In 1987, Kentucky Fried Chicken became the first fast-food chain to open a restaurant in China. Twenty years later, it has more than 2,200 stores all over China with annual revenue of $1 million each and 20 percent profit margins. KFC outperforms all competitors in China in number of outlets, revenue and market share.

KFC Background

Col. Harland Sanders, the smiling, white-haired man whose portrait appears in KFC stores and advertisements, founded Kentucky Fried Chicken in 1952. Based in Louisville, KFC is now a unit of Yum Brands, which also includes Pizza Hut, Taco Bell and Long John Silver's. KFC has more than 14,000 restaurants in more than 80 countries, making it the world's most popular chicken restaurant chain. To this day, its signature recipe of "11 herbs and spices" remains secret.

Moving into China

KFC's expansion plans into China started in the early '80s, building on its successful entry into Southeast Asian markets. KFC -- known in Mandarin as Ken De Jin -- opened the first Western-style quick-service restaurant in the capital city of Beijing in 1987.

Milestones Along the Way

By 2001, there were more than 500 KFC outlets all over China, so many that its stores couldn’t get enough imported potatoes for mashing. In 2002, as China’s middle class swelled and acquired more cars, KFC opened China’s first drive-through restaurant. In 2004, the 1,000th store opened, and portraits of Colonel Sanders were displayed in all stores -- where he was quickly mistaken for Uncle Sam. By 2008, KFC had twice as many outlets in China as McDonald’s, a reversal of the ratio in other parts of the world.

Problems Along the Way

The road to success was not without bumps. In 1999, some KFC stores were wrecked by crowds protesting the mistaken bombing of the Chinese Embassy in Belgrade during the NATO air campaign against Yugoslavia. In 2005, KFC had to apologize and remove from its menu “New Orleans Roasted Chicken,” whose seasoning contained a dye linked to cancer.

The Recipe For Success

KFC's China operations also benefited from factors beyond its control. For one, the high cost of doing business in China at that time meant KFC's products were expensive. But high costs soon became associated with high quality and being American, so KFC became popular in China. In addition, fried chicken is simply more acceptable to the Chinese palate than other American food, such as hamburgers.

The Taiwan Gang

The success of KFC in China is also attributable to a business strategy designed and implemented by the so-called Taiwan Gang, a group of Taiwan-born, U.S.-educated senior executives who managed KFC's operations in China in its early stages. Armed with knowledge of China and its culture, they formed local partnerships, hired mostly locals and came up with localized menus and management practices.