Why Is Yum Brands Pulling Down Their Shutters In China?

KFC, Pizza Hut and Taco Bell’s Parent company, Yum Brands Inc. is planning on separating its China market. Following several food scandals and after facing pressure from its stakeholders, the food giant is looking at spinning off its China business into a separate publically traded enterprise.

Past

The Yum Brands chains were off to a rather promising start in the country, which was apparently short-lived. At the financial front, Yum Brands not only quoted a slow return from the China segment but also saw a measly 2% rise in sales.

Yum Brands has been trying hard to attract sales and customers but without success. Factors like stale supply and rumors about their food not being up to the mark fueled the dwindling sale.

According to the firm, other factors that have played a role in impacting its sales are factors like the Chinese economy not doing well and the performance of Pizza Hut’s marketing.

Present

Reports of the separation came post Keith Meister, an activist investor, coming on board with Yum Brands. Founder and managing partner of Corvex Management, Keith happens to be Yum’s largest shareholders with 5% of the company’s common stocks in his kitty.

Ones following the corporate were not surprised as it had just recently announced the completion of its strategic options with potential corporate structure tweaks.

Future

Going by a statement from Yum Brands, the China division, which will be headquartered in Shanghai, will be labeled Yum China. It is projected to grow from a current number of 6900 restaurants to a whopping 20,000.

In addition, “The remaining Yum Brands business will concentrate part of its efforts on becoming more of a franchisor, with the goal of having at least 95% of its restaurants owned and operated by franchisees by the end of 2017. Yum China will be Yum Brands’ biggest franchisee and will operate under a franchise agreement. Yum Brands currently has more than 41,000 restaurants globally”, reports The Guardian.

The enterprise has come to the decision that Micky Pant, who was appointed CEO of the China segment, will hold his post even after the spin off. As for Yum Brands, Greg Creed will continue as CEO.