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As omicron infections decline, Yum Brands sees an improving environment

The owner of KFC, Taco Bell, Pizza Hut and Habit Burger said “we’re moving to a better place” as the impact of the pandemic on its restaurants eases.
Yum Brands labor shortage
Photograph: Shutterstock

Restaurant executives so far this financial earnings season have been nearly unanimous on what’s happened to their operations over the past few weeks. Their sales were going great, but a surge in infections led to operations challenges that affected revenues and profits.

Yum Brands was no different on Wednesday. But the owner of KFC, Pizza Hut, Taco Bell and Habit sees some green shoots—that the worst is behind us and that operations should improve in the coming weeks.

“It does feel like we’re moving to a better place,” CEO David Gibbs said on Yum’s fourth-quarter earnings call on Wednesday. He noted that he was talking with the chief operating officers from each of its brands, and all said that “we’re past the peak impact of omicron.”

“Applications for team members are starting to come back up,” he said. “So we think that the challenges and the impact on our restaurant hours may slowly abate over time.”

The restaurant industry has been dealing with a shortage of labor for several months. Industry demand has taken off. But the labor force is smaller due to retirements and concerns about the pandemic. There is also evidence that many people left the hospitality business and won’t come back.

The omicron variant led to a dramatic surge in infections in December and into January, adding to these concerns and dealing the industry with an unprecedented level of disruption. Restaurant workers came down sick with the coronavirus and stayed home, leaving numerous restaurants understaffed.

Restaurants around the country were forced to shorten hours or close altogether because of a lack of employees. Companies like Starbucks and Papa Johns went so far as to apologize directly to customers for the issues.

Yum Brands experienced many of these same problems, executives said. “We did see some constriction of hours across our brands” in the fourth quarter, CFO Chris Turner said.

Pizza Hut in particular had an issue, he said. Pizza chains and other delivery companies have struggled to get enough drivers to feed demand for delivery—a phenomenon that has already caused some headaches for the chain’s rivals Domino’s and Papa Johns.

“It’s been well documented that’s a challenge for the pizza category,” Turner said. “That’s an area where it was particularly pronounced, particularly coming into early January.”

The shorter operating hours, Turner said, have had a “small but real impact on sales.”

But infections have come swiftly down in the past couple of weeks. According to the New York Times, the seven-day average of infections is now below 240,000, down from a peak of more than 800,000 in mid-January.

Yum executives said they see things getting better. “We’re past peak two to three weeks ago,” Turner said. The environment has “gotten significantly better in the last couple of weeks.”

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