Kentucky Fried Chicken (KFC) with origin in the United States came into Nigeria some years ago and opened its first outlet on the 19th December, 2009 at City Mall, Onikan, Lagos. Thereafter, it moved on to rapid expansion of its business across the nation but the events of the past seven months which saw to the closing down of some of its outlets have shown that all is not well with the multi-national restaurant. Invariably, there are signs that the business model being used by the organization may not be working in Nigeria. In this article, I will be analysing what the giant did not get right before coming into Nigeria.
Every business entering a new territory must have a model upon which it will base its operations. This model will definitely be based on a strategic audit of the macro-economic environment where you are to operate. This will involve an analysis of the industry, the competitors and the potential threats of new entrants that may come into the business. This can always be done using Porter’s 5 Forces’ Model. My reason for saying the business model was not properly evaluated is because there were other fast foods that were doing well when KFC was shutting down.
Outlets that were doing well include Mega Chicken, The Place and Dominos. These outlets were expanding while you have some other business names struggling to keep up the pace of their businesses. These include Tantalizers, Mr. Biggs and Chicken Republic. I will say Tastee Fried Chicken (TFC) and Sweet Sensation have decided to maintain the status quo meaning “No shutting down” and “No expansion”. This shows that those who were doing well have something they were getting right while others did not. In other words, their business model was working to the extent that they were opening new outlets across the nation.
KFC came into Nigeria with a menu that is alien to the Nigerian culture. Their dishes were not acceptable to the average Nigerian. I heard from quite a number of people who went into the restaurant and was not satisfied with their menu. It took them a while before they realised that and switched to what the consumers want. Marketing is cultural and that is why the culture of the environment where you are operating and planning to sell your product and services is critical to your business model. There must be a market research that will help understand the psychology, motivations, needs and behaviours of consumers in the particular area. If this was done, the consumer needs would have been critically evaluated and that would have affected their decision on the menu to be served.
Consumer Purchasing Power
This is also another factor that KFC did not analyse properly. I believe they didn’t put into consideration the number of people who are in the bracket of their target market. This is because their servings are meant for a particular class. Meanwhile, when recession hit the economy and inflation added its own, they had a drop in patronage. If their target market had involved a larger bracket of people, there is a higher probability that they may not experience a drop in patronage like they had. If some other restaurants could be opening in more locations, it signals that they were having increased patronage. All KFC needed to have done is to create a model that will accommodate more segments of consumers.
Cost of Operation
It is generally agreed that the cost of doing business in Nigeria is very high. One of the reasons that KFC started shutting down their outlets was because of high cost of operation which was reducing their profitability. There was to have been a research into the cost of operation of the existing operators in the industry before coming into the country. This would have resulted in a wider consideration of how best they can reduce their cost. Reducing cost for KFC could have been in form of a leaner supply chain than the existing operators, reduced manpower and other creative ways of reducing their cost without affecting the quality of their products.
The above points are factors that affected KFC in Nigeria however; they can still rework their model such that they can reopen their closed outlets and start expansion again like Mega Chicken, The Place and Dominos.