Yum! Brands Drive Profitable International Expansion Graham Allan YRI President
Yum! International Division Agenda... 2006 Results/2007 Outlook Building Our Global Brands Future Growth
Another Strong Year in 2006 10%+ growth in operating profit +8% system-sales growth (local currency) vs. 5% target Seventh straight year of 700+ new openings Strong performance across most markets Excellent growth in Franchise-only markets Positive sales in most mixed markets Rostiks & Pizza Hut U.K. acquisition completed
Franchise Markets Driving Performance Franchise-Only Markets Asia Middle East/North Africa South Africa Caribbean/Latin America Other Total Franchise System-Sales Growth ( 06 F) +9% +16% +22% +11% +3% 8% Franchise & License Fees ($ million) 14% 5-Yr CAGR 257 01 06 F 490 Note: Franchise & license fees in reported terms; system-sales growth excludes F/X impact and 53 rd -week impact in 2005.
U.K. Is Largest Mixed Market Strong turnaround underway Double-digit H2 SSSG Sharper brand positioning Clearer communication Successful menu layers Upgrading assets Optimizing dine-in and delivery separately Aggressively pursuing turnaround New GM/CMO Improved marketing execution Redefining value approach Refranchising will make system stronger Confident about the long-term
Generating Significant Cash EBITDA after Capital Spending ($ million) 393 417 334 244 148 02 03 04 05 06 F ROIC 16% 18% 18% 19% 19%* *2006 ROIC includes Pizza Hut U.K. acquisition; without the acquisition, 2006 ROIC expected to be 20%+.
What to Expect in 2007 System-sales growth: at least +5% (local currency basis) Gross builds: 750+; net unit growth at least +3% Operating profit growth: 10%+ Cash Flow after CAPEX of about $½ billion HIGH RETURNS!
Major Elements of YRI Growth Strategy Increase Market Share and Deliver Consistent Profit Growth of 10%+ Build Global Brands Exploit new-unit development opportunities Make India... the next big idea Grow emerging markets Russia, France Launching Taco Bell
Plenty of Room to Grow 5,200 System Restaurants 4,500 3,000 2,350 435 720 1,585 1,580 1,000 1,250 715 700 Continental Europe Asia Excl. China Americas U.K. Note:1. McDonald s restaurant counts are estimated based on available public information. 2. KFC & Pizza Hut restaurant counts are based on 2006 year-end forecast. 3. Asia Yum! excludes China Division; Americas excludes US division.
Why We Are So Optimistic about India Tremendous growth potential 1+ billion population, median age 25 Largest, fastest growing restaurant company Well-resourced, committed franchisees Infrastructure in place local team, supply chain Unit volumes very encouraging
Making Strong Progress Over 135 franchise units in 34 cities Solid momentum 25 new units in 2006 +30% system sales growth International brand, local execution Most trusted food-service brand three years in a row Solid unit economics Development on track 26 stores across 9 cities System-sales growth of over 100% Combined franchise & equity development Contemporary, youthful assets Menu adapted for local tastes Investing in brand building in 2007
KFC France Model Already Attractive Highest AUVs globally 10 th largest system sales market KFC France Store Count 100+ Compelling unit economics Strengthening franchise network 45 Building pipeline for national scale Securing sites biggest challenge Model for wider Continental Europe growth 11 01 06 F 09 F McDonald s 1,000+ Units
Gearing up for Growth in Russia Acquired Rostik s trademark Converting 90+ Rostik s locations to co-brand with KFC Around 30 units converted in 06 Strong acceptance of KFC products Well resourced franchisee network Aggressive development plans Market potential 500+ units
Launching Taco Bell International Limited presence outside U.S. Core brand attributes consistent; customize some food items Test markets identified Concept research and supply-chain work underway Expect operating loss in near term Huge long-term potential
Well Poised for Continued Growth 2011 Goal 15,000 Restaurants... $700+ million Operating Profit Reasons for confidence... Demonstrated track record Dominant brands Clear growth strategy Strong organization capability
Yum! Brands Drive Profitable International Expansion APPENDIX
Two Global Brands YRI System Restaurants Over 11,900 restaurants across 112 countries/ territories 4,800+ 85% operated by franchisees & unconsolidated affiliates $9 billion in franchise sales 6,600+ Taco Bell/ Long John Silver s/ A&W 500+ Note: 2006 forecast numbers; unit figures include licensed restaurants Revenues over $2.3 billion
YRI Is a Diverse Franchise Business System Restaurants 2006 F BY GEOGRAPHY BY OWNERSHIP Asia 35% Americas 23% Franchise & Unconsolidated Affiliates 85% Australia/ New Zealand 9% Middle East/ South Africa 11% Europe 22% Company 15%
YRI Division 2007 Capital Plan 06 F 07 Plan $ Million Restaurants $ Million Restaurants New Company Restaurants 49 37 70 67 Upgrades 30 134 40 261 Brand Projects 7 10 SUBTOTAL 86 120 Maintenance 12 15 Corp/Other 9 20 TOTAL 107 155 Note: 2007 Plan rounded to $5 million
YRI Division s Top 6 Currencies British Pound ± 10% GBP = ~$9 million Australian Dollar YRI Op Profit Mexican Peso Canadian Dollar Japanese Yen South African Rand