Word: yum
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Certainly Yum knows how to cross borders. Since it was spun off from PepsiCo in 1997, the company has radically transformed its overseas business. With Americans stuffed on fast-food options and domestic sales growth a skinny 2% annually, companies like Yum must go global to give Wall Street what it craves. A decade ago, stores overseas brought in less than 20% of profits; today it's 50%. In 2006 the company earned $824 million in net income on total revenue of $9.6 billion...
...story of Yum Brands shows that in the global economy, it's not so much what you sell but how you sell it. Ten years ago, Colonel Sanders was losing the global fast-food war to the Golden Arches. PepsiCo had spread its restaurant division too thin, planting capital-consuming, company-owned-and-operated stores in 32 countries instead of franchising them as it does in the U.S. But PepsiCo did set up valuable infrastructure, including supplier relationships and local management teams. "PepsiCo laid down the tracks but hadn't yet taken advantage of the opportunity," says Novak. In swift...
...Pizza Hut restaurants now number more than 12,000 in 110 countries outside China, says Graham Allan, president of Yum Restaurants International (YRI). Of those stores, 85% are owned and run by franchisees. Operating profit more than doubled, from $186 million in 1998 to $407 million in 2006. International profits drove the stock price up 82% over 10 years. Yum's largest markets overseas include Australia and the U.K. Pizza Hut ranks as the most trusted food-service brand in India, and Russia will soon greet the Colonel through a partnership with top chicken chain Rostik...
...then there's China, where Yum is so big that it has reported earnings separately since 2005. Profits from Yum's stores in China, Thailand and Taiwan popped 37% in 2006, while all other international profits grew 11%, domestic a mere 3%. A KFC opened nearly every day in China last year, and KFCs and Pizza Huts now number more than 2,300. (McDonald's has about 1,000 restaurants, not that Yum keeps track.) Sam Su, who runs Yum in China, projects 20,000 stores someday. "We're nowhere close to saturation at all," he says...
Pizza and fried chicken are tasty treats, but they're not staples in China like, say, noodles and dumplings--and that's where Yum thinks it can really score. And if a Yank selling egg rolls to the Chinese seems a bit quixotic, then Novak, 55, is the right man for the job. The CEO of Yum since 2000, he's a plain-talking, cheerleading executive who boasts of never having attended business school. He's given to goofy team-building tactics like passing out rubber chickens (and $100) to KFC managers whose stores are performing well. A former...