LETTER TO SHAREHOLDERS

By the way, we want an "act like an owner" mindset across the entire company.  That's why we now require all of our executives to buy stock in the company, and offer most of our employees the opportunity to purchase stock at a discounted price as part of their savings plan.  We think it's a great idea to have our employees have a little "skin in the game," just like you.

Second, in addition to improving sales and margins by making the RGM our number one leader, we intend to drive consistent same store sales growth with marketing innovation Historically, sales growth comes from new products, new dayparts, price value initiatives, heavy user promotions and superior service systems.

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We have begun to build a pipeline of initiatives for all of our companies in each of these categories and will eventually introduce them to our customers with powerful break-through marketing.  The average restaurant sales for our three brands is a little more than half of McDonald's average restaurant sales today.   We have an underutilized asset base with plenty of room to grow.  We'll be going after this growth with some major new products in '98, along with tie-ins to hot new promotional properties.

Third, we will make multi-branding and consolidated market planning a big idea.   This last year, we've had enormous success testing the combination of several of our brands under the same roof.  For example, we've added Taco Bells to KFC, and have driven sales increases far in excess of the incremental investment made.  We also have placed all three of our brands in one restaurant, and sales are well over $2 million.

We believe, over the next eight years, we can add 2,000 to 4,000 new multi-units in the United States alone, and create a potential $250 million after-tax business.  What's more, we now have consolidated market planning so we can develop each of our markets working closely with the interest of each of our brands.  Believe it or not, before the spin-off, our companies actually bid against each other for real estate sites.  Those days, thank goodness, are over.

Next, we have just begun to operate as one system and leverage our enormous scale.  That's a huge opportunity, and unique to Tricon.  Just think about it.  We have 30,000 restaurants - 30,000 laboratories - that give a tremendous opportunity to share best practices and drive productivity.  So rather than have three of everything, we have the ability to share services - everything from information technology and accounts payable to ingredient purchasing and media buying. 

As an example, we've begun to consolidate our television network media buying, making Tricon the fifth largest U.S. network buyer.   Before, our three brands were independently ranked in the top 50.  Our goal is to have the lowest cost structure in the industry and to wipe out every redundancy.   We also intend to work closely with our franchise partners, making sure both company and franchise operations move with a unity of purpose. 

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