KFC Seeks Secret Recipe for France

NEW YORK--Yum Brands Inc.'s KFC brand is plotting a deeper move into France, hoping that the Colonel's recipe will strike the taste of a broader swath of French consumers.

This week, KFC launched its first round of national television advertisements in France as it gets set to open its 100th store there, giving it the scale needed for a broad marketing push. KFC plans to have 300 stores in France by 2015, and sees a possible tenfold increase over time.

"One day I'd like to have over 1,000 stores here, though we're going to take it 100 by 100" at a time, Ivan Schofield, general manager of KFC France, said in an interview.

Yum, the world's largest restaurant operator with more than 37,000 locations, is one of the largest retail developers in the world, a key strategy underpinning its growth. With the U.S. fast-food market mature, China has become by far Yum's most crucial growth market, and the company is also starting a major expansion in India to open 1,000 stores.

Even though these two fast-growing markets dwarf France in terms of population, Yum executives see KFC's France business as an anchor for what could be a broader expansion in continental Europe. KFC's European footprint is under 800 restaurants, lagging behind burger chain McDonald's Corp., with about 5,600.

"It's their most important market in Europe," Stifel Nicolaus restaurant analyst Steve West said. "Obviously, China's the most important market, but there's a lot of growth opportunity for Yum in France."

Fast-food competition remains less intense in France, where McDonald's and local operator Quick dominate the market.

McDonald's, which was seen as an American invasion when the first store opened in 1979, worked hard to woo French diners by tailoring its menu to local tastes. The company sells beer as well as soft drinks, and it recently introduced a version of the macaroon, a national culinary institution. Last year, it opened a restaurant in the food court of the Carrousel du Louvre, the shopping center under the famous Parisian museum, raising some eyebrows. The chain has grown to about 1,100 stores in France.

Other American companies have had less success or moved more cautiously. Burger KingStarbucks Inc., the U.S. coffee chain, opened its first outlet in France in 2004 and today has about 50 locations—a number dwarfed by its 650 in the U.K.

In addition to relatively tame competition, France has another major appeal: It is one of the largest dining-out markets in Europe. Many French consumers still frequent locally owned, corner restaurants, but fast food has made headway as diners cut their lunchtime down to 30 minutes or so, Mr. Schofield said. France's fast-food customers also tend to prefer full meals with desserts, rather than just sandwiches, which bring the average sale to between €6 and €8 (about $8 to $10.50) at KFC.

As a result, KFCs in France make more money than anywhere else in the world. Stores on average reach sales of $4 million a year, about three times that of the average KFC elsewhere in the world.

KFC initially got off to a meek start in France. Its former parent PepsiCo Inc. opened just seven locations 1992 before abandoning the effort to expand elsewhere.

Yum came back to France in 2001, as McDonald's started investing in its stores there. KFC found itself an underdog, and positioned itself as a challenger brand. KFC tailored its menu to local preferences, introducing items like the Boxmaster, chicken and other fillings wrapped in a tortilla, and Brazer, a grilled line of products.

Yum has invested more than $300 million in its France business since 2001, and is now profitable, although Mr. Schofield wouldn't say when it tilted into the black. Though Yum owns and runs most of the stores here, by 2015 it wants to shift more of the development burden to franchisees. By that time, Yum thinks annual profits in France will reach $100 million. Corp., which challenges McDonald's in many global markets, withdrew from France in 1997. It said at the time that its 39 restaurants didn't give it a strong enough presence and that it wasn't sufficiently profitable.
—By PAUL ZIOBRO: Javier Espinoza in London contributed to this article.