Presentation Overview

Ricardo:
Company Profile Mission Statement Ownership & Organization

Vania:
Alliances Products & Technology Market Trends & Growth Key Players

Presentation Overview
Andrew:
SWOT Analysis

Talib:
Financial Overview
Past and Present

Financial Ratio Analysis Probable Outcomes and Predictable Crises Critical Success Factors

Background & Overview

Company Profile

Founded in 1952 Operates in more than 108 countries globally Parent company YUM Brands Serves approximately 12 million customers in more than 5,200 restaurants globally

Background & Overview

Mission Statement

YUM BRANDS: Build their brands in China Aggressive international expansion Improve U.S. brand position Drive long term Shareholder and franchisee value

Background & Overview

Ownership & Organization

David Novak, CEO of YUM Brands Roger Eaton CEO of KFC KFC Franchise breakdown: Restaurant General Manager Assistant Managers Average of 20-35 employees per store

Background & Overview

Ownership and Organization
Company Beginning of Year New Builds Acquisitions Refranchises Closures Other End of Year Total % of Total 60 47 None 855 17 60 107 (12) 4,225 83
956

Franchisee
4,210

Total
5,166

74 None

80

None 154 (12) 5,080 100

Background & Overview

Alliances

Pizza Hut & Taco Bell Yum Brands: Worlds largest proprietor of multi-branded fast-food locations KFC holds 69% of Yum Brands market share

Background & Overview

Charitable Alliances

Animal Welfare World Hunger

Background & Overview

Products & Technology
KFCS Point of Difference: Secret Recipe for Fried Chicken Fast-Food Competitive Technology: Automation Heating Food Production Shelf-Life Ingredients

Market Overview
Market Trends & Growth

Global Recession = Increase in consumption of cheaper foods 73% of Americans eat fast food out of convenience 33% of Americans and 30% of the Asia Pacific Market eat fast-food at least once a week

Market Overview
Market Trends & Growth

KFCs usually clustered in urban centres Soaring food prices notably wheat, health and diet concerns have slowed growth of fast food chains since 2006 in U.S. Emerging Markets: Prefer international brands

Market Overview
Key Players

International:
McDonald's

Domestic:
Wendys Burger King Sonic Jack in the Box

Strategic Analysis
Strengths: Market Share

KFC has roughly 42% of the global chicken on the bone market share
Nearly 3 times as much as their nearest competitor China 2009, 16% increase in market share Aided KFC in declining U.S. Market growth

Strategic Analysis
Strengths

Differentiation: Trademarked items and Recipes International Presence: Global Diversification and ability to expand rapidly (i.e. China)

Strategic Analysis
Strengths
USA 5,166
Mainland China 2,497

Japan

1,150

Great Britain

689

Canada

780

Australia

572

Indonesia

336

Malaysia

431

Strategic Analysis
Weaknesses

Systemic: Integrity of Supplier & Distributors Decentralization of OwnershipFranchisee model (i.e. quality,service,cleaniness, etc.) Branding: Mom and Family values: Health and weight issues

Strategic Analysis
Opportunities

Stability In Commodity Pricing: Analysts indicate that chicken prices should stay stable in short term Beneficial in further maintaining costs to provide better margins

Strategic Analysis
U.S Chicken Price per lbs. (cents)
Month Feb 2009 Mar 2009 Value 86.70 85.73

Apr 2009
May 2009 Jun 2009 Jul 2009 Aug 2009 Sep 2009 Oct 2009 Nov 2009

85.38
86.96 88.17 88.56 86.77 84.88 82.85 82.13

Dec 2009
Jan 2010

82.15
83.00

Strategic Analysis
Opportunities

Emerging Markets: Estimated 5% growth rate in emerging economies Perceive brands as superior to local Asia Pacific region rates high globally in fast food frequency visits Low Labour Costs

Strategic Analysis
Opportunities

Diversification in Mature Markets: Develop Incremental sales layers (i.e. Breakfast, new beverages, expanded protein options, etc.) Expansion of Multibranding: Single store location pairings with Pizza Hut and Taco Bell

Strategic Analysis
Threats

Mature Market Diet and Health concerns (75% of Americans eat less fried chicken due to health concerns) Foreign Currency Fluctuations Animal Welfare Activists (i.e. PETA) Emerging Competition in Mature Markets (i.e. Chicken Fil A) Avian Flue

Financial Overview
Past/Present
Past: Steady share price increase over past ten years KFC U.S. Sales per unit have grown by 2% over last 4 years Present: Yum Brands achieved 6.9% growth in 2009 compared to 2008 Annual Sales per restaurant in U.S. are around 1.3 million, on par with industry

Financial Overview
Past/Present

KFC U.S. Sales per Unit:

Year End thousands

2008

2007

2006

2005

2004

% growth

KFC US

$967

$994

$977

$954

$896

2%

Financial Overview
Past/Present

KFC Division Sales Growth:

In Billions KFC U.S. 2008 Company Sales: $1.2 Franchisee Sales: $4.0 Company Sales: $1.4 Franchisee Sales: $7.6 Company Sales: $2.5 Franchisee Sales: $1.1 2007 $1.2 $4.0 2006 $1.4 $3.9 2005 $1.4 $3.8 2004 $1.4 $3.6 5-year growth (4%) 2%

KFC International

$1.3 $6.7

$1.1 $5.7

$1.1 $5.2

$1.0 $4.7

9% 13%

KFC China

$1.7 $1.1

$1.3 $0.8

$1.0 $0.7

$0.9 $0.6

28% 18%

Financial Overview
Financial Ratio Analysis
Debt/Equity: Yum Brands: 3.28 McDonalds: 0.75 Industry: 2.00 Gross Profit Margin: Yum Brands: 20.6% McDonalds: 44.0% Industry: 35.2% Return on Assets: Yum Brands: 15% McDonalds: 15.1% Industry: 12.5%

Financial Overview
Financial Ratio Analysis
Earnings Per Share: Yum Brands: 2.22 McDonalds: 4.11 Current Ratio: Yum Brands: 0.7 McDonalds: 1.1 Industry: 1.0 Inventory Turnover: Yum Brands: 56.4 McDonalds: 117 Industry: 97.8

Financial Overview
Financial Ratio Analysis
Quick Ratio: Yum Brands: 0.4 McDonalds: 1.0 Industry: 1.0 Asset Turnover: Yum Brands: 1.14 McDonalds: 0.8 Industry: 1.1

Probable Outcomes & Predictable Crises

1. Continue rapid expansion in emerging markets 2. Diversification of Menus in North America 3. Improve control processes on ethical operations 4. Improve operational and supply chain efficiency

Critical Success Factors

1) Develop brand equity in new markets and sustain a differentiated brand in existing markets 2) Develop and sustain healthy relationships with franchisees and other stake holders

Critical Success Factors

3) Provide an infrastructure that is flexible enough to adapt to local markets under the umbrella brand 4) Ensure the integrity of supply and distribution networks in the face of international variances, environmental crises and intensifying ethical concerns.