Please ensure Javascript is enabled for purposes of website accessibility

KFC's Secret to Sales Success

By Steven Mallas – Updated Nov 16, 2016 at 12:57PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's been 65 years since the Colonel concocted the "secret recipe," which has spiced up shareholder value ever since.

What historic event occurred 65 years ago this month? Why, the famous chicken connoisseur himself, Col. Harland Sanders, engineered one of the best culinary concoctions ever to have graced this fine planet: the KFC Original Recipe. Yum! Brands (NYSE:YUM), which owns the KFC brand -- along with brethren Pizza Hut and Taco Bell -- issued a press release the other day in finger-lickin' celebration.

I got a huge kick out of this release. The company cleverly linked the revelation of a political secret that has bugged this country for many years -- the identity of the mysterious Deep Throat -- with the intense protection afforded to the Colonel's classified algorithm for mixing 11 herbs and spices to produce an addictive form of cooked poultry. Even Bob Woodward and Carl Bernstein are mentioned, which really juiced up the humor quotient. Apparently, only a few select people are privy to the recipe; even the suppliers who work with KFC only know half the picture.

Having top-secret recipes is a nice marketing asset. Coca-Cola is an example of another company that has used such a tactic to good measure. The allure that is added to the product can only increase the intrinsic brand equity. It makes you feel like you're eating something special when you think that there is a sense of tradition and history behind the food. And if it's special, then a premium price can be more easily justified.

KFC has been good to Yum! Brands lately in that company's quest to effectively compete against quick-serve powerhouses like McDonald's (NYSE:MCD) and Wendy's (NYSE:WEN). Comps last year were terrible for the chicken outlet -- down 2% for all of 2004. This year, however, KFC has so far shown excellent same-store sales appreciation, with double-digit expansion recorded in two periods. For the first quarter overall, KFC comps went up 5%. For the second quarter, the jump was even better, at 8%. The brand is pulling its weight this time around, as opposed to being an abject drag, and is in fact challenging Pizza Hut and Taco Bell to get with the program and keep pace.

The three Yum! Brands are a fixture of Americana at this point and should remain so long into the future, making this a company on its way to blue-chip status along the lines of the aforementioned McDonald's. The company initiated a dividend last year and has strong prospects in China. Investment manager Bill Nygren told Fool contributor Matt Logan that he'd consider holding Yum! Brands for a decade.

If you're looking to add a fast-food restaurant chain to your portfolio, definitely take the time to take a closer look at Yum! Brands. Just don't expect to find that secret recipe.

For more juicy Takes on Yum! Brands, check out:

Let us know what you think of the secret recipe at the Yum! Brands discussion board.

Fool contributor Steven Mallas owns shares of Coca-Cola. He thinks it would be hilarious if KFC did an advertising campaign tied to its secret recipe that spoofed the whole Watergate/Deep Throat thing. The Fool has an ironclad disclosure policy.

None

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

McDonald's Corporation Stock Quote
McDonald's Corporation
MCD
$245.95 (-0.80%) $-1.99
The Wendy's Company Stock Quote
The Wendy's Company
WEN
$19.07 (-0.37%) $0.07
Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
YUM
$110.65 (-0.13%) $0.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.