Pizza Hut 2006 Annual Report Download - page 6

U.S. restaurant brands have tried and failed to expand
internationally. Consequently, we don’t expect most U.S.
competitors to have significant international businesses
for a long time to come.
We continue to focus our company ownership in markets
where we generate significant returns and profitable unit
growth. I was particularly pleased in 2006 to announce
that we purchased the remaining 50% interest in 544
Pizza Hut restaurants in the United Kingdom from Whit-
bread, PLC. Pizza Hut is the leader in casual dining in the
U.K., which historically has been one of our strongest mar-
kets. While KFC is very strong and profitable in the U.K.,
Pizza Hut has had some challenges in recent years with our
joint venture structure, and we are confident that we will be
able to right the ship. We have already established a new
management team that’s bringing new energy to the busi-
ness. I’d also like to congratulate our Australia and Mexico
teams on their ability to continue to drive consistent profit
growth. South Korea continues to underperform and we
are working aggressively to turn the business around.
We are also vigorously pursuing growth in big, underdevel-
oped Yum! markets. We’re very proud that a consumer
survey last year in The Economic Times ranked Pizza Hut in
India, with 127 units, as the #1 most trusted brand among
21 to 40 year olds. We also have had early success
opening 21 KFCs in India featuring not only our delicious
chicken, but also a local vegetarian menu. In Russia, we
have gained immediate strength and scale by partnering
with Rostik’s, the country’s number one fast food chicken
chain, giving us about 100 restaurants overnight. (By the
way, it took us ten years to develop 100 restaurants in
China and India.) We’ve begun to convert those restaurants
to KFCs and the business is promising. We’re also mak-
ing significant progress in other European markets where
McDonald’s has a huge profit base. You might be surprised
to learn that our very highest KFC unit volumes in the world
are in France. We’re basically on the ground floor of these
emerging markets, and we’ve established the infrastructure
and people capability to build on our initial success.
One question we’re always asked by customers around the
world is “When will we get Taco Bell?” We’ve just begun
executing our strategy to take Taco Bell global. Our plan is
to open new restaurants in Mexico, the Middle East, India,
Japan, Canada and the Philippines over the next couple of
years. Whereas Pizza Hut and KFC brought U.S. brands to
established categories, chicken and pizza, our task is much
more difficult with Taco Bell because we have to establish
the Mexican food category and the brand, both of which are
unfamiliar in most countries. We will learn as we go and
look forward to reporting on our progress.
INTERNATIONAL DIVISION KEY MEASURES: +10% OPERATING PROFIT
GROWTH; +5% SYSTEM SALES GROWTH; 750 NEW UNITS/YEAR.
Improve U.S. Brand
Positions & Returns
The foundation of our company is in our portfolio of
category-leading U.S.-based brands. These brands have
demonstrated outstanding economics on a stand-alone
basis, and our U.S. business is very stable. We have aver-
aged 2% profit growth the past five years, and in 2006,
we generated over $1 billion in operating cash flow.
#3
Great
Brands!
We continue to focus
our company ownership
in markets where we
generate significant
returns and profitable
unit growth.
4