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There are two distinct reasons why Pepsi (and other PepsiCo soft drinks) and not Coke is sold at KFC.
Firstly, fast food restaurants use fountain dispense soft drinks instead of the cans and bottles that are sold in retail stores. This is far more profitable for the restaurant. However, fountain beverages require sophisticated and expensive equipment in order to blend and carbonate the beverage at the point of dispensing (syrup is blended with filtered water and carbonated in the restaurant).
Due to the equipment required, the soft drink contract is usually signed with only one supplier; in most cases, either the Coca-Cola Company or PepsiCo.
In the case of KFC, PepsiCo used to own the restaurant chain. KFC was spun out, along with Pizza Hut and Taco Bell, into a company called YUM. For PepsiCo, maintaining a close relationship (and supply agreement) with YUM remained a top priority since the availability of PepsiCo soft drinks along with fast food is a key strategic imperative.
PepsiCo has continued to retain the dispense contract with KFC in most countries. However, renewal terms are hard fought every two years or so. There is no long term assurance that KFC will never convert to dispensing Coca Cola beverages in the future.
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