Pizza Hut 2007 Annual Report Download - page 6

Download and view the complete annual report

Please find page 6 of the 2007 Pizza Hut annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 86

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86

4
YRI is a diverse,
high-return
business, opening
a record 852
new traditional res-
taurants across
six continents
last year!
more convinced than ever that one day we will have more restaurants and profits in China
than we do in the U.S., so we are glad that we’ve made an investment into along-term
competitive advantage that’sgetting stronger. That’smy story and I’m sticking to it!!!
CHINA DIVISION KEY MEASURES: 20% OPERATING PROFIT GROWTH; +20% SYSTEM SALES
GROWTH IN MAINLAND CHINA; AT LEAST 425 NEW UNITS PER YEAR IN MAINLAND CHINA.
Yum! Restaurants International (YRI), which operates in over 100 countries and ter-
ritories outside of China and the U.S., had its best year yet in 2007.YRIdelivered same
store sales growth of 6%, system sales growth of 15% and operating profit growth of 18%,
resulting in record operating profit of $480 million. Here we have ahigh return franchising
model with 87% of thebusiness being owned and operated by franchisees who are also
opening up over 90% of the new restaurants and generating $568 million in franchise fees,
requiring minimal capital on our part. Like China, YRIisatremendous growth vehicle, but
we believe it may have even more potential. While KFC and Pizza Hut are already global
brands, with atotal of 11,686 restaurants, we have barely scratched the surface reaching
acombined populationof 5billionpeople.
What’s more, we are getting stronger and more diversified each year. Weopened a record
852 new traditional restaurants across six continents last year. That’sthe eighth straight
year we’ve opened more than 700 units. Our ever increasing scale fuels growth as more
restaurants and more sales leads to more marketing and an even stronger organization.
In fact, our system spent approximately $650 million in marketing last year while YRIspent
$375 million in G&A. This global infrastructure, coupled with our over 750 dedicated
franchisees, is our single biggest competitive advantage at YRI. Forthis we are largely
indebted to PepsiCo who, priorto ourspin-off in 1997, invested 40 years and billions
of dollars to establish the global network we’ve turned into a12,000 unit powerhouse.
The realityisitwould take the sametime and commitment for our competition to reach
our size and scale, and frankly, we don’t expect most U.S. competitors to have significant
international businessesfor a long time to come.
We’re focused on profitably driving international expansion in three global arenas —
franchise only markets, established company operations markets, and emerging,
underdeveloped markets with huge populations.
When you look at ourcore franchise and company business in total for the year, I’m
especially pleased with the consistently strong results we had across the board, with
only a very few soft spots.
Our franchise restaurants generated franchisee fee growth of 15% in 2007 and I’m
especially pleased with the consistent growth we are seeing from ourgreat franchise
business units. I’d like to give aspecial congratulation to our teams in Asia 19%, Caribbean
Latin America 12%, Middle East Northern Africa 32% and South Africa 32%.
In ourcompany ownership markets, our Australian and Mexico businesses had excellent
years on top of strong year ago performance, which is the kind of consistency we are striv-
ing for. Wewere also pleased to see our KFC U.K. business turn around with exceptional
same store sales growth in a challenging market. If you’ll recall, we purchased the remaining
50% interest in 544 Pizza HutRestaurants in the U.K. from Whitbread, PLC which had been
an underperforming market. While the team has set a clear direction for a turnaround, the
#2.
Drive
Aggressive
International
Expansion and
Build Strong
Brands
Everywhere.
Yum! Restaurants
International generated
record operating profit of
$480 million in 2007.