Metropolitan Financial Group segment: holds interest and cash in long and short term investments in other food and franchised operations.

Metropolitan Financial Group favourite golden ticket to global profits in 2010 is “Yum Brands.”

Yum brands is China’s largest quick-serve restaurant concept [NYSE: YUM] owns KFC. Unlike Col. Sanders’ famous recipe, the investment case for Yum isn’t a closely guarded secret. Yum’s family of global, industry-leading brands and a first-mover advantage in the world’s next superpower have positioned it to become to China what McDonald’s is (was?) to America.

Yum is the world’s largest fast-food restaurateur by number of locations. It oversees 36,000 KFC, Taco Bell, Pizza Hut, Long John Silver’s, A&W, and East Dawning restaurants spread across 110 countries.

Yum’s size affords it a couple of competitive advantages. First, it gives the company serious bargaining power with its suppliers, which is a huge deal in a world of $0.89 tacos.
Additionally, Yum’s tough-to-match distribution capabilities allow for lower costs and for it to consistently establish new outposts in China well ahead of the competition. This is why challengers are literally years behind Yum’s progress in China, where its locations outnumber McDonald’s roughly three to one.

“Yum is the most successful foreign fast-food firm in China.” – The Economist, Oct. 29, 2009

Even though Yum has already established itself as a fast-food giant in China, the opportunity still ahead is huge. China currently has about 600 million urban dwellers — that’s twice the entire population of the U.S. Even more amazing — Yum has 6 times the number of stores in the U.S. than in China.

It’s no wonder Yum is going to invest $1 billion in its China operations in the next three years alone – to open more than 1,500 new stores.

You might be wondering how long this growth will last, given the difference in cultures and the opinion Americans have of fast-food restaurants as an unhealthy option.

But the opinion of fast food in China is completely different. The Chinese see fast-food restaurants as places to celebrate with the whole family, and not just a place to stop for a speedy in-and-out meal.

What’s more, a researcher at Euro monitor International states that Chinese customers see a trip to restaurants like KFC “as a healthier alternative.”

Surprising? Yes. But it makes sense because the hygiene standards at a restaurant like KFC are far superior to the average street food you’d find in China. The cleanliness and freshness of the ingredients are almost a guarantee, which is not something that most restaurants in China can claim to be true.

Yum isn’t your traditional restaurant play

Yum owns only about 20% of its restaurants — most of the rest are operated by franchisees. Along with footing the bulk of restaurant-level costs, franchisees pay Yum a fixed rate on their stores’ gross revenue. Here in the U.S., this rate averages around 5% to 6%. By the end of 2010, CEO and Chairman David Novak is looking to slash Yum’s percentage of U.S. stores owned to less than 10%.

The exception to this strategy, interestingly enough, is China, where the stores are so profitable that Yum wants to own the profit outright.

But what’s even more important for a potential investor is that Yum has a long history of taking care of its shareholders. The company consistently churns out several hundred million dollars in free cash flow, fuelling a 2.3% dividend yield and a solid reputation for share repurchases. Metropolitan Finance Group believes its shares are about 20% undervalued today…

This is a low estimate because it doesn’t account for the likelihood that the dollar will weaken against the Chinese Yuan. A stronger Yuan means bigger profits abroad for Yum. So not only does this mean higher shareholder returns, but it also doubles as a “low-key hedge for your portfolio.”

Our readers who wish to purchase a KFC or any other International franchise

If you are a commercial enterprise looking to purchase a KFC other franchise or, interested individuals who have a passion for food and desire financial independence by owning or developing a franchise. You are invited to submit your enquiry by email to info@metropolitanfoodgroup.com, and an account executive will return your call within 24 hours.

Our Premiere Franchise: for 20 10 is A Taste Above™.

A Franchise Opportunity we believe is the most rewarding and most reasonable entry level franchise system we know of.

 

        Ask for an invite to a complimentary cocktail presentation

 

www.atasteabove.com   Register your interest,   members@atasteabove.com

                                    Want to learn more? Attend one of our events! www.atasteabove.com/blog