Business Intelligence on Retailing, Franchising, and Consumerism in China

Yum! Brands Sees China Sales Grow

Yum! Brands Inc. today reported Period 11 system sales for its International Division increased 4% prior to foreign currency conversion or 7% after conversion to U.S. dollars. Period 11 system sales for its China Division increased 8% prior to foreign currency conversion or 10% after conversion to U.S. dollars. U.S. blended same-store sales at company restaurants increased 6% for Period 11, ending October 29.

David C. Novak, Chairman and CEO, said, "Driven by the momentum from the continued expansion of our China and International Division, and strong U.S. same-store-sales growth, we expect to build on this year's forecasted 12% EPS growth with another year of at least 10% EPS growth in 2006. This would be our fifth straight year of meeting or exceeding our annual target of at least 10% EPS growth."

Yum's International Division includes all operations outside the U.S., with the exception of those reported in the China Division. Currently, the International Division includes more than 11,000 system restaurants in 100 countries and territories. The International Division's period close remains one period earlier than the company's period-end date to facilitate consolidated reporting.

The China Division includes mainland China, Thailand, and KFC Taiwan. Based on restaurant counts at the end of the third-quarter 2005, the China Division includes 1,657 restaurants in mainland China, 370 restaurants in Thailand, and 132 KFC restaurants in Taiwan.

System-sales growth for Yum's International and China businesses includes total sales from all restaurants regardless of ownership, including company-owned, franchise, license, and unconsolidated affiliate (joint-venture) restaurants.

Sales of franchise, unconsolidated affiliate (joint-venture) and license restaurants generate franchise and license fees for the company (typically at a royalty rate of 4% to 6% of sales).

Franchise, unconsolidated affiliate (joint-venture) and license restaurant sales are not included in the company sales Yum presents on its Consolidated Statements of Income in accordance with U.S. GAAP; however, the franchise fees (which include on-going royalties and initial fees) are included in the company's revenues.

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