Yum! CEO explains why the future of food is about improving customer experience.
With our three big brands – Taco Bell, KFC and Pizza Hut – we are not in the functional ‘food as fuel’ business. We’re in the business of delivering superb food experiences for customers and we do that by creating great experiences for our employees. We are changing from owning restaurants to putting them in the hands of our franchisees. A small variation in same-store sales can have a big impact on operating profit. Franchisees take the volatility out of our business and letting them handle day-to-day operations frees us to build the world’s most loved, trusted and fastest-growing restaurant brands.
We’re championing the customer experience like never before and bringing aspects back in-house. If you’re in customer service, you can’t outsource the experience, so we’re looking at front-of-house, point of sale apps. We must also get back to really understanding what our customers want. For example, we observed that Millennial consumers at Taco Bell drive-throughs weren’t buying as many soft drinks. We realized that our real competition was the family pack of soft drinks at home, which were effectively free to our consumers, so simply cutting prices would have made no difference. Instead, we created a unique drink that was only available at our outlets.
At Pizza Hut we’re investing in technology to make it easier to get a better pizza. If I can order a shirt online in one or two clicks, why can’t ordering a pizza be that simple? For Millennials, the more frictionless the transaction the better. And better often means easier, which can be anything from how they order to how they pay and how much they pay. Taco Bell is an edgy Millennial brand, which is why we focus on engaging consumers through social media. You can’t out-cool a cool brand, but you can become a cult brand with a deep emotional connection with consumers. The secret is to have a US$10bn brand and make it feel like a US$10m brand.
Last year was a landmark for us: we successfully completed the separation of our China business, returned US$6.2bn to shareholders and launched a multi-year transformation plan to become a one-of-a-kind global franchisor. We’ve talked about going from around 4-5 percent system sales growth a year, excluding foreign exchange, to 7 percent over the long term. I am confident we can. Fried chicken is enjoying a renaissance and Mexican food sales are up as this sector moves outside the US. There is also an opportunity for us to grow in the pizza category – focusing on a digital-delivery-centric model will allow us to do so.
Not dramatically. We have more than 43,500 restaurants in over 135 markets. Some countries will always be up and others down. We’re on target to be at least 98 percent franchised by the end of 2018, which will reduce costs and risk. Spinning off the China business has also made us less volatile, while giving them the chance to expand.
Within the company, some people will wonder how we can accelerate growth in this environment. We must have self-belief, but we’ll need to act differently, think differently and lead differently. We are on track with our refranchising and cost-saving initiatives, which are making our organization more focused, more franchised and more efficient. The transformation of Yum! is well underway and I’m confident in our three-year plan.