Sarah Nelson Smith, UK legal chief of KFC and Pizza Hut owner Yum! Brands took a fresh approach to panel review
Kentucky-based Yum! Brands, the umbrella group for KFC, Pizza Hut and Taco Bell, is not the most obvious setting for a magic circle-trained oil and gas litigator, but Sarah Nelson Smith says the restaurant giant felt like home as soon as she walked through the door.
Having started out at Freshfields Bruckhaus Deringer and then Baker Botts , Nelson Smith joined Yum! as legal counsel in May 2011. She was immediately drawn to the all-American team spirit and the work-life balance.
Beyond the City bubble
“Working here feels more grounded than in the City,” she insists. “There, it felt like being in a bubble, with the real world kept at bay.”
A stark contrast to Borehamwood-based Pizza Hut and Woking-based KFC, where she says the biggest difference from private practice has been the speed at which everything moves.
“In private practice you work with a team on a matter and when you get to the end of that you move on to the next client,” she says. “Here, there’s no area of the business my role doesn’t touch upon, and that involvement doesn’t end.”
She got her first taste of the pace at which things move at Yum! by being thrown in at the deep end shortly after joining, when Pizza Hut was divided into eat-in and drive-through businesses.
The split involved a high-profile sale and franchise of the drive-throughs to private equity-owned Rutland Partners. Midway through the deal Nelson Smith’s predecessor Vanessa Allen left and she was made legal director in October 2012.
“It was a great learning curve,” she says. “It meant analysing every area of the company and determining how best to separate each of the teams and each of our systems into two entities. By the end of the process I was completely familiar with the business.”
It was a massive job for a team that at the time consisted only of herself, a legal contracts manager and an informal external panel. Nelson Smith describes the period as “intense”, but she was pragmatic in her response to the task, appointing Linklaters to handle the split of the business before swiftly appointing a legal counsel to support her in-house and then turning her attention to the company’s first panel review, which completed in December 2013.
“Neither KFC nor Pizza Hut had undertaken a panel review process previously,” Nelson Smith explains, “but I knew many people in both companies had longstanding relationships with some of the firms. It made sense to do a thorough review and, if it turned out that everyone we had advising us was exactly who we wanted, that would be fine as it would have been decided on the basis of fact, rather than precedent.”
She asked staff across the company to feed into the process by letting her know which external counsel they had used in the past. In September 2013 all the firms on that list were invited to pitch for a formal panel position.
“There were about 15 that we already used regularly and 27 in total once we had added all the other firms with links to the company,” she says. “I wrote to all 27 firms asking them to tell us what their areas of expertise were and then we asked them a list of questions.”
The firms’ legal expertise was never in doubt, Nelson Smith says, so the review concentrated more heavily on whether they were a good cultural fit and had adequate experience in the market.
Firms were asked to identify a significant market trend and how it might affect the business, to come up with an innovative Pizza Hut or KFC menu offering and, more unexpectedly, to share the single best piece of advice they’d ever been given.
“When we did the review, I wanted the questions posed to set the tone: we were not just looking for black-letter lawyers,” Nelson Smith explains, recalling the enthusiasm of the firm whose pitch came back mocked up to look like a menu. “Some of the firms carried out internal surveys by ordering in pizza and KFC for their teams and asking them to analyse the products and suggest innovations.”
Others fell spectacularly short. One, unsuccessful and unnamed, partner cited the use of track changes on documents as his idea for how Yum could improve its business.
That was not the only clanger to catch Nelson Smith’s attention. Some surprisingly archaic approaches to pricing were put forward, in particular charging property work relative to the cost of the acquisition or sale.
“It seems illogical, particularly when you compare a low-value but complex Scottish transaction with a quick and easy London transaction with a higher land value,” she says.
Not only was it illogical but since the company is expanding rapidly and acquiring a lot of high-value sites, paying an uplift on legal services did not make sense.
That aside, the review led to substantial savings, with firms offering more modern fee structures such as fixed, capped and blended rates. It introduced value-added services that would not otherwise have been offered, such as lawyers being seconded in-house.
Asked whether Yum! might take a similar approach to legal counsel internationally, Nelson Smith is not convinced.
“I don’t see the benefit of a single global panel for us right now, as some of our most valued advisers are from local firms,” she says.
Nelson Smith has 12 counterparts around the world with whom she says she is in regular contact, and would trust to recommend local counsel if she needed it, but because Yum! generates very little cross-jurisdictional work it is not a priority to extend the panel that way.
With the panel review in place for two years and the in-house team in good shape, Nelson Smith says she is keen to focus on influencing the direction of the business. This is good news for her new panel firms which she says she will be relying on far more heavily so she can carve out more time for business strategy.
Sarah Nelson Smith
Yum! Restaurants International
Position: Legal director
Reporting to: Global chief legal officer for KFC and Pizza Hut (Vinod Mahboobani, based in Dallas); general manager of Pizza Hut UK & Ireland (Sandeep Kataria); CFO/business development director KFC UK and Ireland (Paula Mackenzie)
Employees: 23,000 KFC and 13,500 Pizza Hut (UK)
Legal capacity: About 120 in total globally; three in the UK