Pizza Hut 2010 Annual Report Download - page 9

Yum! Restaurants International, which operates in over 110 countries and territories outside the US and China,
continues to deliver on this strategy as it delivered 11% full year operating prot growth prior to foreign currency
translation. We treasure YRI’s high-return franchising model with over 90% of our new restaurants built by
franchisees who generate over $740 million in franchise fees, requiring little capital on our part. Driven by this
franchisee development machine, we opened nearly 900 new restaurants in over 75 countries. That’s the
eleventh straight year we have opened more than 700 new units, including 548 in emerging markets, and our
pipeline remains strong as we go into 2011. YRI now has 6,350 restaurants in emerging markets across 67
countries, a level that is unmatched by competitors. This impressive unit growth is the most obvious sign of the
health of our brands internationally.
Just like in China, our infrastructure represents a stand-out competitive advantage. Here I always tip my hat to
the foresight of PepsiCo, which prior to our spin-off, invested nearly 40 years and billions of dollars to establish
the global network we’ve turned into a 14,000+ unit powerhouse. The reality is it would take the same time
and commitment for others to reach our size and scale, and frankly, we don’t expect most US competitors to
have signicant international businesses for a long time. As it stands, unlike the US where streets are lined with
competition, we only face McDonald’s and Domino’s as major global competitors.
Meanwhile, we are off and running, widening our competitive advantage
and getting stronger and more diversied every year. What excites me
most is that there’s no doubt our calculated investments in high potential
markets is paying off. We made major progress creating new growth
vehicles by investing in emerging markets like India, Russia and Africa, as
well as beginning to develop Taco Bell into a truly global brand. 2010 was
a milestone year for our business in India, particularly with the KFC brand.
KFC in India surpassed 100 units, had terric sales growth and now has
very good unit economics. This gives us the infrastructure and scale to fuel
aggressive growth going forward. Pizza Hut in India is already in 34 cities
with 171 restaurants and has been voted the “Most trusted food service
brand” for the past six years. What really gets me excited when I visit our
restaurants in India is the clear evidence that our operations capability
there is just like China. In Russia, we made an acquisition that gave us full
management control of the Rostiks-KFC brand, giving us 150 restaurants
in total. I have to tell you we’re very excited to have over 100 KFCs in both
Russia and India. It took us ten years to get to 100 units in China, so we’re
denitely on the ground oor of growth in these two important markets.
In Africa, we already have a dominant market position in South Africa with
over 600 KFCs. We’re now leveraging that powerhouse infrastructure to
build new restaurants in Nigeria, Ghana and East Africa. We’re extremely
happy with how well consumers have taken to the KFC brand and how
enthused our franchisees are about the opportunity ahead. In all, we
can see adding 3,000 new KFCs by 2020 in the emerging markets of
India, Vietnam, Russia, Pakistan and the African continent. At the same
time, we’re also making progress developing Taco Bell internationally. We
entered 10 new countries in the past two years, and we’re building more
and more condence Taco Bell will become a truly global brand. We expect
to build an additional 100+ restaurants by 2015, with tremendous growth
potential over time. In Continental Europe, YRI also made progress getting
to scale in France, where we have over 200 units and the highest average
unit volumes in the world, and in Germany, where strong sales growth is outpacing the industry. Additionally,
we see a huge opportunity to leverage our existing assets by expanding KFC’s Krusher frozen beverage line,
expanding non-fried products, and testing breakfast. We’re also focused on improving our operating model at
Pizza Hut to better separate casual dining from our carryout and delivery business in order to drive stronger
returns. Finally, as we shift our resources to support high-growth, high-return businesses, we elected to
refranchise our Taiwan and Mexico restaurants. These transactions, as well as other signicant improvements in
our company-owned restaurants, improved our restaurant margins 80 basis points. Outside of China and the US,
we expect the consuming class population to grow to 2 billion people by 2020 from 1.1 billion today. That creates
a huge opportunity for us — with just over 14,000 restaurants compared to 17,500 in the US alone, YRI has
barely scratched the surface and is just on the ground oor of global growth.
We opened nearly 900 new
restaurants in over 75 countries,
including 548 in emerging
markets.
India
France