CEO Criticises KFC for Weak Sales and Lack of Ideas

Lagging sales at KFC prompted David Novak, chief executive officer of parent Yum! Brands, to unleash a string of criticisms of the fast-food chain yesterday during a conference call with analysts.

"Taco Bell and Pizza Hut are winning and KFC is losing," Novak said of Yum's three biggest brands. "We have a lot of work to do at KFC."

A lack of new ideas and menu items at the chicken chain's roughly 5,300 U.S. restaurants contributed to weak performance in the three months ended June 14, Novak said.

According to the Courier-Journal, Yum's overall net income for the quarter rose 4 per cent to $224 million, but he said KFC's disappointing results have "taken the bloom" off an otherwise good year.

Earlier this month, David Palmer of investment bank UBS told clients that KFC sales would decline for the quarter, partly because a new toasted wrap "failed to deliver."

KFC's sales also rely heavily on dinner traffic, which Palmer said has been especially tough in recent months. The chain's average check is higher than other fast-food chains, he said, and KFC's efforts to lure customers for lunch and quick snacks have been met with tough competition from established hamburger chains.

Novak also said tests are under way to launch a new menu line called Kentucky Grilled Chicken in the first half of 2009.

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