Delivery boosts both KFC and Taco Bell

But third-party services appear to be eating into Pizza Hut’s market.
Taco Bell delivery
Photograph courtesy of Taco Bell

Delivery appears to be providing a sales tailwind for Taco Bell and KFC.

Pizza Hut? Not so much.

For the chains’ owner, Yum Brands, that still makes the growing business of third-party delivery worth it, though it puts pressure on the company to help the pizza chain evolve and compete in a more challenging environment.

“There’s obviously negative impact, but it’s hard to measure what the cannibalization effect aggregators are having on Pizza Hut,” Yum Brands CEO Greg Creed said on the company’s first quarter earnings call Wednesday.

“There’s obviously a huge opportunity in the $40 billion pizza delivery business to do better. But at the same time, the nonpizza delivery market in the U.S. is worth about $100 billion. It’s growing at 15%, and now we’re going to leverage Taco Bell and KFC to take advantage of that opportunity. So yes, a little bit of negative impact, but I see this whole opportunity for delivery to be an upside for us, not a negative.”

A year ago, Yum invested $200 million into online ordering and delivery provider Grubhub, making a big bet on one of the biggest trends in the restaurant space.

The company has been adding the service into its KFC and Taco Bell brands while also looking for ways to get Pizza Hut involved.

The brands’ respective first quarter numbers perhaps reflect some of the direction delivery is headed.

Same-store sales for KFC in the U.S. improved by 2% in the quarter ended March 31, the company said Monday.

For Taco Bell, U.S. same-store sales rose 5%. But Pizza Hut remains a challenge, with same-store sales flat despite the company’s NFL partnership and a host of new marketing initiatives.

Yum executives said that delivery helped sales for both Taco Bell and KFC.

Taco Bell began marketing delivery nationwide in February, and the service is now in more than 4,000 of the chain’s 6,000 U.S. locations.

“We are excited about delivery as an opportunity to drive incremental sales and transactions,” Creed said. He would not provide specific data, “but I will say that both traffic and check saw benefits from the launch.”

KFC has not marketed delivery to the same extent as its sister chain, but Creed noted that 2,200 of the chain’s domestic locations have the service and that 3,200 offer “click and collect” ordering through Grubhub.

Creed said that delivery “positively contributed” to the chain’s first quarter same-store sales. The company plans to launch the service with marketing later this year.

Pizza Hut is working with Grubhub to join the service’s marketplace, to get the chain in front of the service’s customers.

Creed said that 200 of Pizza Hut’s domestic locations are in the marketplace. Customers place orders on the Grubhub website, but Pizza Hut’s drivers are completing those orders.

Still, Creed said, Pizza Hut’s sales internationally and domestically will be a slow improvement. The company has been shifting stores from full-service concepts into delivery and takeout locations, and that shift will take time and impact sales.

“Sustainable improvements in sales growth will remain a small build as we update and reposition the asset base and make the messaging more distinctive,” Creed said.

Yum Brands’ total revenues declined 9% to $1.3 billion. Net income declined 39% to $262 million, or 85 cents per share, from $433 million, or $1.30. While the brands’ same-store sales results bested investors’ expectations, the profit numbers did not, and the stock declined more than 2% in morning trading Wednesday.  

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