Pizza Hut 2012 Annual Report Download - page 102

YUM! BRANDS, INC.-2012 Form10-K10
Form 10-K
PART I
ITEM 2 Properties
As of year end 2012, the Company’s Concepts owned nearly 900 units and
leased land, building or both for nearly 6,700 units worldwide.These units
are further detailed as follows:
• The China Division leased land, building or both in more than 4,500 units.
•The International Division owned more than 100 units and leased land,
building or both in more than 1,000 units.
• The U.S. Division owned more than 700 units and leased land, building
or both in more than 1,000 units.
•The India Division leased land, building or both in more than 100 units.
Company restaurants in China are generally leased for initial terms of 10
to 15 years and generally do not have renewal options.Historically, the
Company has either been able to renew its China Division leases or enter
into competitive leases at replacement sites without a signifi cant impact
on our operations, cash fl ows or capital resources. Company restaurants
in the U.S. with leases are generally leased for initial terms of 15 or 20
years and generally have renewal options; however, Pizza Hut delivery/
carryout units in the U.S. generally are leased for signifi cantly shorter
initial terms with shorter renewal options.Company restaurants outside
of China and the U.S. with leases have initial lease terms and renewal
options that vary by country.The Company currently has approximately
800 units worldwide that it leases or subleases to franchisees, principally
in the U.S., U.K. and Mexico.
The China Division leases their corporate headquarters and research
facilities in Shanghai, China. The Pizza Hut U.S. and YRI corporate
headquarters and a research facility in Plano, Texas are owned by Pizza
Hut.Taco Bell leases its corporate headquarters and research facility in
Irvine, California. The KFC U.S. and YUM corporate headquarters and
a research facility in Louisville, Kentucky are owned by the Company.In
addition, YUM leases offi ce facilities for the U.S. Division shared service
center in Louisville, Kentucky.Additional information about the Company’s
properties is included in the Consolidated Financial Statements in Part II,
Item 8, pages36 through 70 .
The Company believes that its properties are generally in good operating
condition and are suitable for the purposes for which they are being used.
ITEM 3 Legal Proceedings
The Company is subject to various claims and contingencies related
to lawsuits, real estate, environmental and other matters arising in the
normal course of business.The Company believes that the ultimate
liability, if any, in excess of amounts already provided for these matters
in the Consolidated Financial Statements, is not likely to have a material
adverse effect on the Company’s annual results of operations, fi nancial
condition or cash fl ows.The following is a brief description of the more
signifi cant of the categories of lawsuits and other matters we face from
time to time.Descriptions of specifi c claims and contingencies appear
in Note19, Contingencies, to the Consolidated Financial Statements
included in Part II, Item 8.
Franchisees
A substantial number of the restaurants of each of the Concepts are franchised to independent businesses operating under arrangements with the
Concepts.In the course of the franchise relationship, occasional disputes arise between the Company and its Concepts’ franchisees relating to a broad
range of subjects, including, without limitation, marketing, operational standards, quality, service, and cleanliness issues, grants, transfers or terminations
of franchise rights, territorial disputes and delinquent payments.
Suppliers
The Company purchases food, paper, equipment and other restaurant supplies as well as certain services from numerous independent suppliers
throughout the world.These suppliers are required to meet and maintain compliance with the Company’s standards and specifi cations.On occasion,
disputes arise between the Company and its suppliers on a number of issues, including, but not limited to, general performance, compliance with
product specifi cations and terms of procurement and service requirements.
Employees
At any given time, the Company or its Concepts employ hundreds of thousands of persons, primarily in its restaurants. In addition, each year thousands
of persons seek employment with the Company and its restaurants.From time to time, disputes arise regarding employee hiring, compensation,
termination and promotion practices.
Like other retail employers, the Company has been faced with allegations of class-wide wage and hour, employee classifi cation and other labor law
violations.