Investor / Analyst Day. May 31, 2006

Transcription

1 Investor / Analyst Day May 31, 2006

2 Thoughts About... Tim Jerzyk Vice President, Investor Relations

3 Information herein is as of April 24, 2006 This presentation includes forward-looking statements that reflect management s expectations based on currently available data. However, actual results are subject to future events and uncertainties. The information in the presentation related to projections or other forward-looking statements may be relied on subject to the safe harbor statement posted on our Web site:

4 YRI Division Geographic and Brand Diversity Global infrastructure in place Consistent unit growth 7 straight years of +3% Consistent profit growth Mega markets just beginning to develop India, Continental Europe and Russia Investing for sustained long term growth beyond 5+ years Taco Bell International Strong operating margin, ROIC and Free cash flow A highly valuable business

5 YRI Division s Top 6 Currencies YRI Division s Top 6 Currencies ± 10% GBP = ~$10 million YRI Op Profit British Pound Australian Dollar Mexican Peso Canadian Dollar Japanese Yen Korean Won

6 YRI Overview Graham Allan President, Yum! Restaurants International

7 Yum! Key Strategies Build Dominant CHINA Brands Drive PROFITABLE International Expansion Run GREAT Restaurants Multibrand GREAT Brands

8 Drive Profitable International Expansion Profitably expand KFC as leading chicken QSR Profitably expand Pizza Hut as leader in affordable casual / family dining Drive differentiated Pizza Hut delivery-unit expansion Franchise-led development in most markets Equity ownership in markets offering significant scale, growth and returns Drive world class operations

9 Our Success Factors Brands which work all over the world Strong local capability in 17 offices around the world Over $275 million G&A Invested Demonstrated marketing excellence, product innovation ability - global best-practice sharing Strong supply-chain infrastructure: Global product strategies, local sourcing 700+ franchisees

10 Two Global Brands YRI System Units By BRAND 4,701 6,307 Where we are today Over 11,500 units across 111 countries / territories 88% operated by franchisees & unconsolidated affiliates $8.5Bn in franchise sales TB / LJS / A&W 506 Revenues over $2Bn

11 Consistent Profitable Expansion Number of Restaurants 9,396 9,827 10,418 10,762 11,093 11,514 Company Franchise Note: Includes license units

12 Strong Track Record of Profit Growth Operating Profit ($ million) $385 10% 5-Year CAGR /2 $337 $243 $242 $241 $280 / /1 /1 Includes op profit benefit of 53 rd Week: $4MM in 2000 and $6MM in 2005 /2 Excluding Stock Options expense of $12.3MM; reported op profit was $372MM

13 While Investing for Continued Long-Term Expansion $(15) million loss vs. $(27) million loss in new-restaurant openings in 05 KFC France: Already profitable Emerging Markets Operating Profit ($ Millions) (5) (9) (17) (15) India: Already profitable with huge potential (31) (27)

14 Strong Progress in KFC France Huge potential market 60+ million people, McD with 1,000+units 41 KFC units currently, primarily company (78%) 7 units added in 05 Highest Per Store Average (PSA) Sales in the world System sales growth of 42% in 05, 40% 5-yr CAGR Securing sites is biggest challenge making progress

15 Why We Are So Optimistic about India Tremendous long-term GDP growth potential Large middle class, growing rapidly Open landscape for well-executed brands 118 Pizza Hut units and 11 KFC units Yum! success factors Infrastructure in place - local team, supply chain established Pizza Hut, a highly trusted brand Well-resourced franchisees Full speed ahead on development

16 Partnering in Russia to Pursue Exciting Opportunity 140+ million people Acquired trademarks of popular local chicken brand, Rostik s Strong market reputation and consumer acceptance Provide immediate presence and local market expertise in a key potential growth market Starting to convert 100+ Rostik s locations to co-brand with KFC

17 Even More Long-Term Expansion Opportunities Solid growth achievable from KFC and PH Dine-In Taco Bell International Investing behind capability now Just starting to tap into... Latin America Eastern Europe & Russia

18 Creating a High-Return, Steady Growth Company Harmit Singh SVP & CFO, Yum! Restaurants International

19 Business Trends in 2006 Franchise market strength continues healthy SSS growth and rapid development 1 st half softness in our UK and PH Korea company markets Expect stronger results in 2 nd half due to improving trends and easier lap Company markets Mexico, Australia and Canada positive SSS growth and higher op profits Emerging Markets continue to improve led by KFC France

20 YRI is a Diverse Franchise Business By GEOGRAPHY System Units 2005 By OWNERSHIP Asia 36% Americas 23% Company 12% Mid East/ S Africa 10% Australia / New Zealand 9% Europe 22% Franchise & Unconsolidated Affiliates 88%

21 Franchise Business has Grown Consistently Robust, growing franchise business 700+ franchise partners Constitutes nearly 70% of YRI profits before G&A 240 Franchise & License Fees ($ million) % 5-Year CAGR 448 Driving 90% of YRI development Consistent growth

22 Both Brands Growing System Units 4,914 +4% CAGR 5,944 5,698 5,465 5,179 6,084 6,307 3,811 +4% CAGR 4,528 4,357 4,249 4,123 3,968 4, ' '05 Note: Includes license units

23 Though Capital Needs are Lower EBITDA & Capital Spending ($ million) * 505+* 372 EBITDA** 330 Capital Spending ~ * 06F* * Excludes Stock Options expensing. With Stock Options expense $470MM and $495MM+ in 05 and 06 respectively ** Operating Profit before Net Facility Action, with Depreciations & Amortization added back

24 Returns at Record Level ROIC 16% 18% 17% 19% 19% F

25 Strong Operating Margin and Improving Operating Margin 14% 15% 16% 18% 18% F Note: Operating Profit as % of Revenue, excludes stock option expenses; including stock option expense: 2005 operating margin was 17.5% and 2006F operating margin is estimated to be 18%+

26 We Follow an Earn the Right to Own Mentality Refranchising F Entire Market Singapore PH Germany Puerto Rico Poland /1 US VI KFC S. Africa KFC Spain KFC Venezuela Targeted Activity KFC UK PH France PH Canada PH France PH Canada PH France PH Canada PH Australia PH Australia PH Australia PH France Canada RE Acquisition PH Canada Russia Net Proceeds ($ million) /1 IPO of the 50% Yum! stake in JV company

27 Significant Room to Grow ~$2, International Profits Estimates ($ million) $583 China YRI $86 $60 $37 $5 McDonald's Yum! Starbucks Burger King Domino's Brinker

28 Whichever Way We Look People / Restaurant (KFC & PH) in 000s US 23 UK 44 Mexico 208 SE Asia 301 Europe 336 Estimated Restaurant Count McD KFC PH Europe 5, Asia /1 5,200 2,250 1,500 Americas /2 3,000 1,500 1,000 UK 1, Russia 4,500 India 8,400 /1 Excludes China Division /2 For International business, therefore excludes U.S.A.

29 Global Brands Micky Pant CMO, Yum! Restaurants International

30 Marketing is too important to leave to the Marketing Department - Bill Hewlett At YRI, Strengthening the Brand is a Comprehensive Exercise involving all functions

31 KFC & Pizza Hut World s Top 100 Brands Source: Interbrand Survey of Top 100 Brands July 2005

32 KFC Has Towering Strengths

33 Pizza Hut has towering strengths and heritage Quality Great taste, good for dinner, wholesome, pizza innovation. Restaurant Based Even where restaurant base is in decline (Aus, Mexico, Can) imagery is rooted in dine-in Great for Families Great for Families (and large groups!) Place where you can relax, feel at home, not worry about how the kids behave, eat and be together, act like a family Informal Eating Generally a step above fast food but still fun, social relaxed, not too formal, friendly service, stress free. Inclusive A place TEENS can feel grown up in, could take their first date to. A treat TWEENS look forward to. Source: Qualitative Research

34 Our Strength in Dine-in + Growth of Delivery Market = Two Opportunities of a Lifetime

35 Now we are setting our sights higher Note: The non-yum! logos above are registered trademarks of Nike, McDonald s and Apple.

36 At Yum we have a codified, disciplined marketing process We use the Aaker Model for Brand Identity. Our organizing principles are based on Consumer Insights. We have clear process for product development and testing. We have a disciplined process for advertising development and testing. We are rigorous about Calendar Planning. Our Mantra is Ready Aim Fire, we do not believe in flying blind or replacing process by gut feel. This is the only way we can operate in over 80 markets with consistency.

37 Marketing Model

38 We use The Aaker model for Brand Identity Definition

39 Example: Aaker Brand Identity System for KFC 1 Core Identity Brand Associations 2 Value Proposition 3 Brand Benefit Credibility Permission to Claim

40 Brand As Product Wow flavors Signature recipes Freshly prepared using real chicken Contrasting textures or flavors Leadership Quality

41 Brand as Place Freshly cooked Food Informal and Inviting Energetic and Youthful

42 Brand as Symbol The Colonel The Bucket Red and White Finger Lickin Good

43 Brand as Person Colonel Sanders himself! Always young at heart,, he had a keen interest in what young people and young families enjoyed and wanted He loved Cooking,, and coming up with innovative new recipes. He was relentless about Quality He had a great sense of fun Colonel Sanders was the most exciting man I have ever known Dave Thomas, founder of Wendy s

44 Brand as Organization Customer Maniacs Genuine and Friendly Attentive and Prompt Dedicated to Quality

45 Complete Aaker Model for KFC of the brand. Real Chicken & other real foods Freshly prepared Leadership Quality Wow Flavors Inventive, signature recipes Credibility The colonel, his expertise, his secret recipes Food Served Fast Casual and Relaxing Place to relish good food Family Friendly Welcoming, Inviting Fresh, Bright and Contemporary Colorful, vibrant Passionate Genuine Honest The Colonel Proud The Bucket Forward thinking Red and White 11 herbs and spices Finger Lickin Innovative Dedicated to excellence Leaders Rich heritage Value Proposition (Brand Benefit) FUNCTIONAL; home-made quality; unique, inimitable taste; convenient, wholesome meals & snacks. EMOTIONAL; uninhibited enjoyment; total sensory engagement head, heart & soul; moments to savor; part of my life; an irreplaceable experience

46 For Clarity we also define a Brand Essence Note: The non-yum! logos above are registered trademarks of Nike and Apple.

47 When you add it all up, it s all about tasty, finger lickin good food and the sheer pleasure of eating it. Taste

48 We Are Taking a Holistic Approach to Make This Happen Taste

49 Implications for Menu

50 Brand Organizing Principles Key Need States Flavor Excitement Enjoy My Family Time Make Mealtime Easy Fit my Budget Busy Lifestyle (Portability) Satisfy Me Feel Better About Fast Food 70% Global 30% Localized Menu Solutions Group Meals Family Meal Variety Bucket Individual Meals COB Crispy Strips Portability Zinger Twister OR Fillet Value Menu Snacker

51 The New Logo Says Taste and is Younger Youthful energy, modern flair Apron, to signal his passion for great tasting food Friendlier, more welcoming Phased execution approach has been developed

52 To clarify, this approach is not about Mindless Globalization Globally Consistent Fundamental Human value Core brand benefit / Value proposition Sub-brands Enduring Brand Personality Asset and Ad Tenets Target Occasions & segments Adaptable Marketing Programs Calendar Locally Defined Advertising

53 Close Graham Allan President, Yum! Restaurants International

54 Confident of 2006 and Beyond Expect continued strength across franchise businesses More process and discipline around marketing & communication Strong new product pipeline global best-practice sharing Healthy, growing development pipeline room for more growth in most markets More good news from our emerging markets India, France, Netherlands & Russia

55 Yum! Restaurant International Division Clear Growth Strategy Strong Organizational Capability Significant, Healthy, Growing Franchise Businesses High Return Expansion

56 Yum! International Division What to Expect System-sales growth of at least +5% (Local Currency Basis) Net unit growth of at least +3% Operating profit growth of +10% HIGH RETURNS!