Yum! Brands Inc.

A Corporate Do-Over

CASE SUMMARY

The world's largest restaurant company.

The company has wide portfolio of restaurant brands like KFC, Pizza Hut,
Taco Bell, Long John Silvers, and A&W All-American Food.

YUM! Brands, Inc. operated as a part of PepsiCo, Inc. till 1997.

After spinoff in 1997, the company was formerly known as TRICON Global
Restaurants, Inc. and changed its name to YUM! Brands, Inc. in May 2002.

Leadership of Novak & Culture of Yum!.

Service employees are crucially important in hospitality Industry.

Strength of Organizations Culture, Performance Management, Training &

Team building.

HISTORY

In 1986 Novak joined PepsiCo. as Marketing Executive for Pizza Hut.

By 1996, Novak had made significant progress, profits & same stores
sales were growing at double digit rates.

In 2000 Novak assumed the title of CEO & added the title of chairman
in 2001 while Andy Pearson remained on BOD as Founding Chairman.

Novak had strong belief in relationship with its franchise owners & his
own employee.

He renamed KFC headquarters as Restaurant Support center.

He formed a corporate council including presidents & COOs of each

brand plus his own staff.

MULTI-BRANDING

Customers preferred multi-branding over single brands.

It provides them more choice & convenience under one roof.

KEY CHALLENGE!!

To build operational capabilities to run these restaurants under one

roof while adding onto sales and profits.

THE DO-OVER OPTIONS

Model 1 Decentralization- Each brand standing alone

Similar to PepsiCo.

Overhead cost will be small & savings will be invested in staff at the brand
level for their growth & development.

Model 2 Complete Centralization One Headquarter for all

brands

Redundant costs e.g. personnel for each brand reduced, as could travel &
facilities cost.

Restaurant brands were similar businesses; hence advantageous to

combine functions.

MODEL 3 - THE CHOSEN HYBRID

APPROACH

Activities critical to brand-that make it unique will be managed

from headquarters.

E.g. Marketing & Restaurant operations.

Functions not critical to brand identity to be organized into

single SHARED SERVICES.

SHARED SERVICES helped leverage YUM!s overall size to gain

synergies & reduce cost.

Closing 700 underperforming company owned stores (mostly U.S. based

Pizza Hut stores & selling off (re-franchising) another 700.

Focusing on increasing lunch time sales at KFC & Pizza Hut.

Continuing to grow the international business by focusing on fewer, but

fast growing markets.

Developed documents that would entail the essence of the company.

Novak was very passionate about Yum!s dynasty model

THE LAUNCH AND

INITIATIVES

FOUNDING
TRUTHS
GUIDING PRINCIPLES

WE WORK TOGETHER
Guidelines for the workplace
norms

PASSION

FRANCHISE PACT

DYNASTY MODEL
All together

SHARED SERVICES

Shared services was fundamental design feature of the

company.

It took away everything which was a distraction to identity,

heritage & people. For Ex. Purchasing.

Shared the services like, restaurant development, human

resources, public affairs, legal and treasury.

Mission was to free brands up from recreating the wheel.

PERFORMANCE
MANAGEMENT

To tackle the issue of developing and maintaining the standards.

Each restaurant was rated on CHAMPS Scores

Cleanliness, Hospitality, Accuracy, Maintenance, Product Quality, Speed.

Building customer trust enabling same store sales growth.

Worked on operational enablers like, new POS & drive thru systems,
telephone access for home delivery and technology for back of
house systems.

A book titled Customer Mania! Its never too late to build a

Customer Focused Company was written by Ken Blanchard who
was impressed by Yum!s operating culture & processes.

RECOGNITION
People want to work in a place where they are recognized.
We do not make recognition an accident. It is built in to the
system Novak

Several Employee recognition programs were implemented

Floppy Chicken Award at KFC.

The Big Cheese Award at Pizza Hut.

Every Leader at Yum! was required to create a recognition award

tailored to a specific achievement.

Within RSC in Louisville, Kentucky, was the walk of Champions with

hundreds of pictures honoring people for their achievements.

TRAINING & COACHING OF

EMPLOYEES

The company took special care while recruiting & training its
employees.

This was important as employee turnover in fast food industry was

as high as 200%.

Realistic job preview - It was important for a potential hire to get

a first hand look at how the restaurant operates.

Team cohesiveness was given utmost importance.

The company taught its employees how to exceed expectations of

the customers.

Sharing Best Practices was a common feature in Yum!.

It taught how to recover when you make a mistake.

TRAINING & COACHING OF

EMPLOYEES

Coaching status

Regional Coaches

Market Coaches

Area Coaches

RGMs

Coaching did not only occur down the hierarchy but also upward
irrespective of the position and title.

Restaurant members always list a sense of belonging & Family as

top reason for staying.

Performance evaluation was done on 360 degree basis & they called
it Voice of the team.

KEY CHALLENGES

Lack of integration, coordination and synergy across brands

made everything almost hard.

1.Restaurant

design.

2.Equipment

selection & design.

3.Food

holding times.

4.Back

of the house issues.

5.Managing
6.All

the multi-brand restaurant.

brands created equals Menu Complexity at multi-brand restaurant.

YUM was financially strong enough to make a major acquisition.

Novak believed in right investment at right place at the right timelike already done in the fastest growing economy in the world CHINA.

Increasing presence in the international market is challenging-Multi

Branding further complicates the issue

Yum! Is evaluating options for overseas expansions like purchase of

a local brand, moving from quick serve business to casual dinning,
adding a large hamburger chain to its portfolio etc.

LOOKING AHEAD

OBSERVATIONS

Exhibit 2 - The sales of the company has grown by 16% in 2 years

(from 2002 to 2004) but the Net Income grew by 27%.

Exhibit 3 Focused on opening new stores with franchise.

OBSERVATIONS
Exhibit 4a - While the restaurant count of KFC and Pizza Hut
has increased but that of A&W, LJS & TACO Bell has reduced.
Exhibit 5 a & b - Total US Sales has increased by $ 2.4 billion
(16% growth in 4 years), the same internationally has increased
by $ 3.3 billion (43%).

THANK YOU!