Origins and Current Businesses of Yum Brands Fast Food Restaurant Company - Case Study Example

Yum! Brands Fast Food Restaurant Company Chelsea Banos Contemporary Workplace Yum! Brands Inc. is currently the world’s largest fast food restaurant companies in terms of the number of system units with 40,000 restaurants in more than 125 world countries around the globe. This paper describes Yum! Brands fast food Restaurant Company with particular focus to the origins and current business, its global initiatives, social responsibility programs, financial analysis, marketing mix and competitive position. Yum! Brands Fast Food Restaurant Company Origins and Current Businesses  Yum! Brands Inc. is an American Fast food company operating numerous brands such as KFC, Taco Bell, WingStreet and Pizza Hut worldwide. Based in Louisville, Kentucky, the company is currently considered to be one of the world’s largest fast food restaurant companies in terms of the number of system units. For example, Yum! Brands Inc. currently runs over 40,000 restaurants in more than 125 world countries around the globe. In addition, the company’s rapid growth has been additionally reflected in its revenues which rose to more than $13.08 billion from $10 billion in 2009 (Yum! Brands Inc., 2013). The history of Yum! Brands dates back to 1997 it was first created under the name of Tricon Global Restaurants, Inc., an independent business that resulted from the spin out of the former fast food division of PepsiCo, which owned KFC, Taco Bell and Pizza Hut worldwide. In 2002, they successfully completed the acquisition of a Kentucky based Yorkshire global restaurant known as Lexington, which owned the A&W and Long John Silver’s restaurants and subsequently changed its name to Yum! Brands, Inc. In 2003, the company launched WingStreet restaurant as a hybrid unit with an existing Pizza Hut franchise (Krug, 2012). Currently some of the major competitors of the company include Mcdonalds, Burger King and Domino’s pizza restaurants among other fast food companies. Global Initiatives Yum! Brands Inc. has affected and participated in the global economy in a number of ways. Other than its presence in North America, the company has more than 40,000 restaurants in over 125 countries and territories in different parts of the world. Additionally, from the beginning of 2014, the company has expanded KFC, Tacco Bell and Pizza Hut divisions to China and India as part of its internationalization strategy. According toYum.com (2014), the significant global presence of the Yum! Brands Inc. is particularly attributed to the fact that the growth of the company over the past decade has been primarily dependent on its international expansion based on its vision of achieving growth on the international level. Examples of the restaurants include Pasta Bravo, Wing Street, Taco Bell, Pizza Hut, East Drawing and KFC among others. KFC, Taco Bell and Pizza Hut happen to be global leaders within their respective categories (Novak, 2012). Taco Bell, Pizza Hut and KFC are the world leaders of the pizza, chicken and Mexican-style categories of food. Since its spin-off from PepsiCo in 1997, the company has turned into a real multinational business enterprise, with profits generated from outside U.S growing from 20% to 70% in 2013. The company’s bid to open up to five restaurants a day within the U.S in the year of 2012 made it top international retail development (Hitt, Ireland & Hoskisson, 2013). Yum has based the leading markets for Pizza Hut, KFC, Taco Bell, Long John Silver’s and A&W in many of the significantly coveted markets that experience constant growth of disposable income as well as the middle class. Generally, Yum brands features a portfolio of product brands with different leadership positions within China alongside other upcoming markets. As part of its internationalization growth strategy, the company currently operates under six segments namely the China division, International division, India division among others. In 2011, Yum! Brands Inc. purchased the Chinese hot pot chain known as Little Sheep for HK$4.56 billion. Finally, the company also recently opened the first KFC in Ramallah, West Bank in 2012. In 2014; Yum! Brands were named amongst 100 best multi-national corporate companies. Social responsibility Programs Yum Brands is one of the companies that the CSR movement has deemed as the most socially responsible all through the globe. With almost 36,000 restaurants inside over 110 countries and more than 1.4 million employees, the company remains to be the largest chain in the world. The household names like Pizza Hut, Taco Bell plus KFC all fall under the umbrella that is associated with this mega corporation that attained a leading position in the Top 100 Best Corporate Citizen’s List in 2009. In spite of the economic recess, Jonathan Blum, the then Chief Public Affairs Officer, confirmed that Yum was not dialing back, but dialing up its CSR efforts. The company constantly sees itself as a section of the possible remedies to every social issue that surfaces within its operation environments. On the other hand, Yum supports the Global Sullivan Principles. Further, the company has assured people of discrimination-free operation environment with zero tolerance for all forms of harassment. The company’s commitment to people encompasses the global communities that it serves. Yum has made Corporate Social Responsibility (CSR) is key to its capability of succeeding within the market place in addition to being responsible and positive corporate citizen. The organization works tirelessly to align the global CSR actions in order to drive industry-topping, longstanding shareholder and franchise value through operation as one of the responsible corporate citizens globally. To this end, the company has embraced a worldwide CSR framework aimed at aligning and driving commitments in four classes: its food, its people, its community and its environment. Since Yum is the largest restaurant enterprise in the globe and is passionate about supporting individuals to better themselves or their communities, it is devoting efforts to address priorities such as: the nutritional and health-based needs of its clients, feeding the hungry, upholding responsibility and intentional attitude in every action and building personal abilities of associates around the globe. The social corporate responsibility of Yum! Brands Company has received a lot of appraisal in all the countries’ of this company’s business operations. This was due to the well-defined corporate responsibility policies of the company. Firstly, Yum! Brands Company is fully profound of the uniquely presented cultures the company interacts with in all its areas of operations. The company believes in every culture and promotes people’s trust in their positive intentions. Yum! Brands Corporation indulges in an encouragement procedure to the surrounding communities in order to have an actively developed workforce in a diversified style and backgrounds. Employment opportunities are considerable awarded to the local communities in order to better these communities. This aims at aligning this company’s CRS globally. This company additionally provides for a better health and nutritional needs for their customers. Failures on this company’s CRS basically have been blamed to the unfair competition by other companies in this market. Marketing Mix and Competitive Positions Yum! Brands marketing mix entails a rebranding mechanism in order to dominate the beverage market especially with Pizza Hut and KFC. As much as this Company dominates restaurant markets in China and United State, its business operations are currently facing stiff competition from Coca-Cola Company. This is particularly attributed to the fact that Coca Cola Company has been the main rival of Pepsico, the mother company of Yum! Brands of which it signed a lifetime contract with. . Yum! Brands Company ultimately ensures utility and choice of their products are guided by the 4Ps of the marketing mix. These guidelines are based on product (service), place, price and promotion. All the products needed by the customers are readily available at disposal for their satisfaction. As a company, Yum brands itself through its fulfillment of a number of social responsibilities in addition to its participation in sponsorship advertising like the 2008 Olympics. At present, Yum applies ideas like new product innovations plus multi-branding concepts on strong product brands in order to increase its profit. The move to host two Yum Brands under an individual roof presents customers with additional options that permit the company to get in touch with a larger section of the target market (Lewis, 2007). Yum Brand uses restaurant-specific approaches to target particular market segments. A typical example of such an approach is Taco Bell’s move to avail quality food at reduced prices has seen it top the U.S Mexican QSR segment with a market share turning to 58%. The theme of the company’s promotion revolves around the use of social network utilities such as Intagram, Twitter, YouTube, and Facebook in addition to in-store advertising promotions. Within the countries Yum! Brand operates its businesses, the company has largely identifies a better way to counter attack its competitors. The prices of products provided by Yum! Brands Company is considerate to each customer thus capturing many customers. Lastly, promotional activities by this company represent global market structure. The products message overly targets the global markets. Financial analysis Key Ratios of Yum! Brands Company Cash Flow Ratios 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 2012-12 2013-12 TTM Operating Cash Flow Growth % YOY 7.41 12.47 2.36 20.35 -2.94 -7.69 40.17 10.26 5.71 -6.76 — Free Cash Flow Growth % YOY 24.62 36.42 3.77 19.91 -33.21 10.16 93.08 4.95 -2.85 -8.79 — Cap Ex as a % of Sales 7.16 6.51 6.42 7.12 8.60 7.36 7.02 7.44 8.06 8.02 7.47 Free Cash Flow/Sales % 5.39 7.09 7.20 7.92 4.89 5.60 10.33 9.74 8.77 8.33 8.86 Free Cash Flow/Net Income 0.66 0.87 0.83 0.91 0.57 0.57 1.01 0.93 0.75 1.00 0.82 Profitability 2009-12 2010-12 2011-12 2012-12 2013-12 TTM Tax Rate % 22.42 26.10 19.53 25.04 31.40 24.53 Net Margin % 9.88 10.21 10.45 11.71 8.34 10.83 Asset Turnover (Average) 1.58 1.47 1.47 1.53 1.48 1.50 Return on Assets % 15.66 14.98 15.38 17.90 12.32 16.28 Financial Leverage (Average) 6.97 5.28 4.85 4.18 4.01 3.66 Return on Equity % 233.59 89.04 77.61 80.31 50.51 62.06 Return on Invested Capital % 31.79 27.54 28.48 33.39 24.90 26.47 Interest Coverage 7.58 9.17 10.02 15.40 6.74 — Liquidity/Financial Health 2009-12 2010-12 2011-12 2013-12 Latest Qtr Current Ratio 0.73 0.94 0.95 0.87 0.75 0.98 Quick Ratio 0.36 0.69 0.61 0.49 0.39 0.66 Financial Leverage 6.97 5.28 4.85 4.18 4.01 3.66 Debt/Equity 3.13 1.85 1.64 1.36 1.35 1.32 Annual Income Statement Period Ending: Trend 12/28/2013 12/29/2012 12/31/2011 12/25/2010 Liquidity Ratios Current Ratio 75% 84% 95% 94% Quick Ratio 62% 71% 84% 87% Cash Ratio 30% 40% 54% 63% Profitability Ratios Gross Margin 27% 28% 28% 28% Operating Margin 14% 17% 14% 16% Pre-Tax Margin 12% 16% 13% 14% Profit Margin 8% 12% 10% 10% Pre-Tax ROE 72% 100% 91% 101% After Tax ROE 50% 74% 72% 73% Based on the ratios presented above, it can be concluded that the company has sufficient liquidity and is cur experiencing both revenue and profit growth over the lat three years. Yum! Brands Inc. is currently doing relatively well compared to most of the competitors. The gross profit margin of Yum! Brands particularly indicate that the company has sufficient pricing power than most of its competitors. 4 Conclusion In conclusion, the Yum! Brands Company is one of the most successful fast food restaurant companies in the world. Despite facing stiff competition from its major global competitors such as McDonalds, the company has shown outstanding progress within the last decade. Yum! Brands Inc. has developed some of the most convenient social corporate responsibility policies. Finally, in addition to its restaurant business operations, the company has concurrently developed various Franchises and licenses setups worldwide. References Cyrek, C. (2009). Pizza Hut going after wings market. Dallas Business Journal Krug, J. (2012). Yum! Brands, Pizza Hut and KFC. Appalachian State University Boston, MA: Pearson Education.  Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Competitiveness & globalization. Mason, OH: South-Western Cengage Learning. Lewis, P. S. (2007). Management: Challenges for tomorrows leaders. Mason, OH: Thomson/South-Western. Novak, D. (2012). Taking people with you: The only way to make big things happen. New York: Portfolio/Penguin. Yum! Brands Inc. (2013). 2013 Annual Report - Yum! Retrieved on December 06, 2014 from http://www.yum.com/annualreport/pdf/2012yumAnnReport.pdf Yum.com (2014). Yum!Brands: Building the defining global company that Feed the world. Retrieved on December 06, 2014 from http://www.yum.com/company/ Read More