On the other hand, Burger King Worldwide Inc (NYSE:BKW) is now looking much more attractive as it tries to turn its business model entirely franchise based (similar to McDonald’s, which owns just 19% of its outlets), particularly in the Asia Pacific. The company has now got a new CEO Daniel Schwartz, who has been responsible for driving the company’s expansion in the international markets. With Schwartz at the top, I believe that Burger King Worldwide Inc (NYSE:BKW) will become more aggressive in increasing its international footprint.
The company is eying expansion in Vietnam as McDonald’s is also looking to enter into this lucrative market in early 2014. Next year, the company is planning to take its bigger rivals McDonald’s and Yum Brands’ head-on in South Africa by opening 12 new restaurants to tap into the country’s growing middle class. The new ‘BKDelivers’ initiative is also a good move towards increasing the delivery sales. Therefore, I am bullish on Burger King.
Conclusion: positive outlook
Yum! Brands, Inc. (NYSE:YUM) is a very strong player in the emerging markets. Although it currently has little operations in India, from where it gets nearly 1% of its sales, it is certainly a promising market with enormous potential.
The current pattern of improvements in China’s same store sales indicates that Yum! Brands could produce a positive number in the final months of the current year, which will be followed by significant improvements in 2014. So far, its shares have trailed behind the S&P 500 ETF (SPY), but I believe that it will have outperformed the market by the time it starts hitting positive numbers.
The company has effectively managed the poultry scandal, and despite the slowdown in China, it has remained undeterred and continues to open more restaurants. This year alone, it will open more than 700 new KFCs in the country. The overall long term outlook of the firm is positive.
Yum! Brands’ shares are a little more expensive than McDonald’s at the moment since they are trading at higher multiples of trailing twelve months and current full year’s earnings estimates. However, they are trading just 2.5 times its annual sales as opposed to McDonald’s, which is trading 3.5 times. Yum! Brands, Inc. (NYSE:YUM) also generates a solid return on equity of 60%, which is well above the industry’s average of ~14%.
The article This Fast Food Giant Is Eyeing a Turnaround originally appeared on Fool.com and is written by Sarfaraz Khan.
Sarfaraz Khan has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide (NYSE:BKW) and McDonald’s. The Motley Fool owns shares of McDonald’s. Sarfaraz is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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