BLUF

A thorough analysis of YUM! Brands leads to a strategy that recommends the implementation of SAS data analytics software in the North American division, in order to lead the company towards more efficient operations management, decision making, and financial planning.

Total Initial Investment:Creation of YUm! Analytics

$4.38 Million

execution: $49 Million

$49 Million equals the NPV of strategy costs over 3 years

Total Future Cash Flows

$97 Million a Year, includes expenses saved and slight increase in revenues

STRATEGY OVERVIEW

• Creation of Yum! Analytics
• This new division will provide Data Management, Analytic Analysis, and delivery of the intelligence produced to key decision makers, to downstream systems, to the point of sale.
• 1 Analytics Team per Brand: 5 Member Teams - KFC, Taco Bell, Pizza Hut
• Utilizes the power of SAS Visual Analytics and SAS Visual Statistics (Add-on)

About YUM! Brands

Vision Statement

Yum! Brands is committed to continuing the success realized during our first ten years. Our success has only just begun as we look forward to the future, one which promises a long runway for growth, especially on an international level.

KFC

THE KFC DIVISION COMPRISES 14,577 UNITS, OPERATING IN 120 COUNTRIES AND TERRITORIES OUTSIDE CHINA AND INDIA AND RECORDED REVENUES OF APPROXIMATELY $2.9 BILLION AND OPERATING PROFIT OF $677 MILLION IN 2015

“TO SELL FOOD IN A FAST, FRIENDLY ENVIRONMENT THAT APPEALS TO PRIDE CONSCIOUS, HEALTH MINDED CONSUMERS”

Pizza Hut

THE PIZZA HUT DIVISION COMPRISES 13,728 UNITS, OPERATING IN 90 COUNTRIES AND TERRITORIES OUTSIDE CHINA AND INDIA AND RECORDED REVENUES OF APPROXIMATELY $1.1 BILLION AND OPERATING PROFIT OF $289 MILLION IN 2015.

WE TAKE PRIDE IN MAKING A PERFECT PIZZA AND PROVIDING COURTEOUS AND HELPFUL SERVICE ON TIME ALL THE TIME. EVERY CUSTOMER SAYS, "I'LL BE BACK!"

Taco Bell

THE TACO BELL DIVISION COMPRISES 6,400 UNITS, OPERATING IN 20 COUNTRIES AND TERRITORIES OUTSIDE OF INDIA AND RECORDED REVENUES OF APPROXIMATELY $2.0 BILLION AND OPERATING PROFIT OF $539 MILLION IN 2015.

"WE TAKE PRIDE IN MAKING THE BEST MEXICAN STYLE FAST FOOD PROVIDING FAST, FRIENDLY, & ACCURATE SERVICE."

CURRENT GROWTH STRATEGY

Strategy and Future Plans

• Yum! Brands wishes to reach 96% Franchised by 2017
• Decrease expenses and spread out risk through re-franchising/store improvements/store closures
• Finalize China Spin-Off
• Increase Customer Satisfaction through increased variety and quality
• Increase Profitability Margins
• Increase Shareholder Wealth and Growth in Earning, EPS, and Dividends

Competitive Profile Matrix

SPACE Matrix

Grand Strategy

QSPM

Formulation

Back Ground information Formulation

• Current Capital and Debt Structure Limits New Strategy Funding Abilities
• Any new strategy should be cost effective (not cheap) and provide substantial benefits for both the short and long-term
• We did not choose this strategy because of Yum! brands inability to make decisions based on their current situations. We chose this strategy because those decisions should be empirically driven based on trust worthy data gathered in a timely fashion so that the outcome of the decisions made can be assessed and adjusted more quickly.
• Starting small is the key to success. Yum! Brands is located in too many countries for a new strategy like this to succeed. According to Bloomberg's Craig Giammona and Leslie Patton, The China split now gives Yum! Brands the ability to focus on the improvement of US operations.
• Many other retailers and corporations, such as Walmart and Novardis, have used this type of strategy and seen massive improvements.
• What Yum! Brands lacks is the ability to compile all company and store data in one place.

Supporting Economic and Market data

• Fluctuations in raw material costs make it difficult to operate on thin margins
• Upward trending food, labor, and healthcare costs could cut into profits over time
• Consumer spending is forecasted to increase at a rate of 2.7% over the next 5 years

SUPPORTING INTERNAL RESEARCH

Data Sources

• Finding, collecting, cleansing and interpreting data patterns are what make this entire strategy possible.
• YUM! Brands have contracts with a significant amount of technology, data, and point of sale vendors and companies. Many of the stores are run by different owners and franchisees who use different technologies to run their stores. MICROS, NCR Technologies, Precidia Technologies.
• Each Store has at least 5 sources of data; 1 - Transaction Process Systems; 2 - Office Information Systems; 3 - Management Information Systems; 4 - Decision Support Systems; 5 - Point of Sale Systems
• With all the data that is being created, YUM Analytics will solve the problem of leaving out relevant data that could inform strategic decisions.

Implementation

We are predicting that implementation of this strategy will take 4-6 months. It will require coordination and communication between the IT, HR, Finance, Operations, and Marketing Managers and Divisions. It is important that everyone who will be involved in the training will understand how to software works in order that the data can be applied quickly.

Information Technology Strategy

Responsible for the set-up of new equipment in offices, setting up and downloading the software on the servers, beginning the data collection process, and loading security measures around company data.

Human Resource Strategy

• Staffing is a crucial part to the success of this strategy. Managers with analytic and other relevant skills and experience will be hired to fill the spots of head manager over each of the 3 new YUM Analytics sites.
• SITES: KFC and Pizza Hut- Plano, Texas Taco Bell - Cupertino, California
• Each of their teams will consist of 4 other staff members; a Financial Analyst, Operations/Supply Chain Analyst, Marketing Analyst, and Human Resource Analyst.
• After they are hired and fully on-boarded, each team will be trained by SAS to understand how to apply the software to YUM Brands specifically. Training will take up to 3 months and cost $30,000 total for 15 people. Each year after, training will cost $10,000 to continue learning and improving the team’s skills and abilities.

Marketing Strategy

• This strategy, due to the internal improvements of company operations, does not immediately affect customers and does not need a new marketing strategy of it's own.
• Marketing Strategies will come in the future once data has been analyzed and applied and changes can be made at the point of sale.
• Example of future marketing needs: The data analysis has improved brand or company margins and can now afford to lower prices on specific items.

Financial Strategy

• Due to current company strategy, re-issuing shares or taking out more debt would not be the best choice for funding this new strategy.
• The capital required to fulfill the needs of this strategy are relatively small compared to the size of the company and the expected benefits. Because Data Analytics has matured it is becoming much more affordable to many markets. (see cost analysis for software license fees)
• Re-issuing shares goes against their share repurchase program.
• Increasing the already high debt structure would only lower credit ratings (already below BBB) and increase interest expenses.
• We chose to pay for the strategy with cash on hand. Although they have already hurting liquidity ratios, the low cost of this strategy will not decrease those ratios. (see pro forma ratios)

YUM! ANalytics in Action

Part 2

Re-franchising/Closing stores

• What is Refranchising?
• What Variables play into the decision making for Refranchising?
• What Variables play into deciding to close a specific store?
• How does data analytics improve the decision making process?

Cost Analysis Assumptions for Part 2 of Strategy

Long Term Objective

integration and implementation of YUM! Analytics across international markets

NPV & Cost Analysis

Recommendations

We recommend that YUM! Brands implement SAS technology into their business to create YUM! Analytics, which ultimately will help to add value, increase the top line, as well as increase customer satisfaction.