Introduction
International political conflicts may limit Yum! Brands Inc.’s growth (Lucas, 2019). Trade unions may raise salaries and other issues in tight labor markets. Yum! Brands Inc. prioritizes socioeconomic disparity monitoring. It may also benefit from social media marketing (Kelso, 2021a). Technology trends can be used to establish creative social media efforts for brand community growth. Weather emergencies boost operational expenses and force Yum! Brands Inc. to improve value chain flexibility.
Analysis of Quick-Service Restaurants (QSR) Industry
In 2021, the QSR market was valued at $173.72 billion and was anticipated to expand at a CAGR of 4.9% over the projected timeframe (Fortunebusinessinsights.com, 2020). In the QSR industry, on-demand food transportation is rapidly growing, and cloud kitchens now aid third-party delivery applications such as Grubhub and DoorDash. At the beginning of COVID-19, the QSR marketplace had a huge global impact. Compared to the conventional restaurant sector, 90% of quick-service owners adapted to the epidemic (Mendocilla et al., 2021).
In 2021, standalone QSR commanded the segment and contributed to the highest percentage of global income (Gallarza-Granizo et al., 2020). Due to increased customer interest in dining-out eateries, the eat-in offering category is anticipated to represent the greatest customer base over the projection period. North America held the greatest revenue share of the global market in 2021 (Gallarza-Granizo et al., 2020). In addition, the popularization of a diverse range of cuisines, the provision of simple and speedy delivery options, and the expansion of the e-commerce sphere are expected to contribute to the growth of the QSR industry.
Change Drivers in the Industry
The evolving customer lifestyle, along with a growing preference for accessible meals, is the primary element driving the global expansion of the QSR industry. Due to takeout and delivery-only choices, the dependency on third-party fast delivery services has increased. Large corporations such as Uber Eats, DoorDash, and GrubHub assist consumers by facilitating the acquisition of new clients via these delivery choices (Khan, 2021).
The sector is anticipated to expand as digital innovations are incorporated into food service (Polynskaya, 2021). Additionally, loyalty schemes for customers enable businesses to tailor and enhance customer relationships. They can obtain the information through mobile and internet ordering and point-of-sale orders (Quang et al., 2018).
Industry Attractiveness
With rising disposable incomes in densely populated nations such as China and India, the percentage growth of the QSR industry is accelerating. It is projected to continue to climb in the future years. The Asia-Pacific region is predicted to have tremendous market growth due to the expansion of the middle class and urban sprawl (Agnihotri et al., 2022). Global demand for Italian cuisine is considerably greater than that of other cuisines in this classification (Occhiogrosso, 2022). The home Delivery sector is anticipated to develop significantly in the Global QSR marketplace because, following the pandemic, individuals desire to avoid physical contact with congested areas.
Internal Analysis
Research and development facilities are a resource that Yum! may leverage effectively to develop new offerings. It spends on human resources and offers training manuals in eleven dialects for over 37,000 eatery chief executives worldwide (Yum! Brands, 2021). Being funded by a syndicated credit facility, which consists of 24 banks, provides excellent financial stability to the organization because it is not reliant on one lender (Yum! Brands, 2021). The business operates a successful distribution system, owning its local, national, and international supply chain. Additionally, the corporation owns, leases, and licenses; as a result, the business receives financial resources through royalties and sales.
Financial and Marketing Performance
Yum! Brands witnessed a decrease in GP from 77.93% in 2019 to 73.35% in 2020. However, in 2021 (73.8%) and 2022 (74.5%), the firm saw an increase in its GP (Macrotrends.net, 2022a). The QSR sector GP average was 15.06% as of 2022, meaning Yum! Brands were performing better than their sectoral median.
The company saw a sharp decrease in its ROA from 26.34% in 2019 to 14.81% in 2020. In 2021, its ROA increased to 26.71%, while 2022 saw another decline to 22.81% (Macrotrends.net, 2022b). In 2020, the firm’s ROE was 11.25%, an increase from 16.17% in 2019. The company’s ROE decreased to 19.67% in 2021, while the figure in 2022 was 15.37% (Macrotrends.net, 2022c).
Yum! Brands’ inventory turnover proportion for 2022 was 1.62 (Csimarket.com, 2022a). Its asset turnover ratio decreased from 1.14 in 2019 to 0.93 in 2020. However, in 2021 and 2022, the institution witnessed an increase in asset turnover, 1.12 and 1.15, respectively (Csimarket.com, 2022b). Yum! Brands recorded a rise in their receivables turnover, from 10.23 in 2019 to 10.78 in 2020. Nonetheless, 2022 saw a decrease to 11.23 from 11.9 in 2021.
Yum! Brands witnessed a 33% loyalty rate of US customers after introducing the KFC Rewards loyalty program in 2022 (Kelso, 2021b). Its consumer retention is greater than the QSR industry average of 30%. Yum! Companies put much money and effort into the sports industry, advertising Doritos Locos Tacos at Taco Bell and Pizza Hut specials. Taco Bell’s 6% ROAS was lower than Pizza Hut’s 36% ROAS, although Taco Bell sponsored the largest NBA marketing of any quick-service restaurant brand (Kelso, 2021c). Yum! Brands’ expansion success has been crucially reliant on Mandarin fluency (Flannery, 2021).
Competitor Analysis (McDonald’s Corp.)
McDonald’s Corp., which sells hamburgers, sundaes, chicken, chicken nuggets, sandwiches, and drinks, is the main competitor of Yum! Brands (McDonald’s, 2023). It serves Latin America, North America, Europe, the Middle East, and Asia-Pacific. McDonald’s QSR strategic group operates globally. McDonald’s adapts its product positioning to market changes.
The company’s strategy is to undercut the competition. The company has invested heavily in innovation and technology to reduce production costs without compromising quality and providing value to customers. McDonald’s mobile app and Dynamic Yield integration have changed the user experience in and around its locations (Kelso, 2022a).
Identification and Evaluation of Business-Level Strategy
Yum! Brands is the leading quick-service restaurateur worldwide, and its cobranding approach has been essential to its growth. The corporation’s access to a syndicated credit facility has aided its method of mixing two or more of its five franchise categories in one location, namely A&W, KFC, Long John Silver’s, Pizza Hut, and Taco Bell (GlobalData Plc, 2022). Cobranding has often increased sales by 30% versus single-brand components, making Yum! Brands’ techniques are dominant within their segment (Simpson, 2019). The fact that it owns the three largest brands in the world, KFC, Pizza Hut, and Taco Bell, distinguishes the company.
Corporate-Level Strategy
Yum! Brands expands and combines corporately. The organization aims for long-term international same-store sales growth of 2% to 3% and unit expansion of 4% to 5% using the two methods (Kelso, 2022b). Yum! Brand franchises globally; a strong distribution chain and financial exposure to a syndicated credit facility drive brands.
Yum! Brands acquired Dragontail Systems. In 2021, Yum! Brands bought Dragontail Systems for $69.1 million in cash to comply with Australian corporate law (Yum.com, 2021). Yum! Brands and Grubhub collaborate to expand their markets. Yum! Brands’ syndicated credit arrangement allowed them to buy $200 million of Grubhub common stock (Yum.com, 2021).
Conclusion
Yum! Brands needs expansion and collaboration to beat McDonald’s. Because of its syndicated credit line, it can purchase similar companies without borrowing from lending firms. Cobranding expands Yum! Brands’ customer base. The company’s global supply chain efficiently distributes raw materials internationally, making cobranding possible. Equity financing minimizes Yum! Brands’ liquidation risk. It could build informal partnerships with experts in equity investment. Yum! Brands use syndicated finance arrangements to acquire.
References
Agnihotri, et al. (2022) “Actions speak louder than words”: an impact of service recovery antecedents on customer delight in quick-service restaurants.’ Asia-Pacific Journal of Business Administration, 14(4), pp.421-444. Web.
Csimarket.com. (2022a). Yum Brands Inc. Asset Turnover Ratio (YUM), from third quarter 2022 to third quarter 2021, current and historic results, rankings, and more – CSIMarket. Web.
Csimarket.com. (2022b). Yum Brands Inc. Receivables Turnover Ratio (YUM), from third quarter 2022 to third quarter 2021, current and historic results, rankings, and more – CSIMarket. Web.
Flannery, R. (2021). Yum China’s revenue, profit top pre-Covid-19 levels as mainland economy recovers. Forbes. Web.
Fortunebusinessinsights.com. (2020). Quick-service restaurants market size, industry share, forecast 2030. Web.
Gallarza-Granizo, M.G., Ruiz-Molina, M.E. and Schlosser, C. (2020) ‘Customer value in Quick-Service Restaurants: a cross-cultural study.’ International Journal of Hospitality Management, 85, p.1-10. Web.
GlobalData Plc (2022). Yum! Brands, Inc. Company profile. Web.
Kelso, A. (2021a). Yum Brands eyes digitally-driven restaurant industry record for new unit growth. Forbes. Web.
Kelso, A. (2021b). Major restaurant chains are competing over loyalty customers. Here’s why. Forbes. Web.
Kelso, A. (2021c). Operational efficiencies and digital growth bolster Yum Brands’ Q4. Forbes. Web.
Kelso, A. (2022a). McDonald’s is evolving its approach to value to be more personalized. Forbes. Web.
Kelso, A. (2022b). Yum! Brands sets industry development record, doubles digital sales in two years. Forbes. Web.