Financing

Digital takes off at Yum Brands, but don't call it a tech company

The owner of KFC, Pizza Hut, Taco Bell and Habit continues to add to its in-house technology capabilities and is building digital sales. But the company wants to keep its focus on what matters.
taco bell kiosk
Taco Bell has kiosks at every U.S. location. They can generate a higher average check than counter orders. | Photo: Shutterstock.

Yum Brands, the Louisville, Ky.-based owner of fast-food chains KFC, Taco Bell, Pizza Hut and The Habit, has been making technology a central part of its business in recent years. It has made small acquisitions of tech companies like Dragontail Systems and Kvantum.

It is adding an internal commerce platform that can speed marketing initiatives and is using machine learning to help general managers order supplies. Digital orders now account for nearly half of the sales generated by the company’s chains.

But don’t call Yum a tech company. “I wouldn’t frame it that way,” CFO Chris Turner said in an interview. “We’re going to be a restaurant company that has distinctive technology.”

The focus, he said, should remain on “the things that matter most,” including the food, the value, the brands and the experiences inside the restaurants. “All that should be enabled by digital,” Turner said.

Still, digital ordering and technology inside the restaurant have become central for large fast-food chains in the post-pandemic environment. With costs high and labor tougher to find than ever, making restaurants more efficient is vital.

Digital ordering, meanwhile, comes with ancillary benefits in the form of everything from marketing to order sizes that help drive sales.

Overall, Yum’s concepts globally generated $7 billion in digital sales in the second quarter, the company said Wednesday, accounting for 45% of the chain’s worldwide sales. That helped the company’s system sales rise 13% worldwide, including 9% same-store sales growth. At brands such as Taco Bell, digital sales rose by more than a third in the period.

Yum has been implementing strategies that can often ease stress on restaurant workers while driving sales in more subtle manners.

For instance, the company has been adding kiosks at Taco Bell and Habit restaurants. All of Taco Bell’s 7,200 U.S. restaurants now have kiosks, for instance. And more than 60% of Habit’s more than 350 locations now have them. “On average, kiosk sales see 10% higher checks compared with front counter sales and excellent profit flow-through,” Yum CEO David Gibbs told investors on Wednesday.

The company is also generating some traction with an internal commerce platform. KFC U.S. started using that program in 2021. Last quarter, that enabled the company to launch a promotion with Activision Blizzard to promote the Diablo IV video game, including in-game rewards for KFC purchases.

The company was able to build the infrastructure necessary for the promotion “in a matter of weeks,” Gibbs said. “Previously, the process would have taken months, with significant third-party expense.”

KFC Diablo IV

A Diablo IV promotion was implemented in weeks, where using a third-party would have taken months. | Photo courtesy of KFC.

That program is rolling out to other Yum chains, including Taco Bell and Pizza Hut U.S. “It allows us to not only get economic advantages, it helps us move faster,” Turner said. “It’s one integration that can work across multiple geographies and multiple brands.”

The commerce platform also gives the company more insights because it provides a single platform across multiple brands that is owned and operated internally, providing a consistent set of data that Yum can use to determine the effectiveness of its efforts.

Ease is a vital element in Yum’s digital strategy. The company wants to ease customers’ use of its restaurants, as well as simplify operations and the use of insights. Technology is a way for Yum to do that.

But, while Yum has been making inroads into that idea, Turner stressed that it is all still quite early. Much of its technology is still in the early stages of implementation, for instance, and it wants to get a lot more of its orders through digital channels.

“We’re on a journey to hopefully someday being 100% digital,” Turner said. “But we’re still in the early innings.”

So Yum is a restaurant company. But it just really likes technology.

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