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How Profitable is a KFC Franchise? 2022 Costs & Profits

KFC needs no introduction: with 5,200+ restaurants across the US alone, and 145 countries worldwide, no wonder that KFC is a very popular franchise.

With average annual sales of $1,567,474 a KFC restaurant may sound like a a very lucrative business. But what about profits? Does the hype justify the cost? Should you invest in a KFC franchise as a franchisee?

In this article we’ll look at how much it costs to open a KFC franchise in the US, how much profits you can make with this business and whether this is actually a good investment. Let’s find out!

KFC franchise: key figures

Franchise fee$45,000
Royalty fee5.0%
Marketing fee4.5%
Investment (mid-point)$1,802,050
Average annual sales$1,567,474
Investment to sales ratio0.9x
Investment payback*7.7 years (mediocre)
Minimum net worth$1,500,000
Minimum liquid capital$750,000
* using 15% net profit margin

KFC: a brief introduction

KFC is a leading international American fast-food restaurant chain with 5,200 stores in the U.S. and more than 145 countries worldwide.

Headquartered in Louisville, Kentucky, KFC was founded in 1930 by Colonel Harland Sanders and known then as Kentucky Fried Chicken. It adopted the abbreviated, iconic name, KFC in 1991.

Its original product was pressure-fried chicken pieces, seasoned with the Sanders signature recipe of “11 herbs and spices.”

Today, it serves fried chicken and other chicken products such as chicken fillets, sandwiches, and wraps. It also offers salads and side dishes such as French fries and coleslaw, desserts, and soft drinks.

The first KFC franchise opened in Utah in 1952 and has never stopped since then. Its parent company is Yum! Brands that also own Pizza Hut and Taco Bell.

Today, KFC has over 25,000 restaurants and stores in over 145 countries globally, with more than 5,200 units in the US alone. It is the second-largest fast-food chain after McDonald’s.

KFC franchise: pros and cons

Before starting a KFC franchise, you need to know its advantages and disadvantages.

Pros

  • Global presence: The KFC brand is almost everywhere you go. There is no city you can walk around and never come across a KFC store on one of the streets. This is good news for would-be franchisees. You are guaranteed a ready market.
  • Brand recognition: What else can an investor wish for than a brand that is recognized globally? That is what the KFC brand offers. Customers will automatically recognize and visit newly opened restaurants to enjoy the trademark KFC brand’s good-tasting chicken.
  • Comprehensive training: KFC offers extensive onboarding and training. If you’re looking for a franchise where you can start immediately, KFC does that. It takes you only 9 weeks to complete, and you can start operating even before completing it. Their training will teach you everything you need to know to become a valuable and profitable KFC franchisee serving the best crispy and tasty fried chicken.
  • Solid business support: Another big feature you’ll love about the KFC franchise is its support for new franchisees. They offer new franchisees support in establishing and designing the restaurant. In addition, you are guided on how to operate the business, market, and advertise your products.
  • Proven expertise in the industry: For almost a century now, KFC has been in the spotlight as the world leader in tasty fried chicken. This is because, since its inception, the chain store has developed its brand following its reliable recipe and tradition. KFC is known to excel and do well in this industry, giving new franchisees a proven model for success.
  • Growth potential: KFC has grown steadily over the years. The brand is strong and has a huge customer following worldwide. It boasts millions of customers and offers franchisees great opportunities for expanding their businesses.
  • Reliability: Another benefit of operating a KFC franchise is reliability. It is estimated that KFC serves over 12 million customers in its restaurants worldwide every single day. This offers new franchisees the comfort of investing in a trusted company that guarantees them growth and profitability.

Cons

  • Expensive: Starting a KFC franchise is not cheap. You need at least a franchise fee of $45,000 and $750,000 in liquid capital. This is quite high, especially if you’re new to the franchising business. Also, you’ll have to pay royalties as long as you operate a KFC franchise.
  • No financing for new franchises: KFC offers optional financing to only minority groups. This may be a deterrent to potential franchisees given that the initial investment fee to start a KFC franchise is quite hefty.
  • Not a passive investment: KFC franchises require new franchisees to be fully committed to the operations of their restaurants. You can’t run this as a passive investment. It needs a lot of commitment and team-leadership skills if you operate a multi-unit franchise.

How much does a KFC franchise cost?

If you are willing to open a new KFC outlet, you must invest $1,802,050 on average. This investment amount includes the initial franchise fee of $45,000. 

The investment cost varies depending on your location, between $1,440,600 and $2,163,500.

Here’s the complete breakdown of the cost you will pay:

CostLowestHighestAverage
Initial franchise fee$45,000$45,000$45,000
Permits, licenses & security deposits$50,000$100,000$75,000
Real estate property$400,000$1,100,000$750,000
Building & site costs$534,000$300,000$417,000
Equipment, signage$329,000$500,000$414,500
Other$27,600$33,500$30,550
Miscellaneous Costs$5,000$10,000$7,500
Additional funds**$50,000$75,000$62,500
Total$1,440,600$2,163,500$1,802,050
* includes training, startup inventory and grand opening // ** to cover for first 3 months’ losses

What is the turnover of a KFC franchise?

An average KFC franchise makes $1,567,474 in sales per year.

The amount is the average annual median sales of both Single Brand Outlets and American Showman Outlets. According to the latest FDD, an American Showman Outlet ($1,855,672) makes more sales than a Single Brand Outlet ($1,279,276).

How profitable is a KFC franchise?

What’s great about franchising with KFC is the level of detail they provide in their Franchise Disclosure Document. Indeed, unlike most other franchises, KFC does give a lot of information about the financial performance of its franchise restaurants.

This is actually where it gets tricky. Even though KFC has royalty fees in line with other franchisors, COGS and labor costs are on the higher end vs. similar quick-service and fast food restaurant franchises.

Indeed, COGS as percentage of sales represent 30%, and labor cost 32.1%. Using these numbers, along with average annual sales and other costs, we can estimate the adjusted EBITDA margin for a KFC franchise.

On average, a KFC franchisee makes $384,031 in profits per year. This corresponds to a 25% adjusted EBITDA margin (as % of sales).

Profit-and-lossAmount ($)As % of sales
Sales$1,567,474100%
COGS$(470,242)30.0%
Labor$(454,567)31.1%
Rent$(109,723)8%*
Royalty + marketing fees$(148,910)9.5%
Adjusted EBITDA$384,031~25%
* industry average

Is a KFC franchise a good investment?

In order for us to assess whether KFC actually is a good investment from a financial perspective, we need to compare the profits to the initial investment cost of $1,802,050. That’s what we call the payback period: the time it takes to recoup the original investment.

For profits, we are using net profits (and not EBITDA) which we estimate using 15% of sales. Indeed, net profit take all expenses into account, including taxes, debt interest and any non operating expenses not included in the table presented above.

As per our analysis, a KFC franchise has a payback period of 7.7 years, which is mediocre. Think about it: it would take you on average almost 8 years to reimburse your original investment. And this doesn’t even take into account time value of money.

As a rule of thumb, a payback period beyond 7 years is mediocre, around 5 years is good and below 3-4 years is excellent.

So, on these grounds, it’s fair to say that a KFC franchise is not a great investment. But again, note that these numbers are based on the average of the 5,200 restaurant in the US. As such, your restaurant may perform better than others.

To apply for a KFC franchise restaurant, download the business plan below and visualise insightful reports on profits, payback period, breakeven and more.

Download the KFC business plan and get your franchise funded

Including a 5-year financial plan built with the latest Franchise Disclosure Document numbers