Yum! Brands, Inc. Q3 FY2025 earnings call

• Chris Turner focuses on three areas: staying relevant to next-gen consumers, leveraging global scale to strengthen franchisee store-level economics, and extending technology advantages. Leadership changes include expanding Sean Tresvant's role, promoting Jim Dausch and Ranjith Roy, and planning to add a Chief Scale Officer. They announced exploring strategic options for Pizza Hut. KFC's development pipeline is robust with strong franchise engagement, and Taco Bell's innovation, digital engagement, and value offerings drove growth. Technology efforts focus on easy experiences, easy operations, and easy insights across brands.

KFC represents 53% of divisional operating profit. It delivered 14% core operating profit growth, driven by 6% unit growth and 3% same-store sales growth. Several international markets like the U.K. had strong results, with same-store sales up 9% in the U.K. KFC U.S. saw 2% same-store sales growth this quarter. Taco Bell represents 36% of divisional operating profit. Same-store sales grew 7% in the U.S., with restaurant-level margins at 23.9% (50 basis points higher year-over-year despite beef inflation). Taco Bell International same-store sales growth accelerated. Pizza Hut built 289 gross units this quarter but had elevated closures in some markets, largely tied to specific franchisee matters.

• KFC expected to achieve record gross unit openings full year. Taco Bell U.S. restaurant-level margins expected to land at 24% full year. Q4 ex special G&A expected to grow mid-single-digit. Pizza Hut's strategic review may impact full-year performance, with expenses tied to the review as a special item.

• Beef inflation remains a headwind for Taco Bell, though prices declined 10% since Q3. Potential risks from the strategic review of Pizza Hut, including impact on full-year performance. Macroeconomic uncertainties that could affect the business.

Q: How is KFC being positioned with new leadership, especially in the U.S. turnaround?

A: Scott, KFC Global CEO, is bringing ideas from Taco Bell like brand relevance, digital growth, and food innovation. In the U.S., efforts focus on brand relevance with Catherine Tan-Gillespie driving the comeback plan.

Q: What's the outlook for Taco Bell's momentum into next year?

A: Taco Bell benefits from craveable food, convenient experience, and unbeatable value. Expect broad-based strengths to continue, with growth across income bands and more younger consumers and families. Q4 and beyond will build on these strengths.

Q: How will strengthening franchisee store-level economics impact growth?

A: Leveraging Yum!'s global scale, including supply chain scale and Byte technology, to unlock white space opportunities. Creation of Chief Scale Officer role to focus on helping franchisees plug into scale globally, aiming to strengthen unit growth.

Q: Thoughts on Yum!'s growth profile if Pizza Hut is sold?

A: Yum! will remain focused on KFC and Taco Bell, their largest brands driving growth. KFC has strong unit development potential, Taco Bell U.S. and international have growth drivers. Portfolio will be constantly evaluated, but no other changes announced yet.

Q: Update on Live Más Café and its rollout?

A: Live Más Café piloted in San Diego with 13 open, heading to 30. Positive consumer response expected to lead to broader rollout, with benefits to the entire system even before full rollout.

Q: Factors impacting unit growth pace and white space opportunities?

A: Strong unit economics are key. KFC has white space globally, with examples like Italy and Korea showing growth from right partners. Taco Bell has acceleration in same-store sales and acquisition in Southeast U.S. for white space.

Q: Catalysts for Pizza Hut strategic review?

A: Pizza Hut has strengths but may need different structure for greater success. Evaluating options to position it for leading pizza brand, possibly under outside ownership after multiyear repositioning efforts.

Q: Thoughts on G&A spend and core operating profit growth?

A: G&A has been managed disciplinedly with minimal growth. Core operating profit growth target of 8% remains reasonable with disciplined G&A management and strategic investments.