brand with Chinese characteristics" than McDonald’s. The latter, he says, took a business model that had been successful elsewhere but failed to modify it enough for China.

On the whole, KFC in China is readable and informative – detailed enough for the business executive, but interesting for the casual reader.

One of its strong points is that the obstacles the restaurant chain faced in its early days in China are not only explained in business terms but also placed in their political and cultural context.

The opening of that first KFC in 1987 was a dramatic symbol of change in China’s interaction with the West. Liu captures a sense of the times, describing a climate in which most businesses were state-run and unresponsive to customers’ needs, and people had little disposable income.

A brand apart

Many of KFC’s innovations reflect the rapid changes in consumer spending and lifestyle patterns since economic reforms began. The company introduced the concept of restaurant chains with standardized production and consolidated supply chains. It also recruited experienced ethnic Chinese fast-food managers from Taiwan and other areas to compensate for the talent shortage in China and was an early adjuster to China at a regional as well as a national level. 

Although some aspects of KFC’s success may be unique to the industry – Liu credits the Colonel Sanders icon as a profile booster in a land that respects the elderly – businesspeople in any field could learn from the company’s experiences.

But there remain a few shortcomings in what is otherwise a well-documented account.

Liu mentions that KFC failed in its first venture in Hong Kong, between 1973 and 1975, but never says why. Nor does he explain what was different about the company’s approach in mainland China.

And while Liu is correct in explaining that Chinese culture sometimes affects the way that business is conducted, he sometimes goes too far. For example, he cites a "mentality reminiscent of China’s mighty imperial court" as one of the reasons why employees at KFC’s China headquarters in Shanghai used to look down on their colleagues elsewhere in the country.

Plenty of companies in countries with no imperial history have that same problem with headquarters.

MIKE REVZIN

Excerpt: The big day

While some thought at the time that Shanghai or Guangzhou would make a better choice, in reality it made better business sense for KFC to locate its first restaurant in China’s political center at a time when politics still reigned supreme. For the Beijing government’s leadership, it required strong political courage to permit such a well-known symbol of American capitalism, considered the worst possible Western enemy not so long ago, to rise and stand so close to the political heart of the country.

On November 12, 1987, the first KFC restaurant opened to the warmest embrace imaginable by the citizens of Beijing and many out-of-town visitors. It was as if decades of hidden curiosity and conflicting emotions toward the West had been unleashed all at once.

Along with fried chicken, there were many other reasons why eager customers queued up outside the door during the first few weeks after the grand opening. Customers were attracted to KFC’s Chinese brand spokesperson – Colonel Sanders; the unique restaurant décor; the new way of ordering food; the bright red and blue colors of the brand logo; the American music broadcasted inside the restaurant; and, as an added bonus, a very clean toilet!