KFC says it has been making the same mistake for decades — but now it has a plan to beat Chick-fil-A

One year after KFC brought back Colonel Sanders, business is better than it had been in years.

But the chain needs to accomplish one thing if it wants to truly come back: persuade Americans to trust its food.

"In the birthplace of this brand, KFC hasn't done well in decades," KFC's chief marketing officer, Kevin Hochman, told Business Insider during a visit to the chain's Louisville, Kentucky, headquarters.

As the chain exploded internationally, sales stagnated and locations rapidly shuttered in the US. KFC has lost more than 1,200 net restaurants in the US in the past 14 years, going from 5,472 locations in 2002 to 4,270 restaurants today.

Then there's the issue of KFC's food. The chain has been plagued by rumors of using steroids to produce "Frankenchicken," even as KFC fries its chicken fresh at each restaurant.

At the same time, business has been booming for its rival Chick-fil-A, which passed KFC as the No. 1 chicken chain in the US by sales in 2013 with half as many locations.

To turn business around, KFC last year turned to the man who started it all: Colonel Harland Sanders. The chain is now undergoing a "Re-Colonelization," reinventing its menu, remodeling restaurants, and retraining employees across the US. Sales are rising, with growth every quarter since the Colonel's return.

Here's why KFC's controversial campaign to bring back its founder's image worked — and what the chain still needs to do to regain its spot as the top chicken chain in America.

The fall of Colonel Sanders

As Hochman tells it, KFC began a decades-long decline in quality and sales when Colonel Sanders died in 1980.

"The issues started with the brand when he died," Hochman told Business Insider, comparing the post-Sanders-era KFC to Apple after the death of its cofounder Steve Jobs. "People think he was just our spokesperson, and some people don't even know he's real. But, he's really the founder of our values and our recipes."

Soon after the death of Sanders, the chain decided to ditch the Colonel and its iconic red-and-white stripes from marketing. It instead focused on ads featuring young customers, and it introduced a cartoon Colonel in the 1990s — something executives today see as an embarrassing misstep. In 1991 the chain changed its name from Kentucky Fried Chicken to KFC to highlight nonfried products, but the move inspired rumors that the company genetically modified its chicken.

Operations broke down internally, as the chain added menu options without considering the effect the changes would have on employees. Attention to bone-in chicken — which remains the bulk of KFC's business — was downplayed in favor of popcorn chicken and other new developments. Tellingly, one of the chain's most memorable recent products is the Double Down, a double-meat, pseudo-sandwich that KFC is now eager to erase from Americans' memories.

In the 1990s, KFC bet big on being hip, running ads starring young customers and chasing trends. The chain even produced an ad featuring a rapping Colonel Sanders. For a while, it worked. Now, as millennial consumers bristle at pandering and authenticity is the catchphrase of the day, it doesn't sell.

"The consumer bulls--- meter couldn't be higher," Hochman said. "They know when you're being authentic and true."

So the chain decided to return to its roots.

The Colonel's revival

In May 2015, KFC released an ad starring comedian Darrell Hammond as Colonel Harland Sanders.

It attracted a quick reaction in the US — not all of it positive. Those who hated the new campaign quickly emerged as the loudest voices on social media.

"So far the response has been about 80% positive, 20% hate it," Greg Creed, the CEO of KFC's parent company, Yum Brands, said at a conferencea few weeks after the commercial ran. "And I am actually quite happy that 20% hate it, because now they at least have an opinion."

Hochman told Business Insider that KFC knew bringing back a more traditional Sanders was a major risk but thought it necessary.

"We have to have a point of view," Hochman said. "We've been playing it safe for so many years — some people will like it, some people won't like it, but at the end of the day if we're growing our business and we get more people into our brand, it's worth it."

The campaign required some tweaking. Hochman said many critics thought KFC was mocking the dead in wanting to poke fun at itself. Sometimes jokes got a little too meta and went over some consumers' heads, such as an ad in which a family of four (a longtime go-to for KFC commercials) eats a family meal in the Colonel's limousine.

As the campaign has continued, with three comedians playing the Colonel in the past year, critics' voices have died down. One year in, it looks as if the campaign has gone from a controversy to a marketing success.

Commercials starring Colonel Sanders have accumulated millions of views on YouTube, with the Colonel's reintroduction in the No. 1 spot, reaching more than 7 million views. The British ad-tech company Unruly crowned the chain the most shared fast-food brand of the year. Perhaps most exciting for the brand, celebrities are increasingly talking about KFC — without the chain paying them to do so.

"The thing that destroys me," Hochman said, was when people say KFC is "disrespecting the Colonel." Hochman said he deeply researched Sanders (KFC has both a museum and an impressive archive) and spoke with as many people who knew Sanders as he could find. "Just the opposite — I'm trying to make him relevant again so that a Steve Harvey will tweet about him unprompted!"

While commercials have been the Colonel's most noticeable return to KFC, Sanders also dominates the company's multimillion-dollar remodeling efforts. More than 50 locations have already been remodeled, and there are plans to redesign 70% of the chain's US locations, or 3,000 restaurants, in the next three years.

In brand-new locations, the Colonel is everywhere: plastered on the building's exterior, quoted on walls, and even displayed behind-the-scenes in the kitchen. KFC's chief development officer, Brian Cahoe, says the design and new ads go hand-in-hand in revamping the brand's image and bringing customers back to KFC.

Putting the Colonel front and center seems to be yielding results for the chain. KFC told Business Insider that millennials' belief that the brand was relevant to them grew in the double digits since the new campaign began. KFC recently achieved its seventh consecutive quarter of sales growth at locations open at least a year, or same-store sales. In 2015 the brand grew system sales, the total sales of all franchise and corporate locations, by 2% in the US.

Simply bringing back the Colonel, however, can't save KFC.

The Colonel's distinctive voice may help pierce the din of endless marketing by other brands, even for those who hated him. But now KFC needs to get Americans to listen to what he is saying.

Killing the 'Frankenchicken'

In April, KFC announced it was undergoing "Re-Colonelization," which it describes as a public recommitment to quality involving national employee retraining and a new satisfaction guarantee.

"Customers were saying, 'Your food doesn't taste the same,'" Jason Marker, KFC's US president, said in a press event announcing the program. "We're not making the food the same way the Colonel had, and we're not making food in what he described as 'the hard way.' Today marks the end of that."

If year one of Colonel Sander's revival at KFC was about rejoining the conversation, part two is making the conversation about food.

"Doing things the hard way — we think that's our difference in comparison to McDonald's or most QSRs," or quick-service restaurants, said Hochman, who plans to double down on marketing the "food story" at KFC. "We aren't serving stuff that's being cooked in a central kitchen, frozen, and then reheated. We're really making food."

KFC chicken is not organic or antibiotic-free, but it is prepared by hand in every restaurant, never frozen (except in special circumstances, such as transport to Hawaii and Alaska), and made without artificial hormones or steroids. Despite this, the chain has been plagued with rumors about mutant chickens and general skepticism regarding food quality.

That's where — yet again — the Colonel comes in.

Internally at KFC, Colonel Sanders represents high-quality chicken and "doing things the hard way." The Colonel launched a Re-Colonelization program of his own at KFC in the 1970s, when he was disgusted by the brand's departure from his recipes. KFC lore says that he would travel to restaurants around the US, testing gravy with a golden spoon. If he didn't like it, he would dump that gravy on the floor of the restaurant.

If you aren't a KFC history buff, the Colonel-quality link is less clear. Re-Colonelization tries to make the connection, using the catchphrase "Colonel Quality Guaranteed." New ads further the effort, with commercials with lyrics like "the hard way is the way."

KFC also launched a blog called "Chicken Chattin'," written under the Colonel Sanders name, with posts like "The Great KFC Mutant Chicken Myth" and "KFC & Colonel Sanders Pledge." Still, while the Colonel Sanders campaign may have grabbed customers' attention, getting Americans to believe a promise by a comedian dressed as Colonel Sanders that KFC sells genuine, "real" food might be more difficult.

"I think it's going to take time," Hochman said. "You can't just pivot from Double Downs to 'We make fried chicken in the back of the house' overnight."

New menu items far from the Double Down are also realigning KFC for a food-focused future. The chain launched Nashville hot chicken, based on an iconic Nashville, Tennessee, dish, in January. While some were skeptical of the product, sales were strong. Nashville, a city originally highly unimpressed by KFC's take on the spicy dish, ended up being one of the top markets of the chicken's sales, according to KFC.

Still, the changes aren't enough. Re-Colonelization, with its employee retraining and attempts at improving customer service, needs to extend into KFC kitchens across the US for the chain to take on its biggest fried-chicken competitor.

Why Chick-fil-A is still winning

While buckets of Original Recipe chicken can be prepared perfectly in KFC's test kitchen, ensuring that chicken is made "the hard way" at every KFC location is a much more difficult task. Unlike reheating frozen food (like McNuggets) or preparing food (like a Subway sandwich) in front of customers, there's a much wider margin for error when cooking is put in the hands of employees.

"Operations, quite frankly, has been broken for a long time," Hochman said.

KFC's difficulties in maintaining quality are complicated by its biggest fried-chicken competitor. Chick-fil-A has some of the highest ratings for taste and customer service in the business — a fact analysts say allows its locations to make triple the revenue of KFC restaurants.

Chick-fil-A's dominance on a restaurant-by-restaurant basis can be traced in part to the chain's peculiar business model. The company accepts just 0.4% of franchisees, making it one of the most selective chains in the industry. Operators do not own or receive any equity in their business and can open only one location.

"I don't necessarily subscribe to their religious beliefs, or their beliefs about the world, but I think they find owners that are religious bent [who] tend to be more conservative," Hochman said. "They can make sure that procedures get followed. I think that's a competitive advantage for them. I don't know if it's an advantage I would want, but it's certainly working for them from a business standpoint."

Today, Chick-fil-A is pushing a more apolitical, inclusive message than it has in the past. Franchisees are still encouraged, however, to become "entrenched" in their communities, including involvement in local churches — a strategy that has helped build up the chain's loyal fan base over the years.

It's difficult to pin down what sets Chick-fil-A employees apart (their pay is roughly equivalent to other chains' employees), though the company attributes its success to investing in training employees. With only one location per franchisee and a strongly cultivated company culture, that training may come more easily than at chains like KFC.

In essence, Chick-fil-A has developed a reputation for customer-service excellence. KFC has developed the opposite, with even the company acknowledging that customers no longer trust restaurants to delivery quality food, sparking Re-Colonelization.

Bringing back the Colonel

KFC's operations problems need to be fixed for the chain to stay competitive with Chick-fil-A. As with everything today at KFC, the company's game plan comes back to the Colonel.

While Re-Colonelization at first seems like a consumer-focused quality pledge, it has far greater impact behind-the-scenes at KFC. Last year, pressure fryers across the country were recalibrated. The chain spent more than 100,000 worker-hours retraining more than 20,000 employees. KFC held 43 rallies across the US, attended by more than 97% of restaurant general managers, in addition to national training events at every KFC location in the US.

Perhaps more interesting are the subtle ways KFC is attempting to boost employee performance and customer service. Redesigned locations reportedly experience reduced turnover and encourage more applications; in the kitchen, new signs encourage employees to "Make the Colonel proud." Blackboards at remodeled locations tell customers where the chicken comes from and identifies the chef who is cooking the chicken that day.

Much of the brand's tech innovations are focused on employees, not customers, with digital innovations to help employees schedule shifts, restock, and even chart their distance from work to encourage timeliness.

"We've got an initiative right now where I'm trying to make it easier for our employees," Chris Caldwell, KFC's chief information officer, told Business Insider of the brand's tech developments that excited him most. "Working in our restaurants isn't the easiest. You have to freshly prepare food — you don't have a whole lot of time for administrative tasks."

KFC says taste scores have substantially increased across locations in the past year, apparent proof that the Re-Colonelization process is working by boosting not only customer interest but satisfaction.

"I'm not going to tell you, 'Things are fixed! Say anything bad about me! We're Teflon!'" Hochman said. "We're not. We're still putting the pieces back together."

It's a long road. KFC is still closing more locations than it is opening, though the company believes that will change in the near future, with growing sales and more remodeled locations.

After the Colonel's success getting Americans' attention in the past year, however, KFC is doubling down on its roots. Now it will be left to employees across the US to make sure that the chain's chicken follows suit.

SEE ALSO: KFC is fixing a mistake it has been making for years

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