Competition
However, its competitors like McDonald’s Corporation (NYSE:MCD) are in the battle by opening up restaurants in Vietnam and seeking to take advantage of the growing middle class there. McDonald’s Corporation (NYSE:MCD) plans to open 1,200 to 1,300 new branches, and it would be spending an enormous $3 billion on this exercise. From an investment point of view, McDonald’s Corporation (NYSE:MCD) looks like a better buy as it is present in more than a hundred countries with close to 35,000 restaurants.
It is favorably valued when compared to Yum! Brands, Inc. (NYSE:YUM) as well with a P/E ratio of 18, which is easily cheaper than Yum!’s 23x. But, Yum! Brands, Inc. (NYSE:YUM) has greater growth potential due to its Chinese and European prospects and analysts expect earnings to grow 11% in the next five years. But, McDonald’s Corporation (NYSE:MCD) is expected to grow at a slower rate with a growth rate of 8.45%.
At the same time, Burger King Worldwide Inc (NYSE:BKW) continues to expand its franchisees and is focusing on its long-term strategic initiatives to drive growth. The company thinks that this business model will help it develop a strong brand image and save the energy spent in its day to day operations. The company is taking marketing initiatives to promote its menu nationally. It is taking up a re-imaging plan and focusing on a food-centric approach. This program is a sales growth driver and cost effective, and the company expects to earn a higher return on investment.
Conclusion
Even with such heavy competition, Yum! Brands is committed to its path of growth and is making substantial investments in its various strategies. Even after the setback in China and decline in its overall revenue, the company is still expanding the KFC, Pizza Hut, and Taco Bell branches across China, the U.S., and India. The company considers 2014 to be its year of resurgence and is expected to perform well in the future with its affordable services and innovation and by upgrading its assets. Looking into the expansion plans of the company in the long-term, it is expected to perform well.
The article Looking at the Growth Prospects of This Quick Service Restaurant originally appeared on Fool.com is written by Amal Singh.
Amal Singh has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald’s. The Motley Fool owns shares of McDonald’s. Amal is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
