Pizza Hut 2003 Annual Report Download - page 3

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We thank our friends from PepsiCo who invested billions of dollars to establish the global network
we inherited for both KFC and Pizza Hut. The happy reality is that it would take years of investment
for any of our competitors to reach our size and scale (with the obvious exception of McDonald’s,
which already makes $1.6 billion outside the U.S., demonstrating the size of the prize).
Our plan is to leverage our big scale markets. We have 11 countries and franchise business units
that have almost 500 restaurants or more. We’re continuing to focus our international company
operations investment in seven of these countries that account for over 70% of our international
operating profit. Our franchise and joint venture partners are driving system growth by opening more
than 70% of our new international restaurants. Importantly, our franchisees are using their capital,
not ours, to grow their business since we strategically elected not to invest in our franchisees’ real
estate, like some other franchisors do. We love the high return franchise business!
The silver bullet in our portfolio has to be China. What a business and what an incredible
opportunity! KFC and Pizza Hut already have 1,000 and 120 restaurants in China, respec-
tively. We have a senior tenured team that has worked together for over ten years, building
the business from scratch to where we now make $157 million in operating profit, up 42%
versus a year ago.
In addition, we have the unique advantage of owning our own food distribution system that
gives us coverage in every major Chinese province and access to almost the entire 1.3 billion
population. We also have one of the largest real estate teams of any retailer in the world that
opened up 270 new restaurants in 2003. Our China operations are also best in class, with a
highly educated workforce (64% of the restaurant general managers have at least a college
education, the rest are plain smart!). We estimate there are 450 million urban customers who
can afford our food in the fastest growing economy in the world. KFC is already the Chinese
customers’ favorite brand and Pizza Hut is the number one casual dining chain. We just opened
a Taco Bell Grande dine-in format that is off to a great start. The Chinese love our food and
we love China. I’ve said it before and I’ll say it again, there is no doubt in my mind that one
day we will have more restaurants in China than we do in the U.S.
Left: Seventeen years after opening
the fi rst KFC in China, Yum! Brands
celebrated the openin
g
of its 1,000th
restaurant, located in Beijing.
Right: KFC in China gathered all
of its 1,000 Restaurant General
Managers together as part of its
Annual Convention to mark the
1,000th restaurant milestone.
We’re continuing to
focus our international
company operations
investment in seven
countries.
1.
Above: The United Kingdom, one of our
key high-growth markets, accounted
for $97 million in operating profi t in
2003.