The opportunity in China is similar to that of McDonalds when Ray Kroc founded that chain, said Tim Jerzyk, vice president of investor relations for the Louisville, KY-based company.
"We are very much an international focused company," Jerzyk said. "We have significant global scale, but with significant growth remaining."
Yum! Brands Inc. has more than 34,000 restaurants (under the KFC, Pizza Hut, Taco Bell, A&W and Long John Silver's banners) in more than 100 countries and territories. Yum opened KFC restaurants in China in 1987, when it was still a division of PepsiCo, and had nearly 2,300 units, largely KFC and Pizza Hut, at the end of the year. Thus far, KFC locations far outnumber that for Pizza Hut, which has been positioned as an upscale casual dining restaurant.
Plans call for opening 400 new restaurants in 2006, and again in 2007. Today, China posts $260 million in profits, about 20% of the company's total.
Those numbers should only increase, Jerzyk noted, given China's population of 1.3 billion. The United States, he noted, has 18,000 restaurants for a population of 300 million.
"We will have many thousands of restaurants in China," he predicted. Yum has 400 real estate professionals in country scouting locations and compiling a demographic database unheard of in that country.
India, too, provides a great deal of opportunity. The first Pizza Hut opened in India in 1996. PepsiCo spun off Yum the next year, leaving the company with a solid infrastructure in Asia. At the end of the second quarter, Yum had 125 Pizza Huts and 18 KFC units in India, and was approaching the break-even mark, a typical time period to do so.
Europe, too, is an emerging market for the company, and in fact Yum was surprised by the enthusiastic response of the French to KFC. The company's 40 units in France reached the break-even mark last year, largely because of extremely high volumes. Russia, too, is a high growth market. During the second quarter, Yum finalized the acquisition of the Rostik's chain in Russia, and is now co-branding the units to Rostik's/KFC. Within the next 12 months, the company will have 100 restaurants there.
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