Financing

Yum Brands has been on a building tear coming out of the pandemic

Nearly 25% of the global locations for the company’s brands KFC, Taco Bell, Pizza Hut and Habit have been built over the past three years.
Taco Bell Spain
Taco Bell has grown aggressively in countries such as Spain. | Photo: Shutterstock.

Yum Brands is peppering the world with fast food.

The owner of KFC, Taco Bell, Pizza Hut and The Habit Burger Grill has been on a building tear rarely seen in a company that big.

“In the last three years, 25% of all Yum restaurants have been built,” David Gibbs, CEO of the Louisville, Ky.-based Yum, said at the end of the company’s fourth-quarter earnings call on Wednesday. “And you’re talking about brands that [are] 50 to 70 years or older.”

Some of that 25% features replacement restaurants, largely replacing an aging store base in many markets. “A lot of those replaced stores have reached the end of their useful life,” Gibbs said.

And like every major brand, it closes some locations. But the relentless level of growth has greatly expanded the company’s store base. The company’s three brands have grown by a combined 8,358 restaurants since 2020.

“We set an industry development record for the third straight year” in 2023, Gibbs said. The company opened an average of 13 restaurants a day last year.

Most of that, obviously, is international. Of the 1,900 new restaurants Yum operators built in the fourth quarter, before factoring in closures, 87% were in international markets, executives said this week.

The company’s biggest international growth has come from KFC, which now operates close to 30,000 restaurants globally on its own, and which has added nearly 5,000 locations over the past three years, or nearly 20% unit growth over that period.

More than one-third of KFC’s global units are in China. Chris Turner, Yum Brands CFO, noted that the chain has more than 10,000 restaurants in the country, “yet serves only one-third of the population,” suggesting it could add a lot more.

KFC International opened 2,700 new restaurants on its own last year alone and grew unit count by 10%. More than 80% of that growth came from 15 publicly traded franchisees, including Yum China.

Pizza Hut, meanwhile, opened a record 1,600 new units, before factoring in closures, which Yum Brands said was a record for the brand.

“We love the fact that Pizza Hut globally hit a new record on new unit development and it’s becoming a bigger and bigger contributor to that part of our growth,” Gibbs said, noting that Yum China believes it has a “wide runway” for the pizza chain in that market.

Taco Bell has been particularly aggressive in opening new locations as it looks to join sister chains KFC and Pizza Hut as a global powerhouse. The chain generated 14% unit growth last year outside the U.S. But company executives said Wednesday that it will slow that rate of growth temporarily “to stabilize same-store sales performance in emerging markets and partner with franchisees to optimize site selection.”

Taco Bell’s international same-store sales declined 2% in the fourth quarter, the company said, below the 3% same-store sales growth for the chain’s much bigger international arm.

The bulk of Yum’s nearly 60,000 global restaurants are franchisee owned, and the company coming out of the pandemic has made it a deliberative goal to push more overall unit growth. Executives three years ago were given bonus agreements tied to unit growth targets.

Executives believe that development will keep coming. “The pipeline has never looked better for us,” Gibbs said. “Obviously, it varies by country. But franchisees are getting good returns.”

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