The company behind Taco Bell, KFC, and Pizza Hut is 'always' eyeing potential acquisitions. Here is what the president looks for.
- As scale becomes increasingly important in the restaurant business, food companies are going on an acquisition spree.
- Yum Brands - the parent company of Taco Bell, KFC, and Pizza Hut - is "always looking" for potential acquisition targets, though the bar remains very high, according to president and CFO David Gibbs.
- "It would have to be a brand … that fits in with our growth drivers, that could be a big developer, that has a distinctive relevant brand, that could grow same-store sales growth in the long term," Gibbs told Business Insider.
The restaurant industry is increasingly becoming the land of the mega-brands.
There is JAB Holdings, which owns Krispy Kreme, Caribou Coffee, and Panera, to name just a few of its many chains. Restaurant Brands International has Burger King, Tim Horton's, and Popeyes. Inspire Brands is less than a year old and already owns Arby's, Sonic, and Buffalo Wild Wings.
Many of these conglomerates have beefed up their portfolios in recent months, with deals such as Inspire buying Sonic and Krispy Kreme acquiring Insomnia Cookies.
Read more: Arby's parent company is acquiring Sonic. Here's how the CEO says he picks which brands to buy.
Then you have Yum Brands. The company has owned its three major chains - KFC, Pizza Hut, and Taco Bell - since the company was spun off from PepsiCo in 1997. Between the three chains, Yum has more than 45,000 locations around the world.
"We don't need to do an acquisition to build scale. We already have scale," Yum Brands president and CFO David Gibbs told Business Insider following the company's investor conference on Wednesday.
Gibbs says he believes scale is becoming increasingly important in 2018. For example, the company's scale helped make possible its deal with GrubHub, in which Yum Brands purchased a $200 million stake in the delivery company.
"That's why you're seeing so many other companies go out and try to acquire new concepts just to try and build their own scale," Gibbs said.
According to Gibbs, Yum Brands is "always" being presented with brands seeking acquisitions. But, it takes a lot to make what he calls the "distraction" of a new brand worth its while.
"It would have to be a brand … that fits in with our growth drivers, that could be a big developer, that has a distinctive relevant brand, that could grow same-store sales growth in the long term," Gibbs said.
"If a brand fits all of our criteria - a lot of which I can't share for strategic reasons, then yes, we would go do an acquisition and be excited about it," Gibbs continued. "And we're always looking at them."
Gibbs says that people should not expect a new chain to join Yum Brands' portfolio anytime soon. Instead, the company is more likely to acquire more tech-centric companies, such as with its recent acquisition of delivery company QuikOrder.
"We have a very high bar because we know the brands that we have today are incredible growth brands that we have just scratched the surface around the world in realizing their full potential," Gibbs said.