Pizza Hut 2012 Annual Report Download - page 95

YUM! BRANDS, INC.-2012 Form10-K 3
Form 10-K
PART I
ITEM 1Business
PART I
ITEM 1 Business
YUM! Brands, Inc. (referred to herein as “YUM”, the “Registrant” or the
“Company”), was incorporated under the laws of the state of North Carolina
in 1997.The principal executive offi ces of YUM are located at 1441 Gardiner
Lane, Louisville, Kentucky40213, and the telephone number at that
location is [phone]. Our website address is http://www.yum.com.
YUM, together with its subsidiaries, is referred to in this Form 10-K annual
report (“Form 10-K”) as the Company.The terms “we,” “us” and “our” are
also used in the Form 10-K to refer to the Company.Throughout this Form
10-K, the terms “restaurants,” “stores” and “units” are used interchangeably.
While YUM! Brands, Inc., referred to as the Company, does not directly
own or operate any restaurants, throughout this document we may refer
to restaurants as being Company-owned.
(A) Financial Information about Operating Segments
YUM consists of six operating segments: YUM Restaurants China (“China”
or “China Division”), YUM Restaurants International (“YRI” or “International
Division”), Taco Bell U.S., KFC U.S., Pizza Hut U.S. and YUM Restaurants
India (“India” or “India Division”).The China Division includes mainland
China, and the India Division includes India, Bangladesh, Mauritius, Nepal
and Sri Lanka. YRI includes the remainder of our international operations.
For fi nancial reporting purposes, management considers the three U.S.
operating segments to be similar and, therefore, has aggregated them into
a single reportable operating segment (“U.S.”).In 2012, our India Division
began being reported as a standalone reporting segment separate from YRI
as a result of changes to our management reporting structure. While our
consolidated results are not impacted, our historical segment information
has been restated to be consistent with the current period presentation. In
December2011, the Company sold the Long John Silver’s (“LJS”) and A&W
All-American Food Restaurants (“A&W”) brands to key franchisee leaders
and strategic investors in separate transactions. Financial information prior
to these transactions refl ects our ownership of these brands.
Operating segment information for the years ended December29, 2012,
December31, 2011 and December25, 2010 for the Company is included
in Management’s Discussion and Analysis of Financial Condition and
Results of Operations (“MD&A”) in Part II, Item 7, pages15 through 34
and in the related Consolidated Financial Statements in Part II, Item 8,
pages36 through 70 .
(B) Narrative Description of Business
General
YUM is the world’s largest quick service restaurant (“QSR”) company based
on number of system units, with over 39,000 units in more than 125 countries
and territories.Primarily through the three concepts of KFC, Pizza Hut and
Taco Bell (the “Concepts”), the Company develops, operates, franchises
and licenses a worldwide system of restaurants which prepare, package
and sell a menu of competitively priced food items.Units are operated by
a Concept or by independent franchisees or licensees under the terms
of franchise or license agreements.Franchisees can range in size from
individuals owning just one restaurant to large publicly traded companies.
The China Division, based in Shanghai, China, comprises approximately
5,700 system restaurants, primarily Company-owned KFCs and Pizza
Huts.In 2012, the China Division recorded revenues of approximately
$6.9billion and Operating Profi t of approximately $1billion. On February1,
2012, we acquired a controlling interest in Little Sheep Group Limited (“Little
Sheep”), a casual dining concept headquartered in Inner Mongolia, China.
See Note4 for details. The Company also owns non-controlling interests
in Chinese entities who operate in a manner similar to KFC franchisees.
YRI, based in Plano, Texas, comprises approximately 14,600 system
restaurants, primarily franchised KFCs and Pizza Huts, operating in over
120 countries outside the U.S., China and India.In 2012 YRI recorded
revenues of approximately $3.3billion and Operating Profi t of $715million.
We have approximately 18,000 system restaurants, primarily franchised
restaurants, in the U.S. and recorded revenues of approximately $3.4billion
and Operating Profi t of $666million in 2012. The India Division, based in
Delhi, India, comprises approximately 600 system restaurants. In 2012,
India recorded revenues of approximately $100million.
Restaurant Concepts
Most restaurants in each Concept offer consumers the ability to dine in
and/or carry out food.In addition, Taco Bell and KFC offer a drive-thru
option in many stores.Pizza Hut offers a drive-thru option on a much
more limited basis.Pizza Hut and, on a much more limited basis, KFC
offer delivery service.
Each Concept has proprietary menu items and emphasizes the preparation
of food with high quality ingredients, as well as unique recipes and special
seasonings to provide appealing, tasty and attractive food at competitive prices.