Values and Ethics in Management

KFC Case Analysis

Submitted to :

Prof. Sushanta Kumar Sarma

Group Number A11

Preyanshu Saini P39042

Vivek Gor P39058

Shubham Saket P39051

Swapan Suthar P39056

Divyang Parmar P39018

Background

The food industry has used trans fats for many years because they tend to be cheaper and make oil
last longer, giving food a longer shelf life. KFC has more than 5,400 restaurants in the United
States and more than 8,200 overseas. It is a division of Yum! Brands Inc., which also owns Pizza
Hut, Taco Bell, Long John Silver's and A & W. KFC provides a variety of menu choices and
nutrition information as well, including trans-fat values, on its Web site and in its restaurants so
consumers can make informed choices before they purchase the products. Here, the controversial
substances are trans fats that are used in KFC's cooking. These trans fats are formed in vegetable
oils heated to high temperature and they lower the "good" cholesterol and raise the "bad" which
leads to rise in incidents of heart diseases. Despite such harms and multiple warnings made in
public interest, Fast food restaurants including KFC did not replace the trans fat with an
alternative oil. Moreover, KFC stated that it is one of the factors considered as important in
maintaining KFC's unique taste and flavour of Colonel Sander's original recipe. KFC then was hit
with a lawsuit from a non-profit Centre for Science in the Public Interest, which maintains that
trans fats contribute to 50,000 deaths annually in the US. The class action was in the name of
Arthur Hoyte, a retired doctor who said he had eaten KFC's chicken without being warned of the
health risks.

Ethical Dilemma

Ethical dilemmas arise from having to choose between two equally undesirable alternatives. In
the case of KFC, it has been sued for using trans-fat which is unhealthy for the consumers of KFC
products. Now, KFC on one hand has to ensure that the taste and crispness of its products remain
good so that it delivers on its quality of taste promise. But on the other hand, it is serving
unhealthy products whereas it promises otherwise on the terms of oil used and subsequently the
healthy parameters that KFC takes care of. The two choices and its outcome are as follows:
 Not use trans fatty Loss in crispness of the served
oils food

Not delivering on the promise of

Use trans fatty oils healthy oils and cause harm to
health of customers

From analyzing the case, I could find the main source of ethical dilemma which is explained as
follows:
Production and sale of hazardous but popular products
KFC chicken products are very famous and it has high demand. People enjoy the crispy taste of
KFC chickens. To a certain degree, KFC follows the principle of caveat emptor, i.e. it believes
that its customer know that fast foods are not particularly healthy in nature. KFC provide nutrition
information, including trans-fat values, on our Web site and in our restaurants so consumers can
make informed choices before they purchase our products. KFC just tries to sell the taste with
minimum harmful oils in its products. But its products nonetheless, are harmful to the health of
frequent consumers. KFC have been reviewing alternative oil options, but there are a number of
factors to consider including maintaining KFC's unique taste and flavor of Colonel Sanders'
Original Recipe.

But KFC and even other fast food chains such as McDonalds have been sued for the same reason
of using unhealthy oils in their foods.

Stakeholders

The following are the stakeholders involved in this situation:

i. KFC
ii. The Centre for Science in Public Interest (The plaintiff)
iii. The consumers of KFC products
iv. The local government under whose jurisdiction the case is being pursued
v. The shareholders of KFC

How the stakeholders are impacted from either of the two decisions?

Decision: To stop using trans-fat oil/ Warning consumers about use of oil and
their health effects

KFC: For KFC, it would be a big hit to the brand value, and can ultimately lead to the question of
the company’s existence. There would be a big loss in revenue if the consumers would stop
buying at KFC. There would also be a cost of finding another alternative to trans-fat oil that
maintains the flavour and consistency of their food products, for which it is famous for.
The Centre for Science in Public Interest: This would mean that they have achieved stopping
the usage of extremely unhealthy oils in food products that are consumed by the masses, thereby
working towards their motto of public interest.
Consumers: The consumers might stop eating at KFC restaurants, owing to health concerns that
they have, and would have to move to alternative fast food restaurants/chains that can compensate
for the lack of crispy chicken that they obtained from KFC.
Local government: There government would have to ensure implementation of the judgement
that is passed, that KFC warns their customers regarding the issue.
The shareholders: The shareholders who have a stake in KFC would have to bear the main
impact because of loss of revenue, and lesser returns on their investments.

Decision: KFC wins the case and can continue to use the trans-fat acids

KFC: There would be no need to change to any other type of oil, and hence no loss of revenue.
The brand image would also not be affected much by the judgement.
The Centre for Science in Public Interest: They would have failed to achieve public interest,
because there is no easier way to stop people from consuming trans-fat other than stopping the
restaurants/chains from using it.
Consumers: Although there would be no change in the consumption pattern, overall, there would
be increased risks of heart diseases due to large amounts of consumption that occurs from the
food that is offered from KFC.
Local government: There would be no issue of enforcement of law/judgement passed because it
is the same as before.
The shareholders: No ill-effects to the shareholders, as well as their revenue.

What Actually Happened?

Almost all the things sold by KFC are fried. Being very popular among the customers, it is the
responsibility of the company to provide nutritional and healthy food products to its consumers.
However in the year 2006, it was observed that this parameter of customer satisfaction was not
followed by KFC. They were using oil which contains Trans Fatty Acids. This oil lowers the
good cholesterol (high-density lipoproteins) and raises the bad cholesterol (low-density
lipoproteins) in a human body as a result of which the risk of having heart disease increases.

The Centre for Science in the Public Interest (CSPI), a nutritional advocacy group sued KFC by
filing a case in District of Columbia Superior Court. The authorities found that one three piece
chicken combo meal contains 15 grams of trans-fat, which was crossing the limit that a person
should have in a weeks’ time. The CSPI demanded to ban the use of oil in KFC’s cooking or
force the company to inform its customer that its food contains trans-fat and can cause heart
disease. So, it was not ethically correct from the company to use such ingredients in cooking their
products which will be consumed at across its 22000 outlets as of now. All this was done to get
competitive advantage, reducing cost and ultimately earning huge profits and cost of all this was
being paid by its loyal customers.