Colonel Sanders at 65: A $105 Check, Then a $2 Million Sale

In 1955 Harland Sanders turned 65 and received his first Social Security check. It was for $105. At about the same time he learned that the business he had spent 25 years building was finished.

The new Interstate 75 was going to bypass his roadside restaurant in Corbin, Kentucky. The travelers who had stopped for his fried chicken would now drive past several miles away. In 1956 he sold the restaurant at auction, for less than it had been worth a few years earlier. After paying his debts he had his savings, his Social Security check and a recipe.

Eight years later he sold the business he built on that recipe for $2 million.

A life of odd jobs

Sanders was born in 1890 on a farm near Henryville, Indiana. His father died when he was six, and with his mother out working, he cooked for his younger brother and sister. He left school in the seventh grade.

For the next three decades he tried almost everything. He worked as a farmhand, a streetcar conductor, a railroad fireman, an insurance salesman, a ferry-boat operator and a tire salesman. He studied law by correspondence. Many of these jobs ended badly, some because of his temper.

In 1930, at 40, he took over a service station in Corbin, in the hills of southeastern Kentucky, on the main road from the Midwest to Florida. Hungry travelers kept asking where they could eat, so he started serving them at his own dining table in the back. The food was so popular that he opened a restaurant, then added a motel. In 1935 the governor of Kentucky made him an honorary Kentucky Colonel.

The recipe and the pressure cooker

The restaurant burned down in 1939. Sanders rebuilt it, and by 1940 he had settled on the recipe he would sell for the rest of his life: chicken coated in a mix of 11 herbs and spices. His other innovation was speed. Frying chicken in an open pan took about half an hour. Sanders adapted the new pressure cookers to fry it in a fraction of the time, so travelers did not have to wait.

His first franchise came almost by accident. In 1952 he visited a friend, Pete Harman, who ran a busy restaurant in South Salt Lake, Utah, and cooked his chicken for him. Harman started selling it, calling it Kentucky Fried Chicken, and paid Sanders a royalty of a few cents for every chicken he sold. Harman’s sales more than tripled in the first year, mostly from chicken. A few other restaurant owners took the same deal.

At the time it was a sideline. Sanders still thought his restaurant in Corbin would keep him comfortable for life.

On the road at 65

Then the interstate came. Sanders later said the highway forced him to choose a new direction, so he went into franchising “in earnest.”

With his wife, Claudia, he drove from town to town with a pressure cooker and bags of his seasoning in the car. He would walk into a restaurant, offer to cook his chicken for the owner and staff, and, if they liked it, shake hands on a deal: the restaurant would buy his seasoning and pay him a few cents for every chicken it sold. Most agreements were sealed with a handshake. To save money he sometimes slept in the back seat of his car. His wife mixed and shipped the seasoning from home.

He also turned himself into the brand. The white suit, the black string tie and the white goatee made him look like the Southern gentleman on every bucket.

The deals added up. By 1963 more than 600 restaurants in the United States and Canada were selling Kentucky Fried Chicken. The business was run from Shelbyville, Kentucky, from the building that later became the Claudia Sanders Dinner House. The business had grown too big for a man in his seventies to run from his kitchen.

The $2 million sale

In 1963 a 29-year-old Kentucky lawyer named John Y. Brown Jr. and a Nashville investor, Jack C. Massey, began trying to buy the company. Sanders resisted, then agreed. In 1964 they paid him $2 million. He also received a lifetime salary of $40,000 a year, later raised, a seat on the board, the Canadian franchises and a job as the company’s ambassador.

Brown and Massey turned the business into something Sanders had never imagined: a chain of stand-alone takeout restaurants with national advertising. The company went public in 1966. In 1971 they sold it to the drinks company Heublein for about $285 million, by which time there were about 3,500 Kentucky Fried Chicken restaurants. Brown later became governor of Kentucky.

Sanders came to regret selling for so little, according to The New York Times. He also complained loudly about the new owners’ food, once calling their gravy unfit to eat. But he kept working as the face of the company, traveling hundreds of thousands of miles to visit restaurants, until shortly before his death in December 1980, at 90.

What the record shows

• A location can disappear overnight. One new highway ended a restaurant that had worked for 25 years.
• Sell the method, not just the meal. Franchising let one recipe earn money in hundreds of kitchens at once.
• Age is not the limit people assume. Sanders built his fortune after 65.
• Know what you are selling. $2 million was a fortune to Sanders, and a bargain for buyers who sold for $285 million seven years later.

McDonald’s grew through franchising too, but it made its real money from the land under the restaurants: read how McDonald’s became a landlord. For another founder whose first business was taken away by forces beyond his control, see Sam Walton’s lost store. And Henry Ford, too, failed twice before he succeeded.