Pizza Hut 2004 Annual Report Download - page 6
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Please find page 6 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.Giventhefactwearetheonlyrestaurantcompanytohavea
portfolioofleadingbrands,wehavetheuniqueopportunity
toofferourcustomerstwogreatbrandsinonerestaurant.
Notsurprisingly,whenyouthinkaboutit,ourcustomerstell
ustheyprefermultibrandingoversinglebrandsbecause
itprovidesmorechoiceandconvenienceunderoneroof.
Forexample,ifsomeonedoesn’twantchicken,theycan
havetacos,therebycancelingavetovote.Theresponse
wehearmostoftenfromourcustomerswhoexperience
multibrandingis,“Whattookyousolong?”
Asaresult,multibrandingisbecomingabigbusinessfor
Yum!,accounting for 14% ofourU.S.traditional restau-
rantbaseandanestimated$224millioninU.S.company
storeprofitsandfranchisefees.Salesofournewmulti-
brandingrestaurantsaretypically$250,000ayearhigher
thanoursinglebrandsandsamestoresalesforrestau-
rantsopenedmorethanayeararealsohigher.
To give you a historical perspective, we started with
combinations of KFC/Taco Bell and Taco Bell/Pizza Hut
Express.Welearnedthatwewereabletoaddsignificant
incrementalaveragesalesperunit,dramaticallyimproving
unit cash flows. Our franchisees then pioneered multi-
brandcombinationsbypairingKFCandTacoBellwithLong
JohnSilver’s,thecountry’sleadingquick-serviceseafood
restaurant,andA&WAllAmericanFood,whichofferspure-
beef hamburgers and hot dogs along with its signature
RootBeerFloat.Basedonoutstandingcustomerfeedback
and results,weacquired LongJohn Silver’s andA&Win
2002.Withthisacquisitionwesignificantlyexpandedour
multibrandingpotentialintheU.S.
We can now open high return new restaurants in trade
areas that used to be too expensive or did not have
enoughpopulationdensitytoallowustogotomarketwith
onebrand.Withmultibranding,webelievewecaneventu-
allytakebothKFCandTacoBellto8,000unitsintheU.S.
comparedtotheover5,000eachwehavetoday.
I’mhappytoreport2004wasanotheryearofsolidprog-
ressformultibranding.
Our KFC/Taco Bell concept had solid same store sales
growthandachievedparitymarginswithoursinglebrands.
TacoBell/LongJohnSilver’sisshowingpromisewithhigh
volumeandgoodmargins.Giventheresults,wewillbegin
tomoreaggressivelyexpand this combination.Whileit’s
too early to make a call, we have expanded testing of
ournewLongJohnSilver’s/A&Wcombos.Giventhesoft-
nessinKFC’scorebusiness,wehavedelayedexpansion
ofmultibranding incompanystoresuntilweimproveour
operations.However,ourbestKFCfranchiseoperatorsare
continuingtodevelopmultibrandunits.
Afterseeingthepowerofmultibranding,ourPizzaHutteam
successfully created and tested its own multibranding
concept for home delivery called WingStreet, which is a
tastylineofflavoredbone-inandbone-outchickenwings.
WealsotookthemenuandlearningsfromourPastaBravo
acquisition and created Italian Bistro as a partner brand
withPizzaHut’straditionaldine-inrestaurants.Again,early
resultsareextremelypromising.
Wearenowconfidentthe potential for multibranding at
PizzaHut is as strong as it is for our other brands. In
fact, ourinterestsandcapabilitiestotakeadvantageof
themultibrandingopportunityforallourbrandshasnever
beengreaterthanitistoday.
However,ourbiggestchallengeformultibrandingremains
the same. We must continue to get better and better
at building the operating capability to successfully run
theserestaurants.Andtheplainfactisit’shardertorun
a restaurant with two brands. With more variety comes
more complexity, so we’ve been dedicated to improving
the capability of our people to deliver our customers a
greatexperience.Wehavesimplifiedour backof house
systemsandarereducingcostsbyvalueengineeringour
facilities, while at the same time offering more exciting
buildingdesigns.
Again,thisisanopportunitywecreatedandisuniqueto
Yum!andagain,wecontinueto havefirstmoveradvan-
tage.Ouroperationallearningsputuswellaheadofthe
Multibrandingisbecoming
abigbusinessforYum!,
accountingfor14%ofour
U.S.traditionalrestaurant
baseandanestimated
$224millioninU.S.
companystoreprofits
andfranchiseefees.
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