I.
EXECUTIVE SUMMARY
Yum! Brands, Inc is a service restaurant company. It operates franchises and licenses
Taco Bell, KFC, Pizza Hut, Long John Silver's and A&W Restaurants with worldwide system of
restaurants which prepare, package and sell a menu of food items. The company’s financials and
strategies are compared with Mc Donald’s Corporation and Domino’s Pizza, Inc. These
comparisons indicated that Yum is a financially healthy and has strategies superior to its
competitors as well. Analysis of Yum! Brands, Inc‘s external and internal environments reveal
the company’s strengths, areas that may need improvements, outside threats and opportunities
for growth.
Yum! Brands, Inc operates internationally, however, in this research I focus mainly on
US market and realized that the Company should focus on adding new lines products which are
healthy line and organic line in order to capture consumers’ trends. They should also have a
reward program to enhance customers’ loyalties with their brands.
II.
FINANCIAL ANALYSIS
Even though YUM! Brands, Inc. has been experiencing ups and downs after the financial
crash of 2008, Yum! Brands, Inc. still manage to keep its financial healthy. As the result of
analyzing Yum’s financial over the past five years, YUM! Brands, Inc., in fact did not
experience any major decline on revenue. Yum manages to be on a healthy incline in revenue
despite a drop in 2010.
Through thorough analysis of YUM! Brands, Inc.’s income statement (Exhibit: Table 1a),
Yum has been on a steady increase in revenue in the past 3 years. Yum as of year-end 2012
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raised approximately 8% in revenue. However, that did not match the previous year (2011)
where revenue rose by 11.31%. With the increase in revenue also comes increase in expenses.
Yum’s income statement shows that there has been a 4.88% increase from the previous year.
However, the biggest increase came from the previous year (2011) of 12.92%. Though there are
increase in expenses, the amount increase was less than half from the prior year, showing that
YUM! Brands, Inc. manages to stay competitive with competitors while making sure there they
are still with budget. YUM! Brands, Inc.’s balance sheet (Exhibit: Table 1b) shows that Yum is
financially in good health. Although their cash is reduced by 35% in 2012, Yum still has roughly
$776 million on hand which is more than triple since the financial crash of 2008. Total liability
has decrease by -3.17% in 2012 compared to the previous years. Total shareholders’ equity has
also increase throughout the 5 year period. Shareholders’ equity rose by 17.59% in 2012
compared to 2011. With decrease in liability and increase in shareholders’ equity, YUM! Brands,
Inc. proves that it can still stay competitive and maintain investor’s trust in the brands.
When compared to a couple to YUM! Brands, Inc.’s competitors such as McDonald’s
Corporation and Domino Pizza, Inc., YUM! Brands, Inc. still performs relative well financially.
When comparing the three companies financially through both the income statement and the
balance sheet (Exhibit: Table 2a and 2b), YUM! Brands, Inc. outperformed Dominos Pizza, Inc.
by almost double in percentage of Total Revenue, 11.71 to 6.70 respectively, while trailing
McDonald’s Corporation, 19.82 to 11.71 respectively. The trend between the three companies
stayed constant throughout the last five years. Also, from the comparison, YUM! Brands, Inc.
manages to keep indirect cost lower than its competitor while staying competitive with operating
income throughout the last 5 years. That proves that YUM! Brands, Inc. is still popular with the
consumer market.
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When speaking of financial health, YUM! Brands, Inc. financial ratios suggest that it’s
relatively health. However, when compared to its competitor (Exhibit: Table 3) through
profitability, asset management, debt management and liquidity ratios, YUM! Brands, Inc. is
placed in the middle of the two competitors. YUM! Brands, Inc. leads the pack with regards to
ROE with 80.53% followed by McDonald’s Corporation with 36.72%. Dominos Pizza, Inc. did
not have ROE. YUM! Brands, Inc. debt-to- equity ratio is higher than its competitor. This
signifies that Yum has more debt than equity when compared to competitors.
Overall, YUM! Brands, Inc. is very healthy financially. Even through the financial crisis of
2008, YUM! Brands, Inc. still manage to increase revenue and stay competitive with other
competitor. However, there are aspects of Yum that could use improvement but also to that
regard; there are also aspects of Yum that outperform others.
III.
EXTERNAL ANALYSIS
General Environment
The general environment consists of six factors external to an industry which are
demographic, social cultural, political/ legal, technological, economic and global. All of those
factors are considered as the company’s opportunities and threats, but, the company rarely
controls them.
First of all, the demographic segment plays an important impact to the Yum Brands, Inc.
Growing influence on the industry is the rapid growth of Hispanic and Asian populations in the
U.S., which will continue to drive demand for more diverse in foods, including spicier flavors.
Additionally, the large Boomers demographics will influence restaurant foods. Based on
FastCasual.com, there is an article about “Restaurant industry's 2012 trends shaped by
demographics, nutrition”, they said that “the younger age group will provide a boost to
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juice/specialty drinks, and more brands will continue to shift their marketing dollars toward this
demographic.” (Kelso).
Another force that is shaping this industry is customer tastes and social habits.
Consumers are aware of healthy food products and organic foods, now than any time before.
Many foods in the fast food restaurant industry are considered unhealthy by many customers.
That is why now they tend to get away from creasy, fat and lacking essential of vitamins food to
organic, low fat and calories meals. In order to respond to this situation, the restaurants industry
is changing their menus to add healthier options which lead customers to feel satisfied and
enjoyably.
The innovations of technological segment are enhancing the growth of fast food industry.
The integration of technology into restaurants themselves will further raise customer
expectations for convenience and speed while reinventing how guests select, pay for and receive
their food.
About economic segment, as the economic is getting worse so people become more
concerned about value for money that they spend on meals. They desire of the price of fast food
is low but the portions are big. This is considered a threat for Yum Brands because they not only
eliminate cost but also keep low prices in order to compete with other fast food restaurants.
Many restaurants are competing globally to gain a competitive advantage by trying to
increase market shares. Yum! Brand Inc. is the leader in this strategy. The company currently
owns five restaurants such as KFC, Pizza Hut, Taco Bell, Long John Silver’s and A&W. Most of
the revenue generated from KFC and Pizza Hut comes from global markets especially China.
Also, Yum! Brands are acquiring the most famous hotpot chain in China called Little Sheep. As
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the economy has slowed down in recent years, many restaurant operators have been looking for
opportunities to expand their brands in to other countries such as: China, India, and Brazil.
On the legal or political segment, it has a significant. This qualitative factor will lead to
an increase in costs so the investment will have to spend a lot of time trying to overcome this
issue. There is another regulation which does not have a large impact to the growth of company
however; the industry may be concerned. That is the requirement for labeling the nutrition facts
for the foods served in the restaurants. This can significantly affect fast food restaurants since
their foods tend to contain higher calories and fat.
Industry Environment
For the fast food industry, consumers have a very strong bargain because of lacking of
switching cost. In addition, their choices are all depended on their taste of the food and the
feeling what they crave for on that they. And this is what can be changed every day. Entering to
this market does not require a large amount of capital, yet, they can make much profit. Thus
there are always new rivalry join in. Substitution is such a serious threat of fast food industry
because other forms of profitable foodservice such as ready meals or homemade food.
Furthermore, fast food is always considered as unhealthy and fat-food which is not good for
dietary.
Bargaining power of customer became very strong, especially, in the economic today.
Because of low switching cost and personal taste, they can change their choice every day easily.
Furthermore, price is also a key factor because customers are always comparing the prices
between other fast food restaurants. If they acknowledge that the food of Yum’s restaurant- KFC
for example- more expensive than McDonald, Yum’s restaurant will lose customers.
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According to Fast Food in the United State article, there are only two supply companies
in US which are Sysco and Us Foodservice, Inc. This fact strengthens the bargaining power of
supplier which means they have more power over the company. However, for the labor
intensive, the fast food business gains an advantage because in majority countries, paying
minimum wage is legislation.
The Restaurant industry in US has limited potential entrants. Since the major players
have already shared the market and stabilize their reputation for long time ago, it is difficult for a
new business to get established. Major players have also accumulated their advantages against
new entrants by building new restaurants, franchising, and expanding globally. And that is what
makes the new entrants find hard to enter this industry.
There are many existing restaurants from small to large size nowadays, are now focusing
on value meal within the range $1- $3. This reaction is shifting consumer’s trends and larger
focus on competition amongst industry players. They are creating a price war among themselves
since there is such a negligible switching cost, consumers find easily to change to other
restaurants. Nevertheless, the brand power still forms the greatest competition in this industry.
For example, McDonald spends millions of dollars on global advertising. Overall, the intensity
of existing rivalry is very strong.
In term of substitutions, it is getting high because there is increasing of many
differentiated fast food companies; customers have more options for their choices. Another
reason for high threat of substitution in the restaurant industry is technology development. There
are many new ways to enjoy the food at home now such as frozen re-heatable prepared food
those are offered by strong competitors against fast food. These substitute products are very
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convenient, cheap and provides quality meals which satisfied the consumers’ needs towards fast
food.
IV.
INTERNAL ANALYSIS
The internal analysis will be a best description of Yum! Brands, Inc‘s strengths and
weaknesses which brings to its competitive environment. Through the use of VRIO framework
and Yum! Brands, Inc. SWOT Analysis article, I have found that brand value, diversity store
concepts and the recipe of making food in the company is its competitive advantages.
Strength
Through the use of VRIO framework and Yum! Brands, Inc. SWOT Analysis article, I
have found that brand value, diversity store concepts and the recipe of making food in the
company is its competitive advantages.
Resources
Valuable
Rare
Inimitable
Brand
Recipe
Experience
Location
Price
Advertisement
Y
Y
Y
Y
Y
Y
Y
Y
N
N
N
N
Y
Y
N
N
N
N
w/out
substituted
Y
Y
Y
Y
Y
N
Portfolio of strong brands with high level of consumer acceptance (Yum! Brands, Inc. SWOT
Analysis)
Yum Brands is a leading global quick service restaurants company based on number of
restaurants. The Company operates five branded restaurant concepts: KFC, Pizza Hut, Taco Bell,
Long John Silver’s and A&W. Many of these branded restaurants command market leading
position in their respective segments. For instance, according to the company, in 2012, KFC was
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the leader in the US chicken QSR segment among companies featuring chicken-on-the bone as
their primary product offering, with a 38% market share in that segment, which is over twice as
large as that of its closest national competitor ((Yum! Brands, Inc. SWOT Analysis). Yum
Brands and its concepts own numerous registered trademarks and service marks. Many of these
marks have significant value and are materially important to its business. Over the years, the
company has made large investments in brand promotions. The company's brands are identified
as one of the best recognized global brands. Yum Brands' leading market position provides it
with significant bargaining power. Furthermore, the company's strong brand value facilitates
customer recall and allows Yum Brands to penetrate new markets as well as consolidate its
presence in the existing ones.
Being as a top company that having an unique recipe
The secret recipe that consists of secret herbs and spices have been very valuable for the
company as it is what makes the Company’s fried chickens and other items, exclusive, and
unique. Portions of the secret spice mix are made at different locations in the United States, and
the only complete, handwritten copy of the recipe is kept in a vault in corporate headquarters,
and only a handful people know this secret recipe and they have signed strict confidentiality
contracts. Because, the recipe is a trade secret it has been rare with and very much inimitable.
And because it is so valuable the organization has exploited the recipe but very slightly, by
introducing new menu items
Weaknesses
Dependent heavily on suppliers
A weak supply chain can delay the arrival of products to Yum Brands Inc’s customers.
Unnecessary delays can hurt Yum Brands Inc over the long run, because customers will cancel
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orders. Yum is depended heavily on their food suppliers and has no power over them.
Furthermore, in the article about “Restaurant industry's 2012 trends shaped by demographics,
nutrition mention that “Higher beef and chicken prices in 2012 will affect restaurant offerings
and menu prices” (Kelso). This affects deeply for the Company’s cost which may cause a rise on
menus.
Lack of knowledge about their customers’ trend
Since many other companies have captured the customers’ desired of healthy foods, Yum!
Brands still keeps their company out of the games. They have not added any healthy line into
their menus while all of the companies introduce it such as Chipotle, McDonald. It also
hurts Yum Brands Inc’s reputation and causes customers to flee to competitors, who are more
responsible for them.
Value Chain of Yum Brands’ Inc
In my value chain analysis, I broke down the total service provided by Yum in several set
of value creating activities and found out in which stages they add value through exceeds the cost
of the activities, thereby resulting in a profit margin for cooperate.
The primary value chain activities are:
-
Inbound logistics: Most raw materials are imported from China. Shipment is through
cargo air transport. Once shipment is received, the inventory manger will make sure that all the
materials are accounted for and stored at a distribution center, where the material remains until
the restaurant orders it.
-
Operations: Once the inventories have been received and stored at the distribution center.
Stores around the nation are allowed to place orders for their stores. Since YUM! Brands, Inc.
deals mainly with food preparation, almost all of the materials shipped to stores are raw. Once
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the stores receive the materials, then they will go through the process or prepping the materials to
make fresh cooked foods and serve it to customers.
-
Marketing & Sales: Yum’s main marketing strategy is advisement through mailings,
television advertisement, social media and coupon promotions as well as special pricing on
certain days out of the week. Yum! Brands, Inc keeps themselves very active in news and
popular social media such as Face book, Twitters, Youtube and Instagrams. They are having
thousands of followers who are posting and updating every day one those social websites.
Nevertheless, Yum has a very strong Marketing team who is always keep their brands stand out
among other competitors.
-
Service: Yum employees must follows a proven success training process. As for food
preparations, stores must follow policies from corporate on how to prepare a certain dish correct,
from measures and materials used, to ensure that each dish served is to customer’s satisfaction.
Inbound logistics and operations, these two stages are the key primary activities which give them
the cost advantage with superior quality. By doing so, these stages ensureYum’s profitability.
Support Activities:
-
Procurement: Transcom Foods Limited has obtained the franchise rights of Yum. The
franchise agreement provides for buying approved equipment, service ware and the cooking
recipes from The Company approved suppliers, for example, in Bangladesh, BRAC Poultry is
the key supplier for KFC chicken but flour is exported from a company named Mitsides. With
centralized distribution of food purchasing and ware provider, this gives them a great strength as
quality could be ensured. Cost control is achieved as Yum purchases their supplies in bulk
directly.
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-
Technology & Systems Development: Yum often follows the new technology very well.
They always keep themselves up to date with new tools that help them make business faster and
more convenient for customers. For example, Pizza Hut- the brand owned by Yum! Brands- have
created automatic ordering systems that customers can order pizza, pay and come to pick it up
when it is ready. Besides ordering online, technology also helps consumers locate their favorite
fast food restaurants in their nearest area and show them how to get there. From the restaurateurs'
perspective, digital menu boards, flat screens and in-store signage will be critical marketing
tools. It opens a new era for take-out foods. Even though they don’t use much technology in
cooking process but applying a lot of currently technology is one of their strength. There is no
product technology or research and developments occurs which can make a real difference in the
products they offers. But it has a secret recipe, which separates its fried chicken and other foods
from other fast food providers and attracts more customers. This actually helps it to gain more
profit.
-
Human Resource Management: Yum’s human resource management goes through their usual
job of recruitment, selection, training and development. Usually a franchise of Yum such as the
one in China consists of Area Managers, Restaurant General Managers, Assistant Managers,
Trainee Managers, and Customer Service Team Members and Food Service Team Members. The
HRM department is one of the service activities that Yum cannot do without as they have direct
interactions with the customers and due to this the HRM department has to recruit strong and
competent employees, so that the customers can get the best out of Yum.
-
Firm Infrastructure: In order to assist the restaurant planning and management practices,
the company starts with a strategic analysis of the opportunity by market development strategic
plan. The Company maps demographics to determine where to develop and identify restaurant
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locations and provides asset management to determine the optimum mix and number of
locations. Construction and project management by YUM! Brand helps Transcom Foods Limited
to design and build individual restaurants. With market development system the company would
try to locate in convenient location. Because it understands the dynamics of its industry as well
as very much aware of the booming market.
The procurement and firm infrastructure help the primary activities by provide certain
facilities which lead its quality to above average and help it to attain sustainable growth with the
profit margin.
Competitor Analysis
Through comparison of Yum and its two closest competitors, McDonald’s Corporation
and Dominos Pizza Inc., Yum is inferior to both of its competitors in term of spending for
advertisement. Yum Brands spend approximately $700 million, allocated to three of its most
profitable brand, Taco Bell, Pizza Hut and KFC. While its competitor, McDonald’s Dominos
Pizza Inc., spend roughly $1.36 billion dollars and $1.4 in advertisement respectively.
All three companies use similar techniques, which are utilizing technologies such as
smart phones as well as televise sporting events such as the super bowl and the NBA Finals to
promote their respective products. However, besides for technology, McDonald still believes in
good old fashion promotion and advertising by billboards. McDonalds leads the pack with
roughly $71 million spent on billboards alone.
While Yum is concentrating on expanding its brand internationally, domestically, Yum is
dealing competition from the newly redesign Domino. Domino recently changes their marketing
technique/method to regain market share and dethrone Pizza Hut, a subsidiary of Yum Brands.
As such to stay competitive with the new marketing campaign from Dominos, Yum Brands did
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not change its advertising techniques, however they changes its pricing techniques as well as
creating new menu items that is attractive to consumers.
V.
STRATEGY COMPARISON
Name
Strategy
highlights
Yum!Brands,Inc 1.Drive
Products:
aggressive,
Fried chicken
International
Tacos
expansion and
pizza
build strong
brands
everywhere
2. Dramatically
improve U.S.
brand positions,
consistency and
return
Rationales for
strategy
1. open thousands
of new
restaurants in
many countries in
the world within
2012
2. They added
150 net new units
at Pizza Hut and
over 30 net new
units at Taco
Bell.
McDonald's
Corporation
Products:
hamburgers
cheeseburgers
1. Continuously
improve classic
offerings and
increase the
number and
variety of new
options that
deliver the great
taste and balance
our customers
seek.
2. reduce the
environmental
impacts of
packaging and
waste in
restaurant
operations
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1.Focus on
customers’
nutrition and
well-being
2. environmental
responsibility
Pros
Cons
1.Different store
concepts catering
to diverse
Customer base.
2. Portfolio of
strong brands
with high level of
consumer
acceptance
1. Loss due to
refranchising
of equity
markets
outside the US
2.Allegations
against
YUM’s
poultry
supply
management
and food items
affecting sales
1.Largest fast
1.no
food market share differentiations
in the world
among other
2. $2 billion
competitors
advertising
2. already had
budget
a negative
publicity that
will affect
brand
reputation and
customers’
trust
Page 13
Domino's Pizza,
Inc.
Product:
pizza
1.strive to keep
their position as
#1 pizza delivery
in US
2. putting people
first
VI.
RECOMMENDATION
1.
Potential Strategies
1.Is the largest
share of pizza
delivery channel
and continued
innovation
2. operate
through a set of
guiding principles
founded on
integrity and
putting people
first( our
shareholders,
customers,
suppliers and
employees)
1. Leader in
online & mobile
ordering.
2. Strong
Teamwork aspire
to achieve our
collective vision
1.Weak
international
presence as
compared
to peers
2. Need to
provide more
training for
employees.
Overall, Yum! Brands have done a very good job in analyze their strategies. However,
there are four recommendations only for Yum! Brands, Inc to do in order to eliminate their
weaknesses and to enhance their strengths as well as obtain their potential opportunities to
compete with other competitors.
First of all, they should build their own food supply company that can grow all raw
materials such as chicken, beef, veggies, potato and so on. By owning food Supply Company,
they can reduce threat from suppliers and have an ability to control food. Secondary, based on
the changing of eating habit’s trend, people tend to eat healthier and prefer more organic foods in
their meals. Yum can think of adding two more lines in their menu which are the organic line
such as organic chickens, organic potatoes and another healthy line such as wheat buns for
burgers, multiple grain crust for pizza and spinach tortillas for taco. With the contribution of
these two lines, Yum will catch majority attentions from consumers who are caring about what
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they are eating every day and drive their thought about fast food restaurants to a different way
which is healthier and tastier. Additionally, Yum should establish customer’s loyalty by using
reward cards, thus, they can reduce bargain of customers’ power. For example, the reward card
allows customers to earn points every time they purchased food. And at some certain point they
can get a free food. Last but not least, to keep their employees to be retrained regularly is such
very important factors that help Yum provide a better customer services. Even though, most of
consumers choose fast food restaurant because they do not to tip servers, they still expect good
and appropriate services.
2.
Best recommendation for Yum! Brands and why?
Among those recommendations, there are two options that I believe that it will work well
for Yum and their reasons.
The option that adds a healthy line and organic line seem very practical for the Company.
It is because they already have a great Research and Development team, they are capable to
produce a special and unique recipe for these two lines. Nevertheless, the strong brand awareness
with in many years ago will allow them to attract consumers trying their new products.
Reward program is such an effective and popular program that is using by many
companies such as Starbuck, Yumilicious. With Starbuck, they have a Starbuck card with twelve
purchases get one free drink or Yumilicious Yogurt has a program that you will have a free ten
oz of yogurt after reaching total of $30 bills contributed from many visits. This program is
working pretty well in most of the companies and it will work more perfectly in the economic
crisis. Thus, if Yum! Brands, Inc can tie their customers’ loyalty with their brands; they can not
only control consumers’ switching cost but also compete with all of strong, existing rivalries.
3.
The Challenges
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Challenges always happen every time for any company who wants to find a new way in
their business. Of course, Yum cannot avoid them. For adding new products line in their menus,
they will face with the strong exist competitors such as Subway or Wendy because they already
carried those lines in their menus. On the other hands, having loyal customers’ programs will
cost a lot of money that may affect their finances to do other projects.
4.
How to get over challenges?
As a company with healthy financial resources and great teams, they will get over those
obstacles easily.
Yum, Brands’ Inc are having an valuable recognition by owning many unique recipes,
with an experienced and talented Research and Development Team, they will come up with
another recipe that will keep their brands compete among other strong rivalries in the fast food
restaurants’ industry. After that, Yum also has to spend a lot of money on advertising,
promotions and using their current social media websites to bring their new products closed to
customers’ awareness. By doing so, they can compete easily with all the competitors.
Reward system is very costly, yet, Yum should consider of making a mobile application
for reward programs on smart phone. Most of people nowadays own smart phones so they can
download an application and use it to keep track their award. Additionally, having a mobile
application is always cheaper than giving out reward cards. Not only convenient factors, but also
mobile application is a trend of new technology. The most important about reward cards is Yum
Brands should apply that for all of their existing brands such as KFC, Pizza Hut, Taco Bell,
A&W and Little Sheep. The consistency will give them an incredible result for all of those
brands that the Company is carrying on.
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Exhibits:
Table 1a: YUM! Brands, Inc.: Change in Financials – Income Statement
Income
Statement
(US Dollars, In
Millions)
Net Sales /
Revenue
Total Expense,
net
Operating
Income
2012
%
Chang
e
2011
13,633
7.98%
11,339
%
Chang
e
2010
%
Chang 2009
e
%
Chang
e
2008
12,626 11.31%
11,343
4.68%
10,836
-3.93%
11,279
4.88%
10,811 12.92%
9,574
3.54%
9,246
-5.39%
9,773
2,294
26.39
%
1,815
2.60%
1,769
11.26
%
1,590
5.58%
1,506
Interest Income
(expense), net
(149)
-4.49%
(156)
(175)
(194)
9.79%
2,145
29.29
%
1,659
1,594
14.18
%
14.15
%
9.06%
(226)
Income Before
Tax
10.86
%
4.08%
Income Tax
Provision
Net Income –
Including Noncontrolling
Interest
537
65.74%
324
416
316
20.45
%
1,335
32.91 313
%
8.77% 1,083
-0.01%
1,608
22.12%
13.33
%
12.34
964
Net Income –
Non-controlling
Interest
Net Income –
YUM! Brands,
Inc.
(11)
31.25%
(16)
-20%
(20)
66.67
%
-
-
1,597
21.08
%
1,319
13.90
%
1,158
8.12% 1,071
-
-
%
Chang 2009
e
100% 353
%
Chang
e
63.43%
1.77%
16.34
%
3,899
5.09%
3,710
7,148
9.51%
6,527
1,178
1,396
(12)
1,280
Table 1b: YUM! Brands, Inc.: Change in Financials – Balance Sheet
Balance Sheet
(US Dollars, In
Millions)
Cash & cash
equivalents
Property, Plant &
Equipment, net
Total Assets
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4,250
%
Chang 2011
e
1,198
35.22%
5.15% 4,042
%
Chang
e
15.99%
5.54%
9,011
2.00%
6.23%
2012
776
8,834
2010
1,426
3,830
8,316
Page 17
2008
216
Total Liabilities
6,699
-3.17% 6,918
4.08%
6,647
10.16
%
52.88
%
6,034
-9.06%
6,635
Total
Shareholders’
equity – YUM!
Brands, Inc.
Non-controlling
Interest
Total
Shareholder’s
Equity
2,154
18.16
%
1,823
15.67
%
1,576
1,025
100%
(108)
99
6.45%
93
0.00%
93
4.49%
89
-
-
2,253
17.59
%
1,916
14.80
%
1,669
49.82
%
1,114
-
-
Source: Mergent, Inc, Mergent Online, UT Dallas University Librabry, 8 Dec. 2013.
Dung Nguyen
Page 18
Table 2a: Common Size Income Statement of YUM! Brands, Inc. vs. McDonald’s Corporation
and Domino Pizza, Inc.
Common Size Income
12 months ended Dec.:
2012 2011 2010 2009 2008
Statements
(% of Total Revenue)
Total Revenue
100
100
100
100
100
Total Indirect Operating
12.37 13.04 12.63 13.31 12.79
Costs
Operating Income
15.37 14.57 15.78 13.47 12.16
Interest Income
-1.09 -1.24 -1.54 -1.79 -2.00
YUM! Brand
Total Non-Operating
1.12
-0.57 -0.56 0.87
0.93
Income
Earnings Before Tax
15.39 12.77 13.68 12.55 11.08
Taxation
3.94
2.57
3.67
2.89
2.80
Net Income
11.71 10.45 10.21 9.88
8.55
McDonald’s
Corporation
Dominos Pizza, Inc.
Total Revenue
Total Indirect Operating
Costs
Operating Income
Interest Income
Total Non-Operating
Income
Earnings Before Tax
Taxation
Net Income
100
100
100
100
100
14.63
14.44
15.73
15.54
15.58
30.14
-1.87
30.62
-1.83
30.03
-1.87
28.84
-2.08
26.38
-2.22
0.55
0.30
0.33
0.50
0.54
28.79
9.48
19.82
29.01
9.29
20.38
28.40
8.53
20.55
27.78
8.51
20.01
25.71
7.84
18.34
Total Revenue
Total Indirect Operating
Costs
Operating Income
Interest Income
Total Non-Operating
Income
Earnings Before Tax
Taxation
Net Income
100
100
100
100
100
13.05
12.79
13.45
14.06
11.80
16.82
-6.02
15.69
-5.53
14.50
-6.15
13.50
-7.86
13.69
-7.87
-6.02
-5.53
-5.65
-3.48
-7.87
10.80
4.10
6.70
10.16
3.78
6.38
8.85
3.25
5.60
9.65
3.97
5.68
5.815
2.03
3.79
Source: Mergent, Inc, Mergent Online, UT Dallas University Librabry, 8 Dec. 2013.
Dung Nguyen
Page 19
Table 2b: Common Size Balance Sheet of YUM! Brands, Inc. vs. McDonald’s Corporation and
Domino Pizza, Inc.
Common Size Balance
Sheet
(% of Total Assets)
12 months ended Dec.:
2012
2011
2010
2009
2008
YUM! Brand
Total Assets
Cash & Equivalents
Inventories
Total Current Assets
Current Debt
Total Liability
Retained Earnings
Total Equity
100
8.61
3.47
21.19
0.11
75.44
25.37
23.90
100
13.56
3.09
26.27
3.62
79.36
23.23
20.63
100
17.15
2.27
27.81
8.09
81.05
20.65
18.95
100
4.94
1.71
16.90
0.83
85.66
13.93
14.34
100
3.31
2.19
14.57
0.38
101.66
4.64
-1.67
McDonald’s
Corporation
Total Assets
Cash & Equivalents
Inventories
Total Current Assets
Current Debt
Total Liability
Retained Earnings
Total Equity
100
6.60
0.34
13.91
56.78
111.00
43.22
100
7.08
0.35
13.35
1.11
56.38
111.27
43.62
100
7.47
0.34
13.66
0.03
54.23
105.74
45.77
100
5.94
0.35
11.30
0.06
53.57
103.46
46.43
100
7.25
0.39
12.36
0.11
52.98
101.73
47.02
Total Assets
Cash & Equivalents
Inventories
Total Current Assets
Current Debt
Total Liability
Retained Earnings
100
11.46
6.50
64.05
5.09
47.99
100
10.47
6.39
68.02
0.19
41.03
251.37
251.74
100
10.40
5.86
66.19
0.18
40.38
100
9.34
5.71
61.41
11.10
48.36
295.74
291.12
100
9.78
5.25
54.82
0.07
32.25
306.54
307.17
Dominos Pizza, Inc.
Total Equity
-279.25
-279.28
-272.12
-262.71
Source: Mergent, Inc, Mergent Online, UT Dallas University Librabry, 8 Dec. 2013.
Dung Nguyen
Page 20
Table 3: Financial Ratios for YUM Brand vs. McDonald’s Corporation & Dominos Pizza, Inc.
Financial Ratios
Liquidity Ratios
Current Ratio
Quick Ratio
Debt Management
Debt-to-Equity Ratio
Asset Management
Inventory Turnover
YUM! Brand
Total Asset Turnover
Profitability Ratios
EBITDA Margin (%)
Return on Assets (%)
Return on Equity (%)
Revenue Per Employee
McDonald’s
Corporation
Liquidity Ratios
Current Ratio
Quick Ratio
Debt Management
Debt-to-Equity Ratio
Asset Management
Inventory Turnover
Total Asset Turnover
Profitability Ratios
EBITDA Margin (%)
Return on Assets (%)
Return on Equity (%)
Revenue Per Employee
2012
2011
2010
2009
2008
0.87
0.49
0.95
0.61
0.94
0.68
0.73
0.35
0.55
0.25
1.37
1.64
1.85
3.13
-
33.62
1.53
39.57
1.45
52.22
1.47
59.88
1.59
62.47
1.64
21.1
17.95
80.53
26,139
18.75
15.13
76.36
26,656
20.21
15.02
89.29
30,090
19.44
15.71
234.23
31,045
17.89
14.04
187.52
33,661
1.45
1.09
1.25
1.04
1.49
1.22
1.14
0.95
1.39
1.18
0.89
0.87
0.79
0.75
0.76
127.66
0.80
130.90
0.83
120.87
0.77
116.23
0.78
115.31
0.81
35.75
15.94
36.72
62,481
35.76
16.94
37.92
64,300
35.25
15.90
34.51
60,187
34.97
15.51
33.20
59,077
32.87
14.87
30.01
58,645
Liquidity Ratios
Current Ratio
1.33
1.66
1.64
1.27
Quick Ratio
0.62
0.66
0.66
0.51
Debt Management
Debt-to-Equity Ratio
Asset Management
Dominos
Inventory Turnover
38.12
40.96
42.82
40.50
Pizza, Inc.
Total Asset Turnover
3.51
3.52
3.44
3.01
Profitability Ratios
EBITDA Margin (%)
19.07
17.51
17.02
19.90
Return on Assets (%)
23.51
22.45
19.28
17.10
Return on Equity (%)
Revenue Per Employee
168,305 165,673 144,515 135,426
Source: Mergent, Inc, Mergent Online, UT Dallas University Librabry, 8 Dec. 2013.
Dung Nguyen
1.70
0.72
43.10
3.05
16.46
11.55
136,098
Page 21
Citation
"Fast Food Industry Profile: The United States." Fast Food Industry Profile: United
States (2012): 1-32. Business Source Complete. Web. 5 Dec. 2013
National Restaurant Association, 2009 Restaurant Industry Forecast: ³Datamonitor, United
States - Fast Food (Published August 2009)
"Yum! Brands, Inc. SWOT Analysis." Yum! Brands, Inc. SWOT Analysis (2013): 1-9. Business
Source Complete. eb. 8 Dec. 2013.
Kelso, Alicia . "Fast Casual." Restaurant industry’s 2012 trends shaped by demographics,
nutrition. N.p., 17 1 2012. Web. 9 Dec 2013.
<http://www.fastcasual.com/article/189200/Restaurant-industry-s-2012-trends-shaped-bydemographics-nutrition>.
Newman, Eric. "Fast Food." Adweek 49.14 (2008): SR13. Business Source Complete. Web. 10
Dec. 2013.
References
http://www.restaurant.org/research/forecast.cfm
http://www.sbdcnet.org/small-business-research-reports/fast-food-business-2012
https://www.facebook.com/BaruchMarketingandIB/posts/426432927449942
http://www.yum.com/
http://www.wikiwealth.com/swot-analysis:yum-brands-inc
Dung Nguyen
Page 22