The company that owns Kentucky Fried Chicken (KFC), Yum! Brands Inc., establishes requirements a potential investor must meet in order to open a KFC franchise. While KFC franchises can be quite lucrative for their owners, starting the franchise can be challenging due to the significant time, effort, and investment required. Requirements include a large upfront investment of at least $1 million US Dollars (USD); investors also must have substantial liquid assets and be able to pay a franchising fee. Restaurant locations must be approved by the parent company as well, and franchise owners must commit to a 20-year agreement.
KFC‘s parent organization, Yum! Brands, Inc., is a network of restaurants that includes Taco Bell, Pizza Hut, and Long John Silver’s brands. With over 80% of all KFC locations owned and operated by individual franchise owners, Yum! Brands encourages franchising opportunities. To qualify for a KFC franchise, however, potential owners must meet the company's stringent requirements.
Starting a KFC franchise is not cheap. An initial investment of about $1 Million USD or more is required to cover the costs of construction and equipment. Many individuals use third-party lenders to finance these startup costs, as Yum! Brands, Inc. does not offer any type of financing for its franchising program.
Potential franchisees must have a net worth of about $1 Million US Dollars (USD) as well, along with substantial liquid assets in the million dollar range. Franchise owners must also pay a franchising fee as well as a monthly service fee, which is a percentage of the restaurant’s gross sales, once it opens to the public. In addition, an annual renewal fee must be paid each year, and a 20-year term of agreement is required.
Due to the many restaurants owned by Yum! Brands, Inc., the company strongly emphasizes multi-branding. Franchisees must commit to building or handling three more restaurants over a three-year period. In certain cases, two of these restaurants may be combined into a single unit, such as a Taco Bell/KFC restaurant. In addition, a minimum percentage of the franchise’s gross sales must be spent on advertising.
Once an applicant’s assets have been verified, he or she must meet with a Yum! Brands representative to discuss the restaurant‘s location. Oftentimes, the restaurant will already be built, and the franchise owner will simply negotiate a purchase agreement for the location. If a store isn't available for purchase, the owner and company representative must select a construction site for the new KFC franchise.
In order to minimize sales impact for existing locations, the new franchise must be at least 1.5 miles, or at least 30,000 people, away from any other KFC. Construction cannot begin until the site has been approved by the company. Once a location is cleared for development, the applicant has eight months to complete construction and one year to open.
Like most franchises, KFC franchisees receive all products, training, and branding from its parent company. Each franchise owner, however, is responsible for all construction and hiring costs. From start to finish, the entire KFC franchise qualification process takes about a year.