April 26, 2005
Pizza HutPeter Hearl, President
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Pizza Hut Is an Iconic Global Brand - Built On 47 Years of Success -
Energized leadership team excited about building on legacy
Domestic units
1958 - Carney’s open 1st Pizza Hut
1969 - “Red Roof”concept unveiled
1971 - Become world’s largest pizza restaurant
chain
1977 - Acquired by Pepsico
1980 - Pan Pizza introduced, becomes
flagship product
1986 - Launch delivery
1995 - Stuffed Crust changes way
we eat pizza
1999 - Big New Yorker boosts sales
20%
# 1
2004 - 4forAll sets all-time sales record
3
Leader of $37 Billion Domestic Pizza Category
Pizza Hut leads in market share . . . . . . and in points of distribution
16%
10%
5%
3%
65%
Pizza Hut 8,285
Domino’s 5,008
Papa John’s 2,000
Little Caesar’s** 2,800
2004 Year-end U.S. Points of Distribution*
Local/Regional
*Includes Express units**Estimated1. Source YE 2004 10K2. Per QSR 8/04 magazine as of YE 2003
A true “global brand” with nearly 13,000 points of distribution worldwide
Frozen: 1%
Source: The NPD Group, Inc.; NPD Foodworld; Crest
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Key Facts on Pizza Hut USA
2004 5-year CAGR
Company SalesFranchise Sales
$1.6B$3.6B
- 5%+5%
145# of Franchisees100+ units 8
1160-99 units30-59 units15-29 units
<15 units
2221
84
PSA
# of Traditional UnitsCompanyFranchise
6,3061,741
$794M 3%
4,565
5
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 P13
2005 2004 2003
Sales Growth Has Been Positive 18 Periods Straight!
4-for-All
Sicilian
Dippin’ Strips
Buffalo Chicken
4-for-All
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. . . Driving an Increase in Our Market Share
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
YE Dec ' 02 YE Dec '03 YE Dec '04
56.4%56.8% 57.0%
15.6% 15.3% 15.5%
9.7% 9.9% 9.9%
9.6% 9.7% 9.6%
5.5% 5.2% 5.1%3.1% 3.1% 2.9%
OtherRegionals
YE Dec ‘04 Pt. Chg.
Pizza Hut +0.2
Domino’s NC
Papa John’s (0.1)
Little Caesar’s (0.2)
Regionals (0.1)
Mom & Pop’s +0.2
* Source: The NPD Group, Inc.; NPD Foodworld; Crest
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Strengths
– Global iconic brand
– Category leadership
– Clear, focused strategy
Challenges
– Category growth
– Commodity inputs
– Old asset base
We Have Clear Strengths & Challenges
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Win Home Meal Replacement War
Full Pipeline of Product/Value News
Revitalize Our Dine-in Business
Pizza Hut Imperatives Our Strategies
Run Great Restaurants as “One System”- Build a Customer Maniacal “Sales Force”
Reposition and Differentiate the Brand- Toward “Family Pizza Eating Occasions”
Rebuild and Grow Our Asset Base- Via Asset Upgrades (and Multibranding)
Three Key Strategies to Grow Our Business
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Operational Measures Continue to Improve
69%
46%45%
40
60
80
2002 2003 2004
% Company Units With BYA Sales
50%49%
45%
40
45
50
55
2002 2003 2004
% Perfect Champs (System)
100%98%
111%
60
70
80
90
100
110
120
2002 2003 2004
Company Team Member Turnover %
10
Families account for 70% of all HMR occasions . . .
Coworkers5%
Family55%
Friends13%
Alone12%
Both15%
Source: MarketPulse (Annual 2002)
We Have Repositioned, Differentiated the Brand Toward Families
Moms decide dinner 85% of time
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10
15
20
25
30
35
Source: MarketPulse Brand Imagery Ratings
10
15
20
25
30
35
“Best For SharingWith Family”
“Best For SharingWith Family”
10
15
20
25
30
35‘03 ‘04
10
15
20
25
30
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“Kids Favorite”“Kids Favorite”
‘03 ‘04
10
15
20
25
30
35
“Bringing PeopleTogether”
“Bringing PeopleTogether”
10
15
20
25
30
35‘03 ‘0
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“Enjoy When Getting Together”“Enjoy When
Getting Together”
10
15
20
25
30
35
40
45
10
15
20
25
30
35
40
45‘04‘03
Our Brand Positioning Is Paying Off
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Examples:Stuffed Crust GoldCinnaparts
Examples:Dippin’ Strips Full HousePepperoni Trio
. . . And Our Product Pipeline Has Never Been More Full
Examples:Buffalo Chicken4forALLBagged Salad
2004: 10 Tests / 13 Markets7 New Products + 3 Special Tests**
2003: 8 Tests / 12 Markets 6 New Products + 2 Positioning Tests*
2002: 3 Tests / 3 Markets3 New Products
13 Tests Planned for 2005!
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We Have Two Key Challenges on the Asset Front
Challenge #1: Upgrade Our Dine-In Assets
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We Have Two Key Challenges On the Asset Front
Challenge #2: Build More Delivery Assets
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. . . To Facilitate Rebuilding and Growing Our Assets!
. . . And Two New, Exciting Concept Layers
Life To Date
Points of Distribution48 327
As of P13 ’04 As of P13 ’04
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“Italian Bistro” Is Service, Product, Atmosphere
• DIGM Service
• Sautéed Pastas, Bistro Pizzas– And Toasted Sandwiches
• Entrée Salads, Wine, And Appetizers
• New Interior And Exterior Designs
… The Pizza Hut “Casual Dining” Way!
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WingStreet™ Is The Largest Dedicated Wing Brand in the U.S.A.*
* Based on number of locations
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. . . With More Growth and Development Planned for the Future
New Menu Items
More Restaurants – 300+
More Marketing(including TV support)
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In Summary . . .
• Pizza Hut is the recognized industry leader
•We have a clear brand strategy to drive future growth
•We have exciting, proven new concept layers
• The Pizza Hut system will spend about $1.5B “Rebuilding the Brand”
April 26, 2005
Pizza HutHarmit Singh
Chief Financial Officer
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0
10
20
30
40
50
60
70
<5 5-9 10-49 50-99 >100
Average Franchisee has 31 stores
Average Franchisee Tenure
72% of Stores Owned by Franchisees
Company-owned1,740
Franchisee-owned4560
16 years
Our Franchisees Have Experience and Scale
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Upgrade Dine-In Assets Build More Delivery Assets
88% of qualified assets require “major asset action”:
• Rebuild/Relocate• Remodel
Remainder require re-image
Major asset actions to be completed by 1/1/13
Pizza Hut to notify territory franchisees of unserviced delivery areas
Franchisees required to develop within 5 years
Franchisees Have Committed to “Rebuild the Brand”in Two Ways
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Franchisees Are Living Up to Their End
Note: “Surplus” Major Asset Actions will count toward reimage requirement
TBD TBD
Year Required Completed Required Completed2
12/31/04 35% 24% 5% 30%3
12/31/05 50% 15%4
12/31/06 65% 25%5
12/31/07 80% 35%6
12/31/08 100% 45%7
12/31/09 55%8
12/31/10 70%9
12/31/11 85%10
12/31/12 100%
Major Asset ActionsReimage
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*Assumes 1/3 replacements/rebuilds at $1MM, 2/3 remodels at $.4MM** Net of forecasted closures
0
500
1,000
1,500
2,000
2,500
3,000
Scheduled asset actions
Major asset action
Re-image
Re-image lite
Cost per
Total cost
$25M
$100M
$600M*
$11MM
$76MM
$956MM
~$1,000MM
FZ Assets
New units ~$500MM
Asset upgrades
Total investment ~$1,500MM
PH’s Franchisees Will Spend Over $1.5B in the Next 9 Years
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Reduce Investment
Improve “Hit
Rates”Drive Sales + = Higher Returns+
We Are Continually Striving to ImproveReturns on Asset Actions
Improve Access to
Capital+
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Franchise Actions Desired Result
Maintain 12–18 month rolling tested marketing calendar
Convert/build FZ Italian Bistros •120 in 2005, more going forward
Convert/build WingStreet units • 25 in 2005, more going forward
+3% SSS growth annually
$2,500+ incremental weekly sales
Focusing on Variety of Initiatives to Drive Sales
$1,500+ incremental weekly sales
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RBD “Lite”
Delco “Lite”
Cost reduction
$96,000(vs. delco)
Status:
$165,000(vs. RBD)
• 1 company unit in test
• 4 more planned in 2005
• 2 in test with franchisees
• 5 more plannedfor 2005
Testing RBD-Lite and Delco-Lite to Lower Investment Cost
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Several Initiatives in Place to Improve “Hit Rates”
•Gathered investment data on ~120/180 asset actions in 2004
•Calculating returns on period basis
•Researching, sharing learnings on period basis beginning P4, 2005
Sharing Best PracticesImproving Site Selection
•“Market planning” 21 FZ territories
•Buxton tool offered to all FZees
Measuring returns
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Franchisees Are Supported by a Deep Team of Dedicated Resources
Kendrickstrativestant
Jim SillFBC
Denny HasiakFBC
Bob GibsonFBC
Tom ClementsFBC
Dave BewleyFBC
Ed JacobFBC
Ward WhitworthHead Coach
West Franchise
Marla McKibben
Jodi Rosen
Tanya Williams
Customer Support Team
Restaurant Readiness
9 - FDDs
Tom McCord
FDDs
Jessica Bowles
Julie Schultz
Legal
Katrina McGuigan
Wayne Walker
Marketing
Matt Moss
Janet Omar
Bob Nygren
Carlos Maldonado
Finance
Leo ValdezSr. Franchise HRL/Trng. Ldr.
Diana StylesFranchise HRL/Trng. Ldr.
Tracey WeaverFranchise HRL/Trng. Ldr.
Jan LitzburgFranchise HRL/Trng. Ldr.
Anita Vander Veer
HR / Training
Doug Scott
Frank Lamont
Rick Collinwood
Emil Hoffarth
CHAMPS
Kathleen KendrickAdministrative
Assistant
Jim TothFBC
Bob BrayFBC
Tom PliemanFBC
Mark JaworskiFBC
Jim SchreifelsFBC
Judy CarsonFBC
Omar JanjuaHead Coach
East Franchise
Franchisee
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CFO(HarmitSingh)
Director, Franchise Finance(Matt Moss 972-338-8305)
Capability building Best practice sharing Info management
Finance College
Pacesetter
“1-on-1” financial reviews
Margin playbook
Asset action returns
WingStreet, Italian Bistro results
Sales data
Store, ownership data
Lender relationships
Ad-hoc analysis
Franchise Finance Team Is Committed to Helping Our Franchisees Grow
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In Summary . . .
Our franchisees have experience, success and scale
They are committed to investing in the brand
Pizza Hut is committed to maximizing the return of those investments
April 26, 2005
2JR Pizza EnterprisesPizza Hut Franchisee
Rodney Lee, CFOLouisville, Kentucky
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2JR Pizza Enterprises, LLC
Jeff Reetz, franchisee
25 locations purchased from PHI in February 2000
Louisville Metro and Southern Indiana locations
High sales volume, delivery driven - Eleven $1 million + restaurants
Operate very much like corporate stores in all aspects due to our backgrounds
5 remodels done to date, 2 more planned for 2005
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Opened Three WingStreet Locations Since 2004
Bashford Manor RBDOkolona RBDGlenmary Delco
$1,300/wk incremental wing sales
$1,200/wk incremental wing sales
$1,600/wk incremental wing sales
September 2004 November 2004 March 2005
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Overall Impact Has Been Positive
Consistent incremental sales layer at about $1,500 per week
Margin impacts modest
Food cost up about 1 pp overall
Labor is at our normal variable flow rate
Investment is between $45 million and $75 million
Soon to add nonbreaded wing products, which will help keep our nonbreaded customer
Plans for 2 more locations 2005 or early 2006 during remodels
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Lenders Can Help if They Understand the Opportunity
Funding of remodels and the WingStreet sales layer currently limited to internal funds
Existing senior lenders may have healthier borrowers if they can fund a portion of the WingStreet implementation
Possible benefit to those in your portfolio today who need salesbreakthroughs
Solid IRR and quantifiable improvements
Sales layer
Royalty reductions in connection with remodeling