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Yum! Restaurants International Division
Graham Allan, President YRI DivisionGraham Allan, President YRI Division
Yum! International Division
Today’s Agenda . . .
Strategies and Results
How to Look at our Business
U.K., Franchise, Established, Emerging Markets
Future Growth
Drive Profitable International Expansion
Profitably expand KFC as leading chicken QSR
Profitably expand Pizza Hut as leader in casual/family dining
Drive differentiated Pizza Hut delivery-unit expansion
Franchise-led development
Equity ownership in markets offering significant scale, growth and returns
Yum! International Division — 2005 F
Sixth straight year of 700+ new openings
85% of openings by Franchisees
Seventh straight year of at-least 3% net restaurant growth
+6% system sales growth (local currency) . . . Ahead of our 5% target again
Continued double-digit growth in franchise fees
14% operating profit growth; +10% local currency basis
Record operating margin of 18%, and record ROIC of 19%
Yum! International Division Success Factors
Infrastructure in place
Strong local capability
Over $275 million G&A Invested
Strong supply-chain infrastructure: Global product strategies, local sourcing
Demonstrated product innovation ability and global best-practice sharing
700+ franchisees
YRI Is a Diverse and High-Return Business
$100+
170+
185+ (15) (60)384+
2005 F Operating Profit($ million)
U.K.U.K. Franchise-Only
Markets
Franchise-Only
Markets
EstablishedMarkets
EstablishedMarkets
EmergingMarketsEmergingMarkets
2005 F2005 FCorporateCorporate
U.K. Steady Development Growth
960 1,0241,120
1,2101,288
1,375
’00 ’01 ’02 ’03 ’04 ’05 F
Pizza Hut
KFCKFC
System Restaurants
7%5-Yr CAGR
7%5-Yr CAGR
System-Sales Growth +13% 5-Year CAGRSystem-Sales Growth +13% 5-Year CAGR
Double-Digit Growth Market
5163
76
96
115
100+
’00 ’01 ’02 ’03 ’04 ’05 F
+15% CAGR
U.K. Operating Profit($ million)
Brands fundamentally well positioned in their categories
Experienced teams focused on turnaround
Clearer brand positioning and sharper communication approach
More exciting product innovation
100+ new openings in 2005 and 2006
Optimistic About 2006 in the U.K.
High-Return Franchise-Only Markets
System sales growth of 10% (local currency)
Nearly 5,000 restaurants . . . Expanding at a +5% rate (5-year CAGR)
$170 million operating profit . . . +14% 5-year CAGR
Nearly 40%* of YRI Division operating profit
Another Great Year2005 F
* Operating profit calculation excludes headquarters G&A and emerging markets losses
Broad-Based System-Sales Growth
+10%+10%
+20%Southern Africa
+3%Continental Europe
+17%Middle East/Northern Africa
+9%Caribbean/Latin America
+8%Asia
’05 FSystem-Sales Growth
Franchise-Only Markets
Note: Local currency
Investing for Continued Long-Term Expansion
$(15) million loss vs. $(27) million loss in 2004
System-sales growth +44% (local currency)
Over 65 new-restaurant openings
KFC France: Already profitable
KFC Netherlands/Germany generating positive cash flow in 2005
India: Already profitable with huge potential
Emerging Markets2005 F
How We Are Driving Expansion Around the Globe
Emerging Market
INDIA
Emerging MarketEmerging Market
INDIA INDIA
Franchise-Only Market
MIDDLE EAST
FranchiseFranchise--Only MarketOnly Market
MIDDLE EAST MIDDLE EAST
Even More Long-Term Expansion Opportunities
Developing Pizza delivery as a differentiated Pizza Hut concept
Taco Bell International
Early success in Philippines
Investing behind capability now
Just starting to tap into . . .
Latin America
West Africa
Eastern Europe & Russia
Partnering in Russia to Pursue Exciting Opportunity
140+ million people
Acquiring trademarks of popular local chicken brand, Rostik’s
Strong market reputation and consumer acceptance, convert Rostik’slocations to co-brand with KFC in 90+ stores
Provide immediate presence and local market expertise in a key potential growth market
Yum! Restaurant International Division
Strong Organizational CapabilityStrong Organizational CapabilityStrong Organizational Capability
Clear Growth StrategyClear Growth StrategyClear Growth Strategy
Significant, Healthy, Growing Franchise Businesses
Significant, Healthy, Growing Significant, Healthy, Growing Franchise BusinessesFranchise Businesses
High Return ExpansionHigh Return Expansion
Confident of 2006 . . .
Expect continued strength across franchise businesses . . . action plans in place to address softer markets (U.K., Korea)
Large base of stores added in 2005, pipeline for 2006 better than ever
Strong new product pipeline – global best-practice sharing
More process and discipline around marketing and communication
More good news from our emerging markets – India, France, Netherlands & Russia
Yum! International Division
System-sales growth: at least +5% (Local Currency Basis)
Net unit growth of at least +3%
Operating profit growth: +10% to +15%
HIGH RETURNS!HIGH RETURNS!
What to Expect
More of What You Want to Know . . .More of What You Want to Know . . .
63% 35%
Taco Bell/Long John Silver’s/A&W
2%
By BRAND2By GEOGRAPHY1
Asia23% Americas
25%
Europe26%
Australia/New Zealand15%
Middle East/Southern Africa
11%
International Division Profit Source2005 F
Power of Global Scale and Two Global Brands
1Excludes international headquarters’ G&A2Excludes all G&A
Yum! International Division — Proven Capability
’00 ’05 F 5-Yr CAGR
Total System Restaurants 9,396 11,450 +4%
KFC 5,179 6,280 +4%
Pizza Hut 3,968 4,680 +3%
OPERATING PROFIT ($ million) $243 $384+ +10%
A Track Record of Success
Note: Includes license units
Consistent YRI Division Brand Growth
System Restaurants
4,9145,179
5,4655,698
5,944 6,0846,280
’99 ’00 ’01 ’02 ’03 ’04 ’05 F
3,8113,968
4,1234,249
4,3574,528
4,680
’99 ’00 ’01 ’02 ’03 ’04 ’05 F
+4% CAGR+3% CAGR
Note: Includes license units
YRI Division Business Grouping — Details
KFC U.K.Pizza Hut U.K.
U.K.
IndiaKFC FranceRussiaKFC GermanyKFC NetherlandsKFC Brazil
Emerging Markets
Australia / New ZealandKoreaJapanMexicoCanadaPizza Hut France
Established Markets
Asia (excluding India)Continental EuropeMiddle East/North AfricaCaribbean/Latin AmericaSouthern Africa
Franchise-Only Markets
YRI Development Sourced from All Segments
100+
440+
150+65+ 750+
New-Restaurant Openings
U.K.U.K. Franchise-Only
Markets
Franchise-Only
Markets
EstablishedMarkets
EstablishedMarkets
EmergingMarketsEmergingMarkets
2005 F2005 F
Broad-Based International Division Expansion
Q3 ’05 YTD New Restaurant Openings
Antigua 1 Iceland 1 Pakistan 4Australia 19 India 12 Panama 4Brazil 1 Indonesia 46 Peru 6Bulgaria 2 Ireland 7 Philippines 24Canada 12 Israel 1 Poland 1Chile 4 Jamaica 3 Portugal 5Costa Rica 2 Japan 28 Romania 2Cyprus 2 Jordan 3 Russia 2Czech 9 Korea 19 Saudi Arabia 18Ecuador 4 Kuwait 4 Singapore 3Egypt 4 Lebanon 1 South Africa 19El Salvador 3 Malaysia 15 Spain 6France 4 Malta 1 Sweden 1Germany 2 Mexico 7 Taiwan (Pizza Hut) 6Great Britain 43 Netherlands 2 Turkey 5Guatemala 4 New Zealand 6 UAE 7Honduras 1 Oman 2 Vietnam 3Hong Kong 9
Growth in 52 Countries YTD
Growth in 52 Countries YTD
Pizza Hut U.K. Growth
Joint venture with Whitbread PLC since 1982
Unit growth +9% 5-year CAGR
System-sales growth 5-year CAGR +13%
Unique asset base, limited dine-in competition
Large barriers to entry
Strong family-dining brand; broad consumer base
KFC U.K. Growth
Company/franchise ownership, similar to U.S.
Unit growth +6% 5-year CAGR
System-sales growth 5-year CAGR +13%
Dominant in chicken, menu-innovation leader
Enviable real estate
Broad-Based, Diverse Expansion
+5%+5%
+4%Southern Africa
+2%Continental Europe
+7%Middle East/Northern Africa
+4%Caribbean/Latin America
+8%Asia
Restaurant Unit Growth5-Year CAGR
Franchise-Only Markets
Franchise-Only Markets Scale Is Significant
Asia: 2,050 restaurants
Caribbean/Latin America: 920 restaurants
Middle East/Northern Africa: 760 restaurants
Continental Europe: 830 restaurants
Southern Africa: 425 restaurants
Note: Asia excludes Pizza Hut South Korea, India, China, Thailand, KFC Taiwan; Continental Europe excludes KFC Germany, KFC Netherlands and France
Philippines El Salvador
Established Markets . . . Solid Businesses, Strong Cash Flow
2005 F
$185 million Operating Profit
• 4% 5-year CAGR
4,765 System Restaurants
• 2,885 KFCs
• 1,795 Pizza Huts
Ownership mix will move towards more franchised.
Korea Pizza Hut
Japan JV
Mexico
Australia / New Zealand
Canada
France Pizza Hut
Considerable Progress in Emerging Markets
(5)(9)
(17)
(31)(27)
(15)
’00 ’01 ’02 ’03 ’04 ’05 F
Operating Profit($ millions)
International Division Capital Spending
’04 ’05 F ’06 Plan $ Million Units $ Million Units $ Million Units
New 59.0 59 45.0 50 57.0 55
Replacements 15.0 21 12.5 15 12.0 21
Remodels 12.5 52 17.0 100 12.0 113
Brand Projects 7.0 9.0 13.0
Maintenance 24.0 23.0 16.0
Corp. 10.0 11.5 12.0
Total 127.5 118.0
122.0
YRI Division’s Top 6 Currencies
Japanese Yen
Korean Won
Canadian Dollar
Mexican Peso
Australian Dollar
British Pound± 10% GBP = ~$10 millionYRI Op Profit
± 10% GBP = ~$10 millionYRI Op Profit