In 2018, digital was largely a want for Taco Bell. The Mexican fast-food chain had “virtually zero” digital sales that year, Chris Turner, CFO of parent company Yum Brands, said this week. But it was intent on changing that.
Four years and one industry-altering pandemic later, Taco Bell is on pace to exceed $3 billion worth of digital sales, thanks to kiosks, mobile ordering and third-party delivery. That’s nearly a quarter of the chain’s total sales.
While some of that $3 billion came from customers that might have gone to Taco Bell otherwise, more than a third of it is “incremental,” Turner said, meaning sales the chain generated either from new customers or existing customers making larger orders or coming in more frequently.
“A full $1.2 billion of those sales have been truly incremental to the system,” Turner told investors. “So, fully $1 billion in sales we wouldn’t have otherwise.”
Technology has rapidly changed the equation for Yum, the Louisville, Ky.-based company that owns KFC, Pizza Hut and Habit Burger in addition to Taco Bell. And the company has massive plans to make it even more ever-present, not just to its customers but to the employees in its restaurants and the franchisees and corporate staff making key decisions.
The idea, executives told investors this week, is to make life easier for everyone involved, including customers, employees and franchisees. And, as the Taco Bell story suggests, it can pay real dividends in the not-so-long run.
“Everything we do comes back to digital and technology in every part of our business,” CEO David Gibbs told investors. “We are just getting started on having digital and technology drive our business in ways we couldn’t have even imagined a few years ago.”
“It’s important to own competitive advantage technology. We want technology that provides a distinct advantage. And because of our scale, we can distribute investments to restaurants around the globe.” -Yum Brands CFO Chris Turner
Yum Brands’ digital strategy is a demonstration of how big restaurant companies have been able to quickly turn their businesses from tech laggards to tech leaders in just a couple of years. It’s why many of these companies have pushed to make acquisitions and take other steps to grow larger, so as to better be able to afford new technology.
Yum changed its approach to technology in 2019. In the years before then, its strategy was “decentralized,” Turner told investors. Each brand had its own approach. And most of its energy was devoted to ensuring Pizza Hut could sell pizzas online.
At the time, Turner said, some Yum executives realized that technology was going to play a massive role in the industry, and that its approach needed to change. Turner specifically mentioned Gibbs, COO Tracy Skeans, KFC CEO Sabir Sami and Chief Strategy Officer Gavin Felder as banging the drum on pushing technology.
The company in 2019 hired former Walmart technology executive Clay Johnson to be the company’s first chief digital and technology officer. It created a centralized Yum technology team while each individual brand has its own technology team.
Yum at the center provides the platforms, using the company’s size and scale to ensure it has efficient access to leading technology. And the individual brands tailor the interfaces to fit their customers and employees.
“What a customer at KFC in Thailand expects may be very different from what our Taco Bell customers in the U.K. expect,” Turner said.
Yum then went on a shopping spree.
The company made several acquisitions, each of which on its own was small—at least when compared with Yum’s size—but taken together have helped turn its digital business into a powerhouse.
It acquired the AI marketing firm Kvantum in 2021 and shortly after that acquired Tictuk, which enables ordering through text and Whatsapp. It then acquired Dragontail Systems, which automates the food preparation process from order through delivery. It had already acquired consumer insights firm Collider Labs in 2015.
Yum has also developed much of its own technology. It built a commerce platform and a global data hub. It also developed a “Yum super app” designed to make it easier for restaurant managers to do their jobs. And the company also has a “Red Innovation Team” whose job it is to stay on top of tech trends. That team is looking at strategies such as AI to improve order accuracy or take drive-thru orders or robots to take over some tasks in restaurants.
The company’s strategy is to own and manage its own technology, rather than farm it out—closer to Domino’s, in other words, than to McDonald’s, which has sold off the technology companies it acquired in recent years.
“It’s important to own competitive advantage technology,” Turner said in an interview, noting that a common technology such as cloud computing storage would not fall under that umbrella. “We want technology that provides a distinct advantage. And because of our scale, we can distribute investments to restaurants around the globe.”
Owning, he added, “enables us to move faster. And we own the data.”
A screenshot from the Taco Bell app. The company wants all its sales to be "made easier" by digital.
Turner noted that the company would be open to acquiring other technology companies if they provide a similar competitive advantage but, he said, Yum is focused now on integrating technology into its brands.
That includes Dragontail at Pizza Hut locations in the U.S., which handles orders that come into the restaurant and helps determine when items should be prepared. “Traditionally, the order pops up and the kitchen works on it regardless of when the driver shows up,” Turner said. “A lot of the time, the food is waiting for the delivery driver when they show up.”
Instead, the technology times the preparation so the food is not waiting—and cooling off—when a driver arrives. Pizza Hut U.S. is expected to implement that technology in most of its locations next year.
Habit Burger, meanwhile, is expected to implement Tictuk next year. Yum has typically used that technology to quickly add digital ordering in its smaller markets. Habit, which operates just over 300 locations and is Yum’s smallest concept, will be implementing chat ordering through the service next year.
The company’s brands have been taking other steps to boost digital sales. That has included loyalty—arguably the biggest single technology trend in the U.S. today—delivery and mobile ordering. And don’t overlook kiosks.
Consumers are warming to kiosks quickly. At KFC, for instance, 38% of restaurant sales come through kiosks at locations with the devices. That’s up from just 13% in 2019. “We are seeing a rapid shift for consumers who move from the front counter to kiosks,” Sami told investors. “The mix on kiosks in stores that have kiosks has tripled.”
For Yum, the strategies have helped double digital ordering at the company’s chains, to an expected $24 billion—or 40% of total system sales. But Yum has loftier goals over time. “We think digital should be part of every transaction,” Turner said, noting that all transactions should be “made easier” through digital.
While that may seem difficult, he reminded that “we’re already at 40%” and then noted the benefits of digital technology: a more efficient business, higher frequency and larger orders. Just ask Taco Bell.