Yum! makes plans to drive growth after China separation
Oct. 12, 2016
by MEAT+POULTRY Staff
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Yun Brands' separation from the China business will take place Oct. 31.
LOUISVILLE, Ky. – Yum! Brands, Inc. announced plans to drive growth of its KFC, Pizza Hut and Taco Bell brands following the separation from its business in China, which is expected to be completed by Oct. 31,. The company told investors at its conference in New York City Oct. 11 that the development of its three iconic brands, along with an increase in franchise ownership and creating a leaner cost structure will drive the company’s upcoming growth.
“Our mission is to build the world’s most loved, trusted and fastest-growing restaurant brands,” said Greg Creed, CEO of Yum! Brands. “The transformation we are announcing today is a significant investment in our future designed to build and strengthen KFC, Pizza Hut and Taco Bell around the world and to create even more long-term value for our shareholders. As a ‘pure play’ franchisor, the transformed Yum! Brands will become more efficient and capital light with an optimized capital structure, improved cash flow and laser-like focus on our key strategies to drive same-store sales and new unit growth worldwide.”
The company told investors it will be “more focused,” “more franchised” and “more efficient.”
In an effort to build growth at the three restaurant chains, Yum! Brands is focusing on four areas:
• “Building distinctive, relevant brands, by increasing investment in consumer insights, core product innovation, digital excellence and initiatives that strengthen the quality, convenience and appeal of the customer experience;
• “Developing unmatched franchise operating capability, by strengthening how we equip and recruit the best restaurant operators to deliver great customer experiences, and build and protect our brands;
• “Driving bold restaurant development through partnerships with growth-minded franchisees who can expand and penetrate markets with modern restaurants, strong economics and value; and
• “Growing unrivaled culture and talent to strengthen the customer experience and franchise success with best-in-class people capability and culture.”
Yum! Brands also plans to increase franchise ownership, from its current amount of 77 percent to 93 percent by the time of the separation from the China business to 98 percent by fiscal year ending 2018.
It also hopes to become more efficient by reducing annual capital expenditures from $500 million to $100 million, by fiscal year ending 2019.
“The separation of our China business provided a once-in-a-lifetime opportunity to review our operating model and consider all possibilities available under our new structure. The transformed Yum! Brands will maintain its geographic diversity with continued, meaningful exposure to the growth potential of the world’s largest consumer market, China, but with greater revenue stability by leveraging our four growth drivers. We will reinforce the distinctiveness of our brands and their relevance to customers, select the highest potential franchisees and help drive their success, expand more profitably in key markets across the globe and bolster training and talent initiatives to foster the culture that will be especially critical as we evolve into a highly franchised growth company,” Creed said.
Following the separation of the China business, Yum China Holdings, Inc. will become a licensee of Yum! Brands in Mainland China and will have exclusive rights to KFC and Pizza Hut in China. Yum China has more than 7,300 restaurants and more than 400,000 employees in over 1,100 cities, and generated over $8 billion in system sales in 2015.