It’s hard to imagine a Yum Brands without Pizza Hut. The pizza chain was acquired by PepsiCo in 1977, which then spun off its restaurant division in 1997 to eventually become Yum Brands in 2002. It is an OG, in other words.
But we don’t have to imagine, because a Pizza Hut-less Yum is now becoming a reality. Pizza Hut is going private in two separate deals — to LongRange Capital and Yum China for a total of $2.7 billion — both expected to close this month.
We got a clearer view of what “the new Yum” will look like during its second quarter earnings call last week, and at first glance, it seems to be a stronger company with only a modest impact on earnings power initially.
In Q2, for instance, Yum delivered 7% system sales growth, 6% unit count growth, and 4% same-store sales growth, excluding Pizza Hut. Meanwhile, digital sales excluding Pizza Hut exceeded $17 billion in the first half of the year.
Executives have reiterated that the sale will allow Yum to better focus on the companies it calls its "twin growth engines," Taco Bell and KFC, and there is plenty of incentive to do so.
In 2025, Yum’s operating profit was nearly $2.6 billion, with only about $340 million of that coming from Pizza Hut, or about 13% despite having a global store count of nearly 20,000 out of Yum’s approximately 63,000.
By comparison, Taco Bell generated about $1.13 billion in operating profit last year, despite having a smaller footprint of about 9,000 units. KFC generated just over $1.5 billion and continues to have massive white space across its global markets to build on its 33,000-plus-unit portfolio.
Much of this work is already underway. Taco Bell’s quarterly performance has outpaced its fast-food peers for at least five years, while the chain is targeting 3,000 international restaurants by 2030, nearly tripling its current footprint. Meanwhile, KFC just announced a comprehensive “next chapter” initiative aimed at modernizing the brand across its global system.
Elsewhere on the income statement, Yum CFO Ranjith Roy said the company’s general and administrative (G&A) overhead costs should change little following the divestiture of Pizza Hut.
“The 1.7% G&A percent of system sales, we believe, is still relevant," he told analysts, adding that the company will focus on investing "while staying within the framework and metrics that we think are reasonable and disciplined G&A targets."
Notably, Yum anticipates $2.5 million in transition services related to fees per month as the company continues to provide certain technology and finance services to LongRange’s Pizza Hut, which will fully offset corporate G&A expenses previously allocated to its Pizza Hut division. Those fees will be phased out over the course of 2027.
Additionally, Pizza Hut, excluding China, will continue to leverage the Byte by Yum technology platform under a separate agreement. Yum expects to use a portion of the net proceeds expected from Pizza Hut transactions to pay down debt and repurchase shares. We could also see continued investment in digital technology/AI and, potentially, another acquisition, though executives have not alluded to the latter.
“The Pizza Hut transactions reinforce our commitment to being disciplined allocators of capital with a relentless focus on long-term shareholder value creation,” Roy said.
That’s not to say there aren’t risks, however. Following the divestiture, Yum becomes far more dependent on Taco Bell and KFC, and the recent cyclospora outbreak illustrated just how volatile that concentrated reliance can be. Taco Bell is firmly in recovery mode after its lettuce supplied by Taylor Farms was identified as a potential source of the outbreak.
Still, Pizza Hut has experienced multiple years of declining comparable sales and weaker returns. It is also exposed to a broader pizza category showing softness across the board. And it has become a drag on Yum’s overall performance, weighing on the company’s valuation. Without it, Yum will likely accelerate growth and bolster average returns on capital.
In this environment, scale is a major advantage, but so, too, is running a lean and efficient business. By offloading Pizza Hut, Yum will likely be able to achieve both.
Contact Alicia Kelso at Alicia.Kelso@informa.com
Follow her on TikTok: @aliciakelso