Yum Brands Analysis

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Overview

Yum! Brands Inc, based in Louisville, Kentucky, has over 50,000 restaurants in more than 150 countries and territories primarily operating the company’s restaurant brands KFC, Pizza Hut and Taco Bell which are global leaders of the chicken, pizza and Mexican style food categories.

The company’s family of brands also includes The Habit Burger Grill, a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more.

Since Yum Brands spin off from PespsiCo in 1997, it become a truly global company led by over 2,000 world class franchisees. In 2016, company successfully spun off its China business as an independent, publicly-traded company and announced its recipe for growth, its multi-year growth strategy to become more focused, more franchised and more efficient.

Company’s recipe for growth strategy includes four growth drivers and is the foundation on which its sustainable, long term results are built. As company built a world with more Yum!

It is also sharpening its set of shared values and elevating its brands and business practices through its recipe for good, its global citizenship and sustainability strategy. This means listening to and engaging with stakeholders around its three priority areas of food, planet and people. Yum Brands is extremely proud of the 1.5 million employees and franchise associates in its system around the globe and the unique culture they have built grounded on innovation, inclusion and growth.

Yum! Brands, Inc. is a quick service restaurant company. The company operates its business through six segments: YUM restaurants China, Yum Restaurants International, Taco Bell U.S., KFC U.S, Pizza Hut U.S., and Yum Restaurants India.

It develops, operates, franchises and licenses a worldwide system of restaurants which prepare, package and sell a menu of competitively priced food items.

The company’s each concept has proprietary menu items and emphasizes the preparation of food with various ingredients, as well as recipes and special seasonings to provide appealing and tasty food.

Its traditional restaurant feature dine-in, carryout and drive-thru or delivery service.

The company’s non-traditional units, which are principally licensed outlets, include express units and kiosks which have a more limited menu and operate in non-traditional locations such as malls, airports, gasoline service stations, train stations, subways, convenience stores, stadiums, amusement parks and colleges.

Brands:

1)KFC:

KFC, a subsidiary of Yum! Brands, Inc., is a global chicken restaurant brand with a rich, decades-long history of success and innovation. It all started with one cook, Colonel Harland Sanders, who created a finger lickin’ good recipe more than 75 years ago, a list of secret herbs and spices scratches out on the back of the door to his kitchen.

Today Yum! Brands still follow his formula for success, with real cooks breading and freshly preparing its delicious chicken by hand in more than 24,000 restaurants in over 145 countries and territories around the world. KFC has more than 8,00,000 team members.

The company is grounded in its heritage but looking forward to the future. KFC is always evolving to make it easier for its guests to enjoy its chicken. Company does this through digital innovation and building new restaurants with its valued franchise partners.

In fact, EVERY SIX HOURS, A NEW KFC RESTAURANT OPENS SOMEWHERE IN THE WORLD. As it grow, KFC is committed to doing so responsibly through commitments like its 2025 global plastic packaging goal, the realization of its 2018 commitment to stop purchasing raised with antibiotics to human medicine in the U.S and the KFC harvest program, which to date has donated over 80 million pounds of food to its local communities around the world.

With the help of incredible franchise partners around the world, KFC will continue to be one of the fastest-growing retail brands globally both in emerging markets and developed markets alike. Presence of KFC around the world:

Continent Countries
Africa Angola, Ghana, Kenya, Malawi, Morocco, Nigeria, Swaziland, Tunisia, Zambia, Madagascar, Sudan, Botswana, Ivory Coast, Lesotho, Mauritius, Mozambique, South Africa, Tanzania, Uganda, Gabon, Senegal, Rwanda.
Asia & Oceania Azerbaijan, Brunei, Cambodia, India, Japan, Kyrgyztan, Macau, Maldives, Nepal, Philippines, South Korea, Taiwan, Uzbekistan, American Samoa, Guam, Northern Mariana Islands, Bangladesh, China, Hong Kong, Indonesia, Kazakhstan, Laos, Malaysia, Mongolia, Pakistan, Singapore, Sri Lanka, Thailand, Vietnam, Australia, New Zealand.
South America & Caribbean Antigua and Barbuda, Aruba, Barbados, Bonaire, Cayman Islands, Colombia, Cuba, Dominica, Ecuador, Grenada, Gautemala, Jamaica, Martinique, Paraguay, Puerto Rico, Saint Lucia, Saint Vincent and the Grenadines, Trinidad and Tobago, Venezuela, Argentina, Bahamas, Bolivia, Brazil, Chile, Costa Rica, Curacao, Dominican Republic, El Salvador, Guadeloupe, Guyana, Honduras, Panama, Peru, Saint Kitts and Nevis, Sint Maarten, Suriname, U.S Virgin Islands, French Guiana
Europe Albania, Austria, Bulgaria, Cyprus, Denmark, Georgia, Greece, Iceland, Italy, Latvia, Macedonia, moldova, Poland, Romania, Serbia, Slovenia, Sweden Ukraine, Estonia, Armenia, Belarus, Croatia, Czech Republic, France, Germany, hungary, Ireland, Kosovo, Lithuania, malta, Netherlands, Portugal, Russia, Slovakia, spain, Switzerland, United Kingdom, Belgium.
Middle East Egypt, Bahrain, Iraq, Kuwait, oman, Qatar, turkey, Israel, Jordan, Lebanon, Palestine, Saudi Arabia, united Arab Emirates.
North America Bermuda, mexico, Canada, United States.
Global Reach & Impact:

i)800k+ team members, 24k+ restaurants general managers, every six hour a new KFC opens, 24k restaurants in over 145 countries, 46% of KFC restaurant deliver.

ii) KFC delivery couriers cover equivalent to circling the circumference of the globe over 5,000 times annually.

iii) 2/3 of the world’s KFC are yet to be built.

iv) The bucket represents 35% of the total sales.

v) In 2017, the Zinger became the 1st chicken sandwich to go space!

vi) KFC sells more than 22 million Zingers each year in Australia, which is almost one spicy chicken sandwich for every person down under.

viii) Only few people know the 11 herbs and spices that make up the secret recipe. It’s protected by elaborate security precautions, including various companies blending different spices so that no one ever has the complete recipe.

2) Pizza Hut:

More than 60 years ago, the Carney brothers borrowed $600 from their mom and set out to change the way the world experienced pizza. From its modest beginnings in 1958, Pizza Hut has grown to become one of the leading pizza company in the world.

Pizza Hut has more than 18,000 restaurants and 3,50,000 team members in over 100 countries. Pizza Hut don’t just make pizza but they make people’s day.

Pizza Hut was built on the belief that pizza night should be special, and they carry that belief into everything they do. Pizza Hut deliver more pizza, pasta and wings than any other restaurants in the world.

A true innovator in the pizza category, company was not only the first to provide America with pan pizza, but company was also the first ever to deliver pizza in space!

Location and Number of Store:

Algeria – 2 stores, Andorra – 1 store, Angola – 1 Store, Armenia – 2 store, Aruba – 3 store, Australia – 264 stores, Azerbaijan – 2 store, Bahamas – 4 stores, Bahrain – 16 stores, Bangladesh – 17 stores, Belgium – 104 stores, Bolivia – 7 stores, Botswana – 3 stores, Brazil – 187 stores, Brunie – 15 stores, Canada – 428 stores, Chile – 227 stores, China – 2,249 stores, Colombia – 93 stores, Costa Rica – 57 stores, Curacao – 4 stores, Cyprus – 35 stores, Czech Republic – 8 stores, Dominican Republic – 29 stores, Ecuador – 60 stores, Egypt – 78 stores, EI Salvador – 107 stores, Finland – 12 stores, France – 151 stores, Germany – 78 stores, Ghana – 7 stores, Gibraltar – 1 stores, Grand Cayman – 2 stores, Greece – 16 stores, Grenada – 2 stores, Gaudeloupe – 2 stores, Guam – 6 stores, Guatemala – 148 stores, Guyana – 6 stores, Honduras – 56 stores, Hong kong – 109 stores, Hungary – 19 stores, Iceland – 2 stores, India – 430 stores, Indonesia – 460 stores, Iraq – 7 stores, Ireland – 21 stores, Israel – 90 stores, Ivory Coast – 1 store, Jamaica – 11 stores, Japan – 412 stores, Jordan – 17 stores, Kazakhstan – 1 store, Kenya – 5 stores, Korea – 334 stores, Kuwait – 63 stores, Lebanon – 19 stores, Lithuania – 1 store, Luxembourg – 9 stores, Macau – 7 stores, Malaysia – 400 stores, Maldives – 2 stores, Malta – 5 stores, Mauritius – 7 stores, Mexico – 249 stores, Mongolia – 13 stores, Morocco – 49 stores, Mozambique – 3 stores, Myanmar – 7 stores, Nepal – 3 stores, Netherlands – 5 stores, New Zealand – 99 Stores, Nicaragua – 17 stores, Nigeria – 3 stores, Oman – 41 stores, Pakistan – 102 stores, Panama – 44 stores, Paraguay – 24 stores, Peru – 139 stores, Philippines – 182 stores, Poland – 135 stores, Portugal – 222 stores, Puerto Rico – 58 stores, Qatar – 36 stores, Romania – 45 stores, Russia – 66 stores, Saipan – 1 stores, Saudi Arabia – 222 stores, Spain – 716 stores, Sri Lanka – 60 stores, Sudan – 1 store, Suriname – 2 stores, Sweden – 23 Stores, Switzerland – 8 Stores, Taiwan – 234 stores, Tanzania – 6 stores, Thailand – 140 stores, Trinidad – 11 stores, Tunisia – 5 stores, Turkey – 57 Stores, Uganda – 5 stores, United Kingdom – 668 stores, United Arab Emirates – 106 stores, United States – 7,447 Stores, Venezuela – 9 Stores, Vietnam – 83 stores, West Bank – 5 stores, Zambia – 6 stores, Zimbabwe – 2 stores.

3) Taco Bell:

Taco Bell had innovation on its mind since Glen Bell started serving tacos at the first location in 1962 in Downey, California. Since then, it have grown to be a culture centric, lifestyle brand that provides craveable, affordable Mexican inspired food with bold flavors.

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Not only Taco Bell provide breakthrough value, it offer quality ingredients and is the first QSR restaurant to offer American Vegetarian Association (AVA) certified menu items. Taco Bell and its more than 350 franchise organizations operate over 7,000 restaurants that serve more than 40 million customers each week in the U.S.

Internationally, The brand is growing with nearly 500 restaurants across almost 30 countries across the globe. Outside its restaurant, fans can access Taco Bell through its mobile app, desktop on ta.co and delivery through its partnership with Grubhub.

Taco Bell became the first QSR to launch a mobile app in U.S restaurants for both drive-thru and dinning orders. In 2016, Taco Bell was named as one of the fast company’s top 10 innovative company in the world.

Location & Number of Stores:

Taco bell Location & Number of stores

Country Number Of Stores
Aruba 3
Australia 4
Brazil 29
Canada 41
Chile 9
China 4
Costa Rica 41
Cyprus 5
Dominican Republic 16
EI Salvador 6
Finland 6
Guam 7
Gautemala 60
India 32
Japan 10
Korea 14
Kuwait 7
Netherlands 3
New Zealand 2
Panama 11
Peru 2
Philippines 8
Portugal 2
Puerto Rico 36
Romania 5
Spain 52
Sri Lanka 3
Thailand 1
United Kingdom 37
United States 6,611

4) The Habit Burger Grill.

From its humble beginning in Santa Barbara, California, in 1969 to close to 300 The Habit Burger Grill Restaurants in communities across the country and internationally today, it has always continued to operate under the same simple philosophy: always deliver high quality food and great service at reasonable prices.

The Habit is a burger centric fast casual restaurant that offers the unique flavors of chargrilling over an open flame in a variety of freshly made and flavorful award winning burgers, sandwiches and more.

Location & Number of Stores:
State/Country Number Of Restaurants
California 209
Arizona 14
Nevada 10
Utah 11
Idaho 3
Washington 8
Pennsylvania 1
New Jersey 12
Massachusetts 1
Maryland 5
Virginia 3
North Carolina 2
South Carolina 1
Florida 8
Cambodia 3
China 8
Habit Truck:

The Habit Burger Grill can now be at everyone’s next event with one of their fleet of catering trucks. The Habit catering trucks are built specifically to prepare best Charburgers and sandwiches featuring a state-of-art kitchen that includes a stainless steel charbroiler that is designed to sear a distinctive smoky flavor into everything they cook. Available for weddings, birthday party, company event, or block party, the Habit catering truck is perfect for everyone’s next event.

Habit Truck Highlights:

i)Perfect for events of all sizes.

ii) Truck can be booked with a minimum of $1,600 plus tax.

iii) Truck can accommodate 415 guests within 1.5 hours.

iv) Standard service time is 1.5 hours and $175 for each additional ½ hour.

v) Habit trucks will travel 60 miles roundtrip with no additional fees

vi) A $300 late night fee will apply to events scheduled between the hours of 9:00 pm – 11:59pm

viii) A $500 late night fee will apply to events scheduled between the hours 12:00am – 7:00am.

Yum! Brands new recipe for growth and goodwill will unlock its potential and reflects the importance of collaboration as it continue to build world’s most loved, trusted and fastest growing brands. Company’s new recipe for growth is based on four things:

1)Unrivaled Culture and Talent: Yum will leverage culture and people capability to fuel brand performance and franchise success.

2) Unmatched Franchise Operating Capability: Yum will recruit and equip the best restaurant operators in the world to deliver great customer experiences.

3) Relevant, Easy and Distinctive Brands: Yum will continue innovate and elevate iconic restaurant brands people trust and champion,

4) Bold Restaurant Development: Yum will drive market and franchise unit expansion with strong economics and value.

Yum’s recipe for growth is focused on leading with socially responsible and sustainable stewardship of food, planed and people.

1)Food: Serve delicious food people trust.

2) Planet: Grow sustainably.

3) People: Unlock potential in people and communities.

Yum launched a series of initiatives to transform the company, centering on a new multiyear strategy to accelerate growth, reduce volatility and increase capital returns to shareholders. As part of this strategy, Yum intended to own fewer than 1,000 restaurants (to become at least 98% franchised) reduce annual capital expenditures and to improve its efficiency by lowering general and administrative expenses as a percentage of system sales to 1.7%. 2019 was historic year for Yum! Brands, as it generated over $50 billion in system sales and crossed the 50,000 restaurant mark.

Franchise Agreements:

The company utilizes both store level franchise and master franchise programs to grow its business. Of its over 40,000 franchised units, approximately 30% operate under its master franchise programs, including over 8,800 units in mainland China.

The remainder of its franchise units operate under store level franchise agreements. Under both types of franchise programs, franchisees supply capital by purchasing or leasing the land, building, equipment, signs, seating, inventories and supplies and over the longer term, by reinvesting in the business. In certain historical refranchising transactions the company may have retained ownership of land and building and continues to lease them to the franchisee.

Store level franchise agreement typically require payment to the company of certain upfront fees such as initial fees paid upon opening of a stores, fees paid to renew the term of the franchise agreement and fees paid in the event the franchise agreement is transferred to another franchisee. Franchisee also play monthly continuing fees based on a percentage of their restaurants sales (typically 4%-6%) and are required to spend a certain amount to advertise and promote the brand.

Under master franchise agreements, the company enters into agreements that allow master franchisees to operate restaurants as well as sub-franchise restaurants within certain geographic territories. Master franchisees are typically responsible for overseeing development within their territories and performing certain other administrative duties with regard to the oversight of sub-franchisees.

In exchange, master franchisees retain a percentage of fees payable by the sub-franchisees under their franchise agreements and typically pay lower fees for the restaurants they operate. Its largest master franchise Yum China pays the company a continuing fee of 3% on system sales of its concept in mainland China.

CHAMPS which stands for cleanliness, Hospitality, accuracy, maintenance, product quality and speed of service is Yum’s proprietary system wide program for training, measuring and rewarding employee performance against key customer measures.

Fast Food & Quick Service Restaurant Market Size:

The global fast food and QSR market size was valued at USD 257.19 billion in 2019 and is expected to grow at CAGR of 5.1% from 2020 to 2027. The market growth is assisted by increasing preference for the fast food among generation X,Y and Z across the globe.

The fast and quick service restaurant industry has evolved to encompass the changing needs of its customers in its business model. Most of QSR, along with offering sit and dine also offer numerous other services including take-out, drive-thru and home delivery, which are well suited to the modern lifestyle.

This has also helped the restaurant business in maximizing benefits. The delivery trend has been further propelled by third party delivery services, such as DoorDash, Foodler, and Grubhub, which have extended courtesy of distributing food at odd hours.

Thus, customers who prefer dining at home contribute a major chunk of revenue for the fast food and QSR industry. Delivery services has help QSR industry to survive in ongoing covid-19 pandemic.

Fast Food market size was valued at $647.7 billion in 2019 and is estimated to reach $931.7 billion by 2027, growing at a CAGR of 4.6%.the world has witnessed a significant growth in the women employment rate. With the number of employed women, it becomes significantly difficult for women to cook meals, which results in consuming fast food. The U.S female employment rate in 2019 was 46%.

Similarly in China, the women employment rate was around 43.7% and in South Africa it was around 45%. All these factors collectively drive the fast food and QSR industry growth. The QSR segment spearheads the markets, which accounts 42.59% share in the fast food market and is expected to dominate the market in future also.

Increased internet penetration and quick access to smart phones have resulted in more purchase through online channels. As a result several food chains are shifting towards online portal to enhance online food ordering for fast food chains, which in turn, augment the growth of the QSR market. QSR segment is expected to grow at a fastest CAGR of 5.1% between 2020-2027.

Fast Food restaurant market in the U.S is estimated at US$176.2 billion in the year 2020. China, the world’s second largest economy, is estimated to reach a projected market size of US$167.1 billion by 2027 trailing a CAGR of 5.8% between 2020-2027. Among the other noteworthy geographic markets are Japan and Canada, each forecast to grow at 0.8% and 2.4% respectively over the 2020-2027 period. Within Europe, Germany is forecast to grow at approximately 1.5% CAGR.

Chicken Segment to record 2.4% CAGR. In the global Chicken segment, USA, Canada, Japan, China and Europe will drive the 2% CAGR estimated for this segment. These regional markets accounting for a combined market size of US$97.3 billion in the year 2020 will reach a projected size of US$111.8 billion by end of 2027.

China will remain among the fastest growing in this cluster of regional markets. Led by countries such as Australia, India, and South Korea, the market in Asia-Pacific is forecast to reach US$112.1 billion by the year 2027, while Latin America will expand at a 3.2% CAGR between 2020-2027.

The QSR industry in the United States is one of the most well established in the world. Many of the biggest global QSR brands originated in the U.S and dominate a large portion of the market. In U.S all states are home to fast food restaurants. California accounted for the highest number with almost 31,500 units, while least populous state, Wyoming, accounted for the least.

The total revenue of the QSR industry in U.S reached US$ 273 billion in 2019. This figure was predicted to drop to US$ 239 billion in 2020 as a result of the covid-19 pandemic. In recent times, the QSR industry has moved increasingly online.

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In 2019 the global revenue of the online food delivery market reached US$107.4 billion. The market size of the U.S QSR delivery sector is estimated to reach US$33.2 billion by 2022.

Many fast food restaurants have formed partnerships with online food delivery services such as GrubHub, DoorDash and UberEats in order to target this growing market. This online market became crucial to QSR during the coronavirus pandemic, where lockdown and social distancing measures caused customers to unable to order in-store.

Revenue of the quick service restaurant (QSR) industry in the United States from 2002 to 2020:

(In Billions U.S Dollars)

Year Revenues
2002 159.2
2003 166.3
2004 173.7
2005 178.1
2006 180.8
2007 181.2
2008 185.9
2009 185.1
2010 190.5
2011 193.1
2012 194.8
2013 196.1
2014 198.9
2018 256
2019 273
2020 239

Consumer spending in the quick service restaurant (QSR) sector in the United States from 2004 to 2019

(In Billion U.S Dollars)

Year Consumer Spending
2004 187
2005 206.4
2006 216.6
2007 224.2
2008 230.3
2009 230.1
2010 232.9
2011 238.9
2012 247.9
2013 254.2
2014 261.9
2015 273
2016 281.9
2017 290.2
2018 299.6
2019 279

Indian Fast Food & QSR Industry:

India’s food service market is pegged at US$ 61 billion, China at US$ 8,154 billion and Brazil at US$2,284 billion. This shows that Indian food service market has a lot of catching up to do. The Indian Chain restaurant market is expected to grow at a CAGR of 21% to reach Rs 63,000 crore by 2024 from Rs 24,500 crore in 2019. QSR have the maximum market share followed by casual dining restaurants.

In the chain restaurant market, QSR’s and CDRs constitute 79% in 2019 and the same is expected to grow to 83% by 2024. QSR will be the driving the growth based on the operating model, where centralized commissaries and robust supply chain will help in attaining deeper penetration in Tier II and Tier III cities. The restaurant chain market is dominated by the international QSR brands operating in India.

The Overall share of international brands in terms of outlets in the restaurant chain market is around 37%, contributing 45% share to the total revenue in chain market. For the international brands, the QSR segment is the maximum revenue contributor with around 70-75% share. The Indian restaurant and food service industry comprises two distinct segments: organized and unorganized.

The organized segment accounts for about 35-40% of the industry, while the unorganized segment accounts for the remaining 60-65%. QSR and casual and fine dining restaurants account for about 75-80% of the organized segment. India’s organized segment is in food service sector is expected to grow at a CAGR of 18% between 2020-2024.

Within the organized sector, the share of India’s quick service restaurants is expected to sustain growth to around 15% of the organized market. Growth drivers for India’s QSR segment are as follows:

Urbanization, working population, demographic mix, growing middle class, growing nuclear families, changing preferences, technology, hang out, price-value proposition, festive seasons, Habit and many more

The market size of Informal Eating Out (IEO) industry in India was US$ 131 billion while the size of the QSR segment was placed at US$21.6 billion, indicative of significant category scope.

Approximately 50% of India’s population selects to eat out at least once every three months, while this figure in metro cities is eight times a month as compared to the US (14 times), Brazil (11 times), Thailand (10 times) and China (9times), presenting room for multiyear growth. Indians having income between Rs 3-10 lakhs per annum spends 10% of the total food expenditure in eating out.

Indians having annual income greater than Rs 10 lakhs spends approximately twice as much as their middle class counterparts on eating out. The average urban spends Rs 6,500 a year on eating out. Millennials spend 13% of their food expenditure on eating out. 60% of Indian Millennials eat out at least thrice a month.

On average Chinese people eat out around 50 times in month, Singaporean eats out around 50 times a month were as Indian eats out only 3-4 times a month. This clearly shows the opportunity for QSR’s to increase their business.

Per capita spending on eating out in USA is US$3,630 in Europe is US$1,118 in Middle East & Africa is US$112 and in Asia-Pacific is US$237.21 . Total number of QSR in USA is 3,57,766 in UK is 26,005 and in India is 3,357.

Size & Scope Of The U.S Restaurant Industry:

Sales: $899 billion, Locations: 1 million+, Employees: 15.6 million.

RESTAURANT INDUSTRY’S SHARE OF THE FOOD DOLLAR:

Year Share of Food dollar (%)
1955 25
2020 51

RESTAURANT INDUSTRY SALES (In Billion Dollars):

Year Sales
1970 43
1980 120
1990 239
2000 379
2010 590
2020 899

CONSUMER TRENDS BY THE NUMBERS:

1)63% Consumers who say they would rather spend money on an experience such as a restaurant or other activity, compared to purchasing an item from a store.

2) 58% Consumers who say they are more likely to incorporate restaurant-prepared items — such as a main dish, side or dessert — into their home-prepared meals than they were two years ago.

3) 52% Consumers who say purchasing takeout or delivery food is essential to the way they live.

4) 58% Consumers who say they are more likely to have restaurant food delivered than they were two years ago.

5) 56% Consumers (age 21+) who say they would be likely to order alcoholic beverages if they were offered as part of a food delivery order from a restaurant.

6) 61% Employed adults who say they are more likely to pick up takeout food for dinner on the way home from work than they were two years ago.

7) 76% Consumers who say they are more likely to visit a restaurant that offers locally sourced food

8) 68% Consumers who say they would be likely to take advantage of a house account if it was offered by a restaurant in their community.

9) 48% Consumers who say the availability of discounts for dining on less busy days of the week would make them choose one restaurant over another.

10) 49% Consumers who say they are likely to make a restaurant choice based on how much a restaurant supports charitable activities and the local community

Global Online Food Ordering Market:

Global online food ordering market will grow to $365 billion by 2030, growing 20% each year from the $35 billion market seen today. If the things skew toward the high demand and high efficiency, the digital food industry could reach $815 billion by 2030.

The value of Drive Thru During covid-19:

The average American spends over $1,200 on drive-thru food annually. The value of having Drive-thru has increased tremendously since the onset of the pandemic. Drive-thru visits increased 26% and represented 47% of all restaurant visit. Even today when more restaurants are reopened, drive-thru visit still goes on increasing by around 17%, highest among the service modes of on-premises, carryout, and delivery use of restaurants and other foodservice outlets.

Drive-thrus are likely to increase in popularity because covid-19 has changed the behavior of consumer. And this change is permanent. People prefer drive-thru because they think why to waste time in waiting for dine-in. people got used to Drive-thrus.

Cousins, friends and family gets together at some ones place to enjoy because people still avoid to go at lounges and pubs to enjoy due to scare of pandemic. So while partying at home only one or two people go to take food for everyone.

So drive-thru is perfect option. Drive-thru make the accessibility for customers significantly more convenient, and in turn, increase sales as much as 70% for some national chains. On average, 50 million Americans eat fast food everyday, generating $570 million in global revenue.

Yum’s Digital Business has gained over $1 billion:

Yum’s journey through Covid-19 has taken dramatic turns, as we expect for a global company with 50,000 restaurants. In April, roughly 11,000 of those were temporarily closed. By June, it hovered around 5,000 or 10% of Yum’s! total system.

Today closure have slid to fewer than 2,500 units, meaning Yum is back to around 96% coverage. Naturally, the Taco Bell, KFC, Pizza Hut, and Habit Grill’s top line appreciated a boost, as its U.S business turned positive at all major brands because of massive drive-thru access and a record breaking rise in Digital.

Yum generated $3.5 billion in digital sales in Q2, a 40% Y-o-Y boom that equated $1 billion step up from 2019 levels. Yum witnessed its digital sales mix cross 30% of system sales. KFC recorded the highest average sales per store in the brand’s history and finished Q2 with 7% same store sales growth in U.S market which accounts 16% of KFC’s system sales. Q2 was the toughest period because of covid-19 then too company delivered good numbers. Pizza Hut’s U.S same store sales climbed 5%.

Yum! Brands Q3 results were lifted by strength in the Taco Bell brand, which saw continued off-premises momentum even as it lost business in the breakfast day part. Net income for Q3 ended September.30 was $283 million up from $255 million. Total revenue grew 8% to $1.45 billion from $1.34 billion.

Drive-thru demand at Taco bell increased, which saw 30 million more cars compared to the prior year period. This was possible because chain improved drive-thru times by 18 seconds. Breakfast sales, which typically make up 6% of total sales, accounted for 4%.

Sales at Taco Bell grew 3% in Q3, partially offsetting 1% decline in sales at Pizza Hut. In U.S Pizza Hut’s same store grew 6%, with 17% of same store sales generated by off-premises channels. System wide sales at KFC were down 1% while U.S sales were up 5%. Yum saw its drive-thru sales increased 60% Y-o-Y with the largest growth occurring during the lunch daypart. Taco Bell added new delivery platforms. Taco Bell’s newest design features a dual drive-thru lane and parking spot designated for contactless curbside pick-up. Taco Bell’s lot of franchisees are interested in expanding drive-thru capacity.

After a slow start early into the pandemic, Yum! Brand picked up steam, reaching record highest sales in some cases. Pizza Hut saw its highest delivery and carryout average sales week in the past eight years.

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Taco Bell announced that company run stores, franchises and licensed stores will hire at least 30,000 employees this summer. It will hire for existing positions at all levels in the restaurant, in addition to new roles responsible for monitoring the drive-thru, managing delivery, curbside pick-up, and the mobile app and maintaining proper sanitation. Despite the increased drive-thru volume, Taco Bell has been able to maintain its below 4 minute drive-thru times while hitting all time lows in customer dissatisfaction.

KFC unveiled its new “next generation prototype” concept that prioritizes a digital forward experience. Here are some highlights on it:

1)Modern visuals that reflects KFC’s identity: The exterior of the new model offers a modern take on the KFC signature red and white stripes. It also features a brightly lit red bucket that directs customers to the new digital cubby system for online and pick-up.

2) Digital single entry point cubby system for mobile and delivery orders: KFC said these will create less contact between employees and customers as the order is delivered directly from the kitchen to the cubbies for ease of operation. It’s akin to pickup selves, in terms of how to erases the handoff process. Delivery drivers as well as guests will access the future.

3) Curbside delivery with dedicated parking spots for customers: Guest who order in advance on KFC’s site or through a delivery partner can show up and wait outside.

4) Defined parking and signage for delivery drivers to swiftly collect online orders: KFC recently expanded delivery partnership with DoorDash, UberEats and Postmates. So clearly, it does not expect third party delivery to fizzle out anytime soon.

5) Self-service kiosks available in-restaurant for quick service: This will help customer personalization at the order point and drive higher checks.

One of the locations, or an express store doesn’t feature a dining room and is roughly 1,800 square feet. Generally, KFC is looking at 1,800 or so square feet locations with outdoor seating and smaller dinning rooms, with added options for off-premises business.

Taco Bell’s New “Go Mobile” Concept:

The Go Mobile concept is designed to create a seamless and digitally integrated customer experience. Slated to open in Q1 of 2021, it features five main updates built around digital adoption:

1)Minimization: Like many chains in today’s pandemic climate, Taco Bell is shrinking its footprint to improve ROI and let digital transaction do the heavy lifting. The Go Mobile store is just 1,325 square feet compared to the 2,500 square feet typical Taco Bell boxes average.

2) Dual Drive-thru: Given the small footprint and reliance on mobile ordering, Taco Bell plans to double the lanes with a new priority pick-up option for consumers who order via the app. The new lane will supplement the existing, traditional lane. A better digital and drive-thru experience with additional access point.

3) Synchronized digital experience: Taco Bell is fitting the unit with “smart kitchen” technology integrated with its app. Namely, the Go Mobile restaurant can detect when guests arrive and suggest route for a seamless experience.

4) Curbside pickup: Taco Bell Go Mobile visitors will also have the option to receive their order via contactless curbside pickup.

5) Bellhops: Go Mobile units will roll a feature that’s quickly gaining prominence throughout quick service. In an effort to streamline the ordering experience, the store will include tablets in drive-thru lines and curbside pickup, both of which will be handled by concierge service of employees, termed bellhops. The Taco Bell Go Mobile restaurant concept is not only an evolved physical footprints, but a completely synchronized digital experience centered around streamlining guest access points. For the first time, its guest will have the ability to choose the pick-up experience that best fits their needs, all while never leaving the comfort of their cars.

Taco Bell announced partnership with DoorDash across 5,500 locations. KFC announced it has selected Manthan, a leading cloud based AI and analytics provider, as a strategic partner in their digital transformation journey.

Over the last number of years, KFC Canada has been making digital the priority in every aspect of their business, from restaurant back of house efficiencies to digital ordering. With over 600 restaurants across Canada and online sales continuing to be an exponential growth level for the brand, speed to insights is critical to becoming an agile business. Taco Bell is embarking on its next chapter of global growth.

Taco Bell has signed a deal with Burman Hospitality pvt ltd to develop 600 restaurants and make India Taco Bell’s second largest market. Devyani International Ltd (DIL), which operated QSR of global brands KFC, Pizza Hut, Taco Bell, Costa Coffee, besides its own brand Vaango, will invest around Rs 1,000 crore in next five years for growing these brands. DIL also plans to double the base of KFC and Pizza Hut restaurants over the next 4-5 years to enhance its position in the fast growing Indian retail F&B sector. DIL operated around 700 restaurants and outlets in India, Nepal and Nigeria.

Pizza Hut India on delivery front have already reached pre-covid levels and more than 63% of their business is coming from delivery business contributed 35% in 2019, which has risen to 63% currently. Company’s takeaway segment has also witnessed growth. Sales figures of take segment is even higher than last year.

The company recently upgraded all its digital assets including the website, M-site and mobile app. It plans to continue invest in digital assets. Company’s sales via app has grown at 50-60% versus the pre-covid levels. M-site sales has grown around 30%. This growth has grown has been achieved despite only 85-90% delivery stores being operational. So the growth would be far higher once 100% stores are operational. Company said digital transactions are playing a key role in such new normal and hence they are ensuring its digital capabilities and platforms are geared up to handle the increased in demand.

They are also using several location data and geofencing tools to enable them to increase its delivery efficiencies.

Financials:

Following is a summary of our Concepts’ operations and a brief description of each Concept as of and for the year ended December 31, 2019:

Divisions No. Of Units % Of Units International No. Of Countries % Franchised System Sales (US$in Millions)
KFC 24,104 83% 144 99% 27,900
Pizza Hut 18,703 61% 113 99% 12,900
Taco Bell 7,363 8% 30 94% 11,784
Yum (Total) 50,170 64% 152 98% 52,584

Financial Highlights (figures in million US$, except for per share amounts)

  2019 2018 % B/(W) Change
Company Sales 1,546 2,000 (23)
Franchise & Property Revenue 2,660 2,482 7
Franchise Contributions for advertising and other services 1,391 1,206 15
Total Revenues 5,597 5,688 (2)
Operating Profit 1,930 2,296 (16)
Net Income 1,294 1,542 (16)
Reported Diluted Earnings per common share 4.14 4.69 (12)
Special Items Diluted Earnings Per common share .59 1.52 NM
Diluted Earnings Per Common Share before special item 3.55 3.17 12
Net Cash Provided by Operating Activities from 1,315 1,176 12

Figure are in million US$

Income Statement 2019 2018 2017 2016 2015
Revenues:          
Company Sales 1,546 2,000 3,572 4,189 4,336
Franchise & Property revenues 2,660 2,482 2,306 2,167 2,082
Franchise contributions for advertising & other services 1,391 1,206 _ _ _
Total 5,597 5,688 5,878 6,356 6,418
Refranchising (gain) loss (37) (540) (1,083) (163) 23
Operating Profit 1,930 2,296 2,761 1,682 1,434
Other pension (income) expense 4 14 47 32 40
Interest Expense, net 486 452 445 307 141
Income from continuing operations before income taxes 1,373 1,839 2,274 1,345 1,253
Income from continuing operations 1,294 1,542 1,340 1,018 926
Income from discontinued operations, net of tax _ _ _ 625 357
Net Income 1,294 1,542 1,340 1,643 1,283

Cash Flow Data (Figure are in million US$):

Cash Flow Data 2019 2018 2017 2016 2015
Provided by operating Activities 1,315 1,176 1,030 1,248 1,260
Capital Spending 196 234 318 427 442
Proceeds from refranchising of restaurants 110 825 1,773 370 213
Repurchase shares of common stocks 815 2,390 1,960 5,403 1,200
Dividends paid on Common stocks 511 462 416 744 730

Balance Sheet Data (figures are in million US$):

Balance Sheet Data 2019 2018 2017 2016 2015
Total Assets 5,231 4,130 5,311 5,453 4,939
Long term debt 10,131 9,751 9,429 9,059 2,988
Total Debt 10,562 10,072 9,804 9,125 3,908

Other Data (figures are in million US$):

Number of Units at year end 2019 2018 2017 2016 2015
Franchise 49,257 47,268 43,603 40,834 39,320
Company 913 856 1,481 2,841 3,163
System 50,170 48,124 45,084 43,675 42,483
System net new unit grow 4% 7% 3% 3% 3%

KFC System and Same Store Sales (figures are in million US$):

  2019 2018 2017 2016 2015
KFC Division System Sale 27,900 26,239 24,515 23,242 22,628
System sales growth (decline) 6% 7% 5% 3% (3)%
System sales growth, ex FX and 53rd week 9% 6% 6% 6% 5%
Same Store sales growth 4% 2% 3% 2% 1%

Pizza Hut Division System Sales (figures are in million US$):

  2019 2018 2017 2016 2015
Pizza Hut Division System Sales 12,900 12,212 12,034 12,019 11,999
System sales growth (decline) 6% 1% _ _ (1)%
System sales growth, ex FX and 53rd week 7% 1% 2% 1% 3%
Same store sale (decline) _ _ _ (2)% _

Taco Bell Division Systems sales (figures in million US$):

  2019 2018 2017 2016 2015
Taco Bell division system sales 11,784 10,786 10,145 9,660 9,102
System sales growth 9% 6% 5% 6% 8%
System sales growth, ex FX and 53rd week 8% 6% 7% 5% 8%
Same store sales growth 5% 4% 4% 2% 5%

Company is strong by both financially and fundamentally. So I prefer a buy call on Yum! Brands at CMP of US$107.19 on 25th November, 2020.

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Pritesh Patel

Pritesh Patel

The founder of Patel Securities, Pritesh loves to talk about Stocks, Businesses, and Sectors.
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