FDD Talk 2013: Average Net Sales, Cost of Goods Sold, and Labor Costs of Certain KFC Restaurants (2013 FDD)

Highlights of KFC’s Item 19 Financial Performance Representations (2013 FDD)

• Of the approximately 3,057 domestic, single-brand KFC locations open at least a year as of December 31, 2012, 163 were owned and operated by KFCC or its subsidiaries, and 2,894 were owned or operated by KFC franchisees.

• This financial performance representation reflects the averages for a sub-set of all single-brand KFC locations in the continental United States and Alaska during the calendar year 2012. The sub-set consists of KFCC Restaurants as of December 31, 2012, and all single-brand KFC outlets which were owned or operated by franchisees of KFC as of December 31, 2012.

• The financial performance representation does not include non-traditional, Express, multi-brand, seasonal, or any type of KFC location other than single-brand KFC locations.

• All KFC locations included had been open a minimum of one year as of December 31, 2012.

• Of the 163 single-brand KFCC locations which are included in this financial performance representation and which were open for at least one year as of December 31, 2012, 70 or 42.9% attained or exceeded the stated average result; and 93 or 57.1% did not attain the results stated below.

• Of the 2,894, single-brand KFC outlets owned and operated by franchisees of KFC which are included in this financial performance representation and which were open for at least one year as of December 31, 2012, 1,297 or 44.8% attained or exceeded the stated average result; and 1,597 or 55.2% did not attain the results stated below.

• Characteristics of the included locations may differ materially from the characteristics of the outlet(s) that you may develop or acquire depending on your experience; competition in your trade area; the physical condition of the included locations as compared to your outlet(s); employment and labor conditions in your trade area; and the length of time that the included locations have operated as compared to your outlet(s).

• “Average Net Sales” is the mathematical average of the total annual cash or other payments received after discounts and promotions for the sale or use of any products, goods, or services, that were sold from the KFCC Restaurants included within the group.

• “Average Cost of Sales” is the mathematical average of the total annual delivered cost of food, beverages, paper, and promotional items to the KFCC Restaurants included within the group, expressed as a percentage of Average Net Sales. This does not include any financial results from KFC outlets that were owned and operated by franchisees of KFC.

• “Average Cost of Labor” is the mathematical average of the total annual hourly labor costs; the salaries and related costs of management; payroll taxes; health insurance; vacation; sick pay; bonuses; and workers’ compensation insurance for all employees at the KFCC Restaurants included within the group, expressed as a percentage of Average Net Sales. This does not include any financial results from KFC outlets that were owned and operated by franchisees of KFC.

• The operations of KFCC Restaurants are similar to those of the franchised KFC outlets offered by this FDD, except that KFCC Restaurants do not have certain expenses that franchised outlets have, such as payment of royalties. KFCC-owned Restaurants also benefit from economies of scale that are not available to outlets that are owned singly or in small groups by a franchisee.

2012 Average Performance of Single-Brand KFC Locations Open for at Least One Year as of December  31, 2012

Company-Owned KFC Outlets

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