An outlet of Kentucky Fried Chicken (KFC) in downtown Zhengzhou, capital of central China's Henan Province, was full of customers around dinner time at the weekend.

There was clearly no sign that business was hurt three months after US-based fast-food giants were found selling products containing Sudan I, a food coloring dye that is carcinogenic.

The discovery of Sudan I in some foodstuffs, including KFC products, in March caused widespread scare across the country. But brisk business at KFC indicates the fallout dissipated quickly.

Figures released recently by the Henan Provincial Commerce Department showed that the 15 branches of KFC in Henan, China's most popular province, totaled 27.9 million yuan (about US$3.3 million) in the first four months of this year, ranking first in the province. In April alone, the combined revenue of KFC shops in Henan was nearly 5.6 million yuan (about US$677,966).

The sales revenue of Mcdonald's, another US fast-food giant, ranked second. The third was a Zhengzhou-based restaurant chain offering Chinese foods. Its sales revenue in the first four months was about 13.9 million yuan, about half that of KFC.

An official with the Henan Provincial Commerce Department said that foreign fast-food companies have significantly outperformed their Chinese counterparts in Henan. Their performance is even better in other parts of the country, particularly in such big cities as Beijing, Shanghai and Guangzhou.

Chen Xiajing, a public relations manager of Tricon China Restaurant Group, which owns the KFC brand, said, KFC saw 200 new shops in China on average in each of the past few years. The KFC has more than 1,300 outlets on Chinese mainland since it entered China 18 years ago, becoming the largest food chain in China.

KFC restaurants have spread to 280 Chinese cities, compared with 20 cities in 2000. Last year, 275 new outlets opened in China. The number for this year is expected to reach 375.

Its impressive expansion was largely driven by profits in China. In 2004, KFC China contributed more than US$200 million in operating profits for Louisville-based Yum Brands Inc., KFC's parent company. That was more than half of the company's international profits, Chen said.

At present, KFC places its emphasis on localization and has introduced more than 20 new varieties to cater to Chinese consumers.

Yin Qun, president of Henan's Catering and Hotel Association, said the success of foreign fast-food companies in Henan, and other parts of the country as well, can be credited to two factors: In the first place, foreign fast-food companies expand in the form of chain stores. Secondly, foreign fast-food is something exotic which attracts youngsters and children.

The foreign fast-food industry poses a challenge to restaurants offering Chinese cuisine. Yin admitted that Chinese food companies should learn from their foreign counterparts, especially in management.

(Xinhua News Agency June 6, 2005)