Financing

KFC’s Chicken & Waffles were apparently a ‘huge hit’

Parent company Yum Brands also reported same-store sales at Pizza Hut were positive thanks in part to its NFL deal, but sustained improvement will be a “slow build.”
Photograph courtesy of KFC

KFC might have been late in introducing Chicken & Waffles, but that apparently didn’t hurt sales when it finally did.

Same-store sales at the chain’s U.S. units rose 1% in the quarter ended Dec. 31, parent company Yum Brands said Thursday. And a lot of that came thanks to the late-year introduction of the Kentucky Fried Chicken & Waffles limited-time offer.

“Chicken & Waffles were a huge hit,” Yum Brands CEO Greg Creed said on the company’s fourth-quarter earnings call Thursday. He said that the product, backed by KFC’s “bold and cheeky marketing,” led to the strongest same-store sales month for the brand all year long.

The strong finish to 2018 capped off the fifth straight year of same-store sales growth for Louisville, Ky.-based KFC, which has used new products and that cheeky marketing to get customers’ attention again.

That marketing included items such as a Colonel Sanders bearskin rug contest and chicken-scented “firelogs.”

Same-store sales rose 1% in the U.S. for the full year and 3% internationally, Yum said. KFC’s U.S. market represents 17% of the 23,000-unit brand’s system sales—a distant second behind China, which accounts for 27% of the chicken chain’s system sales.

KFC sister chain Pizza Hut, meanwhile, reported 1% growth in same-store sales in the fourth quarter in its U.S. market and 2% for the full year. Internationally, however, same-store sales at the chain were flat for the quarter and down 2% for the full year.

Creed on the earnings call said that the company is “dissatisfied” with the state of the pizza chain’s system sales growth both in the U.S., its largest market, and around the world. System sales at Pizza Hut rose 3% internationally and 1% in the U.S.

“Sustained improvements will remain a slow build,” Creed said, noting that the company is working to improve its asset base and “make messaging more distinctive.”

In the U.S., Pizza Hut’s NFL deal “brought attention” to the brand, and Creed said that the partnership should continue to provide the chain with benefits in the coming years.

Yet the brand, both in the U.S. and internationally, has a challenge with the number of dine-in units in the system.

About 40% of the company’s restaurants outside the U.S. are dine-in, with half of those locations in China.

The problem with that is customers are increasingly demanding takeout and delivery, and there is a 10-point differential between the company’s dine-in restaurants and its takeout- and delivery-focused locations.

Pizza Hut operates more than 18,000 locations worldwide, and Creed said that the company’s acquisition of the 1,300-unit Spanish chain Telepizza should help accelerate its overall conversion into a more takeout-oriented concept.

Yum Brands’ stock was mostly flat through early afternoon trading Thursday. Revenues in the fourth quarter declined 1% to $1.6 billion. Net income declined 23% to $334 million, or $1.07 per share.  

The company’s Taco Bell units reported 6% same-store sales growth in the quarter. The chain now operates more than 7,000 locations, including 450 international restaurants.

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