Pizza Hut 2002 Annual Report Download - page 6

#1 DRIVING INTERNATIONAL GROWTH. We clearly can
make the case that no other restaurant company has the kind of opportunity
we do outside of the United States. One of the things that we are most proud of
is that our international team has more than doubled its ongoing operating profit
in the five years we have been a public company. With a track record of adding about
1,000 new restaurants per year in each of the last three years, our international busi-
ness is now our largest and fastest growing division.
What’s more, there are only two competitors in our category of any size, McDonald’s and us, competing for the
international share of stomach. Consider this: McDonald’s earns over $1 billion a year in international profit; we
earn nearly $400 million and the next largest competitor is Burger King, which earns about $50 million. As you can
imagine, the biggest challenge to building a business outside the United States is achieving operational size and
scale for profitable growth and making sure you have the people capability to execute. Through a lot of hard work
and years of investment (thank goodness the money losing investment years were by Pepsico), we now have a very
experienced team of talented international executives and 560 franchisees operating in over 100 countries and ter-
ritories. It will take new entrants years of investment to reach our size and scale. The capability we have built is a
huge competitive advantage underpinning our growth.
Let me dimensionalize our company’s opportunity. In 1992, McDonald’s had a little over 4,000 international restau-
rants
— today they have over 16,000. When you look at Yum! today, we have about 11,800 international restaurants
with essentially two global brands — more than 6,800 KFCs and over 4,400 Pizza Huts. We’re committed to doubling
our number of international restaurants in the next eight to ten years by continuing to grow at a clip of 1,000+ new
restaurants a year with KFC and Pizza Hut. Not to mention the opportunities multibranding may unleash with Taco
Bell, Long John Silver’s and A&W. While we see our level of new restaurant development increasing gradually, we
are not predicting a more rapid increase because to do so could threaten the high standards we have for our returns.
We’re focusing our international company operations in seven countries that account for about 70% of our ongoing
operating profit in 2002, with China, the United Kingdom, Mexico and Korea receiving the majority of our company’s
capital investment because the returns are terrific. Our franchise and joint venture partners are driving system growth
by opening about 65% of our new international restaurants. Importantly, our partners are using their capital, not
ours, to grow their business as we do not invest in our franchisees’ real estate, like some other franchisors do.
China continues to be our rising star with approximately 800 KFCs and 100 Pizza Huts. In China, we have one of
the largest real estate teams, not just in the restaurant industry, but in any industry. Another unique advantage in
China is that we have our own distribution system that gives us coverage in every major province and access to
4.
Above With over 100 Pizza Huts in
China, the brand is the country’s
leader in the casual dining category.
Right Celebrations marked the
opening of the 700th KFC in China
(we opened our 800th in 2003!).
Customer Mania is taking hold around
the world. At a recent team dinner
hosted by KFC Malaysia Holdings,
Restaurant Managers from throughout
Asia dressed in their country’s tradi-
tional costumes and celebrated
Customer Mania.
We now have
a very experienced
team of talented international
executives and 560 franchisees
operating in over 100 countries
and territories.