KFC Issue Report

8/12/2019 KFC Issue Report

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INTRODUCTION

Kentucky Fried Chicken (KFC) Corporation, based in Louisville, Kentucky, is the world's most widespreadchicken restaurant chain offering services to more than 12 million customers in 109countries all aroundthe world. KFC operates more than 5,200restaurants in the United States and more than 15,000 units

around the world. KFC was founded by Harland Sanders (Sanders) in the early1930s. He started cookingand serving food for hungry travelers who stopped by his service station in Corbin, Kentucky, US. He didnot own a restaurant then, but served people on his own dining table in the living quarters of his servicestation. His business expanded and by 1964, Sanders franchised more than 600 chicken outlets in the USand Canada. Now customers around the globe enjoy more than 300 other products from KentuckyGrilled Chicken in the United States to a salmon sandwich in Japan. KFC has been a brand and operatingsegment, of Yum Brands since 1997 when that company was acquired from PepsiCo as Tricon GlobalRestaurants Inc.

KFC Malaysia is the famous fast food restaurant in Malaysia; products it sells include chicken,burger,nugget, sandwich, wedges, drinks, fries, coleslaw and many more. It has captured 44%of market sharesin Malaysia. Its first restaurant was opened in 1973 on Jalan Tunku AbdulRahman, now it has more than539 restaurants throughout Malaysia and growing. Among all, their secret recipe chicken is the KFC mostfamous dish, it has great taste and trulyenjoyed by Malaysian ever since. Kentucky Nuggets wasconceived in Malaysia, and found its way to KFC worldwide today. Meals on Wheels, was alsodeveloped in Malaysia, creating andbringing opportunity for people to taste where KFC might notavailable. KFC Kids Chicky Club was also developed to suite for kids. Chicky and Friends, the character inthe KFC, bringpleasure and fun to all children, a good example would be television program sponsored,TheChicky Hour, which broadcast on every Saturday morning at TV3.Some other activities developed byKFC Malaysia include Projek Penyayang KFC, Tabung Penyayang KFC, Tabung Penyayang KFC Collection

Boxes, and 4 of KFC restaurant areoperated by speech and hearing-impaired staffs. These 4 restaurantsare located in Peninsular and East Malaysia. First in Sentul Raya, Kuala Lumpur, second is at Saujana,Sarawak, third isat Tanjung Aru, Sabah and fourth is at Johor.


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PRODUCT

KFC's core product offering is pressure fried on-the-bone chicken pieces seasoned with the "OriginalRecipe". The product is typically available in either two or three piece individual servings, or in a familysize cardboard bucket, typically holding between 6 and 16 chicken pieces. Poultry is divided into 9

different cuts (2 drumsticks, 2 thighs, 2 wings, 1 keel, and a backbone based breast cut divided into 2pieces. The product is hand-breaded at individual KFC outlets with wheat flour mixed with seasoning in atwo to four minute process. It is then pressure fried for a maximum of seven minutes at 185 degreesCelsius. Following this, the chicken is left to stand for 5 minutes in order for it to sufficiently cool beforeit is placed in the warming oven. It is KFC policy to discard chicken if it has not been sold within 90minutes, in order to ensure freshness. The frying oil varies regionally, and versions used includesunflower, soybean, rapeseed and palm oil. A KFC executive stated that the taste of the chicken willvary between regions depending on the oil variety used, and whether the chicken has been corn-fed orwheat-fed.

As well as its core chicken on the bone offering, KFC's major products include chicken burgers. KFCadapts its menu internationally to suit regional tastes, and there are over three hundred KFC menuitems worldwide. Some locations, such as the UK and the US, sell grilled chicken. In predominantlyIslamic countries, the chicken served is halal. In Asia there is a preference for spicy foods, such as theZinger chicken burger.

Issue

1. Overcrowded farm environment

The chickens are stuffed by tens of thousands into over-crowded sheds where they hardly find space to

move freely. To save space and avoid chicken hurting each other, the sensitive chicken beaks are cut offwith hot blade without giving any painkillers. Overcrowding and poor litter quality in the farms alsocaused painful ammonia burns on the chickens. The injured chickens received no treatment and had tobear the pain throughout their life.

2. Improper breeding

Birds are fed genetically modified feed in order to accelerate their growth rate. As a result they sufferfrom ailments such as extreme obesity and fatty livers and kidneys, heart attacks and other problems.

3. Cruelty in the slaughter house

The chickens are slaughtered before they are 6 weeks old. At the slaughter house, chickens are hungupside down and transferred through conveyor belts to the killing room fully conscious. Too manychickens are dumped from the crates to the fast moving conveyor belt that caused the birds at thebottom to get suffocated. Unable to manage the large inflow of chickens, the workers threw away somechickens slamming them to the walls or floors. During the processing, to remove feathers, the livechickens are thrown into scalding-hot water.


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4. Frustrated Workers

Due to poor wages and working conditions, employees used the chickens as a means to vent frustrationsand alleviate boredom. They twisted the birds heads off, spat tobacco into their eyes and mouths,spray-painted their faces, used them as footballs and squeezed their bodies so hard that the birds

expelled faeces.

Issues Concerned with the Case

This case can be solely related with both market stakeholders and non- stakeholders of KFCsenvironment.

No. Stakeholder Description

1. Stockholders KFC is one of the brands among the Yum brands, whichhave been operating in various cornersof the world. Theactivities practiced by the KFC and its suppliers have largerimpact on thestockholders. The protest initiated by variousorganizations has effect on operations and if thecompanyfails to solve the current issues, the company would may besolely responsible formissing out to take advantage ofopportunities that lies, ahead in future. The stockholdershaveinvested in the company and if the company closesdown, their investment would be at risk.

2. Customers Consumers continue to return to KFC because of the qualityand good prices of their foodproducts. KFC has many fans

and continues to grow to provide better customer service.Fromresearch we learned that KFCs suppliers havebeenbreeding unhygienic, drugged birds thatcould possiblyhave negative impact on the customers health. KFC shouldinvestigate thesuppliers breedingand poultry process sothat proper quality of their chicken are maintained

3. Suppliers KFC has numerous suppliers among which, Perdue Farms,Tyson Food and PilgrimsPridesupplies the major chicken toKFC, and those chickens are further processed to be servedintotheir chain of restaurant all over the world. Proper

steps and methods should be applied toevaluate thesuppliers and their products as suppliers largely affect theoverall operation andbusiness of KFC. Suppliers shouldfocus on their improvement as when KFC is affected; theyarealso likely to be affected, as KFC is the suppliers mainbuyer of their chickens in huge mass.


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4. Media Mass media is also highly affected, as most of the protestmade all around the world initiated bynon- governmentorganizations, were made from the channels of the media.Media made people,organization and business firms, to bemore aware about their activity, and draw the line

betweenthe right and wrong. Through information gainedfrom media, people have changed theirdecision anddemonstrated their activities against the KFC

5. Non-GovernmentOrganization (NGO)

NGO such as PETA and Greenpeace are highly influenced bythe supplier poor management forbirds handling by theworkers. PETA has been involved into protest to makepeople aware aboutthe activities of KFC suppliers, mainlyPilgrims Pride, and they have also mentionedsomecorrective course of action that can improve the lifeof birds. Likewise Green Peace organization,made the

whole world aware about the Cargill, one of the supplier ofKFC for soya fed forchicken, who was highly responsible forAmazon rainforest deforestation.

6. Rules and Process Due to poor implementation and execution of rules andprocess of chicken handling, transportingand slaughteringhas led to this scenario. PETA has explained in their articlethat KFC shouldbound their supplier to work on animalwelfare program, to ensure that birds are takencareproperly because, these birds are sent to restaurant allover the world. What supplier breeds, areconsumed by thefinal consumer, so organization should be aware about therules and process tohandle birds. Greenpeace is highlyconcerned with the destruction of Amazon rainforest,theyclaim to KFC to not seek cheap soya that are feed tobirds back in their suppliers farm. KFCshould be sound andresponsible for the effect on the environment and shouldtake correctiveaction to minimize the impact ontheworldsenvironment.


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HUMAN RESOURCES


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Corporate governance statement

The Board of Directors (the Board) of QSr Brands Bhd (QSr or the Company) has adopted andsubscribed to the Malaysian Code on Corporate Governance (revised 2007) (the Code) as a minimumbasis for QSr s pra ctices on corporate governance. The Board further recognizes that the principles of

integrity, transparency and professionalism are key components for the Groups continued growth andsuccess. These will not only safeguard and enhance shareholders value but will at the same time ensurethat the interests of other stakeholders are protected. The Board is pleased to report to theshareholders in particular and other stakeholders in general on the manner the Company hasapplied theprinciples of corporate governance.

The board of directors

Composition, Size and effectiveness of the Board

The Board is led and managed by an experienced and effective Board with a wide range of knowledge

and expertise. The Board is primarily assigned for charting the strategic direction of the Group. On 1January 2010, the Co mpanys Board composition was further strengthened with the new appointmentof an Independent non-executive Director who is also the Managing Director of KPJ Healthcare Berhad,Datin Paduka Siti Sadiah binti Sheikh Bakir. With the changes, the Board curre ntly has 8 memberscomprising the Chairman, Tan Sri Dato Muhammad Ali bin Hashim (Non -Independent Non-ExecutiveDirector), Deputy Chairman, Ahamad bin Mohamad (Non-Independent Non-Executive Director), theManaging Director, Jamaludin bin Md Ali, 3 Independent non- executive Directors being Dato Drridzuanbin Mohd Akil, YaM Dato Seri Syed Amir Abidin Jamalullail Ibni Almarhum Tuanku Syed Putra Jamalullailand KuaHwee Sim and 1 other Non-Independent Non-Executive Director being Sheik Sharufuddin binSheik Mohd. The Company is incompliance with the Bursa Malaysia Securities

Berhadslistingrequirements which require at least two directors or one -thirdof the total number ofDirectors, whichever is higher, to be Independent Directors. The Board retains full and effectivecontrolof the Company.

The Managing Director has direct responsibilities for business operations whilst non-executive directorshavethe necessary skill and experience to bring independent judgments to bear on the issues relating tostrategy, performanceand resources. Key matters, such as approval of annual and interim results,acquisitions and disposals, material agreements,major capital expenditures, budgets and long termplans would require the Boards approval. The Board views that the number and composition of thecurrent Board members are sufficient and well-balanced for the company to carry out its duties

effectively, whilst providing assurance that no individual or small group of individuals can dominate theBoards decision making.to ensure that there is balance of power and authority, the roles of theChairman/Deputy Chairman and Managing Directorare separated and clearly defined. TheChairman/Deputy Chairman is primarily responsible for the orderly conduct andeffectiveness of theBoard, including, but not limited to, organizing information necessary for the Board to deal withtheagenda of meetings, whilst the Managing Directors primary task is to report, communicate andrecommend key strategic andoperational matters and proposals to the Board for decision making


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purposes as well as to implement policies and decisionsapproved by the Board. The IndependentDirectors and Non-Independent Non-executive Directors are from varied businessand professionalbackgrounds and bring with them a wealth of experience that is broughttobear favor ablyin boarddecisionsand policy formations. Together, the Directors bring a wide range of business and financialexperience relevant to the direction of the expanding group. Other than the Chairman and the

Managing Director, the shareholders or stakeholders may convey any concerns that theymay have tothe Chairperson of theaudit Committee who is also an Independent Non-executive Director.

Training and development

At KFC, all employees receive extensive training provided through using blended learning techniques (e-learning, on-the-job and formal classroom). The Company employs over 3500 Team Members, 450Managers and 75 Shift Supervisors, located in 122 restaurants.

All Team Members receive comprehensive training in the following areas:

All Shift Supervisors/Managers participate in our KFC Global Training curriculum (40 core competencies).The training is designed and facilitated by accredited professionals (internal and external) to ensure allShift Supervisors/Managers gain the skills, knowledge and experience to operate our successfulrestaurants.

In addition, the company provides comprehensive training in the following areas:

1) Leadership Development2) Coaching Skills3) Culture4) Interaction Management5) Fire Safety6) First Aid training7) Food Safety8) Human Resources, Workplace Health & Safety9) Information Systems10) Financial & Operations Accounting

KFC Issue Report

Documents

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