KFC EYES NATIONAL ROLLOUT OF CHICKEN SANDWICHES

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Despite poor initial results, KFC is expanding its market test of chicken sandwiches next month, with an eye toward a national rollout in mid-1999.

The chicken chain's goal is to take at least a slice of business away from the burger giants by boosting lunch sales.

KFC will revamp advertising for the chicken sandwiches as it adds a third test market, Kansas City, Mo. New ads, via longtime agency Y&R Advertising, New York, will feature a price promotion.

The $2.99 product has been available in Atlanta and Yakima, Wash. But one Atlanta franchisee said sales were soft in that market because the sandwich prices were too high compared to chicken sandwiches sold by rival chains. And a humorous campaign featuring chickens driving a bus didn't compel consumer trial.

CUTE ADS `DIDN'T HIT THE PEOPLE'

"They were really cute ads, but for some reason they didn't hit the people," said another franchisee, Dick Cahill, who sat in on consumer focus groups in Atlanta following the introduction.

KFC's new sandwich campaign uses the animated Col. Sanders icon introduced on national TV this month and the revived slogan "We do chicken right."

KFC declined to comment on the sandwich line.

The five-item line reflects KFC's new, more cautious approach to product launches. Rather than moving ahead with a big national launch, such as the one for last year's ill-fated Twister wrap sandwiches, the chain is slowly tweaking an offering until it's ready for rollout to its 5,100 U.S. restaurants.

An executive close to KFC said Atlanta was the toughest test market the chain could have selected, since it is the headquarters of several major chicken competitors, including Chick-fil-A, which has an extensive sandwich line, and AFC Enterprises' Churchs Chicken and Popeyes Chicken & Biscuits chains.

Like KFC, the latter two have built their business on dinner sales. KFC's marketing department was recently restructured to concentrate on two business streams, the chain's core dinner business and its so-called "to go" business -- quick-service meals that compete with other fast-food segments.

NEW PRODUCTS SPUR SALES

Since 1995, KFC has been launching new products such as Crispy Strips as part of a strategy that helped spark a turnaround for the chain. Same-store sales have increased every year since 1995, although the growth rate slowed last year to 3%, from 11% in 1996. U.S. systemwide sales last year rose 2.6% to $4 billion.

KFC spent $168 million on measured media last year, according to Competitive Media Reporting.

Franchisees said they are pleased with Y&R's newest campaign, which replaced a short-lived effort tagged "Isn't it time for some really good chicken?"

"The animated colonel we think is a pretty nifty idea," Mr. Cahill said.

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