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Building BIG Brands in Asia Pacific Director of Development

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Presentation on theme: "Building BIG Brands in Asia Pacific Director of Development"— Presentation transcript:

1 Building BIG Brands in Asia Pacific Director of Development
April 1, 2017 Building BIG Brands in Asia Pacific Henry Saliba Director of Development







8 China

9 Agenda YUM Brands / YRI – who we are
Asia Franchise Business Unit (AFBU) Our business philosophy Our franchising model How we engage

10 April 1, 2017

11 We are the largest restaurant company in the world!
34,880 restaurants as of Dec 2009

12 We are also the largest retail developer in the world
1700+ gross builds a year in 2009! US YRI CHINA

13 YRI’s asset base is vast…
Over 13,000 restaurants, of which 83% are franchised As of Q1 2010

14 4000+ restaurants in Asia Pacific alone!
LARGEST contributor toYRI’s Operating Profit 14

15 AFBU covers 14 countries ; 29 franchisees and all 5 brands
April 1, 2017 AFBU covers 14 countries ; 29 franchisees and all 5 brands South East Asia/HK/Taiwan/Korea Pacific Sales : $1.5+ billion Korea Stores : 2500+ Sales : $150MM+ Stores : 150+ Countries : 2 Hong Kong Taiwan Franchisees : 13 Japan Sales : $1.5+ billion Stores : 1500+ Countries : 11 Franchisees 15 Countries : 1 Franchisee : 1 (Sub-Franchisees : 108)

16 Strong growth since spin-off – 1998 to 2009
AFBU Units Added 2000+ System Sales ($MM) Double Digit CAGR Operating Profit ($MM) 4 x

17 Asia Franchise (ex-Japan)
KFC is the “800 lb gorilla”! April 1, 2017 Asia Franchise (ex-Japan) Japan KFC Pizza Hut Taco Bell A&W LJS KFC Company KFC Japan Franchise PH Company PH Franchise % of Sales % of Sales

18 Our business philosophy

19 Our business philosophy

20 Our business philosophy

21 We are about ACCELERATING THE

22 How our business is organized Organization Excellence
Support Functions Core Functions Brand Development Restaurant Excellence Product Excellence Asset Development Franchise Excellence Organization Excellence Building Brand Equity Providing Maniacal Customer Service Developing Great Products Building Great Restaurants Finance Excellence

WORLD-CLASS FRANCHISOR WORLD-CLASS FRANCHISEES Consumer proposition Business system Commercial terms Culture Alignment System discipline & process Ready for growth Constructive engagement

24 Roles & responsibilities Business Units & Franchisees
Dallas RSC Globalization of Best Practices Defining Operating Standards Business Units & Franchisees Creation of Best Practices Execution

25 The partnership works! Dominant Brands Dominant Market Share
World Class Assets World Class Teams

26 And our partnership has a bold future…..
Overview of Development, GFP and the YRI Way May 2009 And our partnership has a bold future….. YUM = 1,700 openings per year - 4 restaurant openings per day! Asia at almost an opening every day!! YUM = 2,500 remodels per year - 7 remodels per day! Asia at 2 remodels per day!! Best looking, branded restaurants in the world More powerful brands *We have tools and we have process. *Standards Library - records our best practice. *College - teaches it. *Policies - guide our relationships with our partners. *Inventory Tracking - Development is not about openings -it is about the milestones which lead to openings. © 2009 Yum Restaurant Services Group, Inc.

27 Our franchisees make this possible
New Net Openings 924 900 852 780 785 Equity FZ 27

28 Our GROWTH & LEADERSHIP mindset is key
Overview of Development, GFP and the YRI Way May 2009 Our GROWTH & LEADERSHIP mindset is key Scale advantages Supply chain Media efficiency Market penetration drives Convenience Awareness Market Share Competitive Advantage Raises barriers to entry Builds credibility with developers/landlords Assets that separate us from the competition © 2009 Yum Restaurant Services Group, Inc.

29 Franchising Principles and Review of Standard Agreement (IFA)
Our Franchising Model Franchisee gets: License to use our Trademarks for a defined term A business system Franchisor gets: Fees Growth of System, goodwill Dynamic relationship

30 Franchisee/Franchisor Relationship
Franchising Principles and Review of Standard Agreement (IFA) Franchisee/Franchisor Relationship There is no agency or partnership YRI and Franchisee are independent parties Both parties should be sensitive to information on which the other party may seek to rely

31 Franchising Principles and Review of Standard Agreement (IFA)
Franchise Agreement Key Terms Right to Use the System, System Property, and Trademarks Confidentiality protection Protection of System Property & Goodwill of System (non-compete) Renewal Criteria Grant of right to use the system, system property and trademarks at the outlet only. No right to contiguous space, etc. without a Development Agreement. Confidentiality Agreement - Information provided to us and vice versa is provided confidentially. Some Franchisees are publicly traded. SEC styled implications. Without one in place you should not provide any information to prospective Franchisee. General Principles Site-Specific License: no territorial exclusivity or radius protection No Sub-Franchising

32 Franchising Principles and Review of Standard Agreement (IFA)
Franchise Agreement Trademarks and System Property The Franchise Agreement includes comprehensive provisions aimed at protecting our Trademarks and intellectual property rights Confidentiality The franchisee’s obligation of confidentiality extends from the terms of the Franchise Agreement and Manuals to all other information concerning the System or YRI’s business and affairs Failure to properly control the use of our trademarks and other intellectual property can jeopardize our ownership rights and puts the entire franchise system at risk. In order to ensure that the system remains vibrant and contemporary over the 10-year term, YRI must retain the right to change the trademarks and introduce new trademarks. Any improvements to the trademarks or the system, including new products, will become YRI’s exclusive property, regardless of whether they were initiated by a franchisee. The broad confidentiality is necessary to protect YRI’s ownership/copyright in the trademarks, intellectual property and know-how associated with the system and also to maintain our competitive edge. Where franchisees are public companies, it will be necessary to exclude from this clause information required to be disclosed to the local Stock Exchange. This exclusion should be added in Schedule C.

33 Franchising Principles and Review of Standard Agreement (IFA)
Franchise Agreement Principal Operator The franchisee is required to appoint a Principal Operator to be primarily responsible for the management of the business and for dealing with YRI Guarantee The Franchise Agreement requires a guarantee to be obtained from appropriate parties For single unit and smaller franchisees, the Principal Operator should be one of the guarantors. Under the guarantee document, this person should also covenant to direct, supervise and manage the operation of the outlet and to devote his or her whole business time and efforts to the franchise business. The need to obtain personal or corporate guarantees will vary from country to country and deal to deal, as will the legal form of any guarantee. Personal guarantees will be mandatory in the case of small, single-unit operators and the guarantee document should include personal undertakings to comply with all provisions of the Franchise Agreement. Where the franchisee has a complex corporate structure, the guarantee document is also a means of ensuring the non-compete and transfer provisions of the Franchise Agreement bind all associated/parent companies in the corporate group.

34 Franchise Policies Manual
Franchising Principles and Review of Standard Agreement (IFA) Franchise Policies Manual Contains operational details May be amended by YRI any time by notice to franchisees in response to operational changes Formalizes franchisee notification/receipt systems for annual updates Is incorporated into and forms part of the Franchise Agreement Manual Notwithstanding the 10-year franchise term, the detailed operational requirements of our franchise systems will necessarily change and evolve daily/weekly, etc. The franchise relationship must be structured to give YRI the maximum flexibility to adapt to those changes. While franchisees may express concern about our ability to change the operational requirements in the Manuals, this is standard to all franchise relationships and unless we keep our system relevant to the consumer, it will lose its value, for franchisees as well as for us. We have committed that the implementation period required by us for any change to Standards will reflect the nature of the change. Franchisees should take comfort that this prevents us from imposing unreasonable implementation time frames on the franchisees. The Manuals contain the essential know-how which, along with the brands, are the franchisor’s most valuable asset, and we must be able to require the franchisee to return all copies of the Manuals to us at any time, including upon termination. In order for YRI to retain copyright in all Manuals and thereby prevent wholesale copying by competitors, we must restrict use and copying of the Manuals by our franchisees. For multi-unit franchisees, we provide the franchisee with one copy of all Manuals and allow the franchisee to make a single copy for each store, provided that the franchisee allocates a serial number for each copy and keeps central records of the location of each copy.

35 Franchising Principles and Review of Standard Agreement (IFA)
Non-Compete During the Term, YRI must approve any franchisee involvement in any competitive food concept or business anywhere in the world Approval may be withheld for concepts/ businesses in which chicken, pizza/pasta, Mexican, or beef/chicken burger products represent a certain % of the product mix Franchisees operating competitive brands have a conflict of interest: the competitiveness of the food industry means we cannot afford to allow our franchisees’ competitive systems advance access to our marketing/product initiatives, etc. Franchisees with additional resources should be encouraged to invest in YRI’s 3 diversified restaurant concepts. The preferred approach with franchisees who have pre-existing competitive businesses is to agree to a timetable of divestment of the competitive business as a precondition to any further expansion or renewal of their YRI franchises.

36 Development Agreement
Franchising Principles and Review of Standard Agreement (IFA) Development Agreement General Principles Applies where franchisee is granted the right to develop stores in a specified Development Area Franchisees are not given territorial exclusivity. A first right of refusal is a form of territorial protection Development rights subject to compliance with global Expansion Criteria

37 WHY is Development so important?

38 Overview of Development, GFP and the YRI Way
Our Goals May 2009 Building of Big Brands Build & Rebuild Units Build World Class Designs Build Profitable Restaurants Build People © 2009 Yum Restaurant Services Group, Inc.

39 How we engage - Top 6 Franchisees ranked by System Sales
Country Brand Franchisee Ownership Japan KFC/ PH KFC Japan Public Listed (majority : Mitsubishi) Malaysia/ Singapore/ Cambodia QSR Brands/ KFC Holdings (majority : Kulim) Indonesia KFC PT Fastfood Indonesia (family controlled) HK/ Taiwan/ Vietnam PH Jardines Philippines High-Flyer Food Private Hong Kong Birdland (HK) Private Equity (Navis)

40 AFBU Partner Engagement Model
TYPE PROCESS / METHODS DETAILS STRATEGIC HWWT2 Action Planning Meetings Partners Council Franchise Convention One APM with each partner per year. Strategic / troubled markets have more Partner’s council held once a year Franchise Convention once every other year BUILDING KNOWHOW Yum Colleges Conferences & Workshops Best practice visits Champs Challenge / Champions Club In 2010: 2 Yum colleges held 1 workshop held 4 conferences held 7 Best practice visits arranged 2 events held DRIVING RESULTS (ONGOING BUSINESS SUPPORT) Organization structured functionally & by brand to provide markets ongoing support Marketing, Operations – by brand Development, Finance, SCM, QA, R&D, HR - Shared

41 Our current franchising needs?
Franchising Principles and Review of Standard Agreement (IFA) Our current franchising needs? Interested? Contact Henry Saliba:

42 More than a restaurant company…… …….a global leader in Franchising

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