Yum Brands’ CEO: Culture Is What Will Get You Through A Tight Labor Market

Food & Drink

Yum Brands

YUM
’ CEO David Gibbs believes his company and its four brands–KFC, Taco Bell, Pizza Hut and The Habit Burger Grill–is in a better position than most of its restaurant peers to contend with the current labor crisis.

That labor crisis, by the way, has yielded an all-time high quit rate for restaurant workers. It has also driven operators to hike their wages in response, and average pay in the industry is now above $15 an hour for the first time ever.

But Yum’s advantage comes from its culture, Gibbs said during a presentation Monday at the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum.

“The dollars matter, but everybody’s paying more now,” he said. “It’s the kinds of environments where friends refer friends that are the most successful … I like our position when it comes to attracting the best talent in the industry and staffing our stores because Yum is built on a people-first culture. It’s not just about paychecks; it’s about paychecks and pathways. Culture and talent and environment is where we have an advantage.”

That said, Yum is “pulling out all the stops” to make sure restaurants are sufficiently staffed in this challenging environment, adding benefits like retention and referral bonuses. The company is also honed in on that “pathways” piece, even going so far as to acquire Heartstyles last year. The leadership development company offers hands-on training to help individuals with an objective of building “heart-led leaders” and elevating the customer experience.

“This can’t be overstated: The culture you create in the restaurant is first and foremost what is going to help you get through a tight labor environment,” Gibbs said. “Our franchisees that have better cultures and environments are the ones that are doing better.”

Yum has been recognized for its award-winning, employee-focused learning experiences, and Heartstyles may very well help generate a more consistently positive restaurant environment once scaled across the company’s massive, 50,000-unit global system.

Notably, Heartstyles joins a growing roster of acquisition targets for Yum, most of which are technology startups. In the past several months alone, for example, Yum has acquired AI company Kvantum, marketing and omnichannel solution company Tictuk Technologies and order management solution company Dragontail Systems.

The timing of these acquisitions has been beneficial to say the least. Such technologies were ramping up prior to the COVID-19 pandemic, but the industry shutdown forced an acceleration of digital behaviors and off-premise business, which made them table stakes. For Yum, that meant surpassing $20 billion in digital sales over a 12-month period.

“I don’t think we ever imagined we’d be there this quickly, but that’s what this environment has done,” Gibbs said. “All of the technology we’ve been investing in is all paying great dividends for us.”

The company isn’t likely done making such investments. Gibbs said one of Yum’s biggest advantages is its ability to both scale and share learnings across its giant footprint. The company is leveraging those abilities to ensure it provides customers, employees and franchisees with the best technology solutions.

“If you’re interacting with Yum, you should have the best-in-class experience with our technology,” Gibbs said. “We can do that because we can afford to buy up some of these smaller companies that have great technology–competitive-advantage-technology–and then scale it in our system. We make the economics work in a way that our franchisees get the best solutions at the lowest cost. I imagine we’ll do more [acquisitions] because of the economics and the battle that’s going to be more and more fought over who has the best technology solution in the restaurant space.”

Gibbs also doesn’t rule out acquiring another restaurant brand down the road. Yum’s last such purchase came when it added The Habit in early 2020. The mergers and acquisitions market has ramped up significantly since then with no end to the momentum in sight.

For now, however, the focus is on its current brands’ growth, including KFC and Pizza Hut getting back to net new unit growth in the U.S., Taco Bell stretching its legs internationally and The Habit moving out of California and into international markets.

“The Habit, in many ways, was dipping our toe in the water without making a massive investment,” Gibbs said. “Everything there, despite the crazy environment, has worked well. I imagine there will be other Habit-like deals down the road, but we’re in no rush. We have so much growth ahead of us with the brands we have today and if we don’t do any other acquisitions, we’re still going to be a much larger company in the future than we are today.”

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