As inconceivable as it sounds, KFC (formerly Kentucky Fried Chicken) has announced most of its 900 KFC outlets in the UK and Ireland were forced to close due to a shortage of chicken—of all things. Taking to Twitter to explain the crisis, KFC said the shortage had been caused after it had taken on a new delivery partner, DHL, and apologized for the closures.
First, the company apologized to customers on Saturday, blaming “teething problems” with DHL. In an update Monday, it listed almost 300 stores as open, but didn’t say when the other stores may reopen. It said those branches that remained open were operating a limited menu or shortened hours.
“We’ve brought a new delivery partner onboard, but they’ve had a couple of teething problems—getting fresh chicken out to 900 restaurants across the country is pretty complex!,” KFC said in an online statement Monday. “We won’t compromise on quality, so no deliveries has meant some of our restaurants are closed, and others are operating a limited menu, or shortened hours.”
DHL, which took on the contract last November with QSL after promising to “re-write the rule book and set a new benchmark for delivering fresh products to KFC in a sustainable way,” also apologized.
“Due to operational issues a number of deliveries in recent days have been incomplete or delayed,” a DHL spokesperson told CNBC. “We’re working with KFC and our partners to rectify the situation as a priority and apologize for any inconvenience this may have caused.”
Some of the fallout has been immediate. For example, frustrated possible customers have resorted to contacting Members of Parliament and even calling police. Police departments in many municipalities have, in turn, been using social media to promote the message that “fried chicken is not a police matter.”
There are also allegations that KFC was warned this type of trouble could occur. The Guardian reports the GMB union said it had expressed major doubts about KFC’s decision last October to switch its deliveries from the food delivery specialists Bidvest Logistics to DHL. Mick Rix, the GMB’s national officer, said he told KFC that it could face a repeat of supply problems that had plagued Burger King when it switched from Bidvest Logistics to DHL six years ago, The Guardian article reports.
“We warned them a few months ago. I wrote to KFC. I alluded to Burger King trying to cut costs and ending up with poorer quality service and poorer distribution. They had shortages, too, but not on the scale we’re seeing now at KFC,” Rix says in the article. “Within six months they [Burger King] were pleading with Bidvest Logistics to take it back.”
Rix further says in The Guardian that KFC’s current crisis stemmed from dropping a supply system based on six warehouses run by Bidvest to a system of one distribution center in Rugby run by DHL. Conditions at the Rugby warehouse were “an utter shambles,” he says.
“They took a lower tender with a load of promises that have not materialized. The system can’t cope,” Rix says in The Guardian. “My sources say KFC execs knew three weeks ago that there was a major problem with DHL. They were concerned about the set-up and the systems after testing. And some of the answers from DHL were completely strange and worrying. It was clear it was going to fall flat on its face.”
It’s difficult, at this point, to determine all of the possible consequences stemming from the chicken shortage—especially since it appears the end is not in sight. That said, Stifel analyst Chris O’Cull estimates that the roughly 750 KFC outlets affected by the chicken shortage, or about 3.5 per cent of the brand’s global total, generate daily sales of U.S. $2.1 million, the Financial Post reports.
What sort of reputational damage do you think is being done to KFC? With significant financial losses adding up, what do you think the eventual outcome will be?