David C. Novak
1953–
Chairman, president, and chief executive officer, Yum! Brands
Nationality: American.
Born: 1953.
Education: University of Missouri–Columbia, BA, 1974.
Career: Tracey-Locke BBDO, ?–1986, various positions leading up to executive vice president; PepsiCo, 1986–1990, senior vice president of marketing for Pizza Hut; 1990–1992, executive vice president of marketing and national sales for Pepsi-Cola; 1992–1994, COO of Pepsi-Cola North America; 1994–1996, president and CEO of KFC North America; 1996–1997, group president and CEO of KFC and Pizza Hut; Tricon Global Restaurants, 1997–1999, vice chairman and president; 1999–2001, CEO and president; 2001–2002, chairman, CEO, and president; Yum! Brands, 2002–, chairman, CEO, and president.
Address: Yum! Brands, 1441 Gardiner Lane, Louisville, Kentucky 40213; http://www.yum.com.
■ David C. Novak was the chairman and CEO of Yum! Brands, an independent, publicly owned fast-food franchiser that in 2004 was made up of six subsidiaries organized around five core restaurants: Pizza Hut, KFC, Taco Bell, Long John Silver's, and A&W All-American Food. Pizza Hut, KFC, Taco Bell, and Long John Silver's were the global leaders in the quick-service pizza, chicken, Mexican, and seafood categories, respectively. Serving its signature frosty-mug root beer drinks since 1919, A&W All-American Food was the longestoperating quick-service U.S. franchise chain. Due greatly to Novak's creative management and organizational style, Yum! Brands' global sales totaled more than $24 billion in 2002.
FROM PEPSICO TO TRICON TO YUM! BRANDS
Novak started his career in the advertising field, holding leadership positions over a 20-year period primarily with the
advertising agency Tracey-Locke BBDO (now TLP Tracey Locke Partnership). There he eventually reached the position of executive vice president, as which he supervised client relationships, including those with PepsiCo and Frito-Lay. Novak later held similar positions at Pizza Hut, PepsiCo, and KFC. Starting in 1986 he became senior vice president of marketing at Pizza Hut, reaching the same position at PepsiCo in 1990. In 1992 he became chief operating officer of Pepsi-Cola North America. Novak became president of KFC's North American operations in 1994 and group president and CEO of the North American operations of both KFC and Pizza Hut in 1996. He became president and vice chairman of the board at Tricon Global Restaurants when it came into existence on October 7, 1997, as a result of a spin-off from PepsiCo, which had owned and franchised the KFC, Pizza Hut, and Taco Bell brands worldwide. Novak served in these capacities until December 1999.
NOVAK AT THE HELM
Novak was named the chief executive officer of Tricon Global Restaurants in January 2000, succeeding Tricon's first CEO Andy Pearson; a year later, on January 1, 2001, Novak became Tricon's chairman. During Pearson's time as CEO, he and Novak worked together closely in focusing on three main goals: to correct the management problems left over from the company's time under PepsiCo, to increase the competitiveness of its four operating companies, and to capitalize on opportunities for multibranding, international growth, and increased scale.
During this time span, first under Pearson and later under Novak, Tricon's performance dramatically increased with respect to profit and sales growth, debt payment, margin improvement, return on investment, and employee commitment. In fact, Novak's excellent grasp of the nature of the CEO position allowed Pearson to bring him up to the top management spot earlier than had been expected. Pearson called Novak a driving force behind Tricon's great performance—with a remarkable grasp of the company's business, outstanding skills as a conceptual management leader, and superior operating expertise. Appropriately, in a 1999 press release, upon stepping down from the top position, Pearson said of Novak, "David is the most effective leader I have ever worked with" (November 15, 1999).
UNITING A NEW COMPANY
Novak immediately faced an ominous challenge in uniting the global fast-food brands of KFC, Pizza Hut, and Taco Bell. The three individual companies were floundering and, just as seriously, were mutually suspicious of each other's management styles. By utilizing the same people-friendly attitude, quality-service standards, comprehensive vision, and product innovations that he had used to help turn KFC around in the mid-1990s, Novak took and molded the three restaurants into a cohesive partnership with division leaders who cooperated with rather than competed against one another.
Novak was able to transform the company with regards to its franchisee relationships; in retrospect, Novak was considered to be the mastermind and architect of Tricon's successful and profitable one-system company. In the first five years following the spin-off, Tricon increased systemwide sales by 8 percent, more than doubling operating earnings per share, and improved return on invested capital by 10 percentage points.
HYPERCOMPETITIVE AND GENEROUS
Novak's skillful management tactics were credited with influencing the cultural shift that was eventually incorporated into Tricon. He was characterized as wearing many hats during the changeover: those of captain, friend, mentor, politician, and team player. Novak was described by many observers as a man so hypercompetitive that he frequently went "for the jugular" when urgency called for such action. As quoted in an article in Brandweek , John Neal, the president of JRN who operated one hundred KFC units, said of Novak, "He is one of the most competitive leaders that I have ever sat across the table from. He will beat you whether in golf, poker, or basketball. He just isn't going to lose" (October 11, 1999).
Novak's competitiveness, however, was grounded in a leadership style that was also generous when it came to recognizing and rewarding individuals who had performed well. Rather than dictating the manner in which work should be done, Novak used a "buy-in" approach to accomplish projects with a team attitude. In 1995, when he was working exclusively for KFC, he used one thousand autographed rubber chickens to generate employee, supplier, and manager support around a new employee-recognition program. Pizza Hut and Taco Bell then instituted their own employee-recognition programs centered around the Big Cheese and the Royal Order of the Pepper Awards, respectively.
Such concepts, according to Novak, helped company employees create positive experiences each and every time a customer entered their restaurants. Novak remarked that these tactics, which he constantly reinforced, had far greater long-term impact on brand perceptions than even television advertisements. In general Novak called this approach "Customer Mania," saying that it improved the method with which each restaurant interacted with its customers and "put a 'Yum' on their faces all around the world" (YUM.com).
YUM! BRANDS CREATED
In March 2002 Tricon declared that it would be acquiring the Lexington, Kentucky–based Yorkshire Global Restaurants as well as its two brands: Long John Silver's and A&W All-American Food. At that time Novak announced the company's intention to change its name to Yum! Brands in order to better reflect its expanding portfolio of restaurants as well as its New York Stock Exchange ticker symbol, YUM. On May 7, 2002, the Yorkshire acquisition was finalized, showing the extent to which Novak and the company were committed to multibranding. On May 16, 2002, a vote during the company's annual shareholders meeting officially changed the company's name from Tricon Global Restaurants to Yum! Brands. In 2002 the company's U.S. sales totaled $7.78 billion, as produced by a workforce of 244,000 employees.
LONG-TERM STRATEGY
Novak's Yum! Brands, a Fortune 300 company, had become one of the largest quick-serve restaurant companies in the world, trailing only McDonald's in sales. Yum! Brands did eventually grow to the point where it outnumbered its hamburger competitor in terms of system units, with nearly 33,000 units in more than one hundred countries and territories. The company owned and operated about one-fifth of its stores, franchising the remainder.
Under Novak's direction the company's long-term strategy built on Yum! Brands' foundation as a worldwide brand franchiser. Novak's five areas of long-term focus, which were considered essential to the company's growth and progress, included multibrand expansion, international expansion, the company's portfolio of category-leading U.S. brands, worldwide franchise fees, and strong cash generation and returns.
MULTIBRANDING
Novak instituted multibranding, a concept that provided consumers with more choices and convenience at a single location hosting a combination of KFC, Taco Bell, Pizza Hut, A&W All-American Food, or Long John Silver's restaurants. Under Novak, Yum! Brands became the worldwide leader in multibranding with over 1,800 domestic multibranded restaurants, representing nearly 10 percent of total traditional U.S. units. Over two thousand multibranded restaurants worldwide generated nearly $2 billion in annual sales, and in 2002 Yum! Brands was opening three new restaurants outside the United States each day. In addition Novak bought into a portion of Yan Can, the start-up casual, quick-service Asian restaurant chain.
Novak directed the development, operation, licensing, and franchising of a system of both traditional and nontraditional units in each of the company's brands. Nontraditional units included kiosks and express units that had a more limited menu and operated in nontraditional locations like airports, amusement parks, colleges, gas and convenience stores, and stadiums, where traditional, full-scale outlets would not be efficient or profitable.
STRESSING DIVERSITY
Under Novak's direction Yum! Brands was named one of Fortune magazine's 50 Best Companies for Minorities for its comprehensive adherence to key diversity measures. This honor was bestowed upon Yum! Brands based on the survey that appeared in Fortune 's July 7, 2003, issue. The authors of the article described how surveyors measured minority representation throughout organizations in such categories as the board of directors, the 50 highest-paid executives, purchasing from minority firms, diversity training, recruitment and retention, and charitable contributions to minority organizations.
The results showed that Yum! Brands led all companies for managerial diversity and was ranked among the top 10 companies having the highest percentage of African American employees. In all, 54 percent of the company's U.S. workforce, including 53 percent of recent hires, comprised minorities. Novak remarked in a press release that "Yum! Brands' commitment to diversity helps drive all aspects of our business" (June 26, 2003). He further stated that the company's diversity strategy included leadership development, purchasing, franchising, and community involvement.
PHILANTHROPY EFFORTS TARGET MINORITIES
Novak was actively involved in Yum! Brands' philanthropy efforts targeting minorities. In 2002 the company almost tripled its charitable contributions to minority communities and the volunteer involvement of its employees through initiatives such as the Dare to Care Food Bank, based in Louisville, Kentucky. Yum! Brands committed one million dollars annually to the Food Bank; two-thirds of that total would help the Food Bank in supporting upwards of 46,000 undernourished children in minority communities lacking in resources.
Novak, through Yum! Brands, also supported charitable organizations such as the National Association for the Advancement of Colored People, the League of United Latin American Citizens, the National Urban League, the National Council of LaRaza, the National Minority Supplier Development Council, the MultiCultural Foodservice and Hospitality Alliance, the National Minority Franchising Initiative, the American Indian College Fund, and the U.S. Pan Asian American Chamber of Commerce.
See also entry on Yum! Brands Inc. in International Directory of Company Histories .
sources for further information
Howard, Theresa, "Quick-Serve Artist: David Novak's Fast-Food Empire," Brandweek , October 11, 1999.
"Message from Andy Pearson Announcing David Novak's Promotion to CEO," November 15, 1999, http://www.yum.com/news/111599.htm .
"Yum! Brands Recognized in Fortune's Top 50 'Best Companies for Minorities' and Takes Number-One Spot for Managerial Diversity," June 26, 2003, http://www.yum.com/news/062603.htm .
—William Arthur Atkins