百勝餐飲集團 (YUM) 2002 Q1 法說會逐字稿

Good morning.

My name is Terry, and

I will be your Conference

Facilitator today.

At this time, I would like to

welcome everyone to the 2002

First Quarter Earnings Release

Conference Call.

All lines may have been placed

on mute to prevent any

background noise.

After the speakers' remarks,

there will be a Question and Answer period.

If you would like to ask a

question during this time,

simply press star then the

number one on your telephone

keypad.

If you would like to withdraw

your question, press the pound

key.

I would like to turn the call

over to your host, Mr. Tim

Jerzyk, Vice President of

Investor Relations.

Thank you, Mr. Jerzyk,

you may begin your conference.

Thanks, Terry.

Good morning everyone.

Thanks for joining us on the

call.

Before we begin, I would like

to go through a few necessary

things.

This call is being recorded

and will be available for play

back.

We are broadcasting the

conference call via our

website at www.triconglobal.com.

If you ask a question, it will

be included in both our live

conference and any future use

of the recording.

I would also like to advise

that this conference call

might include forward-looking

statements that reflect

management's expectations

based on currently available

data.

However, actual results are subject to

future events and

uncertainties.

The information in this

conference call related to

projections or other

forward-looking statements may

be relied on subject to the

previous Safe Harbor statement

as of the date of this call

and may continue to be used

while this call remains in the

active portion of the

company's website which will

until our next quarterly

earnings conference call.

On today's call we have David

Novak, Chairman and CEO and

Dave Deno our CFO.

They will both follow with remarks

and we will then take your questions.

I will turn it over to David

Novak.

Thanks, Tim, and good morning, everybody.

I'm pleased to report that Tricon, soon

to be Yum brands, had an outstanding first quarter.

Our operating earnings per

share was up 37 percent.

Basically, we hit on all

cylinders.

We had double digit profit growth

internationally and across our

portfolio in the United

States.

Portfolio blended same store

sales results in the United

States were the best since

1999.

Up five percent.

Our worldwide restaurant

margin was strong at 15.6

percent.

Given the broad based momentum

of our business, we expect

strong results in the second

quarter as well growing

ongoing operating EPS in the

14 to 19 percent range.

We are confident our

international business will continue

to grow at least 15 percent in

profits.

And each of our U.S. brands is

well-positioned to grow same

store sales at least two percent for

the full year.

U.S. portfolio same store

sales should be up about three

percent for the year.

We expect to hit or exceed

all of our development, comp

sales and margin targets.

As a result, we are raising

our full year ongoing

operating EPS forecast to

$3.63 to $3.70 from the

previous range of 3.56 to

3.63.

We are also pleased to report

that our A&W and Long John

Silver acquisition is

proceeding smoothly.

In fact, we expect to close the deal

within the next couple of

weeks.

We are very excited to bring

these brands into the fold.

Our A&W and Long John

Silvers multi-branding sales

and profit results with Taco

Bell and KFC continue to be

outstanding.

And the acquisition allows us to

scale multi-branding on a

national level over time.

You may recall that average unit

volumes increased 20 to 30

percent and EBITDA increases

of 30 to 50 percent with our

multi-branding combinations with A&W and Long John Silvers.

As we have shown you before,

multi-branding allows us to

reimage the U.S. system to a

much more contemporary and

appealing format as we open

new restaurants with higher

returns.

With the acquisition, we are

looking forward to our name

change from Tricon to Yum

Brands.

We think it better reflects

our expanding portfolio of

leading brands going forward.

The acquisition was a key

event as we continue to

execute against our strategy

of leading in multi-brand

innovation.

Another equally important event in the

first quarter related to our

strategy of becoming a top

tier restaurant operator.

We remain very focused on

improving the customer

experience in our restaurants.

As we previously announced we

launched our long-term

commitment to customer mania

training.

Our goal is to train each team

member how to be customer

maniacs, which we define as executing the operational

basics, what we call CHAMPS, which is cleanliness, basics,

hospitality, accuracy, maintenance, product

quality and speed.

We want to execute CHAMPS, and do

it with a "yes" attitude.

In fact, we are empowering our team

members to solve customer

problems on the spot without

asking permission from their

managers.

The initial training is

generating a ton of enthusiasm

and we believe our long-term

commitment to customer mania

will ultimately drive

consistently positive customer

experiences and lead us to

become a top tier restaurant

operator.

We just begun all the

training -- this training in

our company stores and have

the vast majority of

franchisees on board because

the program

training -- training makes so

much sense.

I was just in Amsterdam last

week with our European franchisees where we're rolling

it out and everybody is excited about what we are doing

with our team members and they

believe it will give us a

competitive advantage going

forward.

Going forward you can count on

us to remain very focused on

our two key strategic

objectives.

Number one, and that's international

expansion, driven by our two global brands,

KFC and Pizza Hut.

Our restaurant counts are up

seven percent over the past 12

months internationally.

We have had system same store

sales growth for 15

consecutive quarters.

As I said earlier, you should

expect 15 percent growth in

ongoing operating profit each

year from our international

business.

Our visibility on this is very

high as we go into the future.

Number two, our second

opportunity is to accelerate

the growth of our U.S.

portfolio.

We'll drive the U.S. growth by

improving our restaurant

operations, supported by

customer mania, leading the

way in multi-branding

invasion which we just scaled

through our recent

acquisition.

And, we will continue to lead the

industry with superior

marketing and product

innovation.

With the financial discipline

that has been instilled in our

company in its processes, led

by our CFO Dave Deno, I can assure you thar

we will also remain focused on

maintaining a strong balance

sheet, generating substantial free cash flow, and

maintaining our industry-leading return on

investment capital.

We are very proud our return

on capital is leading the pack

and we intend to keep it that

way.

I'll give you a little more color on

what's going on with your

international business and

each of our three brands after

Dave Deno gives you the

financial review and details

of our Q2 forecast.

We'll then answer any

questions you have.

Dave?

Thank you, David.

By any measure, comp sales,

unit development, margins,

productivity control and our

structural costs, the first

quarter was a terrific

quarter.

Even better than our fourth

quarter of 2001.

Ongoing operating EPS was up

37 percent operating earnings

were up 41 percent.

This was better than we

expected mid-quarter when we

raised our expectations.

Essentially our international business

performed better than expected.

U.S. margin performance was

exceptional.

Our tax rate was slightly

better than expected.

Q1 revenues increased 7

percent.

This is the best quarterly

growth we produced since

becoming a public company.

More of what you will see in

the future, especially now

that our refranchising program

is largely complete.

Both our international and

U.S. businesses performed well

with solid double digit

increases in ongoing profit.

We continue to make good

progress in reducing our

structural costs: tax, interests, and overhead.

Overall it was a great way to

start the year.

And given the broad based

strength in our

operating performance,

we have given guidance for Q2 which is higher than most of

you expected, and we increased our guidance for

the full year.

More on that in a few minutes.

First let me take you through Q1 in

a little more detail.

Looking at international.

As I mentioned our

international business got off

to a very good start, even

better than we expected and

helped us exceed expectations.

In local currency terms,

revenues increased 13 percent

and ongoing operating profit

increased 16 percent.

In dollar terms, international

profit was up 11 percent.

We were very pleased with this

performance considering the

shift of the Chinese New Year

holiday to Q2 this year.

This impacted growth rate by

several points as did foreign

currency for Q1 which had a

negative impact of $4 million.

Goodwill amortization

elimination benefited the

quarter by approximately four

points of growth,

right in line with prior

guidance.

Our international revenue growth

continues to be fueled by

solid growth in new

restaurants and the 15th

straight quarter of system

same store sales growth.

Net growth in new restaurants

is currently running at 7

percent annual rate,

slightly ahead of our five to

six percent target.

We have the sweet spot in this

business of same store sales

growth and good distribution

growth.

Our major businesses in China,

the U.K., Canada, and Mexico

all had strong performances in

the quarter.

In the earnings release the

company's four high growth,

high investment markets, China,

Mexico, Korea and the U.K. are

doing very well in their focus of expanding

the KFC and Pizza Hut brands,

leading the way in restaurant

growth.

International restaurant

margins increased 7/10ths of a percentage point.

Our performance continues to improve sequentially.

That should continue the

balance of the year.

Importantly our large Taiwan acquisition of last

year's fully integrated and

performing well.

We are very focused on margin

opportunity remaining in our

business and are confident our

teams will may go the

necessary progress to make

further improvements the

balance of the year.

Turning to the United States.

Our U.S. business had an

exceptional quarter with

strong comp sales growth and

excellent margin performance.

All three unit brands have mad progress in differentiating

their brands and operational measures. We are confident of

continued progress in these areas by each of the brand

teams going forward.

David will talk about each

brand shortly.

For the first quarter

U.S. revenues grew six percent

while ongoing operating profit

increased 25 percent.

As you saw in our earnings

release company same store

sales increased five percent

in the quarter.

Importantly, our franchise

systems performed equally as

well or better.

For KFC and Pizza Hut,

franchise comps were several

points ahead of company

results of the for example

Pizza Hut franchise comp were

up six percent in the quarter

which is excellent performance

for the Pizza Hut brand.

Taco Bell franchisee

performance was similar to the

company's positive eight

percent results.

Overall, as I said earlier, we

have a very broad based

operational performance

momentum.

Now, let's look ahead for a

minute.

We are very focused on the

consistency of performance in

our comp growth, particularly

from a U.S. portfolio

perspective.

Within the brand portfolio you

will see some swings from time

to time primarily at Pizza

Hut.

They remain very focused on

their successful innovation

strategy with the launch

schedule of new products, not

necessarily timed to match

prior year successes for

obvious competitive reasons.

Personally I watch more

closely the performance to

forecast so I don't get

excited when I see plus

sevens or minus fours.

The important measure is at least plus

two for the year which is what

we continue to expect for

Pizza Hut.

David spoke of the customer

mania training we launched in Q1,

which will become a permanent YUM

feature every quarter for all

725,000 team members around

the globe.

This, as well as the other key

initiatives by Alwin Lewis, our Chief Operating Officer,

will be a key driver to producing consistent

customer experiences in all of

our restaurants every day.

It is in areas like this that

we are investing some of our

overhead.

We are very aware everyone is

targeting to raise their gain

in QSR.

We remain focused of being a

top tier operator.

Looking to the future now, when you

consider the strong capability

we have in brand

differentiation and product

development in our category leading brands, the intense

focus of improved operations, along

with our multi-branding

opportunity, our confidence

in consistently growing the

U.S. business is high.

Now, let's turn to the second

quarter.

With excellent momentum

carrying into the second

quarter, we expect very

good performance driven by

particularly strong

performance from our

international business.

I think it's safe to say our forecast is well ahead of

most of your expectations.

As I give you the details of

the second quarter forecast

please note these numbers

include the impact of the YGR

acquisition unless I note

otherwise.

We expect ongoing operating

EPS of 83 to 87 cents for the

second quarter of growth of 14

to 19 percent.

We expect revenue growth of

nine to ten percent.

Six to seven percent excluding

the YGR acquisition.

Let's now talk about what makes up

this growth.

Our international business

will have a terrific quarter.

As I said earlier, and in our

original Q1 guidance the slip in

timing of the Chinese New Year

shifts several points of

growth from one to Q2.

That fact combined with

continued very good growth of new

restaurants, system comp sales

growth and margin improvement

leads us to expect

mid-teens growth from

international and 30 to 35

percent growth in ongoing

operating profit for the

quarter.

These numbers include the

slight negative impact of

currency and are in

U.S. dollar terms.

Our international

business is YUM's number one growth driver, going well into

the future, and it continues to perform very well.

Our strategy of focusing on

key markets only with company

operations and investment is

paying off.

Each of these key company

markets is expected to have a

very good year, especially

China.

We believe we have a real gem

here that no one else in the

restaurant category can match

in terms of international

growth opportunities.

We have two brands with

extended visibility for

expansion, infrastructure in

place, and experienced team of

internationalists to make it happen.

This is our largest division

and it's growing very, very

well.

Turning to the U.S.

For the second quarter in the

U.S. we expect continued solid

performance.

Ongoing operating profit growth of 10

to 12 percent driven by two to

three percent growth in portfolio

blended same store sales and

another good quarter in margin

performance and G&A

productivity/.

The YGR acquisition adds about two points of

operating profit growth for Q2.

Let me just say at this point, for the year when you

include interest expense, we still

expect the YGR acquisition to

be slightly diluted.

From a comp sales perspective

expect Taco Bell to have the

best results in Q2 continuing

our recent trends, fairly good

results at KFC skewed somewhat

to the end of the quarter and

a modest but expected decline of Pizza Hut, as they lapse

the successful launch of Twisted Crusts a year ago. We

expect Period Five will be Pizza Hut's low point on comps

for the year.

The second half will likely be

Pizza Hut's best for comp growth.

Once again, we expect Pizza Hut comps to

be up two percent this year.

Turning to Tricon overall,

We expect continued top tier

performance in restaurant

margins with one full

percentage point improvement

versus last year to 15.5

percent.

Our structural costs will

continue to be tightly managed.

G&A will be up about four

percent in dollar terms for the quarter, excluding the YGR

acquisition.

Excuse me excluding YGR

acquisition G&A will be up only

about one percent.

We continue to make very good

progress in overhead productivity, while at the same time

investing behind our growth opportunities: international

expansion, multi-branding and improved

operations.

The ongoing tax rate will be

in the range of last year's or

somewhere between 29 to 31

percent.

Our tax group continues to work on

key tax planning strategy,

including the full foreign

tax credibility and timing

remains up in the air.

Please remember our tax

opportunities tend to come in

large blocks and the timing

will vary.

We are working hard on these

initiatives.

Interest expense will be up

slightly in dollar terms

versus last year's second

quarter.

If you exclude the YGR

acquisition interest expense will be about

flat for last year.

Again all this adds up to 83

to 87 cents in ongoing

operating EPS for the second

quarter or growth of 14 to 19

percent.

Revenue we expect to grow nine

to ten percent.

The YGR acquisition contributes

about three percentage points

to revenue growth.

Finally let's look ahead to

the full year.

There is no doubt we are off

to a great start with

expectations for a terrific

first half.

We feel very good about the

momentum in the business and

importantly plans for the

second half.

That is why we have increased

our full year guidance and

ongoing operating EPS to a

range of 3.63 to 3.70, from 3.56 to 3.63 previously.

We are confident of this new

range as we look add the

performance and plans of our

international team and the

three U.S. brand teams.

They have all made very good

progress against our key

strategies.

We expect they will make more

progress going forward.

In assessing our full year

forecast please remember our

comparisons get tougher as the

year progresses, and that

we had a very good fourth

quarter last year.

Also as David mentioned

earlier the acquisition of the

Long John Silvers and A&W

restaurant brands is going

smoothly and should get off to

a good start somewhere in the

middle of the second quarter.

Finally, as David discussed

earlier we are very focused on

maintaining a strong balance

sheet and expect to continue

to generate high levels of

cash every year, more than enough to fund our capital needs

for growth and restaurant upgrades. At this point let me

turn it back to you, David.

Thanks, Dave.

Thanks for doing your usual

good job of detailing the

numbers, identifying our

challenges and explaining why

we are taking our full year

forecast up to the range of

3.63 to $3.70 in ongoing

operating earnings per share.

Let me now share with you the key

company initiatives that

will drive our performance for

the balance of the year and

into 2003.

On the international front,

Pete Bassey and his team intend

to open another 1000 plus new

restaurants this year.

We continue to focus and

invest the bulk of our capital in four high growth, high

return markets for the company; China, Mexico, the U.K. and

Korea.

Franchisees continue to open

nearly 70 percent of our

international new units in

countries around the world.

We will continue to strengthen

company operations focus and

our partnership with great

franchisees.

That's why we agreed to sell

our Singapore business to Malaysian Holdings, one of

our strongest operating

franchise groups in the world.

In the base international

business we are driving same

store sales by launching

proven new products from the

U.S. like Popcorn Chicken and

Pizza Hut's latest pizza innovations.

P'Zone is in Canada as we speak and doing extremely well.

Our core countries are performing well and China is

having an absolutely

sensational year.

In the United States, our

number one focus at each of

our brands is to get better at

running rate restaurants.

We are executing a common

operating approach which is

spear headed by Alwin Lewis, our Chief Operating Officer.

First quarter measures

continue to improve at each of

our companies for CHAMPS,

turnover and margins.

We know we have a lot more

upside, but we do know for

certain we are making progress.

Let's look the the brands.

Emil Brolick and the Taco Bell team have recorded

30 straight weeks of positive

same store sales growth.

We realize we have not been

lacking the toughest

comparisons but Taco Bell has

been positive the last eight

periods and two year trends are now positive.

Taco bell will continue to

bring news this year to the Think

Outside the Bun advertising

campaign and benefit from the

quality improvements we have

made in tortillas, beans and

beef and the addition of steak

and 100 percent white meat

chicken to our line.

Taco Bell is also benefitting

from operational improvements

and significant gains in

speeds of service.

This has been our focus.

In the first quarter our speed

of service times improved by

nearly 10 percent from a year

ago.

Or more than 20 seconds

better.

We know that that drives

sales.

Taco Bell is also coming off a

very successful steak quesadilla launch, a

$1.99 product that was

advertised without mentioning

the price point.

Right now Taco Bell is featuring

value with the new 7-Layer

Nachos for 99 cents, and

we have a steady stream of

high quality product news and

value news planned for the

balance of the year.

We expect Taco Bell second

quarter same store sales to be

up at least 7 percent.

Taco Bell is definitely

building on its momentum.

Now, let's turn to KFC.

KFC has been a real model of

consistency.

KFC same store sales have been

positive 15 out of the last 16

periods and seven out of the

last eight years.

Cheryl Bachelder and the team

will continue to position KFC

more competitively on the

basis of superior quality to

fast food with the successful

Jason Alexander advertising

campaign.

Operationally, KFC's focus on Hot

and Fresh is driving

continuous improvement in our

food quality scores.

The plan is to drive

continuous product excitement

around our existing menu and

to launch significant

packaging and sizing innovations

to improve our overall value

equation.

We have successfully tested

programs and we have those

programs in the pipeline, and

we expect to continue our

momentum with stronger

advertising budgets that allow

us to support both the Family

Meals, Chicken on the Bone and

Individual on the Go products.

We expect KFC's Q2 same store sales to

be up two percent.

Very, very confident about

KFC's future as we move on.

Now let's turn to Pizza Hut.

As you know Pizza Hut as had a

soft fourth quarter or had a

soft fourth quarter in

2001.

But with the launch of the P'Zone,

Pizza Hut reversed that

negative trend and generated

two percent same store sales

growth in company stores.

As David said, franchise same store sales

were up six percent for the

quarter.

Now, you are probably asking

why would there be such a

difference?

Well, the P'Zone was a very

popular dine-in product

because of its low price point

and individual eater appeal.

Now, if you'll recall the

company restaurant base is

primarily delivery driven with

delivery carry-out units.

The delivery carry-out

business is driven primarily

by traditional pizzas, whereas the franchisees have more of

a Red Roof, dine-in asset base. Overall acceptance in

product mix for the P'Zone was

outstanding, exceeding expectations.

The P'Zone attracted new

customers at a better rate than

many previous Pizza Hut new product

launches.

Company stores sales were less

than expected because delivery

sales are driven more from our

base pizza business, because, basically

what we are doing is serving

up whole meal replacement

options with the pizza.

The good news is that with the

P'Zone, we have another great

pizza in our arsenal of

limited-time offers, and

we know the best way to market

it is in combination with our

base pizza line.

So in other words, sell our base pizza and the

P'Zone together and we think

that would give us a more

powerful marketing program.

We are pleased for the

franchisees we were able to

drive significant sales in the

dine-in business.

At the same time, obviously

reverse the business trend

that we had in the fourth

quarter.

We are also very pleased that

Pizza Hut had a great profit

quarter with less

discounting on the

base pizza line which impacted

traffic, as we talked about, but

clearly supported great

margins.

We are also pleased that Pizza

Hut improved its delivery

speed of service and other key

operational measures during

the launch.

The balance of the year Pizza

Hut will bring back previously

successful limited time offer

pizzas and introduce an

outstanding new product that

we have successfully tested.

Right now Pizza Hut is

overlapping the very successful

Twisted Crust Pizza and Period

Five sales will be down about

seven percent.

We expect they will be down

about two percent for the

second quarter and we will

finish the year with a very

solid second half ending the

year up at least two percent.

We are confident that Pizza

Hut is back on track and that

the team has the winning

strategy in the pizza category

with quality, pizza innovation

and offering every day value

while focusing on continuous

operational improvement.

We love being the innovator in

the pizza category.

We are definitely off to a strong start

when you look at it all and

step back, you have to, I

think anyone would conclude we

are definitely off to a strong

start at all of our companies

and fully intend to keep it

going.

We have taken up our forecast

and expect to hit it.

But let me remind you it's still

early and we have some more

tough sledding ahead.

We are comfortable we can

deliver in the range of $3.63

to $3.70 for the full year but

believe it would not be

prudent for you to bank on us

to do more.

If we can do better, we will.

We are committed to keeping

you advised fully along the

way.

Before I close, let me spend

just a minute on how

acquisitions fit into the

execution of our strategies in

the future.

First, and foremost, we will

leverage our existing

U.S. asset base in

international infrastructure.

This will be through, number

one, QSR mid-scale

opportunities in the U.S. to

drive multi-branding.

Just like the A&W, Long

John Silver's acquisition we

just completed.

We will also be testing casual

concepts through partnering

agreements that will fit with

our U.S. brand assets, particularly Pizza Hut dine-in

assets. You'll see this in a test we

have with Backyard Burgers and

Pizza Hut dine-in restaurants

as we look at upgrading the

image of Pizza Hut Red Roof restaurants.

We are also looking at testing

pasta and sandwiches for this

same opportunity at Pizza Hut.

We are also looking at these

and other food categories that

could leverage our Pizza Hut

delivery system.

But we basically think that fast

casual gives us an opportunity

to maybe plug and play with

Pizza Hut.

We'll see what happens.

The great news here is we are

able to test this, find out if

it works.

When we know we have a winner,

then we can decide what the

best option is for us as we go

forward and determine the absolute

best use of our capital.

The big news is we are

leveraging or existing asset

base, which we know drives shareholder value in a big-time

way. We will also look at

international expansion of any

promising multi-brand combination or single brand

opportunity that allows us to utilize our existing

infrastructure. What we have internationally

is really special.

I mean, you know as we have

talked about when you look at

McDonald's and you see how

much profit they are

generating outside the United

States, $2 billion.

You know, we make over $300

million and, you know, we are

quickly heading towards the

four category on that.

And the real opportunity that we

have is to close the gap

versus McDonald's, knowing the

next nearest competitor we

have makes only about $30

million a year.

We have the infrastructure to

really start continuing to really

drive our international

businesses as we move ahead.

The going forward, you know,

we really think we can execute

whatever acquisitions we make

we think we can

successfully execute our

strategy through small

investments and test them and

then expand them as they prove

successful.

We think this is a real luxury

we have.

And again, our primary strategy is

to leverage existing our asset

base through multi-branding.

Overall we think this strategy

is the best way to drive

shareholder value and stay

focused on our existing

business.

When we look at what are we

going to be the best at as we

go down the road?

We are going to be the best at

really bringing customers

branded restaurant choice.

I mean this is a tremendous

break-through strategy that we have.

We're going to be the best in the

world.

We are looking at this holistically from a

worldwide standpoint.

So with that I will open it up to

you for any questions that you

have.

Dave will answer all the tough

ones and I'll take all the

softball.

Okay, sir, we are ready for

questions.

At this time, I

would like to remind everyone,

in order to ask a question,

please press star then the

number one on your telephone

keypad.

We will pause for just a

moment to compile the Q&A

rosters.

Your first question comes from

Coralli Winter.

Hi.

Could you talk about the -- a

little bit more specifically

about the performance in your

largest international markets?

What same store ranges look

like for China, Mexico, Korea

and the U.K.

And what the competitive dynamics

you see in Europe versus Asia.

And then secondly could you provide

guidance on where you see

U.S. restaurant margins and

international restaurant

margins for the year.

First of all we don't

disclose by country our same

store sales growth.

But we are really happy with

sales gains in the countries

that you identified.

The U.K., Mexico, China, et

cetera.

And Coralli, what's happening is you

are getting base same store

sales growth plus we are

getting new unit development.

And when both of those things

happen in a particular

geography, it adds up to a lot

of profit growth.

As far as the dynamics go in

the competitive set, David's

mentioned that the continent

of Europe for us for KFC is a

provider.

We do not have the kind of

scale we have in Asia.

And we are continuing to work

against that and spend against

that.

In Asia continues to be a very,

very strong focus for us going

forward.

And then finally, on the

U.S. margins and the

international margins, we

expect both to be in the high

15's for the year.

Very, very good year for us

going forward.

So the U.S. margins,

specifically we expect in the

high 15's.

International margins we

expect to be in the mid to

maybe high 15's for the year.

And the U.S. number includes

the YGR acquisition.

And Coralli, I think one other point on just the

competitive dynamics

internationally.

In Asia, in many of the companies -- countries

we operate in we actually beat

McDonald's and have a, you

know we go tow-to-tow with

them.

In Europe we are basically in

the process of building the

business with McDonald's being

our -- the lead horse that I

think is basically educated

the category on fast food.

So we'll ride their coattails

and try to make progress as we

go forward.

Thank you.

Thanks, Coralli.

Next question, please.

Your next question

comes from Mark Kalinowski.

Hi.

Good quarter everybody.

Just wanted to get your

comments regarding your

outlook for cheese prices

that's embedded in your Q2 EPS

target.

Thanks.

We have, mark, the

traditional cheese curve which

is a little bit less than last

year, but

it tends to strengthen as the

year goes along, the prices.

But nothing really -- no real big change in our

cheese costs or, you know,

versus our usual trends.

So you would say it's

accurate to describe a

slightly favorable outlook on

a year-over-year basis?

Very slightly favorable.

Again, I want to stress to

everybody that our commodity

costs are very balanced

between chicken, beef, cheese,

other items.

We do not see a significant

upside from cheese because it

is a relatively small amount.

Also its doesn't make up a

huge, huge part of our

portfolio.

Thank you.

Thanks, Mark.

Next question, please.

Your next question

comes from Michael Sherik.

Thanks, guys and

good morning.

Could you comment a little

bit --

You talked about boosting some

of the advertising at KFC.

Can you talk about advertising

spend on an absolute dollar

basis and also from am

appreciation standpoint in

terms of where you are today?

And then secondly, your

guidance for international

operating profit growth, this

go-round includes the impact of FX, can

you let us know what your assumptions are for that?

I'll answer the second question first,

$9 to $12 million of FX impact for the year.

There was four in Q1.

So, you know, hopefully the

proportionate share happened

in Q1 and those of you that

follow the dollar know that

it's the dollar's weakened a

little bit here lately.

But it is what it is and we always

carry a little bit of a

contingency for that.

On advertising spend, Michael,

what we have talked about

before is some of our brands

like KFC have some of our

franchisees have matched our

investment spending to a half

a point, and

that's enabled us to increase

our add impressions in

those -- in that brand.

The media market is more

favorable than it was a year

ago.

I don't have right off the top

of my head how many more

impressions we are getting but

at KFC advertising spend is

higher as a percent of sales

than in the past because to the investment spend match.

I believe -- we can double

check on this, but I think Pizza Hut and Taco Bell

are roughly the same as last year. We are getting more

impressions because of the more favorable media markets.

Thanks, Michael.

Your next question

comes from John Glass.

Thanks.

Good morning.

Couple questions.

One, on the Yorkshire

acquisition, can you walk

through how the acquisition

will impact the second half

with respect to [acreation] to

operating profits?

I think you said it was two

points of growth in this quarter, but we only caught a

partial quarter of that, so if you could provide that

detail.

And then secondly on the multi-branding

units, how many multi-branded units are in the

comp base now?

If you have looked at it

versus the average blended

comp for the system, how big

of a delta are you seeing

multi-branded versus single

brands in the comps?

As far as the Yorkshire

guidance goes, as I talked

earlier in previous

discussions, we expect when

you include interest expense,

we expect a slight negative in

operating earnings this year.

We expect some operating

profit increases for the back

half of the year.

I think it's three to four

points as far as, yeah, on the

U.S. only.

And about three to four points

in operating profit.

So we expect Yorkshire to come

on in the next couple weeks.

We include the guidance for

the second quarter. Let me just clarify it for everybody,

it's not the reason why we

took our operating earnings

per share range up.

It's off of our base business.

We expect the Yorkshire to

have virtually no impact on

operating earnings per share.

So that is the Yorkshire piece, and we will continue to

update you on that as the deal closes and

we get better understanding as

to what's going on in that

business.

But you can expect about three

points in U.S. operating profits

from it.

The multi-brand restaurants,

there's not enough of them

today in our full system to

have a measurable impact on

the comp sales performance.

If you look at how the

restaurants themselves are

trending on a comparable sales

performance, they are trending

equal to or better than what

we currently see out of our

single brand restaurants.

Two-part answer to your

question.

We have a slightly better comp

sales performance out of our

multi-brand restaurants.

When you look at it in

aggregate for all our

U.S. brands there are not

enough multi-brand restaurants

to have a measurable impact on

our comp sales performance.

John, also on YGR so all of

you who have questions about

YGR, balance of the year we

are expecting it to begin

impacting our P&L Period Six, so, the last period of Q2.

Keep in mind it's about $575

million annual revenues.

Margins were about four

percentage points below ours.

And G&A is about $5

million a period.

Something around that range.

That should give you enough to

pretty much model that out.

Thank you.

Thanks, John.

Your next question

comes from Peter Oaks.

Good morning.

I was actually hoping to

follow-up on the multi-branding

question of John's.

Dave if I understand, you are

saying the comps for the

multi-branded units were only

equal to or slightly better

than the single branded un

its?

When you are looking

at -- Peter, I'm not talking

about the first year.

Okay?

I'm talking about once they

are in the ground and they are

in the ground for at least 13

periods.

That -- comp sales performance

is equal to or better than

what you are seeing in our

base branded restaurants.

First year we are still seeing

that sales gains that David

talked about 20, 30, 40

percent.

So I just want to make sure

that clarification comes in.

So this would, of the

approximately 1600

multi-branded units or

slightly under, I think you

had about 1100 a year ago.

This would essentially isolate

those folks?

Yes.

What we always do is we take a

look at how we are doing in

the first year sales, Peter

and then importantly how we

are doing after that.

One of the things we were

most pleased about with

multi-branding is it

solidifies the economic power

of the restaurant on an

ongoing basis because what we

find is our same store sales

growth are actually higher in

the multi-branded units, because

you are leveraging two

customer bases which really

drive purchase frequency.

In our overall strategy

the real economic engine for

us is to drive purchase

frequency.

That's why we think variety,

that we can get credit for,

which multi-branding gives

us immediate legitimacy in

different food categories is

the key to driving purchase

frequency.

When you get more customers

coming in, it raises the whole

boat.

That's the power of this.

So we are very pleased that we

have a strategy that is

long-term in nature.

It would be one thing if you

got the big lift in year one

and year two the sales went

down.

We don't see that.

We see the sales outpacing our

stand alone brands.

Given how important

multi-branding is to the story,

kind of medium to long-term is

it your intention to provide

us comps on a regular basis?

On multi-branding or on

just -- we will continue to

present, peter, by brand.

And talk about multi-branding

as we do today.

But it will be included in our

overall base portfolio

guidance.

What we are going to give

you is what our existing asset

base and new assets deliver.

Okay?

We have a very unique

strategy.

Nobody else is doing it.

What we are doing is we are

going to win on the basis of

branded choice.

So, you know, our whole asset

base will transform,

ultimately, into

multi-branding and, you know, I

think at some point in time we

may be multi-branding in China.

We will be looking for ways to

maximize variety and maximize

our asset base while really

responding to the customer.

Because the only reason why

this works is because

customers love it.

Peter, your point is we

continue to expand

multi-branding into the

future, and

it gets to be a very significant

scale in the U.S.

The key number to watch from a

comp perspective, even more so in

the future than now is the

U.S. blended portfolio rate

rather than by brand.

Okay.

Thank you.

Thanks, Peter.

Your next question

comes from Howard Penny.

Hello, howard.

Hi.

Thanks very much.

I was curious about your

comments of both Pizza Hut and

Taco Bell as to the level of

discounting in the quarter.

Can you comment on your

philosophy as it's changed

over the years to discounting

and was I reading you right

saying there was less

discounting this year?

If you could even maybe go back as

far as to what the discounting

was like when you were part of

Pizza Hut.

Thanks.

I'll take the immediate

question and turn it over to

David.

Obviously one of the reasons

why our margins were so strong

in the first quarter, is

there are a bunch of factors,

but one of which that David talked about was, we did a

good job on our price points at Pizza Hut

and Taco Bell, especially.

I'll turn it over to David to

talk about the overall

philosophy.

I think, Howard, you know

to win in this category, we

are really focused on what we

call inside, at least

internally as two tier

strategy, okay?

You know that the category's

driven by value.

All three of the categories.

Chicken, tacos, pizza, looking at Long John Silver's and

A&W, same thing. We know this, there's a very value

conscious customer out there.

So we believe that we want to

continually drive home, you

know, competitive value

offerings on an every day

basis.

I mean, that's just part of the

business.

Where we think that -- what

makes our strategy different

is that we have one-two punch.

We have the every day value

plus we are introducing higher

quality type products we can

get a premium on.

Or more innovative products

that allow us to improve our

margins and still get the kind

of traffic growth that we need

to really drive the business.

At Taco Bell great example of

that would be the steak

quesadillas.

Literally we are bringing quesadillas at

$1.99 price point,

unadvertised.

To think about anything going

for 1.99 at Taco Bell five

years ago, everybody would

have been in a panic.

We found that that really is a

great strategy for us.

At Pizza Hut most recently the

P'Zone.

It was a terrific product.

Great customer scores.

And, we were able to come in

and literally not discount our

base pizzas and we had a greet

profit quarter and a very

solid sales quarter.

We would have liked to have

more sales out of the company

restaurants but the bottom

line was it was a very

successful quarter for us.

It's a balancing act.

Then what we are really try to

go do is when you look at our

marketing dollars, we are

trying to figure out the best

possible way to maximize our

marketing spending so we can

have a two tier message out

there.

Pulse value, come back to

higher quality products, come

back to value.

KFC, right now, is on a two

tier media strategy where we

are supporting both the chicken on

the bone product which is

generally higher priced and

our portable products which is

lower priced.

So we can make our product

available on an affordable

basis and have the high end,

low end working in terms of

the menu mix.

That's how we are approaching

it.

We call it two-tier marketing.

And we are very focused on

trying to find the right

balance.

Thanks, Howard.

Next question

comes from Jack Russo.

Hi, Jack.

Thanks.

Great quarter, guys.

Thanks.

Just a couple nonoperating

questions, David, for you.

Could we get a full year tax

rate what you are expecting

for the full year?

And also, any thoughts on

interest expense for the full

year?

And I know you didn't buy back

any stock in the quarter.

I'm curious, is that due to

the acquisition or do you

attempt to resume that?

Finally, you have ended in the

fourth quarter for Pizza Hut a

new product.

I know you can't talk a lot

about it.

Are you still expecting some

type of blockbuster new

product to be rolled out there

in the fourth quarter?

Tax rate 33 to 34 percent.

We'll continue to pursue

things as we see them.

Especially on the

international side.

Interest expense we would have

expected to be about flat this

year.

That includes YGR, Tim?

No flat before YGR.

Flat before YGR.

We have the YGR impact this

year.

Jack, what else did you have?

Share buyback?

Do you expect to get

aggressive there the rest of

the year?

Yeah.

We'll continue to do our -- we

have a $300 million share

repurchase authorization that

we are executing against.

We intend to keep against

that.

Okay.

Then finally, on the pizza

hut --

We have a great new

product we are going to

introduce sometime in the

second half.

Second half of the year?

Yes.

Okay.

Thanks guys.

No problem.

Next question please.

Your next question

comes from Andy Barish.

Hi, guys.

Couple of cost questions.

Can you quantify or sort of at

least directly let us know if

the new customer

mania programs

were a significant cost item

as you rolled those out?

Where would that show up?

Secondly back on cheese prices.

Where are cheese prices

favorable in the first quarter

or was that the toughest

comparison of the year for

you?

It was a little higher in

the first quarter.

Then offer the balance of the

year it will continue to

moderate a bit, and be

slightly favorable like we

talked about earlier.

I want to remind everybody we

have a very -- we have other

components to our food cost

besides cheese.

Secondly, on the second

part -- first part of your

question, Andy, I'm sorry?

Cost on customer mania, do

you care to quantify as you

roll that out?

We will not specifically

quantify it.

But when you see changes in

overhead, we are investing in

our overhead behind our CHAMPS

measures, our international

measures and multi-branding

measures.

Specifically I think our

CHAMPS Excellence Review which

is something we do to monitor

to see our progress on CHAMPS,

we are spending $6 million

more this year than we have in

the past.

So our ongoing G&A

productivity continues.

We continue to look for back [INAUDIBLE]

house opportunities,

consolidation opportunities as

we always have.

And then we are reinvesting it

behind our growth drivers,

ops, international and multi-branding.

Customer mania training is

something we plan on doing

every quarter forever more.

We think we are on to

something here, and we are

going to stay after it.

The reason you would likely

not see any impact on

restaurant margin is we

already have training going on

in the restaurants, we are

better utilizing the times we

spend in the restaurants for

things like this.

We believe this is a much

better investment.

You should not see impact or

margins going forward.

Just as a reference look at

our Q2 guidance on margins.

We expect to be very strongly

positive.

Thank you.

Your next question

comes from Brett Levy.

DAVE DENO Hi, Brett.

Good morning.

Just a follow-up on Andy's

question on customer mania.

What is the franchisee

commitment?

Secondly franchisee presence

within the big four

international markets you are

targeting, what is their

growth commitment?

Third do you have any color

you want to give, any quantitative

numbers on CHAMPS

scores?

I'll take the middle one,

David.

On the franchise split China

and -- excuse me Mexico and

the U.K. KFC business are

company and franchise

ownership.

And the U.K. Pizza Hut did

this as a joint venture with Woodbread.

Korea is primarily company and

the Pizza Hut side all

franchise on the KFC side.

On the company side it's

pretty much all company in

China.

Franchise partners quite

happily, are coming along with

us and investing behind our

brands in each one of those

countries.

So that's our international

growth story.

Okay.

Regarding the franchise

commitment to customer mania.

You know, first of all, the

status of where we are at

right now is that we are

implementing this in all of

our company stores around the

world which is about 20

percent of the system.

And we have the vast, vast

majority of the franchise

system executing it along with

us.

Taco Bell in the United States

basically we have 100 percent

alignment.

Pizza HUT'S almost 100 percent

alignment.

KFC is about lagging a quarter

behind the company operations

but is aligned as we roll it

out.

And then internationally, you

know, I would say we have the

vast, vast majority, there's

no need for me to go country

by country.

Basically what I told the

European franchisees last week

as we were going through it

and they are excited about it.

This is a way of life for us

you are either going to be a

good franchisee or a bad

franchisee.

If you are not on the program

you have to be on somebody

else's program, because this is what it's going to be all

about. We are very focused on doing this.

We are tracking who's in,

who's not in on a global

basis.

And, you know we have varying

agrees of execution in terms

of pacing and sequencing.

But ultimately our goal is to

get to 725,000 team members.

And we are very confident we

are going to get there because

this program is just being

sucked up.

People love it.

You know, it's getting the

right kind of spirit inside

the restaurant.

We are teaching people the

right things.

We have also, part of this we

are empowering the team member

to solve a problem right off, without

going to the restaurant

manager for food costs up to

$10.

Basically if you had a $20

problem, you know, you could

literally take care of it if

you are a team member without

talking to your restaurant

general manager.

The team member says hey, you

believe in me, I'm a part of

the team, you trust me.

You know, it's really getting

our team members involved

which we know really drives

performance.

And where we tested this, you

know, our food costs are

exactly the same or lower.

Our customer complaints are

going down dramatically.

And what I'm excited about is

the whole organization is

galvanized and

energized around this customer mania notion.

It's changing our restaurant

support centers.

We are going, this is our real

passion.

This is what we are passionate

about getting done, because

we are tired of being bottom

tier, middle tier operators.

We will not be happy until we

are one, two, three, four and

five at the top, in terms of

our operational measures.

Way think it can get done.

We are a long ways from where

we want to be but this is

fundemental.

We are tracking all of our

franchisees, and we're going to lead the way from a

company perspective. In terms of our ops measures,

you know I don't have off the

top of my head the exact CHAMPS

scores, but I think Tim does.

We are basically improving our

measures, we just had our

quarterly business reviews.

You know, turnover is moving

in the right direction in all of our brands.

We've got customer mania under way.

Consumer complaints are down.

And, you know our CHAMP scores

are moving in the right

direction.

Yes, Brett CHAMP scores are

up anywhere from up slightly

to up as much as four points

at Taco Bell.

Some of the key measures like

for example David mentioned

earlier the speed of service

at Taco Bell.

They were better by 22 seconds

in the first quarter alone.

Pizza Hut one of the key

focuses is on delivery time as

promised.

The percentage of transactions

that have met that time is up

eight percentage points over a

year ago.

Better than 10 percent.

And then on KFC the focus on

Hot and Fresh product they are

up about eight percent in

the -- particularly on their

product scores on CHAMPS.

The other thing we are

doing around the world, is we

are testing in each one of our

brands and in our countries,

we are testing what we call

catalytic mechanisms.

Things that guarantee great

service.

You are not happy?

You get your money back.

Just ask in the U.K..

You have any issues?

Just ask.

If we don't solve your problem,

we'll give you your

next -- we'll give people the balance back

coupons for discounts on their

next purchase.

We are really try to

develop things that put teeth

into driving great service.

And I think the goal is by

mid-year of next year we will

have some standardized service

programs we can roll out

around the world as well.

We're just attacking our whole

service system in a way to say

to the customer we are more

committed than anyone else to

their total satisfaction.

Again, I'm not sitting here

taking any victory laps.

The rude reality of this is we

are not where we want to be.

But I can tell you we are very,

very focused on getting where

we want to be.

Thanks, Brett.

The next question

comes from Joe Buckley.

Hi, Joe.

Hi.

Just a couple more cost questions.

One, are you [comments] chicken cost trends and maybe

what kind of wage rate

inflation you saw in the first

quarter.

And then, just a question on

multi-branding, whether, as you

approach the closing of the

Yorkshire deal your priorities

are shifting in terms of

what direction you want to go,

what combinations.

Lastly McDonald's just

announced a potential deal

with Fizoles.

I'm kind of curious if that's

a concept you kind of looked

at as a potential partner for

Pizza Hut?

Answering the chicken and

the wage rate questions.

Chicken, we expect to be

roughly flat.

We see no real changes.

Wings are getting a little

more expensive, but nothing

really hitting our P&L too

hard.

Wage rates pretty much

standard.

Three to four points up.

Nothing really up or down

there.

On the Fizoles transaction, we

don't comment on things that

we do or don't look at.

We do have a group that looks

at various concepts.

We don't get specific into

anything we have or haven't

looked at.

I'll leave that as a no

comment.

Regarding the yorkshire

acquisition we have or marketing

under way.

We are assessing what the best

avenues are for us to excite

more commerce through

multi-branding.

We really don't have anything

new to report in terms of what

our priorities are versus Long

John Silver and A&W and

how to use it.

We talked to our franchisee's

are basically clamoring over

the idea, which is the best news of all.

The phone is definitely

ringing off the hooks which we

feel very, very good about.

This has a lot of traction, a

lot of excitement. And again, the main thing here is,

there's no need for us to

hurry into anything.

We are not into winning the

race here.

We want to build a great

company.

We know we have great

strategy.

So we want to execute this

right.

Okay?

So, you know, we are going to

take our time easing into this

acquisition and figuring out

the best way to go.

We are going to have very

planned [for] growth as we go

forward.

Thanks, Joe.

Your next question

comes from John Ivankoe.

Hi.

Thanks.

Two questions if I may.

The first, we look at Pizza

Hut's international business

and I guess focusing

specifically on delivery.

Could you comment on the state

of usage, you know, of that

business and what the

opportunity may be both in

Asia and Europe?

And secondly, if I may, David

Novak, following up on a

comment you made.

What segments do you think,

outside of what you are

currently doing are available

for international expansion?

If you could comment on that

would be an interesting

thought.

Thanks.

I'll take the first one

then I'll turn the second one

over to David, John.

On Pizza Hut International we have

some counties that do

extremely well.

We have segments of Asia,

parts of Europe, especially

the U.K. that do very, very

well.

Obviously much like pizza

delivery in the United States

back in the 70s and '80s, you

do have to teach people that

customer access point.

We are working that.

But some parts of the world,

especially U.K. and Korea are

very far along.

We do quite well there and we

are continuing to expand pizza

delivery in all of our major

markets, you know Canada,

Australia, the European theater.

Everywhere in those areas we

believe we have a business

model that can be expanded

either company or franchise

development.

I think when you look at

the segments that we think we

could potentially penetrate

internationally, you know

starting with the fact that we

basically are in two segments

today both chicken and pizza.

That gives us lots of

opportunity.

We think that Mexican food is

a segment that will have

relevance over time.

But we believe it's a nitch

category, and that the best

way we'll be able to drive

Mexican food is in combination

with another brand.

We are excited about having

fish.

You know fish, particularly in

the U.K., Asia, Latin American countries,

we think that the fish segment

is totally untapped.

But, again, we have to

determine whether it can

really drive enough volume for

single unit economics to

really work.

But, again, our strategy is

multi-branding.

I think where we can move into

these nitch categories is when

we combine one or two

together.

That's why we are happy about

Long John Silver because it

gives us an opportunity to

team up with Taco Bell or

potentially leverage our asset

base with chicken as we go

down the road internationally.

You know, I think the hamburger

segment for us is -- it's

untapped for us which A&W

gives us an opportunity.

And it also gives us a

dessert.

They have an incredibly good

line of hard packed shakes

that are absolutely delicious.

So, you know dessert is a big

opportunity internationally

and something we really don't

have.

When you think about in

combination of how do you go

to market against a McDonald's,

maybe in continental Europe.

KFC, A&W is not out of

line for us.

We think that might give us a

break through type of approach

we'll learn about going

forward.

We are also down the road, I

mean we are very intrigued by

what's going on with Asian

food.

We think Asian food is a category that

we may have an opportunity to

move into which could also be

something we that could use to

leverage our delivery asset

base as we go down the road.

But, you know, I think we are

kind of thinking outside the

dots, you know, by thinking

really about what the customer

really wants.

And they do love choice.

And, you know, our goal is to

try to bring this choice to

them in an exciting retail

format.

And that's really what we are

working on and galvanized

around.

If you look at China, for

example right now China is

rocking and rolling.

It's just -- we are opening up

great restaurants, our [hurdle] rates are phenomenal.

But I think, you know, five years

from now, six years from now

when those great restaurants

are doing great, we may need

to provide the customer more

choice.

All right?

So rather than introducing a

fish sandwich that no one

could give us any credit for

in China, okay?

We could introduce maybe Long

John Silver and have a whole

new line of products we could

get a lot of credit for and

take China to the next level.

That's conceptually how we are thinking

about this.

We are very, very excited

about it.

It takes a category that

people describe as competitive

and tough which it is, but it

gives us some real headway as

we go forward.

Thanks, John.

Next question, please.

Next question

comes from Jeff Amahandro.

Good morning this is John

White for Jeff.

Question is with regards to

the Yorkshire acquisition.

How soon do you expect to

grade the A&W and Long

John Silvers concepts on CHAMPS?

Where do you expect them to

stack up?

You no, I think that we'll

do that within the next year,

you know?

I have talked to the

franchisees.

They are excited about our

operations programs and our

people programs.

We are bringing them a

capability they would be the

first to say they really don't

have.

So we'll want to get them on

the customer mania CHAMPS

Excellence Review, CHAMPS

program as soon as possible.

I think we have, you know

bottom, basis what I have seen

in the -- our research, I

think we are in bottom middle

tier.

You know, middle tier at best

with both A&W and Long

John Silver.

But, again I'm not trying to

sound like Pollyanna here but

if there weren't things that

you could go out and fix you

wouldn't have growth

opportunities.

I think we can take the

business forward by improving our

operations as we move ahead.

Thanks, John.

Next question, please.

Next question

comes from Mitch Spizer.

Hello, Mitch.

Terry can we have the next

question?

At this time there

is no response from

Mr. Spizer's line. He must have withdrawn his question.

The next will come from Paul

Luster.

Hi, Paul.

Can you quantify your

turnover rates and the hourly

manager level?

Second on the Yorkshire

was wondering if you were

thinking any differing

outcomes in urban versus

suburban locations, perhaps, or maybe some geographic

areas. And lastly any update on

technology implementation on

supply chain or maybe store

level? Thank you.

Paul, I'll take the first

question on turnover.

Basically Taco Bell is in the

150, 160 area.

This is team member turnover

which is what we are primarily

focused on, as well as our [INAUDIBLE].

Team member turnover at Taco

Bell is 150, 160 which is down

30, 40 basis points over

last year.

KFC's into about the 120, 130

range.

Which is down 50 to 60 basis

points over last year.

Pizza Hut in the 100 to 110

area which is about even with

last year.

And I just want to add.

Our international markets we

don't have those with us but

tend to be significantly lower

than that in turnover both in

manager and team member.

And I think when we look at

our -- the success and the

earnings we have had on trade

area basis, urban, rural, suburban, we did that

testing prior to the

acquisition, and we got green

lights in all three of the

areas.

I think, frankly the thing we

will have to learn over time

is just how -- what's the best

way to maximize a whole

marketing area.

For example, can we have units

a mile and three quarters away

and 40,000 population or is

the stretch of the brand

50,000?

The other thing that was

really interesting is that,

you know, what we are doing

with this acquisition is we

are also strengthening our

appeal with the Hispanic

audience.

Long John Silver is the number

one ranked quick service

restaurant chain among

Hispanics according to the

research we have seen from the

Long John Silver folks.

So again that's one of the

reasons why, back to the

earlier question, we think in

catholic countries for example

we have a tremendous

opportunities, Hispanic

countries with seafood.

And finally on technology

that is one area where we

continue to be more productive

we are re-investing in our tecnology and systems to enable

even more productivity, both in the back of the house, in

our restaurants and here in our

restaurant support centers to

continue to streamline

especially our financial

systems.

Thank you.

We have time for one more

question.

The final question

comes from Terrance Wheat.

Yes.

In terms of -- you talked about

your investments and doing

small acquisitions and

investing in them staying

focused driving shareholder

value. In light of that,

can you comment on any of your

thoughts on Burger King?

We will not comment on

Burger King other than the

fact that it's a great brand.

I think they are marketing

challenges are pretty well

documented.

And we did not -- there was

a bid process on Friday, we

didn't bid.

Beyond that we are not really

commenting.

Okay.

Thank you.

Thanks everyone very much

for attending the call.

This concludes

today's Tricon Conference

call.

You may now disconnect.