Pizza Hut 2006 Annual Report Download - page 4

business, with +20% store level margins and a cash pay-
back on investments of less than two years. We uniquely
own our food distribution system that gives us coverage
in every major Chinese province. This has allowed us to
expand KFC across 402 cities, and bring Pizza Hut to 62
cities. We also have one of the largest real estate teams of
any retailer in the world that opened 364 new restaurants in
2006. And we continue to grow our people capability ahead
of the business by recruiting and retaining talent with highly
sought, well-paying jobs.
The investment in infrastructure has given us an incredible
head start to tap an unprecedented opportunity. I liken it to
the days when Colonel Sanders, Glen Bell, Dan Carney and
Ray Kroc started KFC, Taco Bell, Pizza Hut and McDonald’s,
creating category leading brands in the U.S. that today reg-
ularly serve 300 million consumers at over 30,000 U.S.
restaurants. The Chinese middle class already represents
the size of the entire U.S. population, with 300 million
urban customers who can afford our food. Make no mis-
take, we are the pioneers on the ground floor of a booming
category in a growing mega market and we fully expect to
capitalize on the total opportunity.
That’s why our goal is to build dominant restaurant
brands in every significant category. So in addition to KFC
and Pizza Hut casual dining, we’ve recently developed
and are successfully expanding Pizza Hut Home Service.
We’ve also created our own quick service restaurant
chain, East Dawning, tailored to the local favorites of the
Chinese customer. We are offering affordable great-tasting
Chinese food in appealing facilities that separate us from
local competition. Our team is convinced that we will make
East Dawning a success and believe long-term it could
be our highest potential concept because — guess what?
Chinese people like to eat Chinese food!
Since I’m always asked how big we think we can be in China,
I’ll give you my crystal ball answer: We’re in the first inning of
a nine-inning baseball game. We clearly have a long runway
China is our highest
return international
equity business
with +20% store level
margins!
Build Dominant China Brands
in Every Major Category!
With KFC and Pizza Hut, we already have the dominant
brands in their respective categories in the fastest
growing economy in the world, with 1.3 billion people.
To prove the point, KFC has 1,822 quick service res-
taurants compared to 784 for McDonald’s, our nearest
competitor. Pizza Hut has 254 casual dining restaurants
and there is no other substantial casual dining chain in
mainland China.
The major factor for our success is that we have an out-
standing local team that has worked together for over 10
years to build these brands the right way from scratch. The
team started with the vision to become not only the best
restaurant company in China, but the best restaurant com-
pany in the entire world. I’m proud to say that we are doing
just that. I know this sounds like hyperbole, but you have
to see it to believe it. Just ask any analyst, investor or con-
sumer who has visited our Chinese restaurants, and they will
tell you we are building best-in-class brands and operations.
What’s more, it’s our highest return international equity
#1
1,822
784
McDonald’sKFC
Units in Mainland China
Great
Restaurants!
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