Yum Brands this week dropped a bomb when it announced plans to move KFC’s headquarters from Louisville, Kentucky, to Plano, Texas.
The move was a surprise to outsiders, who wondered why a brand called Kentucky Fried Chicken would abandon the state with which it has long been associated—even as parent company Yum Brands remains entrenched in Louisville. But Yum has been shifting more of its work to Texas for some time.
And a growing number of companies have been either opening second headquarters or moving them wholesale to other states.
In-N-Out is moving one of its headquarters to Tennessee from California. Dutch Bros is opening a second headquarters in Arizona.
Subway moved part of its headquarters to Miami from Connecticut. McDonald’s moved its headquarters from the suburbs to downtown Chicago. Chipotle moved headquarters from Denver to California. Blaze Pizza moved from California to Texas. Hardee’s and Carl’s Jr. moved from California to Tennessee. Papa Johns opened a second headquarters in Atlanta.
Corporate relocations are commonplace. According to the real estate firm CBRE, 465 U.S. companies have relocated headquarters between 2018 and 2023. And 30% of Fortune 500 companies have taken some action regarding their corporate headquarters over that period. Companies move. It happens.
Reasoning for these moves generally varies. Companies can move because of the business climate or cost of living concerns. Or they may want access to new customers or to consolidate their portfolio, which is ostensibly the reason for the KFC move.
But restaurant chains also move to change culture or to cut corporate overhead. Many of the companies above needed some sort of culture shock to make big changes. Chipotle in 2018 moved headquarters in part because the company needed to make big changes in corporate culture after a slow recovery from an E. coli outbreak. McDonald’s moved its headquarters at least in part to overhaul a corporate culture that had grown insular, though it also helped with cost cuts.
In those situations, it’s difficult to argue with the results. Both chains have thrived post-move. But not all such moves work. Hardee’s and Carl’s Jr. haven’t exactly thrived in the years since parent CKE Restaurants moved to Nashville. Brands can’t necessarily outrun problems that exist in the stores, after all.
It’s difficult to understand the reasoning behind moving KFC to Texas. Yum isn’t abandoning Louisville, keeping the corporate headquarters in town. So some benefits of such a move wouldn’t fully be realized, such as access to talent that might be more readily available in the Dallas suburbs, or an allegedly more favorable business climate. (Texas has the nation’s top business climate, according to the publication Site Selection; Kentucky is 23rd.)
The company has cited “increased collaboration” and “bringing our people together” for its reasoning behind the move. But KFC is simply moving from one building housing Yum Brands employees to another building housing Yum Brands employees. Maybe there might be some brand collaboration that might benefit. But now none of the restaurant chains that Yum operates will be housed in the building housing Yum brass.
We’re not sure why keeping Yum separate from all its brands makes sense, unless the company has long-term plans for a wholesale move to Texas.
Some have speculated to us that this is ultimately a cost-saving move, which makes sense given KFC’s struggles in recent years in its home market. It may also give the company reason to inject large numbers of new workers into the brand assuming that some people opt not to make that move.
Ultimately, however, we believe moving KFC away from its home market will do little to improve the brand and, in fact, may do more damage.
There is almost no correlation between chains associated with states and the location of their corporate headquarters. Texas Roadhouse is located in Louisville, after all. And Church’s Texas Chicken is based in Atlanta.
But few restaurant chains are as closely associated with their home state as is KFC. Moving that chain away from Kentucky is like moving Dunkin’ out of Massachusetts or McDonald’s out of Chicago. It’s a drastic move that should only be done when absolutely necessary. And we’re not convinced this was the case.