KFC Tests A Fast-Casual Restaurant Starting Next Month

KFC (NYSE:YUM) will open a fast-casual restaurant on Aug. 5 to test whether it can compete with Chipotle (NYSE:CMG) and Panera Bread (NASDAQ:PNRA) for younger upscale customers, Nation's Restaurant News reported.

The test restaurant in Louisville, Ky., will be called "KFC eleven" and will serve flatbread sandwiches, rice bowls, salads and Original Recipe chicken—but only the boneless version that KFC introduced in April. A second fast-casual store is set to open in a strip mall sometime in the next few months.

KFC President John Cywinski told the Associated Press that customers currently equate KFC with "buckets of fried chicken on the bone" for dinner or on weekends. The fast-casual test is to see how the fast-food chain can update its offerings and draw in a broader customer base, particularly women.

The chain's other target: customers in their 20s and 30s who have drifted away from conventional fast food in favor of restaurants like Chipotle, where they believe they spend a little more for much better food.

That potential growth area is particularly important for KFC parent Yum Brands, which has seen huge drops in sales at its stores in China, where the company generates about half its sales. The China problems are due in part to a bird-flu scare earlier this year that hurt all fast-food stores, but especially KFC. However, the chain has also faced allegations of tainted food (later disproved) and an ongoing government crackdown on large foreign food and drug companies.

If that crackdown stifles growth in China, where KFC is the largest foreign fast-food chain, expanding its U.S. customer base (with the potential of moving that model outside the U.S. as well) may become critical. For now, Cywinski will only say the chain plans to open another iteration of the upscale KFC restaurant—presumably incorporating what the chain learns from the first two tests—within the next year.

For more:

- See this Nation's Restaurant News story
- See this Associated Press story

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