You use the phrase “unrivaled culture” a lot when referring to Yum. What does that mean to you, and how has it come in handy these last several months?
I guess we think of it as people first. And that goes back to David Novak when we were spun off from PepsiCo and the principles that he founded the company on. Every decision we make is through the lens of people. We know that the restaurant business is a people-intensive business. We have 1.5 million employees all around the world that bring our brands to life for consumers. And if those employees aren't happy, taken care of, feeling satisfaction in their jobs, seeing opportunities for advancement, they're not going to do a great job of taking care of the customer. So we start with the people-first mentality.
When we talk about unrivaled culture, it's people first. And that means attracting the best and developing them. We have a huge emphasis on making sure that the people in our company are the best in whatever function they’re in, that they have the potential to stretch into bigger roles. And when I talk about people, I'm talking about our franchisees also. We have 2,000 franchisees around the world. Those people are our partners, and if we don't have the right kind of relationships with them, if we're not picking them carefully and investing in their growth and their expansion, then we're not maximizing the potential of our business.
It all starts with people, and then the culture is about growth and having that kind of a growth mindset where we're constantly striving to improve the business every day where we know that the potential of our brands has only scratched the surface around the world. [It’s] leaning in and having that mentality that our huge business can become much, much larger and do a better job of taking care of customers and experiencing growth all around the world.
At one point Yum had closed 11,000 restaurants. How difficult was it to make that call?
It really wasn't difficult because everything we've done has been out of an abundance of caution. This is a situation where risks are not rewarded. You can take risks when it comes to things like new ways of ordering and implementing new procedures that are going to protect the customer that may not be 100 percent perfect from day one, but we know we'll protect the customer. But we weren't going to take risks with our employees and their safety.
Closing stores was just an unfortunate outcome of this. But as we've seen, while we peaked at 11,000 stores closed, as we just released, we're now down to almost half of that, and the stores are reopening, and we're finding that customers are coming right back to the stores, and we've got new learnings about how to take care of them in this environment that should make our business stronger in those cases.
It obviously caused difficulty for our franchisees, and that gets back to the point we had to be there for the franchisees and support them when their stores were closed and they were hurting financially. And I think we've done that all around the world.
What has Yum learned and how has it evolved its strategy in getting through the pandemic?
I think the first thing, going back to the people-first mentality that we have is, our people are capable of amazing things in a crisis. We can either band together, work more effectively together, build stronger bonds, or we could have gone into a panic. Thankfully, the teams around the world performed some amazing things in record time.
For example, this rollout of contactless all around the world was done probably in weeks, which, if we had made an initiative around this during normal times, it might have been a six-month project. There's a phrase that we use: crisis-like collaboration. We used that before the pandemic; faced with the pandemic, we actually had to implement crisis-like collaboration. And it's amazing what your teams can do when bold challenges are put together and you have no other choices. So we've learned that our capabilities are probably even greater than we thought.
But I also think that the trends that existed prior to all of this have just been accelerated. The things that we're finding that are working now aren't necessarily new things on our radar. They're just more important now; that idea of digital ordering and paying. That was obviously a trend in the business before. We've been working on that for a while to make sure that every restaurant in the world can take an order through a mobile device or have payment processed through a mobile device. Well, people obviously don't want to exchange cash and other forms of payment now, they want to pay in a contactless way. So it just accelerated trends like that around the world. And I think we're well positioned with our tech and our scale to leverage those trends to strengthen our business.
So there's been a ton of learnings that have come out of this in terms of our capabilities and how quickly we can move and accelerate the journeys that we've been on that have all been very positive.
For the size of your company, you surely had an extensive blueprint for how Yum would expand. What does that blueprint look like now?
The reality is the last few years we’ve talked about our Recipe for Growth and our Recipe for Good. And our Recipe for Growth was centered around bold restaurant development, building our operating capability, having brands that are relevant, easy, and distinctive for consumers. And then, of course, people and culture. Those four things which we call our growth drivers haven't really changed. That's what we've been focused on coming into this, and those will remain our focus coming out of it. f
For me personally taking over as a new CEO January 1, my spin on what I wanted to accomplish during my tenure is I wanted lean in more on the customer experience. We serve 40 million customers a day in our restaurants, and we aren’t getting every one of those transactions right. I think Yum has an opportunity to strengthen the operating side of the business in some parts of the world. In other parts of the world we’re world-class, but customer experience for me was a high priority.
Accelerating our technology journey was another big part of my agenda. And then leaning in on the culture; we've always talked about having a recognition culture. But more than ever, I think collaboration is critical in our industry and for us in particular, because things like technology are pretty much brand-blind. So we've got to be leveraging technology across all of our brands and all of our markets, so that requires more collaboration.
So my agenda was to lean in on the customer experience, lean in on technology, and expand the culture from just a recognition culture to a recognition and collaboration culture. If you think about those three things and the environment that we’re operating in right now, they couldn't be more relevant to what we're dealing with now. We’re not ripping up the Yum playbook to get through this. We're leaning on the Yum playbook and leaning in on the areas that we've already been working on that have just become more important to the business today.
What’s your take on each of the four brands and where they go from here?
Well I think one of the things we've learned through this crisis is that consumers really care about the trust right now. They have to be working with brands that they trust. They're going to frequent those brands that have the reputation and a place in their heart where they know that they'll take care of them. And so that's how we've seen this play out. Now we're very fortunate in that we have our three large brands, our brands with a long operating history and a relationship with consumers that has built that trust.
I’ll start with The Habit, our newest brand. It doesn't have that history outside of California. So it has been fascinating to watch; in California, where they have a 60-year operating history, The Habit has been getting through this fairly well, considering that 65 percent of their sales were dine in, they've got sales nearly flat and been able to make up for all that lost sales by pivoting to off premises because consumers trust them. In markets outside of California where they don't have the history, they've been hit harder, and have struggled more to come back. So it's a great example of how important that trust in brands is.
But if you think about Pizza Hut, it's a brand with a long operating history, an off premises model that works great. It's a great value and convenience play in off premises and obviously with a unique, iconic product. We believe that this has had a positive impact on the brand, proven the resilience of the brand, and as we have strengthened things like contactless curbside and contactless delivery, it’s a brand that's right for these times and going forward, and well positioned for success. Building new Pizza Huts is the lowest investment you can make in building a new Yum restaurant. So the economics of building new stores are really strong, and we think it's got lots and lots of growth ahead, primarily through the delivery and carryout channels.
KFC is another brand that actually was really designed for these times, as people have pivoted to more family meals and the things that are familiar to them. KFC is at the top of that list. We immediately saw a spike in buckets of chicken as people went back to what they were familiar with. In fact, when you think about this trust idea, prior to the pandemic, trust was really sort of a given when you had brands like ours. Consumers then immediately pivoted to what was familiar to them, like a bucket of chicken. And then as we've gone through it, we see them prioritizing the safety measures you're taking in restaurants as a new indicator of trust. And as you come out of this, they're very focused on how are you treating your employees? Because if you don't treat your employees right, I don't know if I can trust them to treat me right. When you think about that journey, I think all of our friends are well positioned for it. But KFC, in particular, with familiar products, implementing all the right protocols in the restaurants, has continued to keep the consumers’ trust and has come out of this stronger with their family meals. So KFC, while a very large brand today with 24,000 restaurants, has a massive opportunity to expand its footprint around the world and grow its sales.
Taco Bell's in a little bit of a different spot because in the U.S. it's obviously a powerhouse brand with a huge amount of trust from consumers. But our international footprint is smaller and we don't have that long relationship. So this is going to be a little more challenging for us to grow Taco Bell. But what we've seen in the markets where we do have a Taco Bell international presence is that they pivoted to family meals and they pivoted to the things that consumers want in this environment, and they can successfully get through it.
There's a lot of reason to be very excited about the future of all of our brands. We skew off premises, which is what consumers want. We provide value and convenience. And I think those things in this environment are more important than ever.
How can Yum continue to maintain its relevancy as all brands start to compete in the digital marketplace?
I think we have four big advantages at Yum as we go through this. The amazing culture and global talent across the world, that allows us to make our brands relevant, easy, and distinctive, which is our second major advantage. We just have scale that other people don't have. For example, we own a consumer insights company called Collider Labs. It has done amazing work talking to consumers about what's important to them as we go through this, to make sure that we are pivoting our brands in the ways that make sense for the consumer. So that scale, being able to just go buy a company like Collider and then leverage their learnings internally, is a tremendous advantage.
Obviously our diversified business model with 290 brand-country combinations and all the learnings that we get from around the world is incredibly helpful for us as we navigate environments like this. And the strength in off premises, combined with offering value and innovation. But this definition of ease will change. It's obviously pivoted just in the last three months, and you're seeing things like curbside contactless carryout really emerge as a new trend in the industry that we should be well positioned to take advantage of. If you think about a Taco Bell, for example, during a lunchtime, their drive-thru lane is packed. The only way we can increase sales at Taco Bell at lunch is to get more cars through the drive thru and shave seconds off the drive-thru time. But if you add into the equation the ability to do curbside carryout and take some of those cars out of the drive thru and put them in the parking lot in designated stalls where we can bring food to them the minute they pull onto the property because they’ve ordered it in advance, now that opens up additional capacity. So that's an example of ease for the consumer that they love that makes our business model stronger. And it's those kinds of things that I think you’ll see us accelerating, those kinds of initiatives, which will just strengthen our business.
And not everybody is well positioned to do that. You have to have the technology infrastructure, you have to have the capability in the back of house to process more orders, you have to have the locations where you can do curbside. As we move through this, you'll see our business model pivot just like it did 30 or 40 years ago when the drive thru was invented and we started to add drive thrus onto all of our stores, another big pivot inflection point in the industry that our KFC and Taco Bell brands embraced and leveraged.
You’ve had an incredibly difficult first year on the job. What have you learned about yourself as a leader through these turbulent times?
Look, this is not what I envisioned for my first year as CEO, but I think in so many ways, it's been an opportunity for me to develop my leadership style and help navigate the company through one of our biggest challenges ever. I've got 31 years of history all around the world working with our great franchise partners and our team members and leaders around the world. So I have a unique network of people in this company, and that's been a real advantage for me that I can just pick up the phone and get the real story about what's going on in any part of the world.
But I think the things that have been hallmarks of Yum that I've learned while working at Yum have been valuable to me in navigating this. This people-first culture is what matters. Our team was initially scared. They wanted to understand what was going on. We had very open dialogues and transparent discussions, where we didn't have all the answers, but we told them we would take care of them and keep in touch with them. And these weekly chats have done just that. My style is to be very transparent and to try to make our big, huge world as small as possible. And I think that's been helpful and comforting to the team as we've gone through this.
But obviously the other part of working at Yum and being a leader of Yum is we have to rely on the great leaders we have around the world. This business is too big before any one person to manage through a crisis. And we've been so fortunate that the talent that we've had and the leaders that we've added—people like Mark King at Taco Bell—have been superstars in helping us get through this, in the way that they partnered with our franchisees, pivoted the business to make sure that we were meeting consumers’ needs and taking advantage of every opportunity.
I'm excited. My style is people first and a growth orientation. And I see a very bright future for Yum as we come out of this stronger with better relationships with our franchisees. New opportunities and new ways to grow the business that this has created, and the success that we're having taking advantage of those today and navigating through all of it safely with our team members, safety for employees—safety first and foremost.