Why Yum! Brands wants to grow outside the US

By

Updated

Key metrics to assess sales

In the last part in this series, we mentioned that restaurant companies in the U.S. are facing flat sales. They’re exploring markets outside the U.S. We’ll use two key metrics—same-store sales and unit growth—to see how Yum! Brands (YUM) is performing inside and outside the U.S.

YUM Same-Store Sales Growth 2014-10-05

Same-store sales

Same-store sales is the growth in sales of an existing location over a certain period of time. For example, it could be sales over a year. To understand this better, flat same-store sales growth would mean that a restaurant location didn’t generate any more or less revenues than the previous period.

U.S. same-store sales

Article continues below advertisement

In the above chart, we can see that the combined same-store sales of all three brands in the U.S. were flat in 2013. The U.S. market has the highest restaurant count. To give you a perspective, there are 58 restaurants per million people in U.S. According to Yum! Brands, there are two restaurants per million people in emerging markets.

This theme is consistent with other restaurants like McDonald’s (MCD), Darden Restaurants (DRI), and Bloomin’ Brands (BLMN). These restaurants are part of the Consumer Discretionary Select Sector SPDR (XLY).

Yum Restaurant International (or YRI) same-store sales

Yum Restaurant International includes all the restaurants globally—excluding restaurants in India and China. The average same-store sales growth over five years has been above 5%. This segment consists of developed markets like Japan, Great Britain, Canada, and Australia. It also includes developing markets like South Africa, Malaysia, and Indonesia.

Emerging markets in China and India 

Markets in China and India have experienced double digit growth over the past five years. This is the solution to low or no growth situation in the U.S. market. Yum! Brands has taken several initiatives in China. The rewards from the initiatives can be seen in its revenue breakup. In the next part in the series, we’ll consider another revenue driver—unit growth.

Advertisement

More From Market Realist