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Want exposure to fast-growing China without the political risk and corporate governance problems? Yum! Brands
Yum! Brands fast facts
| Market Cap | $19.2 billion |
|
Revenue (TTM) |
$11.1 billion |
|
Earnings (TTM) |
$1.1 billion |
|
Cash/Debt |
$545 million / $3.2 billion |
Source: Capital IQ, a division of Standard & Poor's.
Yum! is the world's largest fast-food company, with more than 37,000 Kentucky Fried Chicken, Pizza Hut, Taco Bell, Long John Silver's, and A&W units spanning the globe. But although Yum! has a presence in more than 110 countries, I’m most intrigued by its operations in just one: Liechtenstein.
Just kidding! As you've likely guessed if you watched my video on Fool.com, it's Yum!'s Chinese operations that have whet my investing appetite.
Go east, Yum! Brands
The first foreign fast-food concept to enter China way back in 1987, Yum! has built a network of nearly 3,600 locations (mostly KFCs) in the country -- three times as many locations as second-place McDonald's
| Metric |
U.S. |
International |
China |
|---|---|---|---|
|
Locations (as of June 12, 2010) |
19,573 |
14,051 |
3,590 |
|
System sales growth (2009) |
(5%) |
5% |
9% |
|
Restaurant margin (2009) |
13.9% |
11.1% |
20.2% |
How chicken conquered China
Exporting a successful business model from the U.S. to China is no small feat -- as even juggernauts like eBay
1. Distributing more than wings
Unlike in the United States, where the company relies on third parties to route its food products, supplies, and equipment, Yum! owns and operates its Chinese distribution network. This gives Yum! a significant edge in securing low-cost supplies and establishing new locations in second-tier, or midsize, cities. Yum! can open new restaurants much faster than the competition, which has helped the company establish a presence in more than 650 Chinese cities (and counting).
2. A little local flavor
While companies like McDonald’s and Starbucks
And Yum! isn't just serving Western-style fast food. In addition to its brands that are familiar to Americans, Yum! has also invested in two new restaurant concepts. East Dawning focuses on authentic Chinese fast food, and Little Sheep Hot Pot produces Mongolian-style hot pot dishes.
A value meal for investors
With about 3,600 locations, Yum! is the top dog in Chinese fast food, but management believes its concepts have plenty of room to grow. CEO David Novak claims that China can support 20,000 units, a greater than five-fold increase from current capacity. And while the company’s Chinese operations are the main attraction at the moment, Yum!’s operations in markets like India, Russia, Korea, and France also merit excitement. With stable recurring revenue from its mostly-franchised U.S. operations, decades of growth lying ahead in the international arena, and a tasty 2% dividend yield, Yum! Brands can satisfy the cravings of every investor.
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