Yum! Restaurants India, owner of KFC, Pizza Hut and Taco Bell, had an ‘exceptional quarter-basis value innovation and expanding digital channels’, the restaurant chain’s global chief executive David Gibbs said in a post earnings call for the fourth quarter.
“India had another exceptional quarter with 12% same-store sales growth, ending the year with 10% same-store sales growth. Their momentum is attributable to marketing around value innovation and expanding digital channels,” he said. Gibbs named India, Canada, Japan and Europe as markets with internationally strong sales momentum for the year.
In a simultaneous development, Yum! Restaurants, Indian subsidiary of Yum! Brands, has picked up minority stake in its largest franchise partner RJ Corp-owned Devyani International (DIL), one of the first franchisees globally where the restaurant major has acquired equity stake. This follows DIL’s acquisition of 74 KFC restaurants from Yum! over the last 18 months.
“Yum! is looking at India as its next biggest bastion of growth after China, and the strategic equity investment strengthens our association with them. Our consumption outlook is double digit growth for the business, riding on scale investments,” RJ Corp chairman Ravi Jaipuria told ET. DIL operates 500 KFC and Pizza Hut stores in India.
A notice by Competition Commission of India (CCI), approving the proposed combination between Yum! Restaurants and DIL, estimated the book value of the assets of the business undertaking comprising of 61 KFC restaurants at less than Rs.350 crore.
The India development comes at a time when the Kentuckyheadquartered restaurant chain said its 2020 results were likely to fall short of its long-term outlook, weighed down by the deadly coronavirus outbreak in its biggest market China and lagging sales of Pizza Hut in home market the US. “While Yum’s business model is highly diversified, this will certainly be a headwind for 2020,” Gibbs told analysts.
Yum!’s overall presence in India is spread across quick service brands KFC and Pizza Hut and mexican cuisine based Taco Bell. In all, it operates over 1,000 restaurants in the country.
DIL president Virrag Josshi said the company would double the base of KFC and Pizza Hut restaurants over the next four-five years. “Over the next five years, DIL plans to invest over Rs.1,000 crore in growing its brands including KFC, Pizza Hut, Costa Coffee, Vaango and food courts.”
Yum! follows the global strategy of doing away with capital-intensive operations to instead focus on brand growth and development. Over 98% of the KFC business globally, spread across 145 countries, is now operated by independent franchise owners. In India, while Pizza Hut is already entirely franchised, KFC’s company-operated footprint is under 10% in India.
The chain, which competes aggressively with Domino’s, McDonald’s and Burger King, has split its entire franchise operations between two partners. Besides DIL, its other franchise partner in India is Sapphire Foods, set up by a consortium of funds led by Samara Capital in 2016.
Source: Economic Times