Pizza Hut 2011 Annual Report Download - page 110

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International Division Throughout YRI we and our franchisees use decentralized sourcing and distribution systems involving
many different global, regional, and local suppliers and distributors. In our YRI markets we have approximately 1,500 suppliers,
including U.S.-based suppliers that export to many countries.
U.S. Division The Company, along with the representatives of the Company’s KFC, Pizza Hut and Taco Bell franchisee groups,
are members in the Unified FoodService Purchasing Co-op, LLC (the “Unified Co-op”) which was created for the purpose of
purchasing certain restaurant products and equipment in the U.S. The core mission of the Unified Co-op is to provide the lowest
possible sustainable store-delivered prices for restaurant products and equipment. This arrangement combines the purchasing
power of the Concept-owned and franchisee restaurants in the U.S. which the Company believes leverages the system’s scale to
drive cost savings and effectiveness in the purchasing function. The Company also believes that the Unified Co-op has resulted,
and should continue to result, in closer alignment of interests and a stronger relationship with its franchisee community.
Most food products, paper and packaging supplies, and equipment used in restaurant operations are distributed to individual
restaurant units by third-party distribution companies. McLane Company, Inc. (“McLane”) is the exclusive distributor for the
majority of items used in Concept-owned restaurants and for a substantial number of franchisee and licensee stores. The Company
entered into an agreement with McLane effective January 1, 2011 relating to distribution to Concept-owned restaurants. This
agreement extends through December 31, 2016 and generally restricts Concept-owned restaurants from using alternative
distributors for most products.
Trademarks and Patents
The Company and its Concepts own numerous registered trademarks and service marks. The Company believes that many of
these marks, including its Kentucky Fried Chicken®, KFC®, Pizza Hut® and Taco Bell® marks, have significant value and are
materially important to its business. The Company’s policy is to pursue registration of its important marks whenever feasible and
to oppose vigorously any infringement of its marks.
The use of these marks by franchisees and licensees has been authorized in our franchise and license agreements. Under current
law and with proper use, the Company’s rights in its marks can generally last indefinitely. The Company also has certain patents
on restaurant equipment which, while valuable, are not material to its business.
Working Capital
Information about the Company’s working capital is included in MD&A in Part II, Item 7, pages 21 through 47 and the Consolidated
Statements of Cash Flows in Part II, Item 8, page 51.
Customers
The Company’s business is not dependent upon a single customer or small group of customers.
Seasonal Operations
The Company does not consider its operations to be seasonal to any material degree.
Backlog Orders
Company restaurants have no backlog orders.
Government Contracts
No material portion of the Company’s business is subject to renegotiation of profits or termination of contracts or subcontracts at
the election of the U.S. government.
Competition
The retail food industry, in which our Concepts compete, is made up of supermarkets, supercenters, warehouse stores, convenience
stores, coffee shops, snack bars, delicatessens and restaurants (including the QSR segment), and is intensely competitive with
respect to food quality, price, service, convenience, location and concept. The industry is often affected by changes in consumer
tastes; national, regional or local economic conditions; currency fluctuations; demographic trends; traffic patterns; the type, number
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