Thursday, May 16, 2002

One stop offers two options

Company's fast-food brands share one roof

By Bruce Schreiner
The Associated Press

        LOUISVILLE — What in the name of Colonel Harland Sanders is going on at KFC, the nation's leading chicken restaurant chain?

[photo] Two familiar fast-food images share a sign and a building at the KFC-A&W restaurant near Louisville.
(Associated Press photo)
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        A jukebox plays rock 'n' roll oldies while customers slurp root beer floats. In the kitchen, burgers sizzle on the grill. Outside, the colonel's goateed likeness is featured alongside an A&W sign.

        For KFC, it represents a merger of past and future.

        The store was the first built as a joint KFC-A&W, where customers can pick up a bucket of chicken and a bag of chili dogs. Eighty-one such stores have opened since 2000 as part of a license agreement with A&W's parent company, with plans for 100 more this year.

        In recent years, Tricon Global Restaurants has combined its chicken, taco or pizza brands under one roof to boost sales in the competitive fast-food market. The Louisville-based parent company of KFC, Taco Bell and Pizza Hut is confident it has cooked up a winning combination.

        “There's nothing else like it where there are two well-known brands under one roof,” said Tricon senior executive Chuck Rawley, who originated the idea of combining the company's brands in the mid-1990s.

        The addition of seafood chain Long John Silver's and A&W All American Food Restaurants to Tricon's lineup will accelerate the opening of multibranded restaurants.

        Rival McDonald's Corp. offers a variety of menu choices — from burgers to fish sandwiches, to chicken, salads and shakes. Other burger chains have followed suit, expanding their menus.

    Tricon has opened or remodeled 1,566 restaurants worldwide featuring two or more brands, generating almost $1.5 billion in annual sales. Tricon had 45 three-brand stores at the end of 2001; the rest had two brands. Within five years, Tricon plans to nearly quadruple the number of multibranded restaurants. So far, the most common combinations have featured KFC-Taco Bell and Taco Bell-Pizza Hut Express.
    The fast-food giant has in excess of 30,000 restaurants in more than 100 countries. The acquisition of Long John Silver's and A&W added more than 2,000 stores.
    David Novak, Tricon's chairman and chief executive, said the combined restaurants cater to customers who like the added choice.
    “You might bring a person in for Long John Silver's, but they say, "Hey, Taco Bell, I haven't had a taco in a while,'” Mr. Novak said.
        McDonald's also has gobbled up smaller fast-food chains. The home of the Big Mac now owns Boston Market and Donatos Pizza, and owns a majority interest in Chipotle, which serves made-to-order burritos and tacos. McDonald's recently formed a joint-venture partnership with Fazoli's, an Italian fast-food chain.

        Tricon, the market-share leader in pizza, chicken and Mexican fast food, decided to build on its core products.

        “Nobody's waiting with bated breath for a Taco Bell hamburger,” said David Novak, Tricon's chairman and chief executive. “Nobody's waiting with bated breath for a Pizza Hut breakfast.

        “So what we found is what consumers do love is they can go into a restaurant and get two brands. That's a powerful way to extend your menu offerings.”

        The first store built as a joint KFC-A&W, which opened about two years ago near Louisville, is a prime example.

        Sales will reach about $1.5 million this year, nearly double the total if it had been only a KFC restaurant, Mr. Rawley said.

        Tricon can use the two-brands-under-one-roof initiative to renovate and rejuvenate older restaurants, said Andy Barish, a restaurant industry analyst with Banc of America Security.

        “Tricon has a lot of assets and a lot of them are in need of remodels and reimaging, and this is going to be one of the key ways to do that,” he said. “Instead of just slapping a fresh coat of paint on the walls, you can add a second brand and drive sales ... higher than they were.”

        Tricon isn't shedding tradition, especially with KFC. Nostalgia is big at the KFC-A&W restaurant east of Louisville. On one side, the wall is adorned with black-and-white pictures of Sanders in his trademark white suit and black string tie. Sanders founded Kentucky Fried Chicken.


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