1、Alone were delicious. Together were toYum!you!upPullseatafor a serving of customer mania.Yum! Brands2002 ANNUAL REPORTYUM_covers_7a.qxd 3/18/03 7:54 PM Page 11.% B(W) Number of stores:20022001changeCompany 7,5266,43517Unconsolidated affiliates2,1482,0007Franchisees20,72419,2638Licensees2,5262,791(9)
2、Total stores32,92430,4898Total revenues$ 7,757$ 6,95312U.S. ongoing operating profit$825$72214International ongoing operating profit38931822Unallocated and corporate expenses(178)(148)(20)Unallocated other income (expense)(1)(3)59Ongoing operating profit 1,03588916Facility actions net (loss)(32)(1)N
3、MUnusual items income273NMOperating profit$ 1,030$89116Net income$583$49218Diluted earnings per common share(a):Ongoing $1.91$1.6119Facility actions net (loss)(0.09)0.01NMUnusual items income0.06NMReported$1.88$1.6216Cash flows provided by operating activities$ 1,088$83231(a) Per share amounts have
4、been adjusted to reflect the two-for-one stock split distributed on June 17, 2002.AVERAGE U.S. SALES PER SYSTEM UNIT(a)(in thousands)5-year20022001200019991998growth(b)KFC$898$ 865$ 833$ 837$ 8173%Pizza Hut7487247126966453%Taco Bell9648908969189311%(a)Excludes license units.(b)Compounded annual grow
5、th rate.WORLDWIDE SYSTEM SALES(a)(in billions)5-year20022001200019991998growth(b)United StatesKFC$ 4.8$ 4.7 $ 4.4 $ 4.3 $ 4.2 4%Pizza Hut5.15.0 5.0 5.0 4.8 2%Taco Bell5.24.9 5.1 5.2 5.0 2%Long John Silvers(c)0.5NMA&W(c)0.2NMTotal U.S.15.814.6 14.5 14.5 14.0 2%InternationalKFC5.45.0 5.0 4.6 4.0 4%Piz
6、za Hut2.82.6 2.6 2.6 2.5 2%Taco Bell0.20.1 0.1 0.1 0.1 10%Total International8.47.7 7.7 7.3 6.6 4%Total$24.2$22.3 $22.2 $21.8 $20.6 3%(a)System sales represents the combined sales of Company, unconsolidated affiliates, franchise and license restaurants.(b)Compounded annual growth rate; Totals for U.
7、S., International and Worldwide exclude the impact of Long John Silvers and A&W for 2002.(c)Beginning May 7, 2002, includes Long John Silvers and A&W, which were added when we acquired Yorkshire Global Restaurants, Inc.FINANCIAL HIGHLIGHTS(in millions, except for store and per share amounts)3.Im sur
8、e youll agree the best year any businesscan have is when you beat your financial plan and set the table for futuregrowth. Im pleased to report 2002 was just that kind of year for Yum! Brands.Our stated long-term goal is to grow our annual earnings per share by at least 10% every year. In 2002, we gr
9、ewongoing operating earnings per share 19%. We also said 2002 would be a year of revenue growth, and we deliv-ered on that promise, with 12% revenue growth. We expanded our core international restaurant portfolio by 6%,and at the same time, we achieved our 2% blended same store sales target in U.S.
10、company-owned restaurants.Our U.S. systemwide same store sales, including the sales of our franchise partners, performed even betterup4%. Internationally, we once again set a new record for traditional restaurant openings, 1,051 to be exact, and grewinternational ongoing operating profits 22%. World
11、wide restaurant margins also reached an all time high at 16%,up 1.2 points versus last year. Our Return on Invested Capital was 18%, the highest in the quick-service restaurantindustry. By any measure, 2002 was an outstanding year for your company.With all this good news, I by no means want to gloss
12、 over the challenges we face. We obviously have both ouropportunities and issues and I will deal directly with them in this letter. Let me start by acknowledging that ourU.S. business competes in a very challenging and competitive marketplace. Some pundits, in fact, have written thatthe U.S. quick-s
13、ervice restaurant industry is oversaturated and mature. Maybe so for some brands and some com-panies. But we are building Yum! for long-term growth around three unique building blocks that differentiate usfrom our competition and provide an exciting growth opportunity. We are anything but your ordin
14、ary restaurantcompany. Let me explain.Dear partners,#1 DRIVING INTERNATIONAL GROWTH.We clearly canmake the case that no other restaurant company has the kind of opportunitywe do outside of the United States. One of the things that we are most proud ofis that our international team has more than doub
15、led its ongoing operating profitin the five years we have been a public company. With a track record of adding about1,000 new restaurants per year in each of the last three years, our international busi-ness is now our largest and fastest growing division. Whats more, there are only two competitors
16、in our category of any size, McDonalds and us, competing for theinternational share of stomach. Consider this: McDonalds earns over $1 billion a year in international profit; weearn nearly $400 million and the next largest competitor is Burger King, which earns about $50 million. As you canimagine,
17、the biggest challenge to building a business outside the United States is achieving operational size andscale for profitable growth and making sure you have the people capability to execute. Through a lot of hard workand years of investment (thank goodness the money losing investment years were by P
18、epsico), we now have a veryexperienced team of talented international executives and 560 franchisees operating in over 100 countries and ter-ritories. It will take new entrants years of investment to reach our size and scale. The capability we have built is ahuge competitive advantage underpinning o
19、ur growth.Let me dimensionalize our companys opportunity. In 1992, McDonalds had a little over 4,000 international restau-rantstoday they have over 16,000. When you look at Yum! today, we have about 11,800 international restaurantswith essentially two global brandsmore than 6,800 KFCs and over 4,400
20、 Pizza Huts. Were committed to doublingour number of international restaurants in the next eight to ten years by continuing to grow at a clip of 1,000+ newrestaurants a year with KFC and Pizza Hut. Not to mention the opportunities multibranding may unleash with TacoBell, Long John Silvers and A&W. W
21、hile we see our level of new restaurant development increasing gradually, weare not predicting a more rapid increase because to do so could threaten the high standards we have for our returns.Were focusing our international company operations in seven countries that account for about 70% of our ongo
22、ingoperating profit in 2002, with China, the United Kingdom, Mexico and Korea receiving the majority of our companyscapital investment because the returns are terrific. Our franchise and joint venture partners are driving system growthby opening about 65% of our new international restaurants. Import
23、antly, our partners are using their capital, notours, to grow their business as we do not invest in our franchisees real estate, like some other franchisors do. China continues to be our rising star with approximately 800 KFCs and 100 Pizza Huts. In China, we have one ofthe largest real estate teams
24、, not just in the restaurant industry, but in any industry. Another unique advantage inChina is that we have our own distribution system that gives us coverage in every major province and access to4.Above With over 100 Pizza Huts inChina, the brand is the countrysleader in the casual dining category
25、.Right Celebrations marked the opening of the 700th KFC in China (we opened our 800th in 2003!). Customer Mania is taking hold aroundthe world. At a recent team dinnerhosted by KFC Malaysia Holdings,Restaurant Managers from throughoutAsia dressed in their countrys tradi-tional costumes and celebrate
26、dCustomer Mania.We now have a very experienced team of talented internationalexecutives and 560 franchiseesoperating in over 100 countriesand territories.almost the entire population of 1.3 billion people. As a result of these capabilities, combined with the superlativeoperating skills of the Chines
27、e team, we are currently opening more than 200 restaurants in China each year. Immore convinced than ever that KFC in China will one day become a bigger business than KFC in the U.S. After all,KFC is the Chinese customers favorite brand of any kindperiod.The biggest challenge we face today is develo
28、ping new marketsgetting to scale inContinental Europe, in Brazil with KFC, and in India with Pizza Hut. Opening up KFCsin Germany is a challenge given consumers unfamiliarity with the brand and theirpreference for beef products. As a result, we plan to test KFC-A&W multibrandrestaurants in Germany i
29、n 2003, providing consumers with a hamburger option.Results for KFC in France and Holland have been very promising. We now have anoutstanding group of well-capitalized franchisees to grow Pizza Hut in India. And wejust formed a joint venture in Brazil with experienced food service operators whohave
30、the local knowledge to help us get up and running. But its tough sleddingbecause building operational capability outside the U.S. takes time. Our approach is to be patient and ever-mind-ful of overall profitability and returns. Our international business self funds its new development from the cash
31、flowit generates, and we have a very disciplined process to ensure we maintain and build our high returns on capital.As I hope you can tell, were truly excited about our international opportunity. We have little competition and lotsof runway to continue growing profitability. The facts speak for the
32、mselves. We are building a powerful interna-tional business and our goal is to be nothing less than the premier global restaurant company. We intend to growour international profits at a mid-teens rate, with great returns for years to come.#2 MULTIBRANDING GREAT BRANDS.The question I get asked most
33、often is how do youcompete in the tough U.S. market? Our answer is to be the best in the world at providing customers brandedrestaurant choice. We have category-leading, highly differentiated brands with proprietary products that succeedas stand-alone restaurant concepts. Yet our customers have told
34、 us loud and clear that we can break away fromthe pack by offering two of our great brands in the same restaurant. We call it multibranding, and heres why itssuch a big idea.For years, McDonalds has been the envy of the industry for their high average U.S. unit volumes, at about $1.6 mil-lion, almos
35、t twice that of the average Yum! Brands restaurant in the U.S. One reason why McDonalds has such highvolumes is they offer the consumer more choices. In fact, they offer seven different types of foodeverything fromburgers, chicken, fish, and shakes to breakfast. McDonalds has something for everybody
36、 and this drives sales.5.1,975 of our nearly 33,000restaurants are now multibranded and accountfor almost $2 billion inannual system sales.13,000multibrandedunitsWe have thepotential forin the U.S. alone.“Its all about mycustomers. They tell me they comehere because thereis something foreveryone in
37、thefamily. Burgers forthe kids, fish formom and a RootBeer Float for dad.”Stephanie Hankins, Long John Silvers/A&WWere committed to doubling our number of international restaurants in the next eight to ten years by continuing to grow at a clip of 1,000+ new restaurants each year.6.However, historica
38、lly, each of our brands has focused on one food category. Pizza Hut has pizza in its name. KFCmeans Kentucky Fried Chicken. Taco Bell stands for Mexican-style food. And every time weve tried to broaden ourappeal by moving into new categories, it fails because our brands stand for just one thing. No
39、ones looking for aKFC or Taco Bell hamburger. But at the same time, consumers do want more choice and convenience. And, whatweve proven is that consumers love the idea of getting variety with branded authorityaccessing two brands inthe same restaurantmultibranding. Our research tells us that custome
40、rs prefer multibranded restaurants 6:1 overstand-alone brands, and we are listening and responding to the voice of our customer.We started with combinations of KFC-Taco Bell, and Taco Bell-Pizza Hut. We learned that we were able to add$100,000 to $400,000 per unit in average sales, dramatically impr
41、oving our already strong unit economics. We thenbegan testing multibrand combinations of KFC and Taco Bell with Long John Silvers, the countrys leading seafoodrestaurant, and A&W All-American Food, which offers a signature frosty mug Root Beer Float and pure-beef ham-burgers and hot dogs. Based on p
42、roven and encouraging multibrand test results, we acquired Long John Silversand A&W this year. With this acquisition, we have more than tripled our multibranding opportunities in the U.S. Because of the significant sales increases we are generating with multibranding, we are remodeling much of ourex
43、isting U.S. asset base by adding a second brand. This will help us dramatically change our U.S. business over thenext five years. We are also opening high return new restaurants in trade areas that used to be too expensive ordid not have enough population density to allow us to go to market with one
44、 brand. With multibranding, we believewe now can realistically take both KFC and Taco Bell to at least Burger King levels of U.S. distribution. Burger Kinghas about 8,000 units in the U.S., with $1+ million average unit volumes. In comparison, Taco Bell and KFC eachhave over 5,000 restaurants. As we
45、 expand Taco Bell and KFC by adding Long John Silvers and A&W under thesame roof, we expect to take volumes to an average of at least a $1.1 million per restaurant. As we do, we plan tomake Long John Silvers and A&W national brands and dramatically increase their marketing clout. Our biggest remaini
46、ng concept challenge is to develop a multibranding combination for Pizza Hut. We have formeda licensing agreement with Pasta Bravo, a California fast casual chain with an outstanding line of pastas at greatvalue. We will begin testing Pasta Bravo with Pizza Huts dine-in restaurants in 2003. Next yea
47、r I hope to reportvery good results on this initiative. We are confident multibranding will be every bit as successful for Pizza Hut asit has been for our other brands.You might be thinking, if multibranding is such a big idea, why arent you moving faster? The quick answer is thatwe want to do this
48、in the best possible way. The biggest executional issue we face is building the operating capa-bility to successfully run these restaurants. As you would expect, these restaurants are more difficult to run becauseof the added complexity of offering two menus. To tackle the executional challenge, we
49、have dedicated a team of“I believe in my team. And theyknow that everyone in therestaurant is critical to makingeach customer who comes inour store feel like they are our#1 priority.” Allison Hale, RGMTaco Bell, Southern Multifoods Inc. As we expand Taco Bell and KFC by adding Long John Silvers andA
50、&W under the same roof, weexpect to take multibrand volumesto an average of at least $1.1 millionper restaurant. 7.our very best operators to develop simplified operating and training systems. Our operating measures and marginsnow approach those of our single brand units, but we still have much work
