I love KFC chicken but it is a food that kills if we over-consume.
I believe many people have the same inclinations that made KFC a renowned brand that sold fried chicken worldwide.
As I was having a bite of the chicken, the analytic side of me started to wonder how much money does KFC make from me.
We will have to get to the financial statements of KFC to find out.
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Some of you would know that KFC is not listed on its own. It is a brand that is managed under Yum! Brands, which also handle Pizza Hut and Taco Bell brands.
This is the reason why you would usually see KFC and Pizza Hut in the same shopping mall as they could have more bargaining power negotiating for more rental space with the landlord. We do not see Taco Bell in Singapore anymore as it didn’t gain popularity with the locals.
It is also interesting to note that Yum! Brands was a spin of from PepsiCo, and this is the reason that KFC only serve PepsiCo’s brands of drinks.
The good thing is Yum! Brands is listed and that means their financial statements are easily available to the public for scrutiny.
Just do an online search and you should be able to find it for download.
We will refer to the 2014 annual report as it is the latest report at the time of writing.
Another positive thing was that the reporting was split among the three brands, which makes it easy to find the financial numbers for KFC.
It was reported that “KFC Division has 14,197 units, approximately 70% of which are located outside the U.S.” Not that it really matters but we can tell the focus of Yum! Brands was to expand in emerging countries like China and India. This focus was reiterated in the company’s goals and reflected in the company’s organisation structure with China and India divisions.
Below is an image of the revenue and profit figures for KFC, extracted from the annual report. These figures were consolidated from all the KFC outlets operated by the Company and the franchise fees collected. The figures were stated in millions.
We will focus on the restaurant margin %. The reasons being
- Restaurant margin is derived by dividing restaurant profit by company sales
- Company sales are more reflective of the profit and loss from running the restaurants while franchise and license fees are a fraction of the actual revenue earned by the franchisee’s restaurants. So ignore line 2 and 3.
- The breakdown of restaurant profit stated that the cost of supplies, labor and rent were accounted for, which is good enough for our estimation of fried chicken profit margin.
- There were additional costs incurred external to the restaurants. For e.g., the salaries of staff in the HQ and management team are excluded. But for simplicity sake we ignore it for this purpose.
Given the above assumptions, the restaurant profit margin is 13.3% which is already given by in the statement. We will use this as a basis to calculate KFC’s profit on one piece of chicken which costs S$3.30.
For a piece of chicken, KFC approximately earns = 13.3% x S$3.30 = S$0.44
There you go. You can geek your family and friends with this number at the next KFC meal.
You are welcome.