April 26, 2005
KFCGregg Dedrick
President and Chief Concept Officer
2
KFC Global / Market Share*
KFC leads in market share . . . KFC leads in market share . . .
46%
8%
13%
33%
Other
*Source: The NPD Group, Inc.; NPD Foodworld; Crest
3
KFC Facts
*Excludes licensees
4,202
1,248
5,450
$896
$3.6B
$1.4B
2004
(2%)Company Sales
2%Franchise
(3%)Company
1%Number of Units*
1%PSA ($M)
5%
5 Year CAGR
Franchise Sales
4
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
5
Dynamic Asset StrategyDynamic Asset Strategy
Winning OperationsPlatform
Winning OperationsPlatform
Menu VisionMenu Vision
BrandPositioning
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!
. . . . . . . . . . . .. . . . . . . . . . . .
. . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .. . . . . . .
. . . . . . . . Built on a Foundation of How We WorkTogether & Franchise Partnership PactBuilt on a Foundation of How We WorkTogether & Franchise Partnership Pact
KFC — The Vision
6
KFC — The Vision
Menu VisionMenu Vision
BrandPositioning
BrandPositioning
7
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
VALUE
AFFORDABLE EVERYDAYCOMPLETE MEAL ABUNDANCE
8
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
9
Restaurant Ready Process is Delivering
10
9
Ops Shakedown
OpsTest
2SRF
$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
10
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
11
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
12
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
13
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
14
KFC — The Vision
Winning Operations Platform
Winning Operations Platform
15
Run Great Restaurants - Framework
Customer & SalesMania Mindsetand Behavior
Customer & SalesMania Mindsetand Behavior
People CapabilityPeople CapabilityHigh VisibilityLeadership &
Coaching
High VisibilityLeadership &
Coaching
100%CHAMPSExecution
100%CHAMPSExecution
Process & Discipline AroundP&L and Balanced
Scorecard
Process & Discipline AroundP&L and Balanced
Scorecard
OneSystem
OneSystem
One System ExcellenceRestaurant ReadySuccess Routines
MultibrandingImprove MarginsOutliers
StabilityHigh Impact CoachingMultibrand Readiness
Ops Owns Sales GrowthCatalytic MechanismMania Training 3xYear
Customer BasedCHAMPSBOH Ops Platform
16
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
17
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
18
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
19
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
20
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
21
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
23
Larry Gathof, Senior Director Strategic Planning
Same Store Sales and Transaction Growth
Franchise Demographics
Franchise Capital Requirement
Dynamic Assets
24
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
(4)
(2)
2004
+3(4)(2)+3(3)+1Transactions
+4(2)Flat+3(3)+2Same Store Sales
Q1 200520032002200120001999
25
13 Period Deseasonalized Sales Trend
Positive recent sales momentum
$18,000
$19,000
$20,000
$21,000
$22,000
$23,000
$24,000
Ave
rage
Sal
es P
er W
eek
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%
26
Franchisee Demographics
71%
15%
13%
1%
<1%
% of Total#
692
491
104
87
7
3
2004 Franchise Population
TOTAL
<5 stores
5 – 9 stores
10 – 49 stores
50 – 99 stores
>100 stores
Experienced franchised ownersWell capitalizedHighly fragmented
27
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
28
Dynamic Assets: Conforming to Geographics and Demographics
29
A Win City Version
30
2 Off the Top Version
April 26, 2005
JRN, INCKFC Franchisee
32
McMinnville, Tennessee Before
33
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
35
Sales History1990 – 2004
$ in millions$ in millions
30
50
70
90
110
130
150
170
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
36
PRA Sales1990 – 2004
500
600
700
800
900
1000
1100
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
37
38
-10%
-5%
0%
5%
10%
15%
20%
25%
Same Store Sales Monthly History2001 – 2005
2001 2002 2003 2004 2005
39
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
40