Presentation Overview
Ricardo:
Company Profile
Mission Statement
Ownership & Organization
Vania:
Alliances
Products & Technology
Market Trends & Growth
Key Players
Presentation Overview
Andrew:
SWOT Analysis
Talib:
Financial Overview
Past and Present
Financial Ratio Analysis
Probable Outcomes and Predictable Crises
Critical Success Factors
Background & Overview
Company Profile
Founded in 1952
Operates in more than 108 countries
globally
Parent company YUM Brands
Serves approximately 12 million
customers in more than 5,200
restaurants globally
Background & Overview
Mission Statement
YUM BRANDS:
Build their brands in China
Aggressive international expansion
Improve U.S. brand position
Drive long term Shareholder and
franchisee value
Background & Overview
Ownership & Organization
David Novak, CEO of YUM Brands
Roger Eaton CEO of KFC
KFC Franchise breakdown:
Restaurant General Manager
Assistant Managers
Average of 20-35 employees per store
Background & Overview
Ownership and Organization
Beginning of
Year
New Builds
Company
Franchisee
Total
956
4,210
5,166
6
74
80
Acquisitions
None
Refranchises
60
60
None
Closures
47
107
154
Other
None
(12)
(12)
End of Year
Total
% of Total
855
4,225
5,080
17
83
100
Background & Overview
Alliances
Pizza Hut & Taco Bell
Yum Brands: World’s largest
proprietor of multi-branded fast-food
locations
KFC holds 69% of Yum Brands
market share
Background & Overview
Charitable Alliances
Animal Welfare
World Hunger
Background & Overview
Products & Technology
KFC’S Point of Difference:
Secret Recipe for Fried Chicken
Fast-Food Competitive Technology:
Automation
Heating
Food Production
Shelf-Life
Ingredients
Market Overview
Market Trends & Growth
Global Recession = Increase in
consumption of cheaper foods
73% of Americans eat fast food out of
convenience
33% of Americans and 30% of the Asia
Pacific Market eat fast-food at least
once a week
Market Overview
Market Trends & Growth
KFC’s usually clustered in urban
centres
Soaring food prices notably wheat,
health and diet concerns have slowed
growth of fast food chains since 2006 in
U.S.
Emerging Markets: Prefer international
brands
Market Overview
Key Players
International:
McDonald's
Domestic:
Wendy’s
Burger King
Sonic
Jack in the Box
Strategic Analysis
Strengths: Market Share
KFC has roughly 42% of the global
chicken on the bone market share
Nearly 3 times as much as their nearest
competitor
China 2009, 16% increase in market share
Aided KFC in declining U.S. Market
growth
Strategic Analysis
Strengths
Differentiation:
Trademarked items and Recipes
International Presence:
Global Diversification and ability to
expand rapidly (i.e. China)
Strategic Analysis
Strengths
USA
5,166
Mainland China
2,497
Japan
1,150
Great Britain
689
Canada
780
Australia
572
Indonesia
336
Malaysia
431
Strategic Analysis
Weaknesses
Systemic:
Integrity of Supplier & Distributors
Decentralization of OwnershipFranchisee model (i.e.
quality,service,cleaniness, etc.)
Branding:
Mom and Family values: Health and
weight issues
Strategic Analysis
Opportunities
Stability In Commodity Pricing:
Analysts indicate that chicken prices
should stay stable in short term
Beneficial in further maintaining
costs to provide better margins
Strategic Analysis
U.S Chicken Price per lbs. (cents)
Month
Value
Feb 2009
86.70
Mar 2009
85.73
Apr 2009
85.38
May 2009
86.96
Jun 2009
88.17
Jul 2009
88.56
Aug 2009
86.77
Sep 2009
84.88
Oct 2009
82.85
Nov 2009
82.13
Dec 2009
82.15
Jan 2010
83.00
Strategic Analysis
Opportunities
Emerging Markets:
Estimated 5% growth rate in emerging
economies
Perceive brands as superior to local
Asia Pacific region rates high globally in
fast food frequency visits
Low Labour Costs
Strategic Analysis
Opportunities
Diversification in Mature Markets:
Develop Incremental sales layers (i.e.
Breakfast, new beverages, expanded
protein options, etc.)
Expansion of Multibranding:
Single store location pairings with
Pizza Hut and Taco Bell
Strategic Analysis
Threats
Mature Market Diet and Health
concerns (75% of Americans eat less
fried chicken due to health concerns)
Foreign Currency Fluctuations
Animal Welfare Activists (i.e. PETA)
Emerging Competition in Mature
Markets (i.e. Chicken Fil A)
Avian Flue
Financial Overview
Past/Present
Past:
Steady share price increase over past ten years
KFC U.S. Sales per unit have grown by 2% over
last 4 years
Present:
Yum Brands achieved 6.9% growth in 2009
compared to 2008
Annual Sales per restaurant in U.S. are around
1.3 million, on par with industry
Financial Overview
Past/Present
KFC U.S. Sales per Unit:
Year End
thousands
2008
2007
2006
2005
2004
% growth
KFC US
$967
$994
$977
$954
$896
2%
Financial Overview
Past/Present
KFC Division Sales Growth:
In Billions
2008
2007
2006
2005
2004
5-year growth
KFC U.S.
Company Sales:
$1.2
Franchisee Sales:
$4.0
Company
Sales: $1.4
Franchisee
Sales: $7.6
Company
Sales: $2.5
Franchisee
Sales: $1.1
$1.2
$4.0
$1.4
$3.9
$1.4
$3.8
$1.4
$3.6
(4%)
2%
$1.3
$6.7
$1.1
$5.7
$1.1
$5.2
$1.0
$4.7
9%
13%
$1.7
$1.1
$1.3
$0.8
$1.0
$0.7
$0.9
$0.6
28%
18%
KFC
International
KFC China
Financial Overview
Financial Ratio Analysis
Debt/Equity:
Yum Brands: 3.28
McDonalds: 0.75
Industry: 2.00
Gross Profit Margin:
Yum Brands: 20.6%
McDonalds: 44.0%
Industry: 35.2%
Return on Assets:
Yum Brands: 15%
McDonalds: 15.1%
Industry: 12.5%
Financial Overview
Financial Ratio Analysis
Earnings Per Share:
Yum Brands: 2.22
McDonalds: 4.11
Current Ratio:
Yum Brands: 0.7
McDonalds: 1.1
Industry: 1.0
Inventory Turnover:
Yum Brands: 56.4
McDonalds: 117
Industry: 97.8
Financial Overview
Financial Ratio Analysis
Quick Ratio:
Yum Brands: 0.4
McDonalds: 1.0
Industry: 1.0
Asset Turnover:
Yum Brands: 1.14
McDonalds: 0.8
Industry: 1.1
Probable Outcomes &
Predictable Crises
1. Continue rapid expansion in
emerging markets
2. Diversification of Menus in North
America
3. Improve control processes on ethical
operations
4. Improve operational and supply
chain efficiency
Critical Success Factors
1) Develop brand equity in new
markets and sustain a differentiated
brand in existing markets
2) Develop and sustain healthy
relationships with franchisees and
other stake holders
Critical Success Factors
3) Provide an infrastructure that is
flexible enough to adapt to local
markets under the umbrella brand
4) Ensure the integrity of supply and
distribution networks in the face of
international variances, environmental
crises and intensifying ethical concerns.