Yum Brands’ impending split into two companies yields a leaner Louisville-based fast-food giant, slashing $400 million in annual capital spending and $300 million from overhead costs while it sells off nearly all its company-owned KFC, Pizza Hut and Taco Bell stores in the United States.
Without concrete mention of layoffs, Yum’s 800 workers in Louisville who support KFC face a parent company pledging to cut 28 percent of $1.1 billion in annual overhead costs over the next three years across operations, including their colleagues at at Pizza Hut, based in Dallas, Taco Bell in Irvine, Calif., and across the globe, Yum Brands chief people officer Tracy Skeans said in an interview Tuesday.
Early retirement offered to Yum workers in August will contribute to a 600-person overall head-count reduction by the end of this year, Skeans said.
declined to say how many work-force cuts were gleaned by those worker exits. In 2017 and 2018, Yum will look to cut 1,500 more jobs from its global payroll, she said.
“We do expect some job loss,” she said. “We really have worked to manage so we’ll have as few as possible.”
Reductions in travel and other employee expenses can be expected as well as a sharp focus on possible trims to Yum’s philanthropic investments, she said. To date, the Yum Foundation has given $1 million annually over the past 13 years to support the mission of the Dare to Care Food Bank in Louisville.
“We need to look at it,” she said. “Right now we are incredibly committed to all the communities we serve. This is a real pivotal moment for us. Becoming more focused will allow us to unlock growth we haven’t had before.”
The brand-new Yum China corporation will own 90 percent of 6,300 KFC and Pizza Huts and aims for 20,000 outlets to serve a China “that is the economic engine of the world,” said Micky Pant, the new CEO of Yum Brands China Division..
Yum CEO Greg Creed said a streamlined Yum Brands back home is carving corporate store ownership from 22 percent to 2 percent. Growing brand strategy and the capacity for consumers to order products online is central to making cheap food faster and more entertaining for consumers, executives said at an investor conference Tuesday in New York City.
“We won’t be owning as many bricks. But increasingly, we will be owning the clicks,” Pizza Hut International president Milind Pant said at the meeting, where Yum Brands outlined a “pure play” brand strategy focused on mostly franchise-owned stores, as much as 98 percent, by 2019.
Cutting $300 million in recurring costs comes as Yum executives pledged Tuesday that overhead would account for no more than 1.7 percent of system sales by 2019. To shrink a new Yum’s expenses by more than one fourth is a daunting task, Skeans said.
About half of the $300 million to be cut from overhead results from savings realized by selling off company-owned KFC, Taco Bell and Pizza Hut stores, she said. Jobs managing real estate and store operations in a new Yum will be less of a focus than jobs in e-commerce, digital operations and information management as a result. By the time Yum Brands cleaves into two publicly traded firms Oct. 31, 93 percent of stores will be owned by franchisees in the United States, up from 77 percent of KFC, Pizza Hut and Taco Bell restaurants owned by the corporation as of Tuesday.
Yum’s chief, Creed, sought to assure investors that headquarter cities for Taco Bell in California and KFC in Kentucky will continue to host those brands.
“We’re not going to be shutting down the Irvine office or shutting down the Louisville office and moving,” he told investors.
In the United States, Yum Brands is working to overcome growth challenges in a market saturated by faster-growing brands, including Chick-fil-A, Panera and others.