'We definitely missed'
(Continued from page 1)
Yum had high hopes for a beef burger promotion at KFC in China in September, but the item did not produce the intended results, officials disclosed.
“The mix was good, but we didn’t get the incrementality, which leads us to believe we have to keep working on the trust side of the equation,” Novak said. “We’ll call it like we see it, when we see it. We definitely missed.”
Despite disappointing sales in China, stemming from both the lingering publicity issues and the ineffective beef burger promotion, Yum “couldn’t be happier with the effort of the China team to drive profitability at the restaurant level” through labor efficiencies, chief financial officer Pat Grismer said. The company’s restaurant-level margin in China was 19.5 percent in the second quarter, down 1.9 percent from a year earlier but still impressive given the heavy sales deleveraging from the 11-percent same-store sales decline, he said.
“The team is learning to operate very efficiently under unprecedented conditions,” Grismer said. “They’ve improved the way they’ve forecasted sales and labor requirements, and they’re developing new tools to deliver customer service with relatively low labor.”
Yum China’s 19.5-percent margin in the third quarter was a significant improvement over its 10.6-percent margin in the second quarter. Grismer said Yum is more optimistic about 2014 in China because the team operating there could carry the labor efficiencies over into next year.
Pizza Hut Casual Dining is on pace to have 1,000 locations in China by the end of the year, and its menu innovations like an expanding breakfast daypart are the kinds of successful moves Yum will try to replicate at KFC, Novak said.
“When we look at the Pizza Hut business [in China], it’s had the innovation, value and operational excellence, and it’s performing well,” he said. “Regardless of competition, when we get things right, we can move the needle … and that’s what we’re working on with KFC.”