Pizza Hut. Peter Hearl, President

Transcription

1 Pizza Hut Peter Hearl, President April 26, 2005

2 Pizza Hut Is an Iconic Global Brand - Built On 47 Years of Success - Domestic units 9,000 8,000 7, Red Roof concept unveiled Pan Pizza introduced, becomes flagship product Stuffed Crust changes way we eat pizza forAll sets all-time sales record 6,000 5,000 4,000 3,000 2,000 1, Carney s open 1st Pizza Hut Become world s largest pizza restaurant chain # Acquired by Pepsico Launch delivery Big New Yorker boosts sales 20% 0 Energized leadership team excited about building on legacy 2

3 Leader of $37 Billion Domestic Pizza Category Pizza Hut leads in market share and in points of distribution 16% 2004 Year-end U.S. Points of Distribution* Pizza Hut 8,285 65% Local/ Regional 10% Domino s 5,008 Papa John s 2,000 5% Little Caesar s** 2,800 Frozen: 1% 3% A true global brand with nearly 13,000 points of distribution worldwide *Includes Express units **Estimated 1. Source YE K 2. Per QSR 8/04 magazine as of YE 2003 Source: The NPD Group, Inc.; NPD Foodworld; Crest 3

4 Key Facts on Pizza Hut USA year CAGR Company Sales Franchise Sales $1.6B $3.6B -5% +5% PSA # of Traditional Units Company Franchise $794M 3% 6,306 1,741 4,565 # of Franchisees units units units units 21 <15 units 84 4

5 Sales Growth Has Been Positive 18 Periods Straight! 10% 4-for-All Buffalo Chicken 8% 6% 4% 2% Dippin Strips 4-for-All Sicilian 0% -2% P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 P13-4% -6%

6 ... Driving an Increase in Our Market Share Other Regionals 100% 90% 80% 70% 60% 3.1% 3.1% 2.9% 5.5% 5.2% 5.1% 9.6% 9.7% 9.6% 9.7% 9.9% 9.9% 15.6% 15.3% 15.5% YE Dec 04 Pt. Chg. Pizza Hut +0.2 Domino s NC Papa John s (0.1) Little Caesar s (0.2) 50% Regionals (0.1) 40% Mom & Pop s % 20% 10% 56.4% 56.8% 57.0% 0% YE Dec ' 02 YE Dec '03 YE Dec '04 * Source: The NPD Group, Inc.; NPD Foodworld; Crest 6

7 We Have Clear Strengths & Challenges Strengths Global iconic brand Category leadership Clear, focused strategy Challenges Category growth Commodity inputs Old asset base 7

8 Three Key Strategies to Grow Our Business Pizza Hut Imperatives Our Strategies Win Home Meal Replacement War Run Great Restaurants as One System - Build a Customer Maniacal Sales Force Full Pipeline of Product/Value News Reposition and Differentiate the Brand - Toward Family Pizza Eating Occasions Revitalize Our Dine-in Business Rebuild and Grow Our Asset Base - Via Asset Upgrades (and Multibranding) 8

9 Operational Measures Continue to Improve 80 % Company Units With BYA Sales 55 % Perfect Champs (System) 69% 50% 50 49% 60 45% 46% 45 45% Company Team Member Turnover % 111% 100% 98%

10 We Have Repositioned, Differentiated the Brand Toward Families Families account for 70% of all HMR occasions... Family 55% Both 15% Friends 13% Alone 12% Coworkers 5% Moms decide dinner 85% of time Source: MarketPulse (Annual 2002) 10

11 Our Brand Positioning Is Paying Off Best For For Sharing With Family Kids Favorite Enjoy When Getting Together Bringing People Together Source: MarketPulse Brand Imagery Ratings 11

12 ... And Our Product Pipeline Has Never Been More Full 2004: 10 Tests / 13 Markets 7 New Products + 3 Special Tests** 2003: 8 Tests / 12 Markets 6 New Products + 2 Positioning Tests* 2002: 3 Tests / 3 Markets 3 New Products Examples: Stuffed Crust Gold Cinnaparts Examples: Buffalo Chicken 4forALL Bagged Salad Examples: Dippin Strips Full House Pepperoni Trio 13 Tests Planned for 2005! 12

13 We Have Two Key Challenges on the Asset Front Challenge #1: Upgrade Our Dine-In Assets 13

14 We Have Two Key Challenges On the Asset Front Challenge #2: Build More Delivery Assets 14

15 ... And Two New, Exciting Concept Layers... To Facilitate Rebuilding and Growing Our Assets! As of P13 04 As of P13 04 Life To Date 48 Points of Distribution

16 Italian Bistro Is Service, Product, Atmosphere The Pizza Hut Casual Dining Way! DIGM Service Sautéed Pastas, Bistro Pizzas And Toasted Sandwiches Entrée Salads, Wine, And Appetizers New Interior And Exterior Designs 16

17 WingStreet Is The Largest Dedicated Wing Brand in the U.S.A.* * Based on number of locations 17

18 ... With More Growth and Development Planned for the Future More Restaurants 300+ New Menu Items More Marketing (including TV support) 18

19 In Summary... Pizza Hut is the recognized industry leader We have a clear brand strategy to drive future growth We have exciting, proven new concept layers The Pizza Hut system will spend about $1.5B Rebuilding the Brand 19

20 Pizza Hut Harmit Singh Chief Financial Officer April 26, 2005

21 Our Franchisees Have Experience and Scale 72% of Stores Owned by Franchisees Average Franchisee has 31 stores Average Franchisee Tenure 70 Companyowned 1,740 Franchiseeowned years 10 0 < >100 21

22 Franchisees Have Committed to Rebuild the Brand in Two Ways Upgrade Dine-In Assets Build More Delivery Assets 88% of qualified assets require major asset action : Rebuild/Relocate Remodel Pizza Hut to notify territory franchisees of unserviced delivery areas Franchisees required to develop within 5 years Remainder require re-image Major asset actions to be completed by 1/1/13 22

23 Franchisees Are Living Up to Their End Reimage Major Asset Actions Year Required Completed Required Completed 2 12/31/04 35% 24% 5% 30% 3 12/31/05 50% TBD 15% TBD 4 12/31/06 65% 25% 5 12/31/07 80% 35% 6 12/31/08 100% 45% 7 12/31/09 55% 8 12/31/10 70% 9 12/31/11 85% 10 12/31/12 100% Note: Surplus Major Asset Actions will count toward reimage requirement 23

24 PH s Franchisees Will Spend Over $1.5B in the Next 9 Years FZ Assets 3,000 Cost per Total cost 2,500 Re-image lite $25M $11MM 2,000 Re-image $100M $76MM 1,500 1,000 Major asset action $600M* $956MM 500 Asset upgrades ~$1,000MM 0 New units ~$500MM Scheduled asset actions Total investment ~$1,500MM *Assumes 1/3 replacements/rebuilds at $1MM, 2/3 remodels at $.4MM ** Net of forecasted closures 24

25 We Are Continually Striving to Improve Returns on Asset Actions Improve Improve Reduce Drive Sales + Hit Investment + + Access to = Higher Returns Rates Capital 25

26 Focusing on Variety of Initiatives to Drive Sales Franchise Actions Maintain month rolling tested marketing calendar Convert/build FZ Italian Bistros 120 in 2005, more going forward Desired Result +3% SSS growth annually $2,500+ incremental weekly sales Convert/build WingStreet units 25 in 2005, more going forward $1,500+ incremental weekly sales 26

27 Testing RBD-Lite and Delco-Lite to Lower Investment Cost RBD Lite Delco Lite Cost reduction $165,000 (vs. RBD) $96,000 (vs. delco) Status: 2 in test with franchisees 5 more planned for company unit in test 4 more planned in

28 Several Initiatives in Place to Improve Hit Rates Improving Site Selection Sharing Best Practices Market planning 21 FZ territories Buxton tool offered to all FZees Measuring returns Gathered investment data on ~120/180 asset actions in 2004 Calculating returns on period basis Researching, sharing learnings on period basis beginning P4,

29 Franchisees Are Supported by a Deep Team of Dedicated Resources Franchisee Ward Whitworth Head Coach West Franchise Restaurant Readiness FDDs Legal Marketing Finance HR / Training CHAMPS Omar Janjua Head Coach East Franchise Kendrick trative tant Customer Support Team Tom McCord Julie Schultz Wayne Walker Matt Moss Anita Vander Veer Doug Scott Kathleen Kendrick Administrative Assistant Jim Sill FBC Denny Hasiak FBC Bob Gibson FBC Tom Clements FBC Dave Bewley FBC Marla McKibben Jodi Rosen Tanya Williams 9 - FDDs Jessica Bowles Katrina McGuigan Janet Omar Bob Nygren Carlos Maldonado Leo Valdez Sr. Franchise HRL/Trng. Ldr. Diana Styles Franchise HRL/Trng. Ldr. Tracey Weaver Franchise HRL/Trng. Ldr. Jan Litzburg Franchise HRL/Trng. Ldr. Frank Lamont Rick Collinwood Emil Hoffarth Jim Toth FBC Bob Bray FBC Tom Plieman FBC Mark Jaworski FBC Jim Schreifels FBC Ed Jacob FBC Judy Carson FBC 29

30 Franchise Finance Team Is Committed to Helping Our Franchisees Grow CFO (Harmit Singh) Director, Franchise Finance (Matt Moss ) Capability building Best practice sharing Info management Finance College Pacesetter 1-on-1 financial reviews Margin playbook Asset action returns WingStreet, Italian Bistro results Sales data Store, ownership data Lender relationships Ad-hoc analysis 30

31 In Summary... Our franchisees have experience, success and scale They are committed to investing in the brand Pizza Hut is committed to maximizing the return of those investments 31

32 2JR Pizza Enterprises Pizza Hut Franchisee Rodney Lee, CFO Louisville, Kentucky April 26, 2005

33 2JR Pizza Enterprises, LLC Jeff Reetz, franchisee 25 locations purchased from PHI in February 2000 Louisville Metro and Southern Indiana locations High sales volume, delivery driven - Eleven $1 million + restaurants Operate very much like corporate stores in all aspects due to our backgrounds 5 remodels done to date, 2 more planned for

34 Opened Three WingStreet Locations Since 2004 Glenmary Delco Okolona RBD Bashford Manor RBD September 2004 November 2004 March 2005 $1,300/wk incremental wing sales $1,200/wk incremental wing sales $1,600/wk incremental wing sales 34

35 Overall Impact Has Been Positive Consistent incremental sales layer at about $1,500 per week Margin impacts modest Food cost up about 1 pp overall Labor is at our normal variable flow rate Investment is between $45 million and $75 million Soon to add nonbreaded wing products, which will help keep our nonbreaded customer Plans for 2 more locations 2005 or early 2006 during remodels 35

36 Lenders Can Help if They Understand the Opportunity Funding of remodels and the WingStreet sales layer currently limited to internal funds Existing senior lenders may have healthier borrowers if they can fund a portion of the WingStreet implementation Possible benefit to those in your portfolio today who need sales breakthroughs Solid IRR and quantifiable improvements Sales layer Royalty reductions in connection with remodeling 36