Yum! Brands Harvard Business School Case Interpretation

1. How well have they performed financially during the 1985-1990 and 2000-2004 periods? Show your financial analyses (ROA, ROE, and etc.). A table can be useful here. 

In order to make this a relevant financial comparison, I have decided to compare the banner year in the case, 1991, with 2004 for the majority of my calculations. On a basic level, we can see that YUM has grown from 20,987 system units in 1991 to over 33,000 today, more than doubling its presence on the planet (only slightly thanks to the addition of Long Johns Silvers and A&W). During this time, worldwide profits have jumped from $575 million in 1991 to $4.36 billion in 2004; demonstrating an average per unit annual profit move from $27,398 to $132,121.
While these numbers are impressive, financial ratio analysis makes it more difficult to ascertain the true strength of YUM. The return on assets seems to have declined by a fraction, from 13.5% to 12.2%. However, this can probably be explained by a maturation process that requires more assets to reach increasingly distant locations. Also, the current quarterly revenue growth percentage for YUM (4.3%) lags far behind that of its main competitor, McDonald's (9.2%), and the industry as a whole (15.3%). 

Nevertheless, YUM must be doing something right recently, since it's share price has risen steadily from 25.12 on 1/2/03 to 51.29 on 5/31/05, amid strong analyst outperform recommendations. 

2. What kind of business is a fast food restaurant? Show your industry analysis. 

Between the times that George H.W. Bush began his tenure as Vice-President in 1980 and ended his term as President in 1992, fast food restaurants underwent a complete revolution. Before 1980, the industry was comprised of a few regional chains whose primary concerns were dining area service and large kitchen space. This all changed in the 1980s, when new locations were built to emphasize speed, simplicity, convenience, value, and variety. Such a radical transformation begs an industry analysis.