Cost Analysis for KFC in China

Topics: Influenza, Avian influenza, Pandemic Pages: 1 (296 words) Published: February 8, 2014
COST ANALYSIS
This part of our proposal will provide a detailed cost analysis of China’s Financial Outcomes dating back to 2012. Starting back in 2012 there were many factors that really impacted the KFC business in China. One significant problem was the bad publicity brought upon by the bird flu epidemic, which started back in December 2012. After the terrible epidemic of the poultry problem, there was new news of the avian flu, which subsequently brought KFC into a deeper financial crisis. Over the year 2013 the U.S. System sales declined 4% in China. Along with a 13% decline in same-store sales in China there was a decline of 2.7 percentage points as well. The problem in China affected the Worldwide operating profit, causing it to decline 26% in China. Taxes even rose as well from 25.8% to 28%. Another issue during the June 2013 in China was when China Central Television reporters had taken ice samples of multiple KFC restaurants and discovered that “the levels of bacteria were 12 times higher than toilet water”(19 times higher than China’s standards for drinking water.) We can see that

Below looking at the earnings per share for KFC we can see how there has been a 9% decrease from 2012 at $3.38 to $2.36 in 2013.

Looking below at the Same Store Sales chart for this past year we can see KFC starting to recover. Unfortunately the reemergence of the bird flu in January 2014 is threatening KFC’s recovery. The virus has infected 96 people in China, killing 19 reported by Xinhua News. Shanghai has just put a hault on live poultry sales for three months and Hong Kond just initiated a three week ban on live chicken sales after poultry from China was tested positive for bird flu. It’s easy to see how this restaurant chain specializing in chicken will be affected.
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