YUM Brands – KFC Living Off The Fat Of The Land

YUM Brands is a top choice in our AMP Watchlist.

It has just announced the sale of A&W and announced it wants to sell Long John Silver chain.

When I was growing up in Canada I was very proud that my uncle made the restaurant drive in speakers that drivers used to order their food at A&W- but that was then, YUM is an opportunity now.

YUM Brands will concentrate on the growth opportunities overseas – especially Taco Bell , Pizza Hutand KFC in China– and this means AMP Portfolio profits.

KFC Is The Leading Restaurant In China

Fast food chains are easy enough to reproduce over and over again so long as they are successful. KFC has been wildly successful in China. To the surprise of many, this fast food chain has been able to outdo McDonald’s (MCD) in terms of number of restaurants in China. This has largely been because of a concerted strategy by Yum Brands to keep things local in their stores — hiring local managers and changing up the food to meet local taste favorites.

Countries shown in blue have one or more KFC restaurants in operation.

Using this formula, Yum Brands has been able to open an incredible 3,000 KFC restaurants in 650 cities in China. With the company now refocusing on this brand, profits are likely to climb even higher as service becomes even better.

While the growth of KFC restaurants is exciting, the growth of A&W ones would not have been as much so. A&W simply does not meet the taste preferences of many in China, and explosive expansion of this chain would likely have been a drawback for the company. It is a good thing management decided to sell off this chain and redouble efforts on the core ones.

These carefully considered moves have made Yum Brands a buy at its current trading price of $59.01 (as of the close on December 30, 2011). Yum Brands is a wonderful play on Chinese growth that does not require an investor to invest in Chinese securities. It is one that could be held  for some time.


Twitter @jack25bc

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