A Word from the Colonel

Over the weekend, I thought about how the founder of KFC might advise you real estate executives (and those aspiring) in the trenches during this difficult part of the cycle. Here’s how I think he’d instruct you to think.

It matters where you’re going, not where you’ve been

Harlan Sanders was born into a family without means and his father died at the age of six, leaving him to cook and care for his two siblings while his mother worked in a factory outside of town. He was discharged from the US Army after one year, fired from a railroad job, and ousted from the legal profession after a courtroom brawl with a client. His entrepreneurial ventures were only mildly successful and they included owning stakes in a ferry boat company and light fixture manufacturer.

In 1930, at the age of 40, Harlan Sanders was broke, without prospects and making matters worse, it was the great depression. To make ends meet, he began preparing and serving chicken meals at a gasoline filling station, and this was when he got his first taste of success. His chicken restaurant gained national recognition and soon grew to be a 142-seat restaurant. In the 1950s, the business was crippled when a new highway was established diverting away most of his customers and forcing him to sell the business at auction at a steep loss.

At the age of 65, Colonel Sanders began receiving $100 a month from social security, and this was his sole source of income. He took a business loan of $87 to buy a pressure cooker and ingredients for his chicken recipe to attempt to franchise his failed chicken restaurant concept. He hit the road, and after hearing “no” 1,009 times, he got his first yes. By the age of 70, he had sold more than 190 KFC franchisees and 400 locations in America and Canada.

"One has to remember that every failure can be a stepping stone to something better.” - Colonel Harland Sanders

Identify your moat

I would argue, the success of Harlan Sanders had less to do with the eleven herbs and spices, and more to do with his innovation around the use of pressure cookers to fry his chicken. The Colonel invented, and later patented, what is considered the most important innovation in chicken cooking history. The?patent ?is named the “Process of Producing Fried Chicken Under Pressure.”

The problem with frying chicken in a skillet was the time to prepare each meal was too great to permit a chicken restaurant of any scale to function profitably and with acceptable wait times for the customers. The pressurized cooking method permitted much faster cook times, and the preservation of moisture and flavor, all the while using less grease.

His moat was the pressurized method of frying chicken which he kept secret, and eventually patented. What are the moats in your business and investments?

Exercise humility

Colonel Sanders, at the age of 65, sold his franchises by offering owners of attractive restaurants his cooking services free for a day. If the customers enjoyed his chicken, he’d ask the owner for more days to serve more chicken to the customers, again for no wage. This was a slow, expensive and humiliating way to generate new business and partners. It was cold calling on steroids!

He travelled with his wife in an aged car full of spice bags and pressure cookers. They would often sleep in the car and sometimes had to rely on generosity from others in order to feed themselves. Even after establishing the brand, he remained the primary salesperson and would personally inspect the gravy at every KFC he visited.

Bonus Facts:

• Franchisees paid .04 cents for every chicken sold, and/or monthly fees for the rights to use the secret pressure cooker method, and of course use the 11 herbs and spices recipe.
• Dave Thomas, the founder of Wendy’s, was an early KFC franchisee and is credited with coming up with the idea to serve the chicken in a bucket.
• Harland Sanders got into a gunfight with a competitor over marketing activities between the two chicken restaurants.
• The Colonel title is not a military title, it is from an appointment from the Governor of Kentucky making him an honorary Kentucky Colonel in 1935.
• In 1964, he sold the business for $2,000,000 dollars and a guaranteed lifetime income of $40,000. It was sold again seven years later for $285 million. In 1986, PepsiCo purchased the company for $850 million.
• In 1987, KFC became the first Western restaurant brand to enter China and is now one of the largest foreign companies in operation. Some studies say its the most powerful foreign brand in the country.

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