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Final Report Pizzahut
Final Report Pizzahut
hen it comes to tossing dough around, no one does it more often and better than Pizza Hut. The division of YUM! Brands- operate the world's #1 pizza chain with more than 13,000 outlets in nearly 100 countries worldwide. Pizza Hut is an American restaurant chain and international franchise based in Addison, Texas . Pizza Hut Inc. is the largest pizza restaurant company in the world in terms of both the number of outlets and the percentage of market share that it holds. A subsidiary of PepsiCo, Inc., the company oversees more than 12,000 pizza restaurants and delivery outlets in 90 countries worldwide. The chain serves a variety of pizza styles, including its flagship Pan Pizza, as well as Thin n' Crispy, Stuffed Crust, Hand Tossed, and Sicilian. Other menu items include pasta, salads, and sandwiches. Nearly 20% of its restaurants are company-operated; the remaining units are franchised or licensed. For the past four decades, Pizza Hut has built a reputation for excellence that has earned the respect of consumers and industry experts alike. Building a leading pizza company has required relentless innovation, commitment to quality and dedication to customer service and value. The qualities of entrepreneurship, growth and leadership have characterized Pizza Hutts business through more than four decades of success. Through the strength of its heritage, its culture and its people and franchisees, pizza hut looks forward to more success in the future. History: Pizza Hut was founded in 1958 by brothers Dan and Frank Carney in their hometown of Wichita, Kansas. When a friend suggested opening a pizza parlor--then a rarity--they agreed that the idea could prove successful, and they borrowed $600 from their mother to start a business with partner John Bender. Renting a small building at 503 South Bluff in downtown Wichita and purchasing secondhand equipment to make pizzas, the Carneys and Bender opened the first Pizza Hut
restaurant. A year later, in 1959, Pizza Hut was incorporated in Kansas, and Dick Hassur opened the first franchise unit in Topeka, Kansas.
In the early 1960s Pizza Hut grew on the strength of aggressive marketing of the pizza restaurant idea. In 1962, the Carney brothers bought out the interest held by Bender, and Robert Chisholm joined the company as treasurer. In 1966, when the number of Pizza Hut franchisee units had grown to 145, a home office was established to coordinate the businesses from Wichita. Two years later, the first Pizza Hut franchise was opened in Canada. This was followed by the establishment of the International Pizza Hut Franchise Holders Association (IPHFHA). It aimed at acquiring 40 percent of the company's franchise operations, or 120 stores, and adding them to the six outlets wholly owned by Pizza Hut. In early 1970 Frank Carney decided that the business strategy was inadequate, and that a more developed, long-term business plan was necessary. The turning point occurred when Pizza Hut went public and began growing at an unprecedented pace. In 1970 Pizza Hut opened units in Munich, Germany, and Sydney, Australia. That same year, the chain's 500th restaurant opened, in Nashville, Tennessee. In 1971 Pizza Hut became the world's largest pizza chain, according to sales and number of restaurants. A year later the chain gained a listing on the New York Stock Exchange. Pizza Hut also achieved, for the first time, a one million dollar sales week in the U.S. market. At the end of 1972 Pizza Hut made its long-anticipated offer of 410,000 shares of common stock to the public. The company expanded by purchasing three restaurant divisions: Taco Kid, Next Door, and the Flaming Steer. In 1973 Pizza Hut expanded further by opening outlets in Japan and Great Britain. Three years later the chain had more than 100 restaurants outside the United States and two thousand units in its franchise network. In 1977 Pizza Hut merged with PepsiCo, becoming a division of the global soft drink and food conglomerate. Sales that year reached $436 million, and a new $10 million dollar headquarters office opened in Wichita. The 1980s brought new competitors to Pizza Hut, all challenging its number one position in the pizza restaurant trade, then worth $15 billion in sales annually in the United States alone. Also, to raise its profile, Pizza Hut introduced "Pan Pizza" in 1980 throughout its network. In 1984 Steven Reinemund was appointed president and chief executive officer of Pizza Hut. In 1986 Pizza Hut opened its 5,000th franchise unit, in Dallas, Texas, and began its successful home delivery service. By the 1990s the delivery and carryout
business had grown to account for approximately 25 percent of the company's total sales. By 1986 there were 100 restaurants in UK and 5000 worldwide. In 1990 Pizza Hut opened its first restaurant in Moscow. The Moscow location quickly established itself as Pizza Hut's highest volume unit in the world. Restaurants just behind in total volume served were found in France, Hong Kong, Finland, and Britain. PepsiCo took advantage of global change following the end of the Cold War, expanding Pizza Hut into new and emerging markets. In 1991 PepsiCo had restaurant outlets in 80 countries and by 1997, Pizza Hut restaurants had spread to 90 countries. In 1994 several changes resulted in the company's first decline in operating profits in 15 years. The pizza market was no longer growing; fast food rivals cut prices; and investment in new outlets was draining corporate resources. PepsiCo's restaurant division saw sales in restaurants open at least one year fall six percent in 1994, contributing to a drop in profits of 21 percent (to $295 million). Some indicators were promising: market share rose from 25.6 to 27 percent; 1995 sales increased 16 percent to $5.2 billion; and operating income rose to $414 million, up 40 percent from the year before. In 1996 Pizza Hut planned to introduce a major new product each year and two or three line extensions. In 1996 Pizza Hut accounted for 17 percent of PepsiCo's total sales and 13 percent of its operating profit. In the late 1990s, PepsiCo drew together its restaurant businesses, including Pizza Hut, Taco Bell, and KFC. In January 1997 the company announced plans to spin off this restaurant division, creating an independent publicly traded company called Tricon Global Restaurants, Inc. The formal plan, approved by the PepsiCo board of directors in August 1997, stipulated that each PepsiCo shareholder would receive one share of Tricon stock for every ten shares of PepsiCo stock owned. The plan also required Tricon to pay a one-time distribution of $4.5 billion at the time of the spinoff. If approved by the Securities and Exchange Commission, the spinoff would take place on October 6, 1997. In July 2000, Pizza Hut became the first company in history to place its logo on the worlds largest proton rocket. In 2002, Tricon Global became YUM! BRANDS INC. In 2006, Whitbread sold their shares to the joint venture to Yum! Brands Inc. Also as a result, Pizza Hut Inc. UK was 100% owned by Yum!
Lastly, up to date in 2008, Pizza hut owners have bought Godfathers Pizza with 28 stores in Ireland. Enrico, who had risen to the position of PepsiCo CEO, explained the move: "Our goal in taking these steps is to dramatically sharpen PepsiCo's focus. Our restaurant business has tremendous financial strength and a very bright future. However, given the distinctly different dynamics of restaurants and packaged goods, we believe all our businesses can better flourish with two separate and distinct managements and corporate structures."
SOCIAL FACTORS:
Pizza hut is multinational. It has basically originated from America, so the organization is overwhelmed by the western culture. There are social forms of society which consist of upper class, middle class and lower class. Every country has cultural norms, values, beliefs and religious obligations which can affect the organization.
TECHNOLOGICAL FACTORS: Now a days technology is improving, where as baking and heating ovens will be of new and efficient technology and will provide efficient service. Due to new technology there are new ways of marketing like: internet, telemarketing and the organization can advertise their products with much faster pace. Computer based customer data is MIS (managing information systems) helps in collecting customer data, daily transactions, future forecasting and decision making. New vehicles will make their service more efficient.
SWOT ANALYSIS
In the internal analysis of Pizza Hut we have considered SWOT of the company. Every organization has its strengths, weakness, opportunities and threats. So, the SWOT analysis for Pizza Hut is as following:
S TRENGTHS:
Companys image Quality and hygienic products Unique pizza with cheese Brand acceptance Effective distribution network Online orders Varity of taste available Little competitors
W EAKNESSES:
Import duty Competitions
High prices Customers loyalty towards Pan Pizza Only large size available Taste of cheese
O PPORTUNITIES:
Economic component Expansion opportunity Demands of different tastes Awareness increase
T HREATS:
Threat of upcoming competition Lowering tariffs on franchising and licensing New entrance like Dominos Pizza in Pakistans market can affect their market shares. Other local restaurants can affect their market shares by providing pizzas with lower prices. Social factors can affect their image as a Western organization.
POSITIONING
Pizza Hut was among the first multinational brands to enter the food retail sector in Pakistan. When the first Pizza Hut restaurant opened in Karachi the quick service industry was at a nascent stage and the pizza category was dominated by a sole regional player who had a marginal presence. Pizza Hut went on to play a significant role in pioneering and developing this category in Pakistan. Worldwide and in Pakistan, Pizza Hut has become synonymous with the best pizzas under one roof. This is because at Pizza Hut the belief is that every pizza has its own magic, thus making it a destination productwhich everyone seeks. It is this belief that has ignited the passion to create, innovate and serve the finest products the industry has to offer, while setting standards for others to strive to replicate. Pizza Hut is committed to providing uncompromising product quality, offering customers the highest value for their money and giving service that is warm, friendly and personal.
A critical factor in Pizza Huts success has been its unique dining experience. Crew members at Pizza hut strive each day to provide CUSTOMER MANIA the kind of service that ensures that every visit of the customer is a memorable one. Pizza Huts constant endeavor to provide extra value whether it is pizzas which are available to suit every price range, new promotions or the introduction to innovative product ranges- that puts a YUM on every customers face has allowed it to increase its presence in Pakistan to the current 38 restaurants across 9 cities.
Business Level Strategy:Business level strategies are plans made to gain a competitive advantage over its rivals in a market. Hence, all the businesses need to adopt business level strategies in order to compete in a competitive environment. If we take a look at the Pakistani market, there are no large competitors of Pizza Hut, but unlimited small competitors exist in the market. The threat of competitors is very low as there is no international food chain offering pizza in Pakistan at present. Therefore, present strategies adopted by Pizza Hut are keeping in consideration the present competition. Whereas, in the future this competition will increase and Pizza Hut will have to change all its business level strategies in order to compete with its rivals. Now as Dominos has opened in varies cities of Pakistan, it will result as a threat for Pizza Hut and hence, their strategies are to be taken into consideration for further modifications. Pricing Strategy: The level of competition a business faces determines its pricing strategy. Sometimes a business has the scope to set its price and other times it does not. When a business has the scope to set its prices this is a number of pricing strategies or policies it might choose. As there are no such competitors of Pizza Hut which could compete with the quality of pizza produced at Pizza Hut, therefore, the pricing strategy adopted by Pizza Hut is market skimming. Pizza Hut has adopted this pricing strategy as they want to hold maximum share of the market by maximum profit. This is a golden era for Pizza Hut, as there are no competitors and hence, Pizza hut is free to charge any price they want. They are charging higher prices due to the uniqueness of the product. They satisfy the target market as the food quality is worth the price paid. The pricing strategy is not just to get the worth of quality but also to gain maximum profits before any competitor enters because then Pizza Hut will have to change its pricing strategy. Although the prices would be lowered with the new entrants in the market but not to a greater extent as the quality food products are not home-produced. They are imported from different countries keeping in view the best quality. Market Share: As there are dozens of Pizza Suppliers globally providing services in different parts of the world, but Pizza Hut is the one who got the bigger market shares globally. This is a survey taken by www.survey.com that pizza hut is having 48% of overall Pizza market in the world. After that Dominos is leading with a percentage of 20%, while the rest 32% is divided in the remaining pizza provides globally.
YUM! BRANDS:
Yum! Brands, Inc., based in Louisville, Ky.- it is the world's largest restaurant company in terms of system restaurants with more than 36,000 restaurants in over 110 countries and territories and more than 1 million associates. Yum! is ranked #239 on the Fortune 500 List, with revenues in excess of $11 billion in 2008. Four of our restaurant brands KFC, Pizza Hut, Taco Bell and Long John Silver's are the global leaders of the chicken, pizza, and Mexican-style food and quick-service seafood categories. In October 1997, Yum! Brands were spun off from PepsiCo as Tricon Global Restaurants, Inc. At that moment it established as a singular goal from which they never wavered: To be the best in the world at building great brands and running great restaurants. Now At present Yum! Brands is the worldwide leader in Multibranding, offering consumers choice, convenience, and value by combining two brands under one roof. Multi-brand opportunities still exist across America and offer franchisees a competitive edge as well as many advantages.
The Yum! System includes three operating segments: - U.S., International (Yum! Restaurants International) and China Division (includes mainland China, Thailand and KFC Taiwan). Outside the United States in 2008, the Yum! System opened more than four new restaurants each day of the year, making us the largest retail developer in the world.
Franchise History
When did the first Pizza Hut open? 1957 When did Pizza Hut start Franchising? 1959 Year 2003 2002 2001 2000 1999 U.S.A. 4725 5901 5974 6126 4277 Canada N/A N/A N/A N/A N/A International 2562 3571 3509 3489 N/A Corporate 2544 2493 2508 2469 2790
What We Like
Yum! Brands offer the power of multi-branding that includes two National Media Budgets, two Category Leading Brands, and two menus. This can broaden customer appeal, which has the potential to increase the average check size. Field offices are located throughout the U.S. to support franchise and company restaurant operations.
Pros
Cons
Operations - Can take up to 46 weeks to open the first store, but it's probably worth the wait.
FACILITIES
Coaching Each brand has Franchise Business Coaches and/or Franchise Business Leaders to provide business insight and instruction. Your coach/leader will keep you abreast of important business initiatives, organize key regional training activity, and be your primary point of contact. Training Yum! Enlists each new franchisee in 12-16 weeks of training. A fee may be charged for the training activity, and franchisees are responsible to staff their restaurants and train the restaurant crew. Yum! University Yum! University is the management and development arm of Yum! Brands, Inc. Yum! Universitys global curriculum covers wide-ranging subjects like:
HR College Leading Change Coaching Leaders Ops College Multi-brand Operations Development College Finance College
Advertising & Marketing Yum! is committed to making our big brands even bigger. A&W All-American Food, KFC, Long John Silvers, Pizza Hut and Taco Bell all have annual promotional calendars featuring a variety of special offers. These promotions are designed to excite customers and increase that stores traffic.
Many markets have local advertising cooperatives to coordinate local marketing activity. Franchisees are encouraged, but not required, to participate in system promotions. Local Store Marketing initiatives help you build customer loyalty with marketing programs. Franchisees are encouraged to use marketing resources made available to them.
Development For a fee, Yum! Brands offer a Development Service Program (YDS) for franchisees that is intended to facilitate the design, approval and construction of restaurant facilities.
Services Provided:
Do you have a passion for operations? Quick-service restaurants are a hands-on business We need operators that are customer focused and pay attention to details Foodservice experience is important. If you don't have it, you will need to hire an experienced leader
Are you committed to building people capability? A commitment to management and team training An infrastructure that supports multiple restaurant ownership
Franchising History
When did the first McDonald's open? 1955 When did McDonald's start Franchising? 1955 Year 2005 2004 2003 2002 2001 U.S.A. 11632 11629 11533 11276 11051 Canada 903 860 843 832 812 International 9878 9694 9740 9850 9455 Corporate 8096 8038 8065 8262 6918
Start-Up Cost & Franchise Fee It takes a lot of potatoes to make these fries so come prepared. You will need a minimum of $300,000 in non-borrowed, personal resources to be considered for a franchise. Most Owner/Operators enter the System by purchasing an existing restaurant directly from McDonalds or from a McDonald's Owner/Operator. A small number of new operators choose to purchase a new facility, but that requires an initial down payment of 40% as opposed to 25% for an existing restaurant. Intensive training addresses all aspects of operating a McDonald's restaurant. While McDonalds does not offer financing, McDonalds Owner/Operators have access to the companys established lender relationships with some of the lowest lending rates in the industry.
Total Investment: $950,200-$1,800,000 Initial Franchise Fee: $45,000 Royalty Fee: 12.5%+ Advertising Fee: N/A Term of Agreement: 20 years Renewal Fee: $45K
Pros
Special Incentive Programs -Minority Fran Participant Recession Proof Market - McDonald's serves more than 27 million individuals daily according to 2007 statistics. World Class Training - McDonald's is recognized as a premier franchising company around the world. Training is required prior to becoming an owner/operator.
Cons
Cost - McDonald's does not provide financing or assistance other than the special incentives for minorities. No Absenteeism - McDonald's franchises are open only to individuals who are involved with the day-to-day operations of the restaurants-no absenteeism allowed.
BURGER KING In 1954, James McLamore and David Edgerton opened their first BURGER KING restaurant. By 1977, Burger King had opened 2,000 restaurants on three continents. Today the Burger King system operates more than 11,300 restaurants in 50 states and 69 countries. Approximately 90 percent of Burger King Restaurants are owned and operated by independent franchisees. Burger King has more than 11,000 restaurants globally in more than 60 countries. This impressive growth relies on the success of their franchisees and that is why Burger Kings market plan focuses on restaurant-level economics.
Franchise History
When did the first Burger King open? 1954 When did Burger King start Franchising? 1961 Year 2004 2003 2002 2001 2000 7050 7252 7552 7756 7826 U.S.A. 228 233 244 214 208 Canada International 3185 3090 2629 2409 2495 Corporate 1182 1150 1038 993 867
Start-Up Cost & Franchise Fee Franchise Fees is a flat $50,000 and the total investment could be as low as $300,000 making Burger King a much more affordable option than most in its class. Burger Kings franchisee training is geared to provide you with the skills to help build a successful business in this extremely competitive marketplace. Burger King offers over 70 days of initial training that covers a broad range of technical and managerial skills. Courses can be added later for you and your team to increase experience, business, and operations knowledge. General business knowledge and past food service experience is required.
Total Investment: $294,000-$2,800,000 Initial Franchise Fee: $50,000 Royalty Fee: 4.5% Advertising Fee: Term of Agreement: 20 years Renewal Fee: $50K
Pros Franchise Fees - Lower than normal franchise fees. Burger King earns 4.5 percent royalties on sales as opposed to the more traditional 6%. Affordable - This is the least expensive of the super chains and although it can still run into the high 6-figures, friendly Burger King makes you at least feel like you can afford it. Special Incentive Programs - Minority Fran Participant and unsurpassed on-going support.
Cons
None - We couldn't find much wrong with this one. Although Burger King is not consumer's first fast-food choice, excellent market research and handholding by the company insures profitable sites before start-up.
Today, in the Franchise 5oo Rank, Pizza hut falls #7 in the list whereas, in 2008 it was #4. In the list of Fastest-Growing Franchises it is listed #65 as of 2009 and in 2008 it was #23. And in the Americas Top Global Franchises it is ranked #7 in the year 2009 and in the past year it was at #9. Pizza Hut has built a strong reputation of its brand through giving quality products and has earned respect from its customers. Its innovation and quality has elevated them to higher standards during the past few years. But still the company is planning to encapsulate more market shares. In addition, Pizza Hut has diverse targets set for them and they have adopted different strategies to successfully achieve those targets set which will help them rank #1 in all categories in the near future.