Pizza Hut 2005 Annual Report Download - page 6

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with฀over฀100฀units.฀We฀have฀also฀experienced฀early฀suc-
cess฀with฀KFC฀with฀an฀offering฀that฀includes฀a฀vegetarian฀
menu฀to฀broaden฀consumer฀appeal฀to฀one-third฀of฀India’s฀
1.1฀billion฀ people.฀ In฀ Russia,฀ we฀ forged฀ a฀ very฀ unique฀
partnership฀with฀Rostik’s,฀the฀leading฀fast฀food฀chicken฀
brand.฀Rostik’s฀will฀be฀co-branded฀with฀KFC฀and฀feature฀
our฀world฀famous฀Original฀Recipe.฀Interestingly,฀this฀was฀
the฀same฀strategy฀that฀Colonel฀Sanders฀used฀to฀launch฀
KFC฀in฀the฀U.S.฀when฀he฀sold฀his฀first฀franchise฀in฀Utah฀to฀
“Harman’s฀Restaurant฀Featuring฀World฀Famous฀Original฀
Recipe฀ Chicken.”฀ This฀ move฀ gives฀us฀ immediate฀ scale฀
of฀ 100฀ restaurants฀ and฀ the฀ local฀ operating฀ capability฀
from฀one฀of฀Russia’s฀top฀food฀service฀companies฀led฀by฀
Rostislav฀Ordovsky.฀By฀the฀way,฀it฀took฀us฀over฀10฀years฀
to฀develop฀100฀restaurants฀in฀China฀ and฀India,฀ so฀our฀
Russian฀move฀definitely฀represents฀a฀bold฀step฀forward฀in฀
this฀major,฀emerging฀consumer฀market.
In฀Continental฀Europe,฀we฀are฀achieving฀the฀largest฀
average฀unit฀volumes฀we฀have฀in฀the฀world฀with฀KFC฀France.฀
This฀is฀translating฀to฀very฀good฀unit฀economics฀so฀we฀are฀
beginning฀to฀expand฀with฀both฀company฀operations฀and฀
new฀franchisees.฀Unfortunately,฀we฀continue฀to฀struggle฀in฀
Germany฀and฀Holland.฀However,฀the฀recent฀introduction฀of฀
television฀advertising฀in฀Holland฀gives฀us฀hope฀that฀we฀are฀
not฀far฀off฀from฀having฀an฀investable฀proposition.
Looking฀ ahead,฀ we฀ have฀ made฀ the฀ strategic฀ deci-
sion฀ to฀ put฀ more฀ emphasis฀ on฀ expanding฀ Pizza฀ Hut฀
Home฀Delivery฀and฀Taco฀Bell฀around฀the฀globe.฀Given฀the฀
tremendous฀success฀we฀have฀had฀with฀both฀these฀busi-
nesses฀in฀the฀U.S.,฀we฀are฀confident฀of฀significant฀profit฀
growth฀over฀time.
I฀want฀to฀emphasize฀that฀developing฀new฀brands฀and฀
new฀markets฀is฀tough.฀Building฀consumer฀awareness฀and฀
acceptance฀takes฀time.฀It฀also฀takes฀time฀to฀build฀local฀
operating฀capability.฀Our฀approach฀is฀more฀like฀the฀tor-
toise฀than฀the฀hare.฀We฀will฀be฀patient฀and฀always฀mindful฀
of฀overall฀profitability฀and฀returns.฀Going฀forward,฀we฀are฀
committed฀ to฀ continue฀ to฀ add฀ at฀ least฀ 700฀ new฀ units฀
each฀year฀and฀do฀it฀profitably.฀Consider฀this,฀excluding฀the฀
China฀Division฀we฀only฀have฀6,200฀KFCs฀and฀4,600฀Pizza฀
Huts฀ compared฀ to฀ over฀ 16,000฀ units฀ McDonald’s฀ has฀
in฀international฀markets฀outside฀China.฀The฀potential฀is฀
obvious฀and฀we฀are฀determined฀to฀build฀our฀international฀
business฀the฀right฀way.
INTERNATIONAL฀ DIVISION฀ KEY฀ MEASURES:฀ +10–15%฀ OPERAT-
ING฀PROFIT฀ GROWTH;฀+5%฀ SYSTEM฀ SALES฀ GROWTH;฀+700฀NEW฀
UNITS/YEAR.
Be฀The฀Best฀At฀Providing฀฀
Branded฀Restaurant฀฀
Choice฀and฀Multibranding฀฀
Great฀Brands
#3
The฀foundation฀of฀our฀company฀is฀a฀portfolio฀of฀cate-
gory฀leading฀U.S.฀based฀brands฀that฀have฀outstanding฀
economics฀on฀a฀stand-alone฀basis.฀We฀have฀individual฀
management฀teams฀focused฀on฀making฀these฀brands฀
more฀and฀more฀powerful฀each฀ year฀by฀building฀even฀
more฀ relevance,฀ energy฀ and฀ differentiation฀ for฀ our฀
customers.฀Each฀of฀our฀brand฀presidents฀will฀tell฀you฀
how฀they฀are฀doing฀just฀that฀later฀on฀in฀the฀report฀but฀
let฀me฀share฀the฀major฀highlights฀and฀challenges.
First,฀Taco฀Bell฀arguably฀had฀the฀best฀performance฀of฀any฀
brand฀ in฀ the฀ restaurant฀ category,฀ generating฀ 7%฀ same฀
store฀ sales฀ growth฀ on฀ top฀ of฀ 5%฀ last฀ year.฀ Taco฀ Bell’s฀
“Think฀Outside฀the฀Bun®”฀advertising฀campaign฀continues฀
to฀ break฀ through฀ the฀clutter,฀featuring฀ innovative฀ ideas฀
like฀ the฀ successful฀ Big฀ Bell฀ Value฀ Menu®฀ and฀ the฀ new฀
Crunchwrap฀Supreme.฀Given฀the฀continuous฀sales฀growth฀
we’ve฀had฀the฀past฀five฀years,฀average฀unit฀volumes฀are฀
well฀over฀$1฀million฀and฀as฀a฀result฀the฀brand฀is฀now฀poised฀
for฀significant฀net฀new฀unit฀development฀in฀2006.
Next,฀ KFC฀ had฀ a฀ dramatic฀ turnaround,฀ experienc-
ing฀+6%฀same฀store฀sales฀growth,฀after฀being฀down฀2%฀
last฀year.฀This฀result฀was฀driven฀by฀improving฀our฀value฀฀
perception฀ with฀ customers฀ by฀ introducing฀ the฀ 99-cent฀
We฀have฀individual฀฀
management฀teams฀focused฀฀
on฀making฀our฀brands฀more฀and฀฀
more฀powerful฀each฀year฀by฀building฀
even฀more฀relevance,฀energy฀฀
and฀differentiation฀for฀฀
our฀customers.
4.฀ ฀ ฀ |฀ ฀ ฀ Yum!฀Brands,฀Inc.