Pizza Hut 2003 Annual Report Download - page 6

We are more confident than ever that multibranding
is potentially the biggest sales and profit driver in the
restaurant industry since the drive-thru window.
us more confident than ever that multibranding is potentially the biggest sales and profit driver
in the restaurant industry since the introduction of the drive-thru window.
We started with combinations of KFC/Taco Bell and Taco Bell/Pizza Hut Express. We learned that
we were able to add significant incremental average sales per unit, dramatically improving our
unit cash flows. Our franchisees then pioneered multibrand combinations of KFC and Taco Bell
with Long John Silver’s, the country’s leading seafood restaurant, and A&W All American Food,
which offers pure-beef hamburgers and hot dogs along with its signature Root Beer Float. Based
on outstanding customer feedback and results, we acquired Long John Silver’s and A&W in
2002. With this acquisition we tripled our multibranding potential in the U.S.
We can now open high return new restaurants in trade areas that used to be too expensive or
did not have enough population density to allow us to go to market with one brand. With multi-
branding, we believe we can take both KFC and Taco Bell to 8,000 units in the U.S. compared
to the over 5,000 each we have today. As we expand, we expect to take volumes to an average
of at least $1.1 million per restaurant.
One of the most exciting learnings we had in 2003, is that Long John Silver’s is performing
even better than expected …we call it our hidden jewel. That’s because there is no national
fish competitor in the QSR industry and consequently there is pent-up consumer demand for
seafood. In addition to outstanding sales results with KFC and Taco Bell, we have created a
Long John Silver’s/A&W combination that allows us to expand into “home-run” trade areas
where we know demand is high and KFC and Taco Bell are already there. The results have led
us to a “fish first” strategy with the goal of making Long John Silver’s a national brand.
I’m also pleased to report that we have created on our own a new multibrand concept called
WingStreet, which is a tasty line of flavored bone-in and bone-out chicken wings. We believe that
WingStreet can be an ideal multibrand partner for Pizza Hut’s delivery service. Initial customer
response is promising. We also acquired Pasta Bravo, a California fast casual chain with an
outstanding line of pastas at great value, to be a partner brand with Pizza Hut’s traditional
dine-in restaurants. Franchise testing is underway. We are confident multibranding will be every
bit as successful at Pizza Hut as it has been for our other brands.
In last year’s report, I stated that the biggest multibranding challenge is building the operating
capability to successfully run these restaurants. That’s still a fact. With branded variety comes
complexity. However, we have structured and invested to drive execution and it’s paying off.
We now have a fully dedicated team of operating experts who have improved back of house
Top: The popularity o
f
the Lon
g
J
ohn
Si
lver’s brand
g
rew
i
n
2003
a
s it became the
p
artner-of-choice
in Y
u
m!’
s
n
e
w M
u
l
t
i
b
r
a
n
d
r
estau-
rants. This
y
ear, Yum! has adopted
a
“fi sh fi rst” strategy of using the
Multibrand development concept to
get Long John Silver’s distribution up
to at least
3,000
un
i
ts and make
i
t a
nat
i
onal brand
.
B
ottom: Multibrandin
g
o
ff
ers our
c
ustomers more cho
i
ce and conve
-
nience by brin
g
in
g
to
g
ether two o
f
our great brands under one roof
.
4.