Financing

Digital sales become a bigger fixture at Yum Brands

The owner of Taco Bell, Pizza Hut and KFC now gets 40% of its sales through digital channels even as dine-in business has returned.
Yum Brands Pizza Hut digital sales
Photograph: Shutterstock

The return of customers into restaurants around the world isn’t keeping them from ordering on their phones.

Yum Brands, the Louisville, Ky.-based owner of KFC, Taco Bell, Pizza Hut and Habit Burger, said on Thursday that its digital sales topped $5 billion in the third quarter ended Sept. 30. That’s nearly 40% of the brands’ total sales in the period.

That happened even as customers returned into the restaurants, giving the fast-food brand operator confidence that the channel will remain a popular one for the foreseeable future.

“From Q2 to Q3, we did see a return to dine-in, yet we saw digital sales go up,” Yum CEO David Gibbs told investors on Thursday. “And we saw digital mix go up, which is proving that not only is it sticky, that it’s still something that’s going to continue to grow for us, which is a great sign for all our brands as we move forward.”

Digital sales have been increasing for years, of course, as more chains implement mobile order and pay and add third-party delivery while finding other ways to make orders electronic.

Those channels took off during the pandemic as consumers shied away from restaurants and more chains made cognizant efforts to get people to order that way. Restaurant chains generally love digital orders, especially when they come through their own channels, because they tend to be larger and more profitable.

These orders are proving to have some real staying power as more markets open and going into restaurants becomes more common again. Several brands, including McDonald’s and Chipotle Mexican Grill, have highlighted continued growth of their digital sales this year.

Much of the digital shift has taken place at Pizza Hut, which has pushed more takeout and delivery in recent years while moving away from the dine-in business that had been its heritage. On a two-year basis, off-premise same-store sales rose 17% in the third quarter in the U.S. By comparison, its full two-year same-store sales rose 8%.

But the other brands are seeing a rapid movement of customers to digital channels. KFC U.S., for instance, already surpassed its 2020 digital sales by July of this year.

Likewise, Yum’s smaller fast-casual Habit Burger also saw digital sales growth this year as consumers returned to restaurants.

At Taco Bell, meanwhile, the company has been aggressively developing units specifically designed with digital orders in mind. The chain has 23 of its “Go Mobile” locations in the U.S., which feature dual drive-thru lanes, one of which is dedicated to mobile orders, and enhanced curbside pickup.

Yum’s digital efforts aren’t just customer-facing, either. The company closed on its integration of Dragontail Systems, a technology company that uses technology to streamline order management in the restaurant and optimizes delivery routes.

The technology is in 1,700 stores in the Pizza Hut system and CFO Chris Turner said that the technology has already resulted in improved sales and customer satisfaction scores.

“We’re prioritizing making it easier to operate a restaurant, ultimately driving efficiencies in our stores to enhance franchise unit economics while also improving the customer experience,” Turner said.

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