Gregg Dedrick President and Chief Concept...

transcript

April 26, 2005

KFCGregg Dedrick

President and Chief Concept Officer

KFC Global / Market Share*

KFC leads in market share . . . KFC leads in market share . . .

*Source: The NPD Group, Inc.; NPD Foodworld; Crest

KFC Facts

*Excludes licensees

(2%)Company Sales

2%Franchise

(3%)Company

1%Number of Units*

1%PSA ($M)

5 Year CAGR

Franchise Sales

Brand Strengths and Challenges

StrengthsStrengths

Global Iconic Brand

Category Leadership

Increasing Sales Momentum

Implemented Restaurant Ready Process

ChallengesChallenges

Brand Relevance

Consistent Operations

Increasing Chicken Competition

Dynamic Asset StrategyDynamic Asset Strategy

Winning OperationsPlatform

Menu VisionMenu Vision

BrandPositioning

World Famous Chicken –Old School Cool!

World Famous Chicken World Famous Chicken ––Old School Cool! Old School Cool!

Using Consumer Insights!Using Consumer Insights!Using Consumer Insights!

Executedwith Mania!

ExecutedExecutedwith Mania!with Mania!

That Builds Our Brand Image!

That Builds Our That Builds Our Brand Image!Brand Image!

A Way of Life!A Way of Life!A Way of Life!

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. . . . . . . . Built on a Foundation of How We WorkTogether & Franchise Partnership PactBuilt on a Foundation of How We WorkTogether & Franchise Partnership Pact

KFC — The Vision

Menu VisionMenu Vision

BrandPositioning

Brand Identity Still a Good Filter

OLD SCHOOL COOLOLD SCHOOL COOL

ROASTED & FRIEDNO COMPROMISE QUALITY

WORLD FAMOUSCHICKEN

MAINSTREET HEROTRUSTWORTHY

EXPERIENCE

ROCK SOLID REAL

COOKIN’

INNOVATION

EXCITING NEW FORMS & FLAVORS

GUTSY NEW IDEAS

MAGNETIC

BUCKETS OF CELEBRATION

BRINGS PEOPLE TOGETHER

COME & GET IT

AFFORDABLE EVERYDAYCOMPLETE MEAL ABUNDANCE

Define

Explore

Develop Develop the business opportunity

Green Light Gate

Define & prioritize business opportunities/barriers, based on consumer needs and perceptions

Determine consumer interest

Evaluate Success

Ops Shakedown

Market Test

National Launch

Validate and optimize the operational Viability

Determine ability to replicate nationally

LAUNCH the business opportunity

Track consumer, operations, financial success criteria

Replicability Gate

National Calendar Gate

Define to Explore Gate

Develop to Ops Shakedown Gate

Restaurant Readiness Process

Drives process and discipline around product pipeline

Restaurant Ready Process is Delivering

Ops Shakedown

OpsTest

$4 Meals

6 Ultimate Dippers

Oven Roasted FiletSecret Recipe Filet

Salads/Bowls$4 Meals

N/AN/A2003 – 2004ACTUAL

5Variety Bucket

Snacker 2 Times Flavors

9101002004 – 2005ACTUAL

2005 – 2006GOAL

Define

81030250

NationalLaunch

MarketTestDevelopExplore

Marketing Calendar

Overall Calendar Goals:

1. Address key brand and consumer perception needs

2. Provide consistent sustaining support for sales layers

3. Grow dinner while building a sustainable lunch business● COB● Lunch● Snackables

4. Always supporting family and individual occasions on air

Build the Brand

AND Drive Sales

KFC Has 2 Distinct Customers / Occasions

• Historically, “The Business”• Decision Maker: Mom• Operations platform:

Batch cooking

• Historically, not our business• Heavy Fast-Food User (HFFU)• Target young males “on the go”• Operations platform:

Made to order

Dinner Lunch

Familie

s Individuals

Advertising is More Consistent

DecemberVariety Bucket

JanuaryNew Spicy BBQ Wings

FebruaryBring Back Dinner!

New Advertising “Rules”• Product and/or Insight News in Each Window• Simple• Same Music, Voiceover• Elevated Casting• Insight Clarity• YUM Ad Tenets

New $9.99Variety Bucket

$1.99 / $6.99Popcorn Chicken

Hi/Low Balance

New $9.99Variety Bucket

DecemberNew SBBQ& HBBQWings

National

January

Hi / LowMenu Balance

National Window Underlays — A Strategy

KFC — The Vision

Winning Operations Platform

Run Great Restaurants - Framework

Customer & SalesMania Mindsetand Behavior

People CapabilityPeople CapabilityHigh VisibilityLeadership &

Coaching

High VisibilityLeadership &

Coaching

100%CHAMPSExecution

Process & Discipline AroundP&L and Balanced

Scorecard

Process & Discipline AroundP&L and Balanced

Scorecard

OneSystem

One System ExcellenceRestaurant ReadySuccess Routines

MultibrandingImprove MarginsOutliers

StabilityHigh Impact CoachingMultibrand Readiness

Ops Owns Sales GrowthCatalytic MechanismMania Training 3xYear

Customer BasedCHAMPSBOH Ops Platform

People Capabilities

New Chief Operating Officer appointed November 2004

Integrated company and franchise support function into a one system approach (modeled off of Taco Bell)

Invested in field structure to support One System

Emphasis around stabilizing management and team

Building Area Coach and RGM capabilities through new tools and training

Customer Based CHAMPS Checks (CBCC)

In 2005, shifted to a customer based measurement program (previously used mystery shop program)

We believe CBCC is more accurate measurement of consumer experience

CBCC will drive more shops per period than mystery shop which will give us better representation

Q1 2005 slightly ahead of company target

45%2005 Target

46%Q1 2005 Actual

# of Stores at 100% CHAMPS

Focused on packline improvement, delivering against menu vision, and improving /simplify restaurant operations.

Converted 10 KFC base restaurants this year including:New Menuboards

New Order Packing processNew BOH packlines and equipment – testing three designs

Blue Solution – greatest investment with optimal capacityRed Solution – mid range investment with reduced capacityGreen Solution – low investment without integrated packline

Back of House Improvements

Went from this . . .

Key Elements:Integrated packline with all products on line and “Chicken first” pack flowBuilt for optimal capacity, leveraging Multibrand learnings & Duke technology

To This!

Enables Greater Menu Variety New Equipment Technology(No Warming Cabinets) Potential Productivity Gains

BOH Improvements – Blue Solution

We’re Making Progress on Operations

CHAMPS scores improving and new program should increase overall customer experience

Progress against stabilizing our Management and team member turnover

Team turnover from 115 in 2004 to 91 Q1 2005Management stability from 49 in 2004 to 65 Q1 2005RGM in place > 1 year from 56 in 2004 to 59 Q1 2005

Early results promising from BOH improvements

Why Will KFC Be Different in 2005 and Beyond?

Strategy Structure Culture

Execution Excellence…Live by the Model (RRP)

Accountability…Eliminate excuses, drive standards

Customer Mania…Beginning with RGM#1

Organized around Pyramid

Investments in Marketing Model: Marketing, FIT, RSS

Aligned around Pyramid… defines our future vision

April 26, 2005

KFCLarry GathofKFC Finance

Larry Gathof, Senior Director Strategic Planning

Same Store Sales and Transaction Growth

Franchise Demographics

Franchise Capital Requirement

Dynamic Assets

Same Store Sales and Transaction Growth

Uneven performance historically

Two out of last three quarters were positive

Franchisees have typically outperformed Company over recent years

*Data above is for Company Stores only

+3(4)(2)+3(3)+1Transactions

+4(2)Flat+3(3)+2Same Store Sales

Q1 200520032002200120001999

13 Period Deseasonalized Sales Trend

Positive recent sales momentum

$18,000

$19,000

$20,000

$21,000

$22,000

$23,000

$24,000

P5 P6 P7 P8 P9 P10 P11 P12 P13 P1 P2 P3 P4Act/FC SSS% (3%) (3%) Flat 1% 4% (1%) (3%) (7%) 1% 1% 3% 10% 4%

Franchisee Demographics

% of Total#

2004 Franchise Population

<5 stores

5 – 9 stores

10 – 49 stores

50 – 99 stores

>100 stores

Experienced franchised ownersWell capitalizedHighly fragmented

Franchise Capital Requirement

Franchise capital requirements for development actions are significant over the next 3 years

$6631,550Total

$2851,245Remodels/Conversion

$10590Replacements

$273215New

Total Capital ($ million)Number of ActionsAsset Actions

Dynamic Assets: Conforming to Geographics and Demographics

A Win City Version

2 Off the Top Version

April 26, 2005

JRN, INCKFC Franchisee

McMinnville, Tennessee Before

McMinnville, Tennessee Remodeled as KFC-LJS with Buffet

Opened 12-29-04

Investment $707,116

340 10 20 30 40 50

McMinnville Sales Weekly Comparison

$ in thousands$ in thousands

Apr wk3Apr wk2Apr wk1Mar wk4Mar wk3Mar wk2Mar wk1Feb wk4Feb wk3Feb wk2Feb wk1Jan wk4Jan wk3Jan wk2Jan wk1

2004 2005

Sales History1990 – 2004

$ in millions$ in millions

57.0 58.1 58.0 65.8 73.6 89.8 132 15759.1 58.3 61.1 70.9 78.5 113 147

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

2004 - $156,089,7492004 - $156,089,749

PRA Sales1990 – 2004

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

669.1 660.3 694.6 775.4 816.4 876.9 986.5

660.8 654.2 660.6 748.2 798.7 836.3 945.3 1020.7

$ in thousands$ in thousands

2004 PRA - $1,020,7002004 PRA - $1,020,700

Same Store Sales Monthly History2001 – 2005

2001 2002 2003 2004 2005

Knowledgeable underwriters

Understanding the concept of cash flow lending

Commitment to franchise lending

Simplified documentation

Flexibility in terms

Competitive rates

No fees

No securitization

Longevity in the marketplace

What JRN, Inc. Looks for in Lenders

Gregg Dedrick President and Chief Concept...

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