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YUM! BRANDS, INC.-2012 Form10-K 26
Form 10-K
PART II
ITEM7Management’s Discussion and Analysis ofFinancial Condition and Results ofOperations
Income/(Expense)
2011 vs. 2010
2010
Store Portfolio
Actions Other
53rd Week in
2011 2011
Company sales $ 3,355 $ (322) $ (76) $ 43 $ 3,000
Cost of sales (976) 95 (23) (13) (917)
Cost of labor (994) 101 (7) (12) (912)
Occupancy and other (908) 95 13 (9) (809)
RESTAURANT PROFIT $ 477 $ (31) $ (93) $ 9 $ 362
Restaurant margin 14.2% 12.1%
In 2012, the decrease in U.S. Company sales and Restaurant
profi t associated with store portfolio actions was primarily driven by
refranchising.Signifi cant other factors impacting Company sales and/
or Restaurant profi t were same-store sales growth of 5%, including the
positive impact of less discounting, combined with the positive impact
of sales mix shifts as well as supply chain effi ciencies, partially offset by
higher restaurant-level incentive compensation costs.
In 2011, the decrease in U.S. Company sales and Restaurant
profi t associated with store portfolio actions was primarily driven by
refranchising.Signifi cant other factors impacting Company sales and/or
Restaurant profi t were commodity infl ation of $55million, or 6%, Company
same-store sales declines of 3%, including a negative impact from sales
mix shift, and higher self-insurance costs.
Franchise and L icense F ees and I ncome
Amount % Increase (Decrease)
% Increase (Decrease)
excluding foreign
currency translation
% Increase (Decrease)
excluding foreign
currency translation
and 53rd week
2012 2011 2010 2012 2011 2012 2011 2012 2011
China $ 101 $ 79 $ 54 29 45 25 38 25 38
YRI 879 851 729 3 17 7 12 8 11
U.S. 802 786 765 2 3 N/A N/A 4 1
India 18 17 12 6 39 18 39 18 39
WORLDWIDE $ 1,800 $ 1,733 $ 1,560 4116877
China Franchise and license fees and income increased 25% and 38%
in 2012 and 2011, respectively, excluding the impact of foreign currency
translation. The increases were driven by refranchising, new unit development
and positive franchise same-store sales.
YRI Franchise and license fees and income increased 8% in 2012, excluding
the impacts of foreign currency translation and the 53rd week in 2011.
The increase was driven by new unit development and positive franchise
same-store sales. YRI Franchise and license fees and income increased
11% in 2011, excluding the impacts of foreign currency translation and the
53
rd
week. The increase was driven by new unit development, refranchising
and positive franchise same-store sales.
U.S. Franchise and license fees and income increased 4% in 2012, excluding
the 53
rd
week in 2011. The increase was driven by refranchising, positive
franchise same-store sales and new unit development, partially offset by the
LJS and A&W divestitures and franchise store closures. U.S. Franchise and
license fees and income increased 1% in 2011, excluding the 53
rd
week. The
increase was driven by refranchising and new unit development, partially
offset by franchise store closures and franchise same-store sales declines.
General and Administrative Expenses
Amount % Increase (Decrease)
% Increase (Decrease)
excluding foreign
currency translation
% Increase (Decrease)
excluding foreign
currency translation
and 53rd week
2012 2011 2010 2012 2011 2012 2011 2012 2011
China $ 334 $ 275 $ 216 21 27 19 22 19 22
YRI 414 400 361 3 11 6 7 7 6
U.S. 467 450 492 4 (8) N/A N/A 5 (9)
India 24 22 17 9 28 25 29 25 29
Unallocated 271 225 191 21 18 N/A N/A 22 17
WORLDWIDE $ 1,510 $ 1,372 $ 1,277 10 7 11 5 11 5
The increase in China G&A expenses for 2012, was driven by increased
compensation costs due to higher headcount and wage infl ation and
additional G&A as a result of consolidating Little Sheep.
The increase in China G&A expenses for 2011 was driven by increased
compensation costs due to wage infl ation and higher headcount.
The increase in YRI G&A expenses for 2012 was driven by increased
investment in strategic growth markets, including the acquisition of
restaurants in South Africa in 2011, and increased compensation costs
in the remaining markets.