i\

*.-

H?ttt\ t1o

1l>l,n

ln5
lildAinsnraF

wlaaAor

100t.

Itll\r

M.'k

Multibranding at yum ! Brands lnc.: Thinking Outside the Bun

Ir)lcnsc cortrl)ctition, slorv slnrc-storc salt,s, and a sluggish cconoml, lravc plagucd quick-scrvicc rcstau-

rant (QSR) chains for scvcral ycars. By |unc 2003, l\'lcDonald's santc-srore sales had fallcn for cach of the prcvious twclvc months, with the first quartcr of
2003 p1eiu6i19 N.{.Donald's lirst quarrerly loss sincc bccoming a public company, in 1965.1 Bascd on fif-

tccn ycars
rtlc to Kcc|

of

ntarket and demographic trcnds,

conrpalics accounl for $107.5 billi<tn i:r salcs, or iLS pcrccnt oI total rcstaurant industry salcs.s Thc rop 400 Iargcst clrains rcporrcd a toral sal..s gain of 5.6 pcrccnr in 2002 for a toral of $207.6 bil_ lion. McDonald's was at thc rop of rhc list rtirh around $40.5 billion in sales, followed by Burqcr King with $t t.3 billion. Thc rhird and fourth larg.,sr

\'lcKinsey and Contpany consultants projected that

o Lodgilc

thc fast-food segment. of the industry would grow revcnucs by just I perccnt a )rar ovcr tlre ne\1 eight '1cars, lcss rhan halfthc 2003 ratc.2 Among thc largest rcstaurant chains, aggressive efforts to retain their
nrarkct shares led to excessive discounting. To regain

chain restaurants werc Kentucky Fried Chicicn (KFC) (SI0.3 billion sales) a'.ld ptzza Hut ($7.8 bi)lion sales), both owned b1,yum! Brands_6 Wlrile rht, burger segmcnt is the largest, accounting for :i-i.,
pcrceirt of the top 400 chains'saies, the fastest gror,._ ing segntcnt is coffec/snacks, which includcs con_ cepts lile Starbucks and Krispy Kreme Doughnurs.

r 1001.

prolitabilirv, they have moved arvay from pricc discounting and are scrutinizing potential site locations, r-rpgradrng menus and dicor, investing in training programs for crcw members, and developing custonrer-lovaltv markcting programs.l Ytrnt! Brands Inc., with three top-tcn chains, is
onc olthc nrajor plal'ers in thc highly conrpetitil,e fasr, tood scgnrent ofthe industr,v and is the worldt largesr

The maturing of the fast-food indusrry

h.rs

reslaurani company with 33,000 stores in more than 100 countics.l The other large holding companies with

nrultiple brands include McDonald\ Corporation,

Diageo PLC, B_rinlier lnternatioDal, CKE Restaurants,

forced the key players ro rcthink rhcir slrategies an.l rcinvcnt their operations. Managenrenr rcorganir.r_ tion, new product development, aggressivc ntarker, ing, and strategic i-edirection helped the indusrrr lcaders rebound in larc 2003.:UcDonald's sanre-strrr., sales rr'ere flat in 2001 and dropped l-5 percenr irr 2002. Horvever, in October 2003 the corporarion posted irs strongest monthly U.S. salcs gain in lir.<, 1ears, rrith a 15 percent increase afier an er1ensir..,

\\tendy's lnrernational, Dardcn Restaurants, Allied

Do;lccq Quick Servic4 Qq512ur.rtt,

global reorganization of senior managcment. \^tend)'s International Inc. attribured custom.r r-esponse to the chain's nerv Homcstvle Chickerl
sales

Ourback

Steaklrouse, and AFC Enterprises_ fbgcther thse large

\\tiflcn b!
was

Prof.ssor Cathv A. Enz of Corncll Univcrsitv This cai. es rhc basis for class discussion. Thc Gvcnts dcrribcd .rc not inrcndd ro illu3r.at. .irhcr cffecliv. <rr inclT.di\t man-_ a8cnr.nr pradiics.

qrittcn

per given changing consumer tastes and recenl obesitl larvsuits.9 Burger King, the second fargest tasi food chain in the United Statcs, has struggled in
I

Strips as one explanation for its reported sanre-storc iump of.7.6 perce-nt during the same period_s tn spite of recent sales turnarounds, sonre observers rvonder if fast food will continuc to pros.

5t

srz i caser

AT

YUH! BMNDS lNciTHlN(lNG ourslDE THE

'.'LT.BRAND.NG

'uN

ln rcfcrcncc to thc hcaltlry-dining consumcr"'No matrcccnt ycars. Diageo PLC, an intcrnational brcwing "wc won't bc ablc to attract *"gf""rcratc, sold thc chain in thc fall of tcr what wc do," hc says'

".i'rpi'rli" thosc PcoPlc lo thc Goldcn Archcs-"|9 McDonald's also 2002 for a low pricc of $l.6 billion.lo tn fact, an cstipcrcent sharc in Prct A Mangcr' a frcsh.-"i tt lo 20 p"r."nt of Burgcr King franchisccs owns a 33corccpt' wilh an oPtion to buy rhc chain rvcrc lrchind on royalty paymcnts, althoJgh thc chain sandwich rcvitalizrtion plan, *"r:"n-ur.g.a- ln iob3 by s"lcs .rf thc-n$v low-fat ourrighr in 2005.16 \^/ith a rcccnt ncw custonlcrs' cncourchickcn baguittc linc.ll Ncvcrrhclcss, onc of llurgcr ii,rg, f".g""rt ft"".hisccs' AmcriKing, with 120 units' .""r"in ctr'"p,". ll bankruptcy in 2013 and intcndcd l2 portfolio of rcstatrrants ,,r r"tt i,. .l.lrc "n,ira first Arrrcricans to gro\{ up with fast food,

McDonald's lropcs to attract agc cxisting customcrs to visit nrorc oftcn' and crcatc brand loyalty. Thc plan includcs upgrading scn'icc' inlProving traininS' and crrlrancing thc tastc and rclcvarrcc of its footl.lT Tlrc chairr rvill focus its brantl k1 adults' kids' and monrs )inr Qotalulxr' thc baby-boonr gcneration (iridividuals t'orn alty on yor.rng chairnlan and chicf cxccutivc officcr' McDolald's bctwccn 1946 and 1964), havc maturcd and arc follows: plan as thc explaincd secking altcrnativc dining options. Thc cnrcrgence and rapid growth of thc "quick casual" scgment it n'h.r, *" embarkcd upon our rcvitalizarstaurarts rrend. rhis of Quick-casual cvidcncc tron plan earlier this year, we announccd fcausually conccpts, or sclf-scrvicc limitcd providc that in 2003 wc would sharpcn our focus gourmt souPs' as such items nrcnu turing"upscalc" and takc the actions nccessary to oPti-

' burriro contains grilled

salads, and sandwiches.ls As thc baby boomcrs scarch for fresher and more nulritious food' fast casual chains such as Pancra Brcad Co', Atlanta Brcad Co., Cosi lnc., Cafd Express LLC, Corner Balicry Co. and Pci Wei Asian Diner are capturing Iunchtime. Most fast-food chains havcresp6ndcd by altcring their menu itcms, adding salads' and changing ingredients. Market Fresh sandwiches' introduced by Arby's, and artisanal breads at Subw"y' just a lew Quiznos Sub, and Togo's Eaterics are ln luly 2003, Taco examples of product innovations "Outside the B-un" Caesar salad Bcil introduced its and a chicken Caesar grilled stuffed burrito. Thc

mize the business. W-e've madc progress roward this goal with October marking the first firl-*onlh that our unireccdented "i'nr lovin'it" campaign reachcd

custonlcrs around thc gloLe. This ncw brand positioning is bringing a ncrv attitud" and en".gy io life foi our customcrs and crew. The management changes rve announced carlicr this rveck arc another examplc ofhow we are making rhe best

ur. oi ou. t"l"nt,nd

all-r.'hite-meat chicken' romaine lettuce, crunchy rd lorrilla striPs, and a

Caesar drcssing, wrapped attribute N'[cDonald's line

resources. During rvi.ll rake addiwe quartcr, fourth the rhc business. re'iralize to actions rional These

will inclucie making decisions

maior factor in its mid-2003 rebound'. As pari of its strategy, McDonald's has made a u".iety of inte.tm"nts in fast-casual concePts, includ ing the. acquisiiion of Boston N'tarket, Chipotle Muitiple branding is likely to bE: pan of the t lilc"n Grilt, and Donatos Pizza- Boston MarLt, a for all of the major plaryers as they rethink their future -quick-casual concePt, was purchased in 2000' and While McDonald's strategy has been ro McDonald's immeiiately began a turnaround effort strategies' separately, tlre company could capiicbrands develop rhat induding remodeling stores ind tbe menu- Russ in thc future' ln contrast' Yum! cobranding on talize SmJ'th, a senior manager rcponsibll for the fast-casual on a multibranding srrategy, i4 bening is lnc. activities at McDooald's, notes that rhesc partnerships Brands puts than one of its brands into more the 6rnr which a diffcrent type of consumir'
enable ttrc firm to rcach

in a toflilla.l{.Analysts of premium salads as a

related to our Partner Brands and implcmenting the rccently announced plans tbr reviializing our business in lapan. These actions, along with the comi.letion of annual in.rpairn.rlnt testing, willrsult in charges in the fourth quarter 2003.ts

Frv LEA'TNG ResTaJRANT

sR NDs

sI3

ct

io

llin Il, lIrtc

ac,
1c-

thc sanrc storc in thc hopc of raising salq5 snd lqvcraging opcrating cfficicncy. This Fortrrttc 100 comPany' baicd in Louisvillc, Kcntucky. is ablc to cxccutc a nrultibranding stralcgy casily bccausc it olxratcs {ivc rvcll-

continucd growth, thc intcrnational busincss rcprcscnts 35 pcrccnt ofsyslcm salcs,3l pcrccnt ofrcvcnuc,

and onc-third of opcrating profits with about

12,(X)0

knorvn brattds: A&\{ All-Arrrcrican Food, Kcrttuc\' l:rir.d Chickcn (Kl:(l), Long lohn Silvcr's, l)izza llut' :rntl'lico llell. Salcs lirr thc glrttral systcnr totalcd $24 2 billion in 2002, up fnrrn $22.1 billion in 20ol're llc{orc May 2002, Yum! llratrcls Inc. was callcd liicon Global llcslaurants to rcPrcscnt its thrcc

rcstaurants, conrparcd to McDonald's nrorc thirr t 6,000 units inlcrnationally.2l McDonald's is considcrcd thc l,rinrary conrpctitor irrtcrrrationally wirh carnings of ovcr $l billiorr itt intcrnatiorral prolit. conrparcd to Yutrr! Ilrand's $400 rlilliorr anci llurgcr
King's $50 nrillion.22

Thc brands tlrat drivc intcrnational grorvth arc

:cr.

nraior brands, Kcrrtucky l:ricd (lhickcrr' l'izz-a llrrt' -llco llcll. ll icort r*as cstablisht'd ns rrI ilrti'' arrd pcntlcnt, irublicll' (x\'ncd conrPany wllcn il wns spun ()[l frotlr PcpsiCo, rvlrich ()wncd and franchiscd thc llrrcc quick-scrvicc rcstaurant braDds
worldwidc.2o l'hc I)anlc chalrgc (o Yuml Brands lnc'

primarily Kl:C wilh 6,800 rcstltrranls

an<l l)izza

lltrt

rvitlr 4,400. \\/ill) a 8o.rl ol doublint (hc rrurttbcr ,rl inlcrnationxl rcslaurirtls b1' 2013, Yunr! llr;rntls is
focuscd on China, ]r'lcxico, thc Utritcd Kingdont, arttl South Korca.l'hcsc four countrics rcccivc thc ltajoriry of thc {irm's capitai invcstnlcnts bccausc of high

camc in lr4arch 2002 after thc acquisition of \brkshirc Global Xs511u13n15. With this acquisitiorr' tllc company addcd t'^ro additional QSR brands: Long lohn Silvcr's and A&\{ All-Anlcrican Food' With {lvc brands in hand, thc nanre changc bcttcr rcflccts rhe enlirc Portfolio o[ restaurants as u'cll as thc conpany's t.!crv York Stock Excharrgc ticker: YUN'l. Exhibir I providcs a bricf overview oI the
conrpan)"s carnings pcr sharc (EPS)'

rcturns-21 Brand operations

in China includc

FIVE LEADI NC RESTAURANT BRANDS

2002, Yum! Brands opened a rccord 1,051 nc'v irrternational s)'stclrl rcstauranls Kcy to the

approximatcly 800 KFCs and 100 Pizza lluts. Thc company has carcfully positioncd itsclf in China rvith rhc largcst real cstatc tcam of any company in any indusrry and a distribution systcm thal givcs it covcragc in cvcry nla;or provincc-and hcnce acccss to n'rosr of China's 1.3 billion residcnts. Olhcr Parts of thc rgorid offer challcnges, as the firm tries lo gct ul ro scalc in Contincntal Europc, particularly in Gernrany ',vith KFC, and in lndia r^rith Pizza Hut A rcccnt joinl r'cnture in Brazil r.'ill help cxpand thc KFC brand in South America
Sincc 1999, the corporation has bccn strategicall)'

In

'onlPan\)s

rcducing its sharc of total s1'stenr units by sclling company-orvned reslauranis to cxisting and Irer.'

YUHI BRANDS INC. EARNINGS PER SHARE FOR 2002 ANO 2001
2002
Q1

2002
Q2

2002
Q3

2002
Q4

2002
FY

2001

fY

rf

the

OnBoinB ope(atin8 lmpacl of NFAs

EP5

i their

0.40 i0.02)
0.38

0.45 s O.49 s 0.56 s r.91 s l.6t (0.02) (0.o1) (0.01) (0.09) 0.0r
0.43 o.46
0.01

en to
lcapiYum!
lmpacl
oa

0.55
0.01

1.82
o.o6

1.62

unusuals

0.02

o02

:9" ln
{s

Reported tPS

0.40

0.45

o.47

0.56

$ 1.88 5 r.62
lDtrcslx' l
2o0l

into

fu(r.:Yum: lland\. -!i ("!l{x Rdrlnrn!.- hqt:/sv-yum

co'Mn\<51o'y'sss hlm

stl

I clser

ourslDETH ouN HuLTIoRANDING arYUl''l!aRANos lNciTHlNKlNc

wcrc rcfranchiscd franchisccs. A tolal of 174 units

doubtful franchisc and license fec reccivablcs in thc

t]
I
I

(sold) in 2002, altlrough thc bulk of rcfranchising rvas .,r,,ir."a ir1 2o0o, with salcs of 757 tcslaurants' and

in 2001 with

salcs

of ?Jl ulits2a In addition'

224

o( poor 1xrrc{tirurxtlts wcrc closccl in 2002 bccausc ycars Yunr! Brands scvcral For rcl,rc,rlitrtt <rr f,rrrrr"rrcc high hls workcd to hclp frarrchisct's sttuggling uodcr royaltics past-duc rvaivcd il 200i, In lcvcls of dc'l.lt. 15 ln addi,,ruc.i try nu"rl"u"rog"d l rco llcll t'ltcratots r,,,,1, i1 sold or (1,'scd .tl'llrorilrr'tlcly 5 200 cr)lllP'lt)){,rrcr.rtc(l rasl:lrrr:llll. lltc

Taco Bcll systcnr. Comparcd to 2001, franchisc and liccnsc cxpcnscs dccrcased by $10 nrillion or l8 pcrccDt in 2002. as a rcsull of financial rcstructuring 0( syslcnl ccrtairr Tirco Bcll franchisccs in 20Ol ' Ovcrall' irt 2fi)2, nlillion to 1,243 $ salcs irrcrcascd by 9 pcrccnt providcs 2 Exhibit with sanc-storc' salcs up 2 pcrccnt'
a

l i
I

'l'hc corporation is divided inlo fivc divisionsA&\{ r\ll-Anrcrican Food conrbincd u'itlr l-ong lohn

sumnrary of opcrating Pcrfornlancc'

cl').iltt artd scllirrg t'f st'rlc' tlrc $4 5ltillrorr ilr l'rrrg(,'rtlt),tt1f Icrjtr\c hchrcrl thc l'ctrtg 'pun-oft try (arlr'(i r[tcr it r.rrrr .lt'bt lllrl company chargcd tlrc 2002' ln l,cpsiCo in 1997.:6 profit to allow for to opcrating cxpcnscs of 58 million

Silvcr's, KFC, l)izza llut, l'aco llcll' and Yrrrn! IlcslarrrJnls lntcrnational llach divisr<ln is lctl by a

lr rrrcsiJcnt, .r Prcsidcnt altd cltici ol'crattng 'r(litct rasc of in tlrc ,,rcsrdcnt attd chicl conccpt ofliccr' or' lh" i,rtcrnarional division. a chairnran Thc board of

ffi(tNMILL'oNs,EX
2002

Qr
Company sales franchise and license iecs
Revenues Food and PaPet

Q2
51 ,5 71

Q3
5r,705
710 1,9r t
5

Q4
s2.1 89

Q1
5r,597

Q2
S1,721 213

Q3
sr,765 )14
r,989
544

51,426

188
1,614
,13

196

272
2,4 61

I,767
442 422 405 1.109 215
9
5

thyroll and emPloyee beneiits pente' Occ upancy an'i otl'or operating e'
Company res(au.an( e)iPense! Ceneral aod adminislralr!e expense3 (b) tranchise and license e\Penses

9 395 169
182

.17

671
601 582

457 .150

1,203

1,124 219

1,854 297
18

t0
7

t?
9

1,802 1,916 492 512 450 173 410 162 1,377 1,467 208 20t 76 (2) (4) 3 217 42 57
1679
251 42 70

47j
481

1,498

212
7 17)

Other iinconle) exPenses'cl Refranchising nel loss l3?in) {cl (dl OperarinB pro{it beiore sPecral ilenls
ln(ere5t exPense. net lncome (ax Provision

(l

1.199
215
3.1

I
33

1,66r
234
45 65

2,159 302

r,716
273
39 67

60
71

6.1

(di Earnings beiore gPecial items

5r

l7

5l14
12.5%
r

sl44

S171

$1r8

sl15

5167
29.0"/"

(dl Tax rate belore sPecial ilems

Company sales
Food and paPer Payroll and emPloyee beneiits OccuPancy and ollrc. oPeralinB exPenses

3r.30/"
10090

31.0%
100%

29.8% 100% 10.5

27 .5

t2.60/" lz-3"h
100% 30.8 28.2 100% 30.9 27.4

o00/" 30.7

100% 30.8 25.8

21

30.8

30.l
16.8
4

26.9

)3.9

5.7 16.7

65
15.4%

Restaunt m3rgio

r5.670

16.4"

l4-l
2OOlr'

l4.E% l5.l

;*...-t"-'i.*a.,

-t."1r(t

Rdnl(ms "

ht\)r//\{w

(De(cnlxr v('m rottvinl(xiorsksr"htm

rrvE LGADTNG REsrruRANr

sR\Nos

5I5

of
!'nl
02,

lcs

,;
rntl

dirccrors is comPoscd of thirtcen individuals, with lwo from Yum! Brands, hvc from rctail companics likc Targct CorPoration and Kohl's Supernrarkets' 27 ,noilr". fivc fronr banks or invcstmcnt firms "n.l l'lrc othcr mcmbcr is thc chairnran of thc board of llarnran Mauagcrrlcnt CorPoration, onc of KFC's largcst franchisccs. David C. Novak' thc clrairrrrnn of thc board and chicfcxccutivc officcr ofYunl! Brands, scrvcd as Prcsidcnt of thc conlpany and was a brand group prcsidcnt for KFC and Pizza Ilut whcn thcy
rucrc owncd bY Pcpsi-Cola.

Mcxican food- As a pcrccntagc of QSR catcgory salcs, Yum! Brands holds 65 Pcrccnt irt lhc Mcxican-stylc catcSory wilh Taco Bcll,46 Pcrccnt

in chicken with KFC, J3 pcrccnt in scafood with Long John Silvcr's, and, l5 f'crccnt in pir-za rvith
Pizza llut.26 Although a sntallcr playcr in thc largc

,)'n
r, ll

Ibrrr of tlrc Yunll brltrtls arc global lcadcrs irr tlrcir catcgorics of chickcn' scafood, ltizza, and

hamburgcr scgntcnt, A&w is thc lotrgcst-running quick-scrvicc rcstauraot in Amcrica. 1'hc to;r twcnty-fivc quick'scrvicc clrains' salcs and unil volunres arc shown in Exhibit 3. As lhc lablc indicatcs, four of thc brands arc in thc to| lwcnt)'-llvc in thc quick-scrvicc scctor'

:of lof
2002 Sales Chain

(in millions)
540,457.6
r

Number of Units (as of 1/1/03)

30,02
5

l3
,7

65

224 ,989 544 17J

481
.49 8

]. McDonald s 2. Eur8er King 3. XFC 4. Pizza Hut i. wendy s

6.5ubwa1'

l,loo.d
7,800.0
7,500.0
5.773.O

I1,400
12,362 r2.030 6.233
17

10,300.0

7. Taco Ecll 8. Domino's Pizza

9.Starbucks

5.400.0
3,961 .7

,358 6,432 7 .2 jO
5,886 5,s00 5,710 1,401

3,182.0'
1,000.0

212

lo. Dunkan'Donuts
I

L Dair) Queen
Sonic Drive'ln ,ack in the 8ox

2.730.0'
2,695.0

17)

12. Arbys

6
t

ll.
1.1.

2.241.0 2.239.6
2,118.5 1,857.6 1,813.6 1,700.0

2,576
1,871

.716 27J
39

15. 7-Eleven 15.

-

5,821

hpa lohn's

2,792 2,348
1,672 1,074

67

17- Hardees

5r67

t8- Tim Hortons 19. Popqs 20. Chick-iil-:

1,432.0.
1,)7 2.8 '

:=:=
r00%
30.8 26.8 27.3 5.1"/"

9.O"k

il.

Littl" C""s".t

22. Carls lr. 23. Baskin-Robbins 24. Church3 Chicken 25. tong lohn Silve.'s

1,2@.0 lo7 4.6 913.8

2,700
987

4,700
1,481

900.0'
a28-O'

1,249

.f.xr.(,: '.{m Rrnkin8t' R(tu.rnlr & lnrtt!,lioor' l5 luly 20ol ' Rctr:u..nlt a ,nslildifis eslimilc.

t8

29

cAsE

OUTSIDE THE BUN HULTIBMNOING AT YUH! aMNOS INC :THINKING

I
out"'il

KcntuckY Fried Chicken

1939 Kcntucky Fricd Chickcn (KFC) was foundcd in wlrat who pionccrcd bv Grloncl llarland D- Sandcrs' lrc callcd "sr-rnday Dintrcr' Scvcn l)a1s a Wcck" rnd

balancc that with an aPProPriarc arrount of cxcrcisc-ils all about cncrgY in, cncrgY
N4arty havc

whal is now frcqucntly rcfcrrcd t()

as

"honrc nrcal

rcplacctrrcnt"-sclling conrplctc nlcills k) cilrl)' tlrat u,,t.2' Kl'C spccializcs in chickcn dirrrlcrs .Ii'i(r.. r_-i.^., an{l and includc Original llccipc, Extra Crispy' lwistcr' ol' Coloncl's Ciispy Strips chickcn with a varicty
"lr()nr('-st)'lc" sitlcs. lr4orc tlran 100 othcr Prodtlcls' Statcs such as ChLrnky Chickcn I'ot l'ic itr thc Utritcrl r"triitr oflcrcd arc in satlclrviclr I'tPan' arrd a salmott
ous locations u'orldroidc'

criticizcd Kl:C for jrrrrrpin6 on tlrc hcalthful-altcrnarivcs batrdwirgcln r''itlrrrut lritvitrg't hc:rlthful product. Ar: cdiloriitl in 11'lt'tltisirrg "l.q' clraritctcrizctl thc ad catrrPaigtr lrs "laughatrl':' arrti 'l-hc cditorial callcd for tlrc arls ttr bc <1anraging." prrllcJ off thc air ilrltrrcdralcly As thc cdrtorial rrrtucrt,'tl. lrr thc long l)i\lory ol Jl)surd. rlti'lc'tdrrrg 'rrr'l i,,J,.,,r,',' .,,1 cl.rirtrs' tltc (irlrrf'rrrlr) \ l\){r{ltrlrrllq r\l Kl:(l's brt'a,.lcci, fricd chickc'rr as a P'rrt rrf a ltcaithv dict nrcrirs spccial dcrision lt danragcs tirc crcdibi)-

Frauchising bcgan in 1952, and thc unit count was acquircd had riscn to 6,600 units by thc timc KFC nrillion cuscight N{o\*'alnlosl bv Pcr:siCo in i9ti6.J0

,onr"r,

scrvcd daily in (hc nlorc than ll'000 "r" locatcd in rcstaurants. This long-cstablishcd brand is

to morc than eight countrics and tcrritories Trying in products' othcr QSR diflcrcntiate thc brand from "Thcre's food' fast thc 2002 the company inrroduced Then lhcrc's KFC" advcrtising caurpaign rvith Jason

rlv Dol iusl of K FC but o[ thc cnttt e nral kctiltg itrdu' ,rr.-tt ,q o pcrccnt dcclinc in samc-slorc sales rc'rs rcportcd by KFC for Scptcnlbet 2003 comparcd to rlrc prcvious ycar-ll Thc troublcs nlay nol stop Ihcr'; (FTC) is invcsli' thc U.S. Fcdcral Tradc Conlmission askitrg thc ealinq, thc tclcvision comtDcrcial's clainrs, thc justif' rvirh c*'idcrrec and cxplain to In,n1.-uny cat nlorc consunlcrs can hclp products irs clainr that

r{ hcalthfullY and losc rvciglrt

A.lexander, a wcll-known actor from the Seinfcld flal' show. ln spite of thcsc cfforts, salcs remained undcrcame Entcring 2003, thc entirc QSR segurent h".sh ciiticisnr by activists who claimed the risc of obcsity in children is atlributcd to nreals that are.high in fat and calorics- ln an effort to Present its chickcn prbducts as "hcalthy," KFC devclopcd an advertising ."nrp"ign that has mariy crying foul KFC began in l"tc )oo1 airing a national advcrtisirlg campaign that idcntities the tiicd chicken producls as lo\{' fat ln thc advertisemcnts KFC Original Recipe Chicken Breasts comPany are conrparcd to Burger King \{hoPFers' A
prcss release stated: "\^rc want to sct the .eco.d str"ight' Consumers should no longer feel guilty about cating fried chickcn," said Scott Bergren, KFCs Executirrc Vice President'

Pizza Hut
billion Pizza Hut, the rccogt'rizcd lcader in thc S33 (hain lD pizzd calcgory, is lhc largcst pizza rcslaulanl ihc rvorld,.rith I0'600 unrls in morc than 100 countricsr morc than 6,600 units are itr thc Unitcd Statcs' conrpany \{as namcd Best Pizza Chain in

Thc

Ancrica in a national consuntcr survev published b1' Restaurottts 4r lnstituliotls magazine Like manl' rcstaurants started by entrePreneursi thc conlPan)'

5600 bcgan rvhcn lrvo college-agc brothers borrorved equiPsecond-hand purchase to fro-m their mother ment and rent a snrall building on a busf intcrsection

in \\tichita, Kansas.lt The year was 1958' and rhe

Marketing and Food lnnovation"Consunrers will bc surpriscd ro learn rhey can en)oy fried chickcn as part of a healthy, balanced dict. Of coursc' rhcy should eat all iood in moderation, and

coniept of a pizza parlor was new but promising- A year later the first fianch-ise unit lvas oPericd' and {he hrst internatidnal lestaurant opened in 1968 in Canada. Units in Mexico' Soulh America, Australia'

Europe, the Far East, and Africa s'ere quick to follos' s'hen Ncariy 3,200 units were in operation bt l977' omPan)" the PepsiCo acquircd

rlYE LEADTNG RESTAURANT

sR Nos

I 5l7

thc

gir Ai"
r

rrcl

bc
.u!i_

lnd

pizzas: Pan I'izza,'I'hin 'N Crispy' l-land-Tosscd Stylc, Stuffcd Crust, Thc Chicago Dish' and Thc Rig Ncw Yorkcr' Tlrc conrpany continucs ro rcfitlc and dcvclop products, including thc Fit 'N Dcliciotrs Piz-zas' Thcsc piz'N Crispy ras havc half rhc chccsc oI tlrc rcgular Thin rcciPcs, gclrcrotrs lrorli()ns ol lonrnto saucc' and tt>|_ pings rhar itrclucic lcan nrcats and frcsh vcgctatrlcs' i'ittlng iu *ith lhc trcnd for lowcr-fat foods' a slicc contains only 3.5 to 5 granrs oI firt, dcpctlding on thc

Pizza Hut is known

for six corc

Long lohn

Si

lve r's

Thc rcccntly acquircd Long lohn Silvcr's lrrand is thc largcst quick-scrvicc sca[<rod chaitr, with morc than 'l'his 1,200 utrits and 14,000 crrrployccs worldwidc. sca{ood conccPt, bcgun in l96lt' was inspircd by llobcrt l.otris Slcvcttsott's classic borlk Trt'rrlrrr,' .lslrrrrd. Thc rcslaurants offcr sclfood prcl,alqd i;l .1
sccrct battcr of wlrcat, corrl, and olhcr natural ittgrcdicnts.lE As thc conccpt Srcw' thc nlcnu cxltan<ictl llcyond thc fanriliar lrush pttppics arrd battcr-dippcd

,ot
It lr i,

rbil .lus

sclcclior) of availablc t<lppirtg,s- according to thc corulnrly, tlrat is 25 pcrccnl lcss flt thart a rcqular rccipc,l-hirr 'N OrisPY Pirz-a'

Taco Bell
Taco

dto
rcrc,
'csti
,l thc

in 1962 by Glcn Bcll in Downcy' company went public in 1966' thc Until California. lcnd thc company nroncy and not would thc banks llcll
was startcd

ilsh. chickcn, alcl shrirrrl' to irtcltrdc slntlrviclrcs. sitl' luds, and dcsscrts. ()llc ncw PloDroliot)ill ilcll) lll storcs duritrg rhc lall of 2003 rvas lobstcr-stuffcd crab cakcs. Whilc onc of tlrc stlallcr lrrands in thc Yun)l corporation, Long )ohn Silver's servcs 3.8 nrillion custonrcrs pcr rvcck and sclls 45 million pounds of
frsh pcr ycar.le

'thc

financing was oftcn sccurcd by Privatc borrowing A forn.rcr Los Angclcs policcman, Kermit Becky'

]6

bought thc first Taco Bell franchise in l964 This stori did t.entcndous voluntes from thc beginning' inspiring othcr franchisees, as Bccky himself freoucnrlyilcurcd S10,000 in onc month ln 1975'GleD
,"rignad

For ycars Long Iohn Silvcr's rvas a public\' tradcd company callcd jcrrico Inc. A lcvcraged buyout in I989 lcd by thc conrpany's scnior managcment and a r.\ew York invcstntcnt firm rcsultcd in thc conl
pany's becoming Private.40 Thc next year the conlpany's othcr restauranl concePts \verc divested and the firnr dcvotcd all of its rcsources to thc oPeration of Long lohn Silvcr's. A dccade latcr, Long )ohn Silvcr's nrcrged with A&W Rcslaurants, resultirrg in thc creation of Yorkshire Global Rcstaurants'

illion
rin in
:oun'talcs.

clraitman of the board, and thtcc years latci he sold Taco Bcll's 868 units to PcpsiCo' lnc'r? l'he dcal nradc Glen Bell a major PepsiCo share-

,,

holder and an cnormously rvealthy man'

in

in

,cd by

ntanY rlPan)' I 5600

including the installalion of drive-through rvindo,vs, r'alue pricing, and frec drink rehlls Taco Bell's compact carts, kiosks, and in-line units begin appearing in airports' gas stations' retail stores' cinemas, stadiunls, and schools in rhe early 1990s'

A varier,v of innovations followcd in thc 1930s'

A&W All-American Food

Ir \1as

lglg

rvhcn. using a fornrula hc had purchased

Thcsc Express busiuesses provided Taco Bell food in

fronr a pharmacisr in Arizona, Californian Ro,v Allcn made a batch of creamy root beer, se[ing the first glass for a nickcl.{l Allen took on a partner' Frank ivright, and together they staned An.tericak first fast'

:quip:'ction

,d the
ing. A-

rd thc '63 in
,tralia, bllorv.
rvhcn

a variety of locations that rvould not merit a fullstore oPcration. $'ilh 6,000 rcstaurants in th United States and nrore than 35 nrillion consumers served each weck' Taco Bell generaied S3.4 billion in systemwide sales in 2002. Like the othcr brands in the company' Taco

food chain, A&W

in

1923

in Lodi, Califomia' By

1933, therc were- more than .170 franchised outleis operating in the Midwcst and \{est- Alleo retired and .old th" busi.tess in the earlv 1950s to a Nebraskan named Gene llurtz who formed thc A&W Root Becr

Company rvith morc than 450 A&W rstauranti

Bell has inrroduced a variety of advertising cam' paigns, including the PoPular talking Chihuahua canipaign. This effort reciir'ed the advertising indusrry's highcst honor' th EFFIE in 1998'

nationwidc. The company rvas sold in 1963 to the l' Hungerford Smith Companl', rvhich had manufactured A&W Root Beer concentrate since l92l' A few was purchased by the United 1'ears latcr the company

st8

"ora

tuar,aa^*DtNc

AT

yuM!

s*Nos

tNc :TH'NK.NG ourstDE THE suN

Fruit Conlpany of Boston. tn 1970, Unitcd Fruit was acquircd by thc AMK Corporation, which fornrcd a was nc\^, corporation, Unitcd Brands Company' A&W a dcvclopcr Taubman, to A. Alfrcd sold again in 1982

within rcason, and how to rccovcr from mistakes.{l To guidc employccs, Yunrl has dcvclopcd a list of foundinS truths (scc Exhibit 4) and a statcmcnt of
how cmployccs work togcthcr (scc Exhibir 5).{a

of shopping ccntcrs and rcal cstatc' ln 1994, Srgitlarius Ac<luisitions. lnc., hcadcd by Sidncy
Iicltcnstcin purchascd thc colrrPalr)' fronr Tautrtrralr' Vrrkshirc Global Rcstaurants was crcatcd in 1999' following tlrc ntcrgcr of l-orrg lohn Silvcr's and A&W All
Anrcrican Food llcstaurants. Yorkshirc, bcconring thc pxrcl)l conlPatly for lloth lrrarrds ilr 2000'

Customcr Mania inclr-rdcs a CllAMl'S Exccllcncc rcvicw, in which 150 o[ tlrc corrrparry\ bcst nranagcrs arc sctlt otll lo (hc rcst.lurants to
iDspcct thc storcs arrd cnsurc that tlrc Cl{AMPS standards arc bcing nrct. Thc conrpany has madc an $18 nrillion invcstnrcnt in this training Progralrr itr tlrc hopcs that it rvill givc thc firn1 a conrpctitivc advanlagc. Aylin Lcwis. chicf opcralitrg olliccr of Yunr!, uotcs, "Typically you scc a con)Pan) roll sorrrcthing out, and that's thc cnd of il. Wc will l-'e training four tinrcs a ycar. This is a pcrtrrancnl comnritnrcnt to quality rraining. Once is not going to be enough."as

A STRATEGY FOR CROWTH

Tlrc vision of Yunr! IJrands lnc. is to offcr custonrcrs food thcy cravc so that lhey will return again and again, whilc using customcr-focrrscd teams With 750,000 associatcs worldvridc, (uslolllcr scrvice training is a key priority. The company devclopcd a progranr called CHAMPS to Suidc opcrations training'

The cntire fast-food industry struggles r'r'ith poor custonter scrvicc. For examplc, in a coorPany
nlcmo scnl to a McDonald's franchisce, thc following
mcssage was

bluntly summarizcd:
sPccd of servicc

CnaVpS stands for

Clcanliness, I{ospitality,

\{e are nccting our

Accuracy, Maintenancc, Product Quality, and Speed' Thc company has developed a "Customcr Mania"

training program tha( irs proPonents arguc Puts proccss arid discipline around all aspects of opcraiions rclated 1o custoncr satisfaction.42 The skills managcrs are teaching the frontline team mcmbers
includc horv to listcn to the customet how to be empathctic to customcr nccds, horv to exceed o.?ectations

standard only 46010 of the time, and 3 out of l0 custonrcrs arc waititig nrotc than four nrinutes to comPlete !heir order. Our 800 number has con{lrmed that - -. the numbcr of complaints . for rude scrvice, unprofessional employccs and inaccurate scrvice has riscn steadill',{6

Our Founding Truths

People Capability Fi6t - . .sa(isfied custome6 and profitability follow not iust litten Respond to thevoice oi the Customer . The RCM is Out 11 Leader .-. . not senior management (raP of the averages Run Each Restaurant Like lt't Out Only One . . . avoid the

leave when yolJ don't Reco8ni(ion Shows You CARE . . "PeoPle Creal Operations and Ma*eting lnnov:tion Drive Sales ' ' no finger pointin8 'proSram of the month" Opera(ion Dircipline Through Process and Stairdards ' consistency-not Faanchisees atevital Assels - . - oPerate as one System, not t\rvo

Qu.lity in EverylhingWe Do

esPecially lhe lood

{D(<(.rl{,(:r

f<v.c(.: \'qm! 8.and5, -Yum! Vil(,l5.- htlrt:/M.yldrcarean.onvy!6value-franre*tup_html

2 2ml'-

A SrR^rrcY FOR

GRc'rfrH

l5l9

.r of

It of
\4 PS

How Wc Work Together

Cuttomcr Mroia wc not only ft5len and rrslnod ro thc voice o{ llr(.(uslontcr, wc nrc ol)le5scd lo 8() lhc (!xlr.r ntilc k) nr.rkc our custonrtrr h.t1t1t1' Bclicf in Pcoplc Wc l,ehcve rn 1rcr_4rlc, trust rn lx)\rltv(: i lclllronr. rrrt orrr.rgc irk,.rr ironr {lvrryonc anrl i wo.k{orcc lh.1l i! div(:rs(' in slt'lo .rt(l lr.v kgrounrl
Rccogni(ion
.r<

1ny's

is lo
itan I $18

tivr'ly rk vt

lo|

) thc
lva
rr

Wc iind rersons lo ct'k:lx,rtt tlrr: .rchicvcrlcnts o{ orhcrs .rnd havc {on {loir)U it
Crraching and SuPPorl \ r'r' coar h .rntl strplxrrl {1r( h

iunrl, (lrin8
i four

(tlx

'

A(c()unlabilitY Wc do what we s:y, we are ar:count,rlrlc; wc txecutional Exccllcnce

icl

likc owners

nt to
h,"{
s

we l)e.t ycar
in(cn5ily. Positivc Encrgy

aBo

r6ults by con(inuoully inrProving;rnd innova(in8 wc iollow throu8h with d'1il)

with
'rPany

rwing

We execu(e with Posi(ivc cnerBy and intensit)'

wc hete bureaucracy and all thc nonsense lhal conts

with

i(.

we pr"ctice team togethec leam j/)!r..'

\,UorI ElJn(I!,

aPa11

ailer Prodlctive conflicl conl/vun\1ik(,-iriN's{]lU|) hhll !Dc\:cml)cl '], ]01),}l

,calels

ai tUfi1.'' hlll,:/A\^!!v.-vUnr(nr(r''rs

Thc Hardcc's chain also has a ncw Progran) that focuses on enrployee training. Andrel{'Puzder' thc prcsidcnt and CEO of CKE, has nrade a conlnlitnrcnt

ro custolner scrvicc in thc poorly

Hardcc's chain. He notes, "Our progran focuses on taking care of thc custonlcr' lt's our only solution' The fact is that if thc custonrer comes in and the rc5lauranls arcn't read)" thc custonrcr isn't coming back- \{c rvant people to havc an opPortunity to find out how good our food is. 5o our emphasis now is on training, changing the culture, and Paying more attcntion 10 cleanliness and scrvice."l? According to

Performing

wc'vc put so Inuclt cffort into training. Wc're building a rcrvard and rccognition culture, one that gcts our (cam PunrPcd up and excited about satisfying cach and cvcry custonrer. It's a great culturc *je're creatirrg and it makes a big diffcrcnce in the store da,v to day and makes people want to stay.lE Yum! hopes to becoDe the best restaurant oPcrator in the k'orld through the execution o[ thc Customer Mania Program. This Program is vievcd as an important strategy implementatioo acritity, while fivc long-term growth dtiYers help shape corPorate stratcgy- Bclorv are thc five dimensions believcd to be essential to corporiie progress and growth.

industry watchers, it's about rimc, l'trilc Flardee's franchisecs are mixed on CKE'S effo.ts. In contrast, Yum! is getiing results. One Taco Bell restauranl nranager fronr Florida dcscribid the Customer
Mania program as follows: Custorner Mania has provided us rvirh a super edgc in hiring grcat Teanr Mcmbers and in keePing thc Brcat oncs

l-

International Expatlsion; Yum! Brands' number-one goal is to drive global expansion with its categoryJeading brands. ln. 2002, thc comPany opened a record 1,05I -

szo I cestr

MULTIBRANoING AT YUHI aRANDS INC:THINKING

oursloETH eL'N

intcrlational rcsraurants and incrcascd irrrcflrarional systcnl salcs 9 pcrccnt prior

to f<rrcigtr currcncy convcrsion' l4ukiltnrnd F-qtttttsiorl: Yuml llratrtis is tllc rv,rrl<hviclc lca<lcr in rtrultibr:rrrding. oflcrirrt consuttrcrs nl()rc choicc :llld convclrit'rrcc irt ortc rcstauratlt krc:rlion

fully funding capital cxpcnditurc nccds,

allowing frcc cash flow for sharc rcpurclrasc and s<tnlc rcpaynrcnt of dcbt. llcttrrn on invcstcd capital is

lc

ll

lll pcrccnt' rcstlturNt'll itt<lustry's t{)l) licr'r9

ir

thc

lionr:t

cornbinaliott o[ t,vo o[ thc cotlltatt)"s

brirrtc'ls.'l'hc colrll)alry alrd its fratlclrisccs olr.r.rtc Illolc th.lll 1,975 rrrtrltilltarlci billiorl irl'rrlrrLlil r a\1.llrrilrlls, l]cllcriltirrg $2 sv\rcltr sirlcs. API) rox irlla tcly 150 sys tcrlr\{idc tlrullibralrd rcstaul ants wcrc

will rcqtrirt' carcful l)lcnsurcllrcnt and attclrliolr

Acconrplishirrg tllc 8r()K'tlr 1l)'ll Yunr! clrvisi()rt\

t(r

pcrf.rrttrarr.c rcstrlrs'lir lrcnchrtr'rr! itr lcrforrtranet" tlrc crrttp.rny has idcrltihcd fitt lcy trtclsurcntcttt arc:rs, shorvn in Ilxlribir 6. Addinc. nlor!' nltrllil)rittr(i rurits is ottc of thc kc)' l'c'r f<trrlr'rrrec tltrqcls

opcncd in 2002.

l.

l\trtfttlio of I'cttding Brarrds: U S slslcnr\{idc sanlc-storc sales incrcascd approxin)atcly 4 Pcrccnt in 2002 whilc U'S. sarne_storc salcs at colrlPilily rcstarrrallts incrcascd approximatcly 2 pcrccnt'
Clobal Frcndtist Fecs: Clobal franchisc fccs' a significant faclor in annual profits and
casir l)orv, grcrv 6 Pcrccnt to 5866 milliorr in 2002. Global franchisc ncl fcstaurant growth \eas 2 Pcrcent. -strorrg Casir Gcneratiorts rtrrd Rcltrrrls: Yurrll iJratrds gctrcratcd $l billiorr irr

TRANSFORMINC THE INDUSTRY THROUCH MULTIBRANDINC

llighcr unit volunlcs arc at thc ilcart of thc corpor'tlc nr;ltibranding st.atcgy. For years' N4cDonald's hls bccn thc cnrry of thc industry rvith t^rice thc volutllc of thc typical KFC or Taco Bcll McDonald\ iras sc\rr) tyPcs of food (burgcrs, chickcn, fish, salads'

4.

cpcs. rvaHles, and pancakcs)' br-rt KIC and Taco Bcll .ric"cach focuscd olr onc lood L alcgor)" No orlc lo')l\

cash from all sourccs in 2002' nlorc tlran

for a KFC or Pizza IIut burger' According to Dart^ Dcno. chief hnancial officcr at Yum!"'Thc biggcst rhing that nrulti-branding offcrs is the chancc to

lmportant Measures
lnrernitronat s)'\lem_lales 8ro\Lllr rlo(al (urreDCvl Nunrlrrr oi n'\\' rnlernatro:'al rost rurant opentng< Net rnternational unil gros'th Nei U.S. unil g.o\\4h

Number oi mul(ilxand restaurant locations Numl>er of multibrand rmi(5 added

4
. r )

Crorvth in franchise fees

Ne$ restauran{ openings b)' {ranchisecs

Cash Seneraled bv the business C;<h gener;(ed aner tap'tal sp"ncling

.t Z

US
U

gyslem_s.les

8ro\{h

blended seme-slo.e s.rles

ope,alinS -a'8in Retorn on invesled caPital

hlm rl){'(cml'(r

\,,,r,. \1!nl llri

ndr. '()ur vi<k

'\.-

hlll):/ArN\rvlm

'on/inv6lrt4isi('n

2(Y)lr

TMN'T.RMTNGTH rNousrRy rHRouGH

..uLTr"*^*o^o

| ,r,

lcvcragc our cxisting asscts that havc lowcr volunrcs lhan say a Mcl)onald's for instancc."50 Early cfforts at

brands, thc company gaincd thc advantagc o[ irttracting franchisccs with cvcn morc brands undcr
tlrc sanrc corporatc cntity. Wrilc Yum! Ilrarrds is tlrc n)ost aggrcssivc conl. fary to usc this stratcgy, Allicd [)onrcc<1 I)ll: has corrrbinc<l its llaskin-lkrbbins, l)unkin' Donuls. artd'li)g(is liatcrics inlo a sirrglc locatiotr to boost lttnch btrsincss.

cobranding wcrc conrbinations of KFC-Taco llcll -lhc nct rcsult of thcsc and Taco llcll-l'izza llut.

t'fforts was thc addition of l>clrvccn 5100,000 antl

S4(X),(X)0

franchiscc. l,arr1' l)ttrrctt' Irrcsidcttl of Sotrthcrn Mtrltilrxrtls, lrrc., opctrcd thc lirst cotrratrdc'd fitco lScll-l.ong Ioltn Silvcr's atr<1 cxplaitrs rvhl' nrultibrancling is such a porrcrlitl idcl for franchist'cs. \.lrrltiblanLling lr.rs r clr:rrtralic inrp:tct orl tlrc .:rrstorttct. lt's a l>.rrricr_ltrt'akcr for llruilics, tttc:Ining thlt sotllctirlcs kids
likc to cat diffcrcnt things than adults. Il vou'vc got an A&W/Long lohrr Silvcr's' likc rvc do in Soutlr Tcxas, you can scc how it offcrs sonlclhing for cvcryonc. )v'lorc globalll', though, if 1'ou havc a KI:C/Taco llcll,1'ou n.right gcl sonrconc who wants a taco one day and who will \unrc Lld(l tltc ttclt dal for ihickcn \Mrcn u,c add volunre to thcsc rcstaurants lhrouglr multibranding, wc add incrcmcntal profits that rrc could nol havc gottcn any other u'ay. For cxanlplc, if yorr takc a good restaurant-iikc a 5900,000 Taco Bell-and add a $400,000 Long lohn Sih'er's, You have added irrcrenrcntal profits that rtould bc inrpossiblc lo gct anv othcr.ta,r'.51
Stxrn thc cotnpanl'bcgan to t11'conrbinations o[ Kl:C and Taco Bcll rvith Long lohn Silver's and AS\V.

pcr trnil in .tvcraq.c salcs incrcascs-

C)nc

(lurl's Ir., a rcgiolal brantl opcratc<i bv (iKli. l{cstaurants, has cobrarrdcil witlr Sarrta l}irrl)rlra
I{cstauaar)l Grou|'s (lrccn l}r.rrritrt clTairt to cnhirncc ils tiinncr busirrcss. llotll ol llrc |irrcrrl cortrpanics of thcsc brarrcls sharc thc surrrr' ch:rirnr:rn,

\\/illiiln I:ol(').il li)r "lt is ccrtainli' a nrlltcr of \./hctr, nol ill' it cxpcriurcnts rvillr rrultibranding, according to a spokcspcrson for thc conrl,alr)' back in 2001-5{ l'hc
McI)oDalcl's,

tin)c appcars to bc no\v, as McDonald's bcgan in 2003 lo cxl)cnnlcnl wltll nc\v col(cPt5 rn cxisting storcs. Dlcvcn units in lndiana havc addcd a dincr, and onc unit il Ncbiaska has a thrcc-in-orrc colccpt rvillr a

McDonald's traditional mcnu, an upscalc sandwich

shop, and a scparatc trcat area rvith bakcd goods and dcsscrts.55 lndccd, thc chairnran of Yum! Brands nray bc corrcct that nrultibranding will lrc thc biggcst salcs and profit drivcr for thc last food scgmcnt since t]rc advcrrt of thc drtvc thtough rvindorv. Thc bcne6ts of multibranding include incrcas-

llcfore thc acquisition of Yorkshire Global

R,--staurants,

the t\{o Parent companics engaged i:l

ing sales volumcs and unit profitabilitl'. Yum! rcports that each timc i1 conbincs brands in a unit, salcs lravc junrpcd )0 pcrccnt.t( lr) addrllon, Pullittg two or ,lrore col)cePts under thc sanrc roof can spread business out during sevcral parts of thc day. For Allied Domccq, thc addition of thc Togo's chain allorvcd thcm to nrovc bcl,ond inrpulse snack or breakfast items into lunch and dinner pcriods. 81' offcriDg two or ntotc brands thesc (omPanics can
also enter into snraller trade areas estatc.-

four

of partnering rr'ith multibranding. Testing rhc conccpt r"irh cighty'thrie KFC-A&\\'units, six
1'ears

KFC-Long John Silvcr's oPcrations, and thrcc Taco Bcli-l ong lohn Sih'cr's galc Yum! an oPPotlunrl) to expcrincnt rvith thc conccpt. lt r.,as not until thc

lrith expcnsi,'c rcal "Now wc can go into tradc arcas that wc couldn't go into \yith an individual brand," notcs
Chuck Rawlel', chief devclopmcnt officer for Yuml57 Sharirrg crcw, storagc, and productton space pernrits a more efficient use of thc asset.

concep( had ficlded positivc results that Yum!

tlrands acquired \brkshire CIobal. Yunl! CEO David' Novak plans to aggressivclv drivc Yunr!'s gro\{h Nith nruhibranding, arguing, "Multibranding is going to translbrm rhc industr,r'- Consunters do rsant nlore choice-'52 Nor., r.'ith thc addilion of the trvo ncw

The dranratic improvcmcnts in unit sales andthe nced to modernizc and rcmodel ouldated stoles havc motivated Yun! Brands to remodel much of its existing asset base. Unit dcsign in thc Pasr had bccn decentralized to the brand lcvel. bu1 in 2002 il vas

-l
522 | ce'sE?
ccntraliz,cd
I

MU].1BRAND|NG AT yuMt BRANDS tNc.:THtNKtNG ouTstoETH oUN

with thc crcation of a new corporatc position, sclrior vicc presidcnt for conccpt dcsign

thc conrpany has.dcvclopcd sinrplificd ofcrating and

and nrultibranding.5E Dcsign is no\{ conncctcd k) brand nrarkctirrg and consunrcr prcfcrcrrccs ratlrcr tlral a dcvcloprrrcnt [unction.
challcngcs. l'r>telrtial problcnrs rrtay itrcludc cncrolching on cxist, ing uuils'salcs, ancl thc ability to opcrjtc subsrantially nn)rc cot)lplcx storc lcvcl opr'rations. \\rhilc cncroaclrnrcrlt docs nol apl)car to ltc a scrious issuc, cxcculion of lhcsc ncrv corrccIts is.-hr lrandlc thc nccdctl oPcratiorr:rl capabilit)' to (rl)crnl. nt()r(r colll)l(-\ rcslartrn'1s

training systcms.5e
1'hc goals, as statcd by CEO David C. Novak, arc to rakc both KFC and l'aco Bcll ro rhc disrriburion
P

Multibrandinr is nor rvithour

of llurgcr King, which has 1t,000 unirs in rhc Unitcd Statcs and to lravc volutncs of al lcast $l_l trrilliorr Pcr rcslauritnl.60 Thc corupant o|crllc.i
lcvcls nrorc lhan 1,975 multibrand rcstaurar)ls r.,orltlvitlc. wlriclr gcncrarc salcs of $1.2 billion cach 1,crrr. lr lroIcs-.to rrrorc than triplc its cobrandccl units by 2007.61 Exltil)it 7 shorvs tlrc nunrtrcr of rrrulribrande.i r('sl:ruranls b1' corrcc|t coDtltinalion.

I
s t,

I'
l:

NUHBER OF MULTIBRANDED UNITS

Worldwidc
2001

Q4
XFC

Taco Bell Pizza

665

llur

r8l
71

Taco Bell/Pizza Hul Long John Silver's Chock Fu ll o' Nuts Vr'ing \ryorks
Total

l'n'l

45
5 3

l
971

T.co Ecll
Pizza

665 673 690 186 r9r 208 8l 94 118 48 49 50 6 7 7 2I tl 16 989 1,027 1,089 571 ltiT
/-7

7A3

708

229

2t9
r82
50
.16

t6l
5l
12

; t,t l.l0 r 99 ;l 19
16

719

lr{
210

;l l;
:6
r.306

)4

t,I

BO

r,2r9
6t 0
21

24

I :;9

llut

i54
2

587 123

tonS iohn Silver's

Eackyard Burgers
Total

608

608

6:
6
B

l
l
615
1,.);

;t6

Pirza Hut
KFC

66 l

Taco Bell

\^/in8 Works

!tl 55s
-l
l

hsta Eravo
Wing Streets
Eackyard Burgers Tolal l-ong lohn Silver's

lll ;66 3ll rll 2l

171
2,O37

2_

t9

r33 r,529
5oo.. c: Yonrl lt.nftls.

149

167

r,566

1,7i7 1,86t
rt)6crntx{ 2.

I7.1

196

t,975

2.08;

-lnkrkr Rchii(nr."

hftp../ $sv.yum.c.rnlin1{,st(l{1/5s1_.hlm

2(X) t).

NOrs

521

Thc latcst cxpc.imcnts includc thc partncring of

10.

D. Milton, Srnrrlaral & h'ert lddrnry Su.t.yt: Rctdurantt

(Ncw York: McGraw lJill, 2003).
A. Carbcr,-Turnaround l,lans DrinBChanScs ro McD, BK fnnchisccs." Mrir',!,! R.rrarr."rl N.s5. l0 Novcnrltcr 2003. 125-

Pizza
,

atc thc

tion

Hut with thc fiftccn-unit fast-casual Pasta Bravo chain, hcadquartcrcd in Aliso Vicjo, California.62 Pasta llravo scrvcs a varicty of frcshly
prcparcd pasta dishcs fanrily stylc- Mcnus includc a $12.95 buckcl of splghcrti and ntcal sau(c scrving forrr to six pcoplc. Thc partncrslrip is in thc form of a Iiccnsing agrccnrcnt, in rvlrich linritcd tcsts in prinlarily fra nch iscc-ol)cra lcd dinc-in urrits will dctcrrlinc rvhcthcr this pairirrg is viablc for cxpansiotr.

t2. lbid., l2s

I:i. D. I'lilron. Sr,' ldrd 6 l\\n't I .lustry fi t\rt t: Rtknr,nlt l,{. ''Ta(o Scll hun.hcs Porrnblc Ccasir sal;'(t. l\.$ Rclcr.(. lunc 27, 200.r. hrrpJ/\ qe.ticdhcll..("r1.25 N,'r. rl'(r :ul.t. li. X. Mr.irthrr. llos{{,n l,lirkcr Ad\ Mikc l)'nncr i li{r\. n/, .r I it;,r.ri ,4.(., 20 liDurr y 200:1, 14.

sr.l
zlcs
id c,

b|'

16. D. I'hiladclphia, Trstitr, l'lushcr rnd l:rsr.

l,rrr

Sorr/,

llrrrf.. l0
17. N4(l)('Dald

SctrcDrt)cr 2002, 5l

rdcri

s, 2002 Srr)rnr.!,v An,,ril l(.t('rr.' hrlf //wh $ r)r.(l,,n,,ld\ (,,rn/r.r tortrr./i!rr.\r,'rlti,,.rn(r.,l

rnft,/.nnurl/rcporl/l.rtcr/t,.,A(l/|)d(r.hlnrl,
2001.

THE FUTURE
or acquirc anothcr quick-scrvice or a fast-casual cbain? Wltat rcould bc a good rrcnu catcgory to add to thc currcnt porlfolio? "lf 1,ou pair a hot cmcrging brand with a provel onc, in a rcal estatc contcxt that alrcady has strong drar.'ing powcr, you can takc advantagc of complcmentary naturcs for frequcncy, reach and freshncss," according to Sarah Palisi-Chapin, CEO oftlre restauShould Yunrl Brands partrter

t5 N.!cr)rl\,

l8

Iurrhcr Srcfs in Rrvilaliz:rion Irlan, l,rcss litl$rc. http://wwr*.mcdonalds onr /(o r po ra rc/prc'r/fin!ncial/2001/l 1072001/indcx html, 25 Novcnrbcr 2001.

I'lcDon.ld s Rctorrr Rccord Ocrol:cr Srlcs Up r8,x, and

Q3
719 244 210
52

20. Yunrl Bra'rds Ifl(, lnvcsting iD Yuml hrrp://\.l\e.)!m.conr/invcstorr/dcf.ulr.htm,

2001.

19. Yuml Brands lnc., A\nual Rcpon fu 2002., Tri.on Clotel Rcsrauranrs, A,xra? R.po lot 2001.

ll.,odr l')..,' 2t r.vovcmb.r

rant rcscarch and dcvelopmcnt firnr

Enersyst.6l

\ltrile thc

35

26

fast-food industry strugqles to rcinvcnt rtself and hold on ro thc afflucnt, quality-drivcn baby boonrcrs, ncw. conccpts may necd to bc dcwloped for the emerging Gcneration X and Y palatcs. If so, hor.,should Yr-rnr! Brands expcriment with its multiplc branding?

21. Yunrl Brands Inc.,^ rual R.to fat 20u,)e 22. \'um1 Brands Inc., A" aa1 Refo lor 20Q pg. 10.

2r.

Ibid.,4.
Yuml Brands

2a

In(.,,4

25. A. Spccror, Tricon I{ounrs Ta<o Bcll Bailou1,

ual Rcpo fo(2002,31.

Ndrfu,,'s

t,106
625 26
8
2

A.ir.ro'nnr N.\".lo FcL' ud' f 2001.1. 26 ibid. 27. \'unr! Brand5 Inc,'Abou(Yuml Brands, Board of Direcrors.'

hltp://"*.vunr
2001.
28.

com/about/boardofdir-htm. 29 No*nrt'er

Notes
l. 2. L
\\:ho Molcd M.DonilJ's Cheesc? Dttf?.r, 6 ll.i;!,r 1,1.1ti, ,une 2003.l. r{. B. Horn. e. A. Ledet. and S- Rauch. Fast Food llitt thc
Brakcs.'' Mr&rrsr1,

29. 10.

tbi,t Xentu.ky Frird Chickn, Abour XlC, hrrp:/A,r.r*.Ilr.tonr

/aboul, 24 Nolembr 20i13. Iuml Brandr In..,'Our Five Brandt. hl rf J/$.a1.\anl .o ) /about/divisions.hrm, 2 I l\-ovcmbcr 20O1. Kcntuckv Fried Chicken. P.css Releasc. "KFC Scrs the Record

661

lt.
t2

Qra't.rb' 1

12002): e.

S.

Hum..'Back lo thc Future, R.naurdflri + Irtr;rrriod5.

li

l
3

{. \'unrl Brands lnc.. "lnv.nors,

/in. csrors/d.fault.htm,
2

luly 2003,20.

lS Oclobr 2001, hrrp://\.hL.kf( (om/aboul /pr/l0280l.hlm, 24 No\cmb.r 2001. -KFC Blundrs in'll.alth'Ads," Ad v.rr isine .{sr. i No\tmbcr
Straighl.''
:001,22.

hltp://\'1.^L.nrm.rom

N-oven]br 2001.

31. Chain Updat.: La(en from

Fooase^.ne

Yum, Rcd Robin, Oth<rs,'

i. 6. 7. 8-

lbid.
S. Humc, ''40O RankinSs."

Eqri,ftnt

a-

S,.tpli.J.

obcr 2001.20

Rclrdrrdnrt
Salca

d l.rslnur;

rr,

l: lul!

?001.25. 42
l5o/o in Oclobcr, 2003, t. ^\o\mbcr '\\tndys U,S. -samc-storc Salcs lurnp 7.6.eo in o.tob.r, R.rlr'l,ranl ,\tl9', l7 r.\orcmbcr 2001. 12. Afarirni M. Bolu Chapnrin. "Fururc (,f Falt Food," C/n; kad$,llJl'! 2003.8.-

A. G.rbcr,'Suprsi?.d:

M(p
17

,ump

A'allb,! R.rrdu.atrr Nd,t,

1.1. I,{. \vi.ldr. A. Srinb.r8, and B. \\'ilk.'FTC EIanriocs Hr:lrh Claims ln KFC! Ads,' T lte t\hll Sk.et |oktnal.En:t. 1Ed;li/,t. l9 hNoftber 2003. Bl. 15. Pizza Hut. ".1bour Pizza.Hut: Our Stor-r'. hnp;/A.r.rv-pizza-16. Ta(o

196

hur..om/ab^ur/d.lauh arf..'l l-orcmb.r 2001 B.ll.'Hi(orv.- hnF://$a.\'.iiaob.ll..om, :.1 No\rmbcr

:003.

2,205

9.

.17. Ibid.

--