Pizza Hut 2008 Annual Report Download - page 160

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In 2008, the decrease in China Division restaurant margin as a percentage of sales was driven by higher commodity costs
(primarily chicken products), the impact of lower margins associated with new units during the initial periods of
operation, and higher labor costs. The decrease was partially offset by the impact of same store sales growth on restaurant
margin.
In 2007, the decrease in China Division restaurant margin as a percentage of sales was driven by higher commodity costs
(primarily chicken products), the impact of lower margins associated with new units during the initial periods of operation
and higher labor costs. The decrease was partially offset by the impact of same store sales growth on restaurant margin.
Worldwide General and Administrative Expenses
G&A expenses increased 4% in 2008, including a 1% unfavorable impact of foreign currency translation. This increase
was driven by approximately $49 million of G&A productivity initiatives and realignment of resources related to the U.S.
transformation as discussed in the Significant Gains & Charges section of this MD&A.
G&A expenses increased 9% in 2007, including a 2% unfavorable impact of foreign currency translation. Excluding the
additional G&A expenses associated with acquiring the Pizza Hut U.K. business (which were previously netted within
equity income prior to our acquisition of the remaining fifty percent of the business) and the unfavorable impact of foreign
currency translation, G&A expense increased 4%. The increase was driven by higher annual incentive and other
compensation costs, including amounts associated with strategic initiatives in China and other international growth
markets.
Worldwide Franchise and License Expenses
Franchise and license expenses increased 86% in 2008. The increase was driven by higher marketing funding on behalf
of franchisees, investments in our U.S. brands as discussed in the Significant Gains & Charges section of this MD&A and
increased provision for uncollectible receivables.
Franchise and license expenses increased 14% in 2007. The increase was driven by higher marketing funding on behalf
of franchisees, franchise convention costs and increased provision for uncollectible receivables.
Worldwide Other (Income) Expense
2008 2007 2006
Equity income from investments in unconsolidated affiliates $ (41) $ (51) $ (51)
Minority Interest(a) 11
—
—
Gain upon sale of investment in unconsolidated affiliate(b)(c) (100) (6) (2)
Contract termination charge(d)
—
—
8
Wrench litigation income(e)
—
(11)
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Foreign exchange net (gain) loss and other (16) (3) (7)
Other (income) expense $ (146) $ (71) $ (52)
Form 10-K