YUM! Brands, Inc., by way of its subsidiaries, operates QSR’s (Quick Service Restaurants). The Company operates in four segments. These are the KFC Division, the Pizza Hut Division, the Taco Bell Division, as well as YUM China. Yum! Brands is headquartered in Louisville, Kentucky. It has approximately 43,000 restaurants in 135 nations and territories.
On November 1, 2016, Yum! announced that it completed the separation of Yum China Holdings, Inc. (Yum China) from Yum! Brands. Consequently, this creates two strong, independent, focused growth enterprises. The China separation Is the initial step of Yum! Brands transformation.
The Company states that the main aspects of Yum! Brands’ growth transformation includes building brands as a world-class franchisor; a focused strategy and leaner structure, and championing the customer experience like never before.
KFC, Pizza Hut, and Taco Bell are the international leaders of the chicken, pizza and Mexican-style food categories. For KFC, Yum! is working to propel global scales to 60,000 restaurants. The Company’s KFC Division same-store sales grew 4% in Q3 2016.
KFC’s core operating profit increased 19% in Q3. In addition, this division opened 138 new international restaurants in 42 nations. In total, the Company’s three brand divisions, excluding China, delivered 11% core operating profit growth in Q3. In Yum! Brands’ China division, core operating profit increased 14%.
For Pizza Hut, the Company is concentrating on digital leadership and having 20,000 Pizza Hut restaurants by 2020. Regarding Taco Bell, Yum! is focusing on having this U.S. brand go international. Taco Bell remains on course with a minimum of 300 new restaurant openings for the year.
2016 financial accomplishments for Yum! include global same-store sales growth of 2%. In addition, this year it has total gross new builds of approximately 2,200 units. The Company is working on increasing franchise ownership to a minimum of 98% by Fiscal Year-End 2018.
With its transformation, Yum! Brands is working to achieve higher same-store sales growth; higher new unit growth; roughly $300MM general and administrative expense reduction, and reducing capital expenditures (capex) from $500MM to about $100MM. This is all to increase its free cash flow.
Free cash flow is important for companies. It is a calculation of how much cash a business produces after accounting for capex. A company can then use this money for dividends, expansion, debt reduction, or an array of other intentions.
The United States accounts for 44% of the Company’s franchise fees; Asia accounts for 24%; Europe accounts for 13%; Canada and Latin America account for 8%; MENA (Middle East and North Africa)/Africa account for 7%, and Australia accounts for 4%.
For Q3 2016, Yum! Brands had EPS (Earnings Per Share) growth, excluding special items, of 9%. The Company is embracing and developing, significantly, its digital operations. Yum! Brands mobile payment doubled from 10% to 20% of sales over the last year.
Yum! Brands’ Chief Executive Officer, Mr. Greg Greed, said, in a conversation with Yahoo Finance that, “We open a KFC about every eight hours and we believe we can open one at least every five hours.”