We've blogged countlessly in the past few years about the great success that Yum! Brands has enjoyed in China and the Far East in general. Their success is now the prototype of other franchises considering international expansion. But we never foresaw that the day would come where Yum! would begin selling of its own franchises in America in order to consolidate its hold on its Asian businesses.
According to reports in leading business news outlets like Fox Business, Yum! has decided to sell of many of its franchise businesses in America to its franchisees. These are franchises that are as (North) American as apple pie - KFC, Taco Bell, etc. It's the clearest signal yet that Yum! Brands believes that its overseas businesses are as important as its domestic ones.
"We tend to reduce our ownership of highly-penetrated, low-growth or lower-performing businesses, and we increase our ownership in lower-developed, higher-growth businesses, where we think we can get better returns," Chief Financial Officer Rick Carucci said during a recent investor presentation. Yum says its returns on invested capital, reaching more than 22%, are some of the highest in the industry.
The stats are quite staggering actually: In 2007, less than 1/3 of Yum's franchises were in emerging markets. Today, 60% of company-owned stores are in BRIC economies. That number is expected to climb to 70% by 2014, according to Fox.
We've chronicled international expansion for franchising for a long time, but we've never seen a franchise embrace global growth so passionately that they actually start the process of defranchising at home. Will others follow suit? Time will tell.