How a Fast-Food Baron Triumphed Over Legal Battles, Protesters, and Avian Flu
You think you're going through tough times? Consider David Novak, CEO of Yum Brands, for whom the first half of the decade was a roll call of catastrophic headlines. It started in 2002 when, fresh from their $250 billion win in tobacco class-action suits, state attorneys general turned their sights to fast food. Obesity was the new tobacco, they claimed, scenting rich winnings. Then, in 2003, PETA attacked KFC for cruelty to chickens. Rock stars, too, came out against Kentucky Fried Cruelty: Paul McCartney, Chrissie Hind and Russell Simmons called for a worldwide boycott of the Colonel's chicken. Novak's driveway was doused with blood. A coalition of students and religious groups also campaigned against the company's pay levels for farm workers picking lettuce and tomatoes. Meanwhile, a Federal Trade Commission began investing health claims in the company's advertising while, with 15 percent of its profit dependent on China, the company was badly hit by the outbreak of SARS. The U.S. market wasn't looking rosy either: with one fast food outlet for every 1,000 Americans, analysts declared the market tapped out and struggled to find new locations that wouldn't cannabalize old ones. And then in 2004, avian flu broke out in China, chicken prices rose, and exchange rates hit the company's bottom line. Oh, and in case you forgot, during this period the United States was in a recession.
By anyone's measure, this was a bad couple of years. So what did Novak do? He focused on two things. The first was Yum's multi-brand strategy, offering different fast-food options side by side, in the same location. With KFC, Taco Bell, Pizza Hut and Long John Silver's Fish'n'Chips in its portfolio, Yum could offer more choice under one roof, reducing real estate costs and increasing revenue. It was a model his rivals found hard to copy.
But on top of this, Novak took on a challenge that left his peers gaping. For years it had been a lamentable but unchallenged orthodoxy that the staff turnover rate in the Quick Service Restaurant (QSR) sector was high -- 200 percent high. Everyone hated it but accepted it as one of the unmovable features of the industry. Until Novak decided to halve it. In the midst of a recession, law suits, chicken blood, and screaming rock stars, Novak attacked the costliest part of his business. And by 2005, he had brought that previously unmovable number down to 100 percent. It was an achievement no one thought was possible and everyone struggled to emulate.
Now, I don't like fast food. I don't eat KFC, I don't think I've ever eaten at Taco Bell, and I'm not a fan of Pizza Hut. But I'm awestruck by Novak's bravura. In the midst of such turmoil, many a CEO would have had their hands full just fire fighting. But that isn't what Novak did. He focused. Offered a handful of gold-plated excuses, he rejected them all, built revenue, and was able -- for the first time in the company's history -- to start paying a dividend. I may not like the food but I have to admire the focus.
So here's my challenge to you: In the midst of a unique global economic downturn, are you using recession as an excuse? Or are you able, despite the despondency and turbulence that surrounds you, to focus on big goals and achieve them?
