Brand power helps Yum, McDonald’s expand their global reach

August 19, 2019

Yum Brands! Inc. is the second largest global fast-food chain behind McDonalds.  It is the holding company that owns such iconic brands as Taco Bell, Kentucky Fried chicken and Pizza Hut.

Like McDonald’s, Yum has gone global and sees emerging markets as the fuel for future growth.  Yum has 48,000 restaurants in 145 countries and has about 48% of its stores in emerging and high growth markets. It opens an average of 8 new stores a day.

McDonald’s has 37,000 outlets in 120 countries with 44% of the outlets in Asia, or other emerging and high growth markets. The U.S. accounts for nearly 50% of Yum’s sales and earnings. The U.S. is also McDonald’s biggest market for sales and profits.

Both companies are an example of global brand power and both can be found in the Harvest Portfolios Harvest Brand Leaders Plus Income ETF (TSX: HBF, HBF.U).

McDonald’s is on track to nearly double the number of restaurants in China by 2022 when China will surpass Japan as the second-biggest market outside the U.S.  For Yum, China is already its second biggest market with 22% of all stores.

Yum, like McDonalds is also expanding its footprint with franchises. In a global marketplace, franchises can respond more quickly to changing local tastes.

In May 2019, Yum signed a new master franchising agreement in India with New Delhi-based Burman Hospitality for its Taco Bell outlets. Burman plans to open 600 Indian Taco Bells over the next 10 years to make India the largest market for its Mexican food outside the U.S.

Yum China will invest up to US$525 million in the current year, opening between 800 and 850 new stores. Most of the new stores will be KFC outlets and a new cafe chain called Coffii & Joy.

Global brands like McDonalds and Yum have a few things in common. One is a simple, consistent marketing message. This creates lasting economic value by ensuring consumers can find the brand, recognize it and be assured that if they buy it, it has the same quality and features as their home market. Both adapt the message to local culture and tastes. 

These energizers help increase revenues and profits and support growing dividends. Brands inspire loyalty and encourage repeat business by offering a consistent product that is recognizable in any language and market where it is sold.

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