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As many as 400 KFC restaurants across the nation are expected to close over the next 17 months because they will not comply with a strict remodeling campaign ordered by the chain's parent company, Louisville, Ky.-based Yum! Brands Inc.
The Courier-Journal reported that most of KFC's 5,500 domestic stores have been updated under the chain's re-imaging project, which includes new awnings, chairs, bucket-shaped lighting and artwork featuring Kentucky Fried Chicken founder Harland Sanders.
Franchisees must make the changes or close their restaurants by June 1, 2008. The deadline, which stems from a 1997 legal settlement, comes at a time when Yum was searching for ways to grow its U.S. fast-food businesses, which also include Taco Bell and Pizza Hut.
Richard Schleicher, a Sellersburg, Ind.-based KFC franchisee with 54 stores, said he predicts that most of the store closings will happen in places where sales are slow and operators will not be able to justify the cost of the upgrades. "People obviously want new, fresh looks," Schleicher told The Courier-Journal. "An old dingy-looking store, you fix it up and your customers appreciate it."
Chuck Peterka, a franchisee based in Toms River, N.J., said four of his five KFC locations are 20 years old and have never been remodeled. He said the upgrades, which typically cost about $250,000 per store, are sorely needed, but that some items have come with "ridiculous prices," such as a $1,300 exterior clock lit by a florescent tube.
Yum expects between 200 and 400 KFC restaurants to close as a result of the remodeling program. Franchisees agreed to the timeline for the upgrades about a decade ago as part of an effort to end a long-running dispute with PepsiCo, which owned the chain before Yum, according to The Courier-Journal report.
About 70 percent of the chain's locations will be finished by the end of this year, leaving more than 1,600 stores to go, said KFC spokeswoman Laurie Schalow. As of early November, the co-op reported that 408 of the restaurants still needing upgrades had drawings approved for the changes, but the goal was 661. The co-op also predicted that demand for the new décor will outstrip supply starting in May, when franchisees scramble to place orders at the same time, the newspaper said.
There are three main styles for the new KFCs, but only certain vendors are approved to sell the equipment. Yum officials declined to answer several questions about the project, and it was unclear how much the company plans to spend overall on the changes.
Peterka, the New Jersey franchisee, said it's possible that some of the closed KFC restaurants will be replaced by multibrand restaurants, which typically generate more revenue because they offer two concepts -- such as a KFC and a Taco Bell -- in a single building.
Yum is targeting about 500 small communities across North America for franchised multibrand stores, The Courier-Journal said.