As I heard it, the honchos at Kentucky Fried Chicken found out via market research that the organization had been taking a hit because the public was staying away from "Fried."
Snopes has that as only one of 3 reasons... http://www.snopes.com/horrors/food/kfc.htm
A move to de-emphasize "chicken" because KFC planned to offer a varied menu that included other types of food. (The Boston Chicken corporation took the same approach for the same reason, changing their name of their retail food outlets to Boston Market.)
A desire to eliminate the word "fried," which has negative connotations to the increasingly health-conscious consumer market.
A recent trend towards the abbreviation of long commercial titles, as demonstrated by other companies' employing shortened forms of their names, such as The International House of Pancakes (IHOP) and Howard Johnson's (HoJo).
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