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Transcript of Yum
Yum! Brands Inc.
A Corporate Do-Over
Marketing of ServicesMarketing of Services
Group - 7
HIGHLIGHTS OF THE CASE
• Positioning of Services in the competitive market
• Designing & managing service processes
• Managing people for service advantage
• Service employees are crucially important in hospitality
Industry
• Service Leadership of Novak & Culture of Yum!
• Strength of Organizations Culture, Performance
Management, Training & Team building
Fact File
• YUM! Brands, Inc., based in Louisville, Ky., is the world's largest restaurant company
• The co. has wide portfolio of 37,000 restaurants in 110 countries under the KFC, Pizza Hut, Taco Bell, Long John Silver’s, and A&W All-American Food Restaurant brands.
• YUM! Brands, Inc. operates independently of PepsiCo, Inc. as of October 6, 1997.
• The company was formerly known as TRICON Global Restaurants, Inc. and changed its name to YUM! Brands, Inc. in May 2002
• It is ranked #239 on the Fortune 500 List, with nearly $11 billion in revenue in 2009.
• The company has marked a voluptuous EPS growth of 13% in 2009 & exceeded its10% EPS growth target
Yum! Vision & Strategy
• Yum! Brands is committed to continuing the success realized during its first ten years.
• Yum! is building a vibrant global business by focusing on four key growth strategies:
Corporate History
• In 1986 Novak joined PepsiCo. as Marketing Executive for Pizza Hut
• By 1996, Novak had made significant progress, profits & same stores sales were growing at double digit rates
• In 2000 Novak assumed the title of CEO & added the title of chairman in 2001 while Andy Pearson remained on BOD as Founding Chairman
• Novak had strong belief in relationship with its franchise owners & his own employee
• He renamed KFC headquarters as “Restaurant Support center”
• He formed a corporate council including presidents & COOs of each brand plus his own staff
Multi-Branding
• Customers prefer multi-branding over single brands
• It provides them more choice & convenience under one roof
• Hence our KEY CHALLENGE!!– To build operational capabilities to run these
restaurants & keep getting better & better
The Do-over Options
• Model 1 – Decentralization- Each brand standing alone– Similar to PepsiCo.– Overhead cost will be small &savings will be invested in
staff at the brand level for their growth & development
• Model 2 – Complete Centralization –One Headquarter for all brands– Redundant costs e.g. personnel for each brand
reduced, as could travel & facilities cost– Restaurant brands were similar businesses; hence
advantageous to combine functions
The Chosen Hybrid Approach
• Activities critical to brand-that make it unique will be managed from headquarters
– E.g. Marketing & Restaurant operations
• Functions not critical to brand identity to be organized into single “SHARED SERVICES”
• SHARED SERVICES” helped leverage YUM!’s overall size to gain synergies & reduce cost
Key Strategic Initiatives
• Closing 700 underperforming company owned stores (mostly U.S. based Pizza Hut stores & selling off (re-franchising) another 700
• Focusing on increasing lunch time sales at KFC & Pizza Hut; and
• Continuing to grow the international business by focusing on fewer, but fast growing markets
Laying the Foundation
• The essence of the new company was set out by Novak by distributing: – “Our Founding Truths”- Guiding principles
of the company– “How we work Together”- Guidelines for
work place norms– “Our Passion” describing the core values of
the organization as a whole“Novak was very passionate about Yum!’s
dynasty model”
KEY CHALLENGES
• Restaurant design
• Equipment selection & design
• Food holding times
• “Back of the house issues”
• Managing the multi-brand restaurant
• All brands created equals – Menu Complexity at multi-
brand restaurant
Shared Services, Performance Management & Recognition
• Shared services was fundamental design feature of the company
• It took away everything which was a distraction to “identity, heritage & people” however provided synergies
• Each restaurant was rated on CHAMPS Scores – Cleanliness, Hospitality, Accuracy, Maintenance, Product Quality, Speed
• A book titled “Customer Mania! Its never too late to build a Customer Focused Company” was written by Ken Blanchard who was impressed by Yum!’s operating culture & processes
Shared Services, Performance Management & Recognition
“People want to work in a place where they are recognized. We do not make recognition an accident. It is built in to the system” – Novak
• Several Employee recognition programs were implemented– Floppy Chicken Award at KFC– The Big Cheese Award at Pizza Hut
• Every Leader at Yum! was required to create a recognition award tailored to a specific achievement
• Within RSC in Louisville, Kentucky, was the walk of Champions
Training & Coaching of Employees
• The company took special care while recruiting & training its employees
• This was important as employee turnover in fast food industry is as high as 200%
• It was important for a potential hire to get a first hand look at how the restaurant operates
• Team cohesiveness was given utmost importance• The company taught its employees how to exceed
expectations of the customers• Sharing Best Practices was a common feature in Yum!• It taught how to recover when you make a mistake
Training & Coaching of Employees
• Coaching status
– Regional Coaches
– Market Coaches
– Area Coaches
– RGMs
• Coaching did not only occur down the hierarchy
• Restaurant members always list “a sense of belonging & Family” as top reason for staying
• Performance evaluation was done on 360 degree basis & they called it “Voice of the team”
Looking Ahead
• Novak believed in right investment at right place at the
right time- like already done in the fastest growing
economy in the world - CHINA
• Increasing presence in the international market is
challenging-Multi Branding further complicates the issue
• Yum! Is evaluating options for overseas expansions like
purchase of a local brand, moving from quick serve
business to casual dinning, adding a large hamburger
chain to its portfolio etc.
Observations
• The NI of the company has grown by ~ 27% in 2 years
(from 2002 to 2004)
• While the restaurant count of Pizza Hut is increasing that
of A&W, LJS & TACO Bell have reduced
• Total US Sales has increased by $ 2.4 billion (16%
growth in 4 years), the same internationally has
increased by $ 3.3 billion (43%)
Recommendations
• The company needs to pay more attention in
strengthening the Taco Bell, A&W & LJS internationally.
• It can also explore the options of holding the multi brand
outlets concepts in the unexplored markets like India,
where the food culture is vastly going quick to serve
Thank You