The past few decades have seen the rise of a phenomenon
known as the illusion of choice.
When you go to the super market and you see the over-stuffed shelves,
it's easy to feel over-whelmed by what appears to be
an over-abundance of different products.
But more often than not, the various competing brands
are in fact owned by the same company,
and in the end, whether you buy a Kit Kat or a Lion,
the profits end up in the same pocket.
Of course, this multi-brand strategy isn't necessarily bad,
and it's actually very popular across almost all consumer industries.
One example that most people find surprising is the restaurant business,
and in this week's video we'll take a look at the company
that owns three of the largest chains in the U.S: Yum Brands.
The three restaurants I'm talking about are KFC, Pizza Hut, and Taco Bell.
And as you'll see, their origins are actually pretty humble.
Let's start with KFC and its famous creator, Colonel Sanders.
The Colonel, who's real name is Harland Sanders,
opened his very first restaurant in 1930
when he took over a Shell gas station in North Corbin.
As you can imagine, operating a gas station during the Great Depression
wasn't very profitable.
That was the reason Shell were willing to give it over to Sanders
in the first place.
By that point, he was already 40 years old
and he'd worked over a dozen different jobs.
He was always struggling to make ends meet, and the restaurant
was his first real success.
He would serve his customers country ham, pork steaks,
and, most importantly, delicious fried chicken.
Sander's chicken was so good that he became a local celebrity.
In 1935, the Kentucky governor even made him
an honorary Kentucky Colonel for his culinary contributions.
Sanders worked hard to improve his recipe and he finally perfected it
in 1940 as a mixture of 11 herbs and spices.
In 1952, Sanders decided to franchise his chicken recipe
to Pete Harman, the owner of a restaurant near Salt Lake City.
Harman ended up being a huge contributor to the early franchise.
He was the one who came up with the name Kentucky Fried Chicken,
and he later trademarked the famous "finger licking good" slogan.
In 1956, Sanders had managed to get six other franchisees,
but his original North Corben restaurant ended up failing
after the new Interstate 75 highway diverted traffic away from the city.
Left with minimal income and $105 dollars per month
from Social Security, Sanders started touring the U.S.,
looking for restaurants who wished to franchise his chicken recipe.
It was a struggle at first, but was eventually very successful.
By 1960, he had around 200 franchised restaurants,
and by 1963, that number had tripled to more than 600,
becoming the largest fast food operation at the time.
Managing KFC became so overwhelming that Colonel Sanders, now 74 years old,
sold his company for $2 million in 1964.
We will find out who he sold it to in a little bit,
but first let's see our next big brand: Pizza Hut.
Now pizza, despite being one of the most iconic dishes in the U.S.,
is actually a very recent phenomenon.
It only started becoming popular after the end of WWII,
when American soldiers returned from Italy.
By the end of the 1950's, pizza parlours were still very much a rare sight,
found most often near communities of Italian immigrants.
In 1958, inspired by the story of one such place,
Dan and Frank Carney decided to open their own pizza restaurant
on their university's campus in Wichita.
The tiny building looked a lot like a hut,
and so they decided to call their establishment The Pizza Hut.
Business was good, and one year later the Carney brothers got
their first franchise contract in the nearby city of Topeka.
Over the next decade, as pizza grew in popularity across the U.S.,
Pizza Hut expanded rapidly.
By 1966, the franchise had increased to over 145 restaurants
and the Carney brothers were already looking to go international,
first to Canada, and then Germany, Australia, Japan, and Great Britain.
By 1971, they had 1,000 restaurants
and were the largest pizza chain in the world.
The Carney brothers finally cashed in on their amazing success in 1972,
when the company went public with a listing
on the New York Stock Exchange.
We will get back to Pizza Hut in a little bit,
but now let's look at our last brand: Taco Bell.
The creator of Taco Bell was a man named Glen Bell.
After witnessing the horrors of WWII first hand,
Glen decided to bring some happiness to his life
by opening a hot dog stand in San Bernadino in 1946.
Across the street from his hot dog stand was a popular Mexican restaurant
where Glen would eat regularly.
He became close friends with the owner, who taught Glen the art
of making delicious tacos.
Eventually, Glen felt confident enough that he sold his hot dog stand
and started making tacos himself.
Over the next ten years, he would experiment with his idea
of Mexican fast food restaurant several times.
Each chain he started was a success, but they were all shared ventures
where Glen was only a minority share holder.
He was a pretty independent guy and so, in the end,
he sold his stake and in 1962 he used the money to open
the first Taco Bell in Downey, California.
You probably know where this going.
I mean, the 1960's were the decade when franchising
really exploded as a concept, and the early adopters
of this business model were very successful.
The first Taco Bell franchise contract was signed in 1964
for a restaurant in the South Bay area of Los Angeles.
Six years later, when the company went public in 1970,
it had a total of 325 franchised restaurants.
It is at this point in our story that Pepsi comes in.
Not the drink, but the company.
This will probably come as a surprise to most Coca-Cola lovers,
but the Pepsi Corporation was actually a huge food
and beverage conglomerate that owns a bucket load of brands.
Their story is also very interesting, but that's a story for another time.
What's important is that during the late 1970's,
they successfully predicted where the future
of the global restaurant industry would be.
Not in small family owned businesses, but in the large franchise chains
that were already emerging in the U.S.
Pepsi decided to get their hands on as many popular franchises
as they could, and this is where our three stories meet.
Pizza Hut and Taco Bell were public companies
when Pepsi acquired them in the late 1970's.
KFC, on the other hand, was private and it had changed hands
three times before finally being bought by Pepsi in 1986
for $850 million.
With the three franchises under their control,
Pepsi was briefly the largest restaurant company in the world.
I say briefly because just one decade later, in 1997,
Pepsi made the very questionable decision of spinning off its restaurant business
into a separate company.
Now, the reasons they gave at the time were
that the restaurant business was becoming unpredictable,
which was kind of true-- domestic sales had been decreasing
for the past three years.
But almost immediately after becoming independent from Pepsi,
the new company, called Tricon Global Restaurants,
saw huge success.
They gave their franchises a face lift and released
various new products and menus.
In 2002, they changed their name to Yum Brands
to better reflect their multi-brand strategy.
Since then, they've become huge, both in the U.S. and internationally,
especially in China.
There have been some bumps along the way,
like when their main supplier went bankrupt in the year 2000,
or when there was an Avian Flu epidemic in China in 2013,
but overall Yum Brands has been doing a good job
and today they're the largest restaurant company in the wold.
If you compare their stock prices to that of Pepsi,
you'll see a pretty clear pattern.
That latest drop in share price, by the way, is due to their recent deicison
to spin off their Chinese restaurants into a separate company.
That decision probably sounds familiar, and we know how spinning off
a good business went last time.
But, hey, I'm sure the CEO knows what's best.
After all, they're not paying him $1.1 million per year for nothing.
I hope you enjoyed this story of Yum brands.
If you did, hit that like button, subscribe, and check out my other videos
for the stories of more cool companies.
Tell me in the comments below which company you'd like me to feature next,
and, as always, stay smart.