Pizza Hut 2004 Annual Report Download - page 4
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Please find page 4 of the 2004 Pizza Hut annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Thefoundationofthisconsistentgrowthcomesfromthe
competitive advantage of the strong infrastructure we
already have in place. For this we are largely indebted
to PepsiCo who, prior to our spin-off in 1997, invested
40yearsandbillionsofdollarstoestablishtheglobalnet-
workweinherited.
The tough reality for our competition is that it would
take the same kind of time and commitment to reach
our size and scale. The obvious exception, of course,
is McDonald’s. McDonald’s already makes $1.8billion
outsidetheU.S.demonstratingtheclearprofitopportu-
nitywecancaptureintheinternationalarena.
That’sbecausethegreatrealityforusiswealreadyhave
strong local teams and operate in approximately 100
countriesaroundtheworldwithnearly600international
franchiseesgrowingtwopopularglobalbrands,KFCand
PizzaHut.Infact,ourfranchiseesopenedupover80%of
the738newrestaurantsweaddedthisyear.Thishelps
makeourinternationalbusinesshighreturnbecauseour
franchiseesareusingtheircapital,notours,togrow.
Ourplanistocontinuetoleverageourbigscalemarkets.
Wehaveninecountriesandfranchise-onlybusinessunits
thathaveover600restaurantseach.We’refocusingour
international company operations investment in four of
thesecountrieswherewearebuildingscaleandexpectto
produceexcellentreturnsovertime(U.K.,Australia,South
Korea,Mexico).ThelargestofthesemarketsistheU.K.
wherewehavegreatKFCandPizzaHutbusinesses.Here,
wehavealmost1,300restaurantsgenerating$115million
inoperatingprofitswitha24%5-yeargrowthrate.
When you look at our franchise-only business, you’ll see
wehavenearly4,500restaurantsgenerating$154million
in operating profit and a 16% 5-year growth rate. What’s
morewehavebroad-basedgrowthevidencedbythefactwe
openednewunitsin60countriesthisyear.
Goingforward,wewanttocontinuetoaddatleast700new
unitseachyearanddoitprofitably.Considerthis,excluding
theChinaDivisionweonlyhave6,100KFCsand4,500
PizzaHutscomparedtoover16,000unitsMcDonald’shas
ininternationalmarketsoutsideofChina.
anincredibleheadstart.Weestimate there arealready
500millionurbanChinesecustomerswhocanaffordour
food.There’snoquestion,weareonthegroundfloorwith
anunprecedentedopportunity.Ilikenittothedayswhen
Colonel Sanders, Glen Bell, Dan Carney and Ray Kroc
startedKFC,TacoBell,PizzaHutandMcDonald’s,respec-
tively,andcreatedfast-foodcategoriesintheU.S.,leading
to270,000unitstoday.Wehavethefirstmoveradvantage
andtheopportunitytodothesamethinginChina.
That’swhyourgoalistobuilddominantrestaurantbrands
in every significant category. So, in addition to KFC and
Pizza Hut casual dining, we’ve recently developed Pizza
HutHomeServiceandourTacoBellGrandedine-informat.
Theteamhasalsoenthusiasticallydevelopedandisnow
testingEastDawning,whichisaChinesefast-foodconcept
thatisgearedtoprovidetheeverydaylocalfavoritefoods
ofChinesecustomers.
WithallthegoodnewsinChina,theleadingquestionis,
whatcangowrong?Well,thepasttwoyearswe’veweath-
eredSARS,theAvianFluandeventslikethatarealways
apossibility.AndI’llleaveittoyoutopredictthefuture
economyorpotentialpoliticalissues.OnethingI’msureof
iswe’llhaveourupsandsomeunforeseendownsbutas
IsaidlastyearandI’llsayitagain,there’snodoubtinmy
mindthatonedaywewillhavemorerestaurantsinChina
thanwedointheU.S.
ChinaDivisionKeyMeasures:+20%operatingprofitgrowth;
+22%systemsalesgrowth;+375newunits/year.
#2
DRIVEPROFITABLE
INTERNATIONALEXPANSION
Since China is now a separate division, the remainder
ofourinternationalbusinessisnowreportedexcluding
our China Division. It too is a large and growing busi-
ness.Forthefifthstraightyearweopened upover700
restaurantsincountriesoutsideofChinaandtheU.S.The
InternationalDivisiongeneratesover$335millioninoper-
atingprofit,withasolidrecordofgrowingatleast10%in
operatingprofits.
OurChinaDivisionisour
highestreturninternational
equitybusinessgenerating
over$1billioninrevenue
and$200millionin
operatingprofit,upover
20%versusayearago.
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