Yum!

Brands
Symbol: YUM Presentation Made by Ebrahim Kaku September 07 2012

UNIVERSITY OF MUMBAI
PROJECT ON GROWTH STRATEGIES BY YUM ! BRAND INC. MASTER OF COMMERCE (ADVANCED ACCOUNTING) SUBJECT: STRATEGIC MANAGEMENT SEMESTER 1 2012-13 In Partial Fulfillment of the Requirement under Semester Based Credit and Grading System for Post Graduates (PG) Programme under Faculty of Commerce SUBMITTED BY KAKUBHAI EBRAHIM MANNAN ROLL NO: 10

PROJECT GUIDE DR. ( MS. ) RAJESHWARY G

K.P.B.Hinduja College of Commerce, 315 New Charni Road, Mumbai

400004.

CERTIFICATE
This is to certity that Mr. KAKUBHAI EBRAHIM MANNAN of M.Com. Advanced Accounting Semester 1st [2012 - 2013] has successfully completed the project on GROWTH STRATEGIES BY YUM ! BRAND INC. under the guidance of DR. ( Ms.) Rajeshwary G

Project Guide

-----------------------

Course Coordinator
Internal Examiner External Examiner Principal

------------------------------------------------------------------------------------------

Date: --------------------Place: Mumbai

DECLARATION

I Mr. Kakubhai Ebrahim Mannan the student of M.Com ( AdvanceAccounting) 1st Semester ( 2012 2013 ), hereby declare that I have completed the project on Growth strategies by yum! Brand inc. .

The Information submitted is true and original to the best of my knowledge.

Kakubhai Ebrahim Mannan

(signature)

ACKNOWLEDGEMENT

The pleasure that follows the successful completion of an assignment would remain incomplete without a word of gratitude for the people without whose co-operation the achievement would have remained a distant dream. So I would like to intend my immense in debtless to all of them who have guided and motivated me through my research project.
I sincerely thank to all for their valuable contribution without which this project report would have not reached its goal. . My sincere thanks go to my supervisor Dr. ( Ms.) Rajeshwari, under whose help and guidance I could successfully complete my project. I would also like to thank my faculty of Advanced Accounting , for grooming me to with stand the challenges of professional career.

TABLE OF CONTENTS

INTRODUCTION

The following Managements Discussion and Analysis (MD&A), should be read in conjunction with the unaudited Condensed Consolidated Financial Statements (Financial Statements), the Cautionary Statements and our annual report on Form 10-K for the fiscal year ended December 30, 2006 (2006 Form 10-K). Throughout the MD&A the Company makes reference to certain performance measures as described below.

The Company provides the percentage changes excluding the impact of foreign currency translation. These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the foreign currency translation impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.
System sales growth includes the results of all restaurants regardless of ownership, including Company-owned, franchise, unconsolidated affiliate and license restaurants. Sales of franchise, unconsolidated affiliate and license restaurants generate

Agenda
Industry overview
Company overview Competitors Thesis points

1. Global 2. Management 3. Cash flow advantage Financial Data Risk factors

Industry overview
U.S: 945,000 restaurants

$552 billion in annual sales.

Quick Service Restaurants (QSR) consist of

72.8 % of the whole industry revenues.

Advantage of economies of scalelow

priced value meals

Fierce competition

Company Overview
Worlds largest quick service restaurant

(QSR) company based on number of system units

1997 spin-off of PepsiCo forms Tricon

2002 changed its name from TRICON

Global Restaurants, Inc. to YUM! Brands, Inc.

 Five concepts

KFC: chicken. Pizza Hut : quick-service pizza Taco Bell: Mexican-style food LJS: seafood categories A&W
Business structure

* Company-operating units * Independent franchisees or licensees

Units Distribution

3 segments: 1. United States - 20,000 units 2. YUM Restaurants International (YRI) 13,000 units 3. China 3,600 units

More than 36,300 units in more than 110

countries and territories

Competitor
McDonalds Dominos Pizza Burger King

Thesis points
1) Global distribution system which has great potential 2) Strong management team and energetic company culture 3) Strong cash flow

Thesis I: Strong overseas growth potential world-wide revenue distribution

(unit: million)
2008 US YRI China $4410 $2375 $2058 2007 4518 2507 2075 2006 4952 1826 1587

The China Division and YRI have been experiencing dramatic growth and now represent nearly 60% of the Companys operating profits

Ignore Stronger Greenback and Buy These Stocks

Comparison Between the growth of McDonalds and Yum

I.

Global Development---Rapid Growth in China

-rapidly growing economy -population of 1.3 billion

Mainland China

KFC
-Leading QSR 2500 units in 500 cities -Yum! opens nearly one new KFC every day in mainland China (Q4 2008)

Pizza Hut
-Western-style casual dining restaurants -400 in 100 cities -the first restaurant chain to introduce pizza

Long Term GOAL

at least 20,000 units in mainland China.

China division system sales growth

2008 2007 31% 31%

2006 26%

2005 13%

RESEARCH METHODOLOGY

SO, why is Yum! successful?

Competitive advantages:

1. Food Quality and Flavor! 2. Product Strategy: localization -Foreign brand with Chinese Character -Promote new product every months
-Combine Chinese dining tradition

 3. Marketing the Brand

-

Make restaurant a social communication place

- Modern lifestyle behind the food

Not a Coincidence!!
Survey Q: Why do you go to KFC or Pizza Hut? A: Food Flavor and Quality: 85% Eating Environment: 43.6% Convenience: 38.2% Price: 25.5% Follow trend or advertisement: 0%

Manager telephone interview

Q: In your opinion, what is the main reason that
Yum! Brands can be successful in China?

A: 1. Quality
2. Food Flavor 3. Service: targeted to different age populations - Birthday party - Student discount

Can the success continue in the future?

-Yes!
1. Low individual visiting frequency for

existing customers consistent and stable consumption pattern

Survey Q: How often do you eat in these restaurants? KFC Occasionally: 57.4% Pizza Hut Occasionally: 83.3%

2. Large Potential Market for Lower Income Population

Survey Q: How much do you spend on average every time you go to KFC? A: 15-25 RMB2.2-3.6 Dollar 56% 25-50 RMB3.6-7.1 Dollar 36.4% Pizza Hut? 30-50 RMB4.3-7.1 Dollar 34.5% 50-80 RMB7.2-11.4 Dollar 34.5%

Survey Q: If there is an economic crisis, how will it influence your consumption in these restaurant? No Change: 55.6% Both decrease: 27.8% Decrease in Pizza Hut, no change in KFC: 13%

Whats more. New Brand, New Product

Pizza Hut Home Service (pizza delivery)

East Dawning (Chinese food)

20% shares of Little Sheep Company, a

Chinese Hotpot system restaurant

Joining Hotpot

II. Overseas--International
YRI Revenues: $3.0 billion

Operating Profit: $528 million (2008) 9 straight years of opening over 700 new restaurants. Company expects to continue to experience strong growth in new markets, including India, France, and Russia.

Increase of Percentage In Franchise Fees Around The Globe (in 2008)

Asia (excluding China) 19% Latin America 12% Middle East Northern America 32% South Africa 32%

India
Interview Indian students at UVa

- Develop in recent years - Localization of food, offer vegetarian options - Welcomed by young people - Large growing potential

USA
Highly competitive marketplace Slower profit growth But continues to produce strong cash

flows.

Furthermore . . .
Multibranding, should strengthen volume

sales
Refranchising company-owned restaurants.

By the end of 2010, management hopes to own less than 10% of its U.S. restaurants (down from 20%)More cash flow

Thesis II. Management

Core CHAMPS

Cleanliness, Hospitality, Accuracy, Maintenance, Product Quality and Speed of Service

Various senior operators visit the companys

restaurants from time to time to help ensure adherence to system standards and mentor restaurant team members.

VAR about Management

- Challenging - Systematic - Like a family

Thesis III: Strong Cash Flows

In 2009, it is important to note that

management does not need to access the credit markets to finance their company
Strong cash flow and balance sheet provide

them with the flexibility to successfully navigate through these challenging financial times.

3 Year Cash Flow Breakdown

2008 Cash flow by operating 1521 activities Repayments of long(268) term debt Capital spending Cash and Cash Equivalents (935) $216 2007 2006 1551 1257 (24) (211)

(726) (572) $789 $319

Financial Data
Last Trade:27.65

Market Cap(bil) 12.68B

P/E 14.5 EPS (ttm):1.96 P/S Ratio 1.09 5-Y Avg Ann Return 6.91% Annual Dividend $0.76 Dividend Yield 2.6% Beta 1.09

the cumulative total return

 2008 Highlights

Worldwide system sales growth of 7%

- same store sales growth of 3%+ international development of 1,495 new units

Worldwide operating profit growth of 8%

An industry leader with return on invested capital

(ROIC) of 20%.

 Earnings per share (EPS) for the previous

four quarters: $1.90

Worldwide Operating Profit growth: 11% PE ratio: 14 Stock price declines compared to 2008

2006 has the same stock price

Risk Factors
Operating results are closely tied to the

success of the Concepts franchisees.

Nature and volatility of the foreign

currency markets
Influence by commodity price

Risk, but also OPPORTUNITY!

Foreign currency factor can be a great

advantage for Yum! Brands

US Dollar depreciation relative to RMB

more of an opportunity than risk

ARTICLE
Yum! to invest $100mn to triple number of restaurants in India Yum! Restaurants India NEW DELHI: Yum! Restaurants India, the operator of the Pizza Hut, KFC and Taco Bell restaurant chains, today said it will invest USD 100 million to more than treble the number of eateries it operates across the country to 1,000 by 2015."We have a plan to more than triple the number of restaurants that we currently have in the next five years, taking the total number to 1,000. The company will invest USD 100 million for the same," Yum! Restaurants India Managing Director Niren Chaudhary told reporters here on the sidelines of the India Economic Submit.

SUMMARY

Yum! Brands, a Global Fast Food FranchiseBharatbook.com added a new research report on "Yum! Brands, Inc.: Success fueled bydeveloping markets" into its market report catalogue for reselling.Yum! Brands, Inc.: Success fueled by developing marketsYum! Brands, Inc. develops, operates, franchises, and licenses KFC, Pizza Hut, Taco Bell,Long John Silvers, and A&W. In September 2011, Yum sold its Long John Silvers andA&W Restaurant chains. 2010 saw China overtake the US as Yums most profitableregion. In February 2012, Yum revealed that its fourthquarter profit for 2011 rose by 30%,fueled primarily by overseas growth. http://www.bharatbook.com/market-research-reports/recreation-market-researchreport/yum-brands-inc-success-fueled-by-developing-markets.html Features and benefits* MarketLine Case Studies describe topics such as innovative products, business models,and significant company acquisitions.* Fact-based and presented in an accessible style, they explain the rationale of commercialdecisions and illustrate wider market and economic trends.HighlightsYum! has over 35,500 restaurants in more than 110 countries. It opened over 1,500restaurants in 2011 (656 of them in China) and plans on opening another 1,500 during2012. The company plans on increasing its restaurants in India from 374 to 2,000 by 2020,investing $1 billion in the process.Your key questions answered* What has Yum! Brands done to address its problems in the US market?* What plans does Yum! have for China, and where is it looking beyond this particular market?OVERVIEWCatalystSummaryANALYSISYum! Brands, a global fast food franchiseAn overviewSale of assetsLong John Silvers and A&W Restaurants are soldYum! in the USThe US no longer Yums most profitable market

Yum! In ChinaChina now Yums most important marketCONCLUSIONYum! focuses on international markets for future growthAPPENDIXSourcesFurther ReadingAsk the analystFor more information kindly visit :http://www.bharatbook.com/market-researchreports/recreation-market-research-report/yum-brands-inc-success-fueled-bydeveloping-markets.html Or Contact us at :Bharat Book BureauPh.: + 91 22 27810772 / 27810773Fax: + 91 22 27812290Email: info@bharatbook.comWebsite:www.bharatbook.comFollow us on twitter: http://twitter.com/#!/Sandhya3BYum,food,beverages,market,research,reportBha rat Book Bureau810, Real Tech Park,8th Floor, Sector - 30A,Vashi, Navi Mumbai 400703

BIBLIOGRAPHY
BOOKS:

ARTICLE: Yum! to invest $100mn to triple number of restaurants in India PTI Nov 15, 2010, 02.37pm IST

WEBSITES: www.google.com www.wikipedia.com www.yum.com www.yumkitchen.com

Questions?