Pizza Hut 2002 Annual Report Download - page 9

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7.
our very best operators to develop simplified operating and training systems. Our operating measures and margins
now approach those of our single brand units, but we still have much work to do. However, given the sales and profit
upside, the pain of working through the executional issues is more than compensated for by the gain we are gen-
erating. The best proof of this is that over 40% of our multibrand units are being opened by franchisees putting their
own hard-earned money in the game. Since franchisees only get behind initiatives that make sense for their customers
and long term economics, you can tell from their investment they’re as excited about multibranding as we are.
The bottom line is we now know multibranding is potentially the biggest sales and profit driver for the restaurant
industry since the advent of the drive-thru window. Asset sales leverage is the key to profitability in any retail category,
and multibranding provides that leverage for us. Our goal is to ultimately offer two brands in the vast majority of our
restaurant locations. We added almost 350 multibrand locations this year. With over 1,975 multibranded restaurants,
multibranding now represents nearly 6% of our worldwide system and about $2 billion in annual system sales.
Importantly, this strategy is very unique to Yum! We have a portfolio of leading brands. We have a huge asset
base of existing restaurants that is not capacity constrained. We have unpenetrated trade areas. We have a great
head start. And we’re really just getting started. Our goal is to transform the quick-service restaurant landscape
with multibranding.
#3 IMPROVING OPERATIONS OF OUR
GREAT BRAND PORTFOLIO WITH CUS-
TOMER MANIA. As you can see in this chart, we have the
leading brands in four major categories: pizza, chicken, Mexican-
style food, and seafood. A&W also gives us a quality hamburger
chain. Make no mistake. Growing these core brands is Job #1 for us!
Over the past 15 years, we’ve averaged about 2% blended domes-
tic same store sales growth. Yet, we’ve had some inconsistency by
brand (especially quarter to quarter) because we know we’re not nearly as good as we should be at running great
restaurants and making our customers happy. The rude reality is that our customer survey results indicate we rank
only in the middle to bottom tier on the basics, and the attitude we convey to our customers is frankly not as con-
sistently positive as it needs to be. We know the more our customers can count on a trusted experience every time
they visit one of our restaurants, the more consistent our sales will be. In 2002, Yum! was up 2% on a blended or
combined same store sales basis in the U.S. Taco Bell led the way, with same store sales up 7%, and KFC and Pizza
Hut were only flat, so clearly we can and should do better.
“Customer Mania to me is the
determination to have each and
every customer that comes
through your door become a
repeat customer
—
for life.”
Jim Vavrek, LJS/A&W Area Coach
seafood & Mexican
quick-service categories.
pizza,
chicken,
in the
leader
LEADERS IN FOUR FOOD CATEGORIES
(QSR Sales)
•Mexican 65%
•Chicken 46%
•Seafood 33%
•Pizza 15%
SOURCE: NPD Group, Inc./CREST
We are the
65%
46%