Q1 2023 Yum! Brands Inc Earnings Call
Speaker 2: The.
Speaker 1: Hello everyone and welcome to the first quarter 2023 Young Brands earnings conference call. My name is Bruno and I will be the operator of today.
Speaker 1: During this presentation you can register to ask a question by pressing star followed by one on a telephone keypad.
Speaker 1: Please limit to one question and remember to unmute your microphone when it's your turn to speak.
Speaker 1: I would now like to hand over to your host, Joe D'Dier, Vice President of Investor Relations. Please go ahead.
Speaker 3: Thanks operator. Good morning everyone and thank you for joining us. On our call today are David Gibbs, our CEO , Chris Turner, our CFO and Dave Russell, our Senior Vice President and Corporate Controller.
Speaker 3: Following remarks from David and Chris, we'll open the call to questions.
Speaker 3: Before we get started, please note that this call includes forward-looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. All forward-looking statements are made only as of the date of this call and should be considered in conjunction with the cautionary statements in our earnings release.
Speaker 3: Please note that during today's call, all system sales growth and operating profit growth results exclude the impact of foreign currency. Please also note the following financial reporting treatment related to our exit from Russia. As a reminder, as of the beginning of the second quarter of 2022, we elected to remove the Russia business from key performance metrics. For the purpose of this call, all references to system sales growth and unit growth results for the quarter are adjusted to remove our Russia business from the prior year-based.
Speaker 3: We have reclass net operating profits from the operating segments in which they are earned. Subsequent to the start of the conflict, to corporate and unallocated and reflected those net operating profits as a special item within the other income and expense line. As a reminder, in April , we completed the exit of the Russia market by selling the KFC business in Russia to smart service limited, including all Russian KFC restaurants, operating system, master franchise rights, and the trademark for the rustics brand. Beginning in the second quarter, the Russia business will no longer be reported in our gap result, including franchise revenue and GNA.
Speaker 3: For more information on a reporting calendar for each market, please visit the Financial Reports section of our website.
Speaker 3: We are broadcasting this conference called VR website. This call is also being recorded and will be available for playback.
Speaker 4: Now I'd like to turn the call over to David Gibbs. Thank you, Jody, and good morning, everyone. Our first quarter results provide further proof of the power of our portfolio of iconic brands. Both the diverse nature of our global footprint and the advantages of our business model enable us to thrive in any environment. Our incredible teams and franchise partners delivered another strong quarter with 13% system sales growth driven by 8% same-store sales growth and 5% unit growth.
Speaker 4: A strong set of commercial strategies that balance compelling value and craveable distinctive products fueled our first quarter sales momentum. We continue to execute on our digital strategy to create more seamless, personalized experiences to drive greater customer engagement and easier access to our brands.
Speaker 4: Importantly, our core operating profit grew 11% in the first quarter, including a one-point headwind from the removal of Russia profits, giving us great confidence in delivering on our long-term growth algorithm this year. Before I discuss our first quarter results, I wanted to provide an update on Russia. In April , we announced the completion of our sale of the KFC Russia business to Smart Service Limited, a local operator, including all Russian KFC restaurants operating systems, master franchise rights, and the trademark for the Rust Express. As part of the sale and purchase agreement,
Speaker 4: Smart service has agreed to retain our company employees in Russia. With the completion of this transaction, we have ceased our corporate presence in Russia.
Speaker 4: Now I'll discuss our first quarter results through the lens of our recipe for good growth framework.
Speaker 4: I'll begin by talking about our relevant, easy and distinctive brands, or red for short, and our unrivaled culture and talent.
Speaker 4: Chris will then share the details of our first quarter financial results before discussing our bold restaurant development and unmatched operating capabilities.
Speaker 4: First, let's discuss our iconic red brands beginning with the KFC division, which represents 50% of our divisional operating profit.
Speaker 4: First quarter system sales grew 15% driven by 9% same store sales growth and 7% unit growth, reflecting broad-based strength.
Speaker 4: Globally, KFC is consistently executing its winning recipe of core menu innovation, disruptive value, expanding category use occasions, and doubling down on digital initiatives.
Speaker 4: We were pleased to see strong year-over-year growth in our KFC China business. As usual, Joey Wad and her team did a great job navigating the complex operating environment as consumers became more mobile in the quarter and KFC was there to meet their needs. Additionally, our international ex-China St. St. St. St. St. St. St. St. St. St. St. St. St. 2-11%
Speaker 4: Fueled by strong transaction and check growth.
Speaker 4: We attribute this exceptional performance to strong value offerings that continued return of Dine and Traffic, digital initiatives, and strategic third party partnerships.
Speaker 4: We've seen sustained momentum across many of our emerging markets, including Latin America and the Middle East.
Speaker 4: Additionally, we've seen renewed strength in many European markets where the team is promoting value at several price points to appeal to a broader customer base while innovating around our core menu offerings.
Speaker 4: The focus at KFC-US is targeting new audiences and category use occasions by using relevant value and product innovation as demonstrated with the introduction of boneless offerings including the return of the Double Down sandwich and launch of two for $5 wraps in the first quarter.
Speaker 4: and the national launch of the much anticipated chicken nuggets early in the second quarter. Moving on to the Taco Bell division, which represents 34% of our divisional operating profit. Before I get to results for the quarter, I want to highlight that Mark King was recently named the 2023 Restaurant Business Leader of the Year.
Speaker 4: for the incredible progress talk about has made growing the brand wall expanding unit economics and strengthening relationships with franchisees under his leadership
Speaker 4: Seeing our world-class talent recognized more broadly across our industry gives all of us at YUM great pride.
Speaker 4: Taco Bell first quarter system sales grew 12% led by 8% same store sales growth and 6% unit growth.
Speaker 4: These incredible results build on years of sustained top line strength as the team executes on its consistent growth formula, which leverages the combination of brand buzz with unparalleled value offerings, mass occasions, and digital initiatives.
Speaker 4: This quarter Taco Bell created customer buzz around craveable product offerings that included the crispy melt taco and the grilled cheese burrito while still providing everyday value through $2 burritos on the cravings value menu.
Speaker 4: Strong demand for the Grocee's Burrito is a fantastic example that proves Taco Bell can win in the big Burrito category and participate in higher price points while maintaining value leadership. Taco Bell U.S. is leaning into its digital initiative to drive customer engagement with Euro-over-year digital sales up approximately 60%.
Speaker 4: leading to an eight-point improvement in its digital mix.
Speaker 4: Talk about recently launched delivery as a service through its mobile app to create easier access for our customers to get our craveable products.
Speaker 4: Additionally, the team also continues to make progress against our recipe for good growth strategy with the ongoing transition of their packaging suite to more recycle-ready options. Taco Bell International grew system sales 25% on the quarter, driven by continued development momentum and strong value propositions through core menu innovation.
Speaker 4: Fourth quarter-driven by China and continued strength in the U.S.
Speaker 4: Pizza International, which accounts for 9% of our divisional operating profit, grew system sales 10% led by 5% same-store sales growth and 5% unit growth.
Speaker 4: Following the successful launch of Melt in the US, the team launched this breakthrough product in 10 additional markets including the UK, Canada, and several markets in Latin America.
Speaker 4: I'd like to recognize our global pizza team for their collaborative efforts to scale this winning innovation quickly. Our markets not only shared consumer insights and product innovation at unprecedented speed, but the operations team also used augmented reality to expedite training of our international team members through our Intelligent Coaching App.
Speaker 4: PizzaUS, which represents 8% of our divisional operating profit, achieved 10% system sales growth with 8% same-store sales growth and flat unit growth.
Speaker 4: Meltz in combination with the big New Yorker in the quarter helped to drive positive transaction growth by attracting new and repeat customers.
Speaker 4: The team continues to expand strategic partnerships and is now integrated with the three major food aggregators in the US. We view Aggregator Marketplaces as an additional channel to provide customers greater access to our brand while also attracting an incremental customer.
Speaker 4: The Habit Burger Grill Division grew system sales 8% with 8% unit growth and flat same-store sales growth. The Habit team continues to focus on expanding its digital capabilities through growing its mobile app user base and partnering with third-party aggregators.
Speaker 4: Before moving on to our Unrivaled Culture and Talent, I want to take a moment to thank Russ Bendel and celebrate his accomplished career in the restaurant industry as he plans to retire next month.
Speaker 4: Russ is passion for restaurants, is always shying through, and anyone who knows Russ knows that what he really values above all else is people.
Speaker 4: Everyone is a friend to Russ and he is beloved by all who have had the privilege to work beside him whether in a kitchen or an office.
Speaker 4: We recently announced that Russia's successor is former KFC Global Division CFO , Shannon Hennessy. Shannon is an exceptional leader and we're excited to have her drive the next chapter of Gross for Habit and continue Russia's focus on people.
Speaker 4: More broadly on our unrivaled culture and talent growth driver, we've held powerful forums this year that galvanized our franchisees and top talent around our recipe for good growth.
Speaker 4: In February , we hosted our 11th International Franchise Convention in Singapore, bringing together our global brand leadership teams and many of our 1500 franchisees from around the world. Having attended this convention for many years, I've never seen this level of unity and enthusiasm for growth, particularly as it relates to development, and broad strategic alignment with our franchise community.
Speaker 4: Our franchisees are some of the most growth-minded entrepreneurs in the world, and the International Francesca Convention was an opportunity to learn from, recognize, and celebrate each other's achievements.
Speaker 4: Our partnership with our franchisees is as strong as it's ever been. We are strategically aligned to keep our iconic brands red and our global growth momentum strong by leveraging the investments we've made in Consumer Insights, our digital ecosystem, innovative technologies, and data analytics.
Speaker 4: Additionally, we are focused on unlocking opportunities for our people and communities while promoting equity, inclusion, and belonging across all aspects of our business. We were proud that many of our leaders, including myself, participated in the Women's Food Service Forum as we focused on elevating all voices and achieving gender parity globally by 2030.
Speaker 4: We also announce the launch of Franchise Fast Start, a program funded by Lafayette Square, to provide lending support to expand young Franchise ownership in underserved communities in the U.S. As a result of our efforts, we recently been named to Newsweek's America's greatest workplaces for women and Forbes.
Speaker 4: America's best employers for diversity lists. To wrap up, I'm always thrilled to start the year with fantastic momentum, especially when the strength is broad-based across our global portfolio. I remain confident in our ability to navigate any economic environment as our brands stand for unmatched value and convenience, providing a range of products and price points to meet all customers' needs.
Speaker 4: We are poised to maintain our robust sales momentum given our pipeline of red product innovation, accelerating digital sales, strengthening operational execution, and compelling value across our global portfolio of iconic brands. With that, Chris, over to you.
Speaker 5: Thank you, David. And good morning, everyone. Today, I'll discuss our financial results, our bold restaurant development and unmatched operating capability growth drivers, followed by our capital strategy.
Speaker 5: I'll begin with our first quarter results which reflect strong fundamental performance across all of our core financial metrics.
Speaker 5: We delivered 13% system sales growth driven by 8% same store sales growth and 5% unit growth.
Speaker 5: Our digital sales accelerated across our three global brands leading to a record quarter with nearly $7 billion in digital sales. We are confident our digital strategies are working considering we reached a new high in our digital sales mix exceeding 45% this quarter. Taco Bell's store-level margins were 22% flat year over year. Ex-special general and administrative expenses were $278 million in line with our expectations. As we previously mentioned we expect our year over year, GNA growth will be higher in the first half of the year. The ex-special tax rate for the quarter was 19%. Our first quarter EPS, excluding special items, was $1.5 million.
Speaker 5: While we've seen similar trends in some international markets, there are others where our franchisees continue to face outsized inflationary pressures. We continue to partner with our franchisees to protect restaurant level profitability while ensuring we maintain strong relative value for our customers. We're encouraged by trends in commodity inflation and labor availability as both bode well for the health of our franchise system, which is the foundation of our industry leading development engine.
Speaker 5: Let me share a few highlights of our diverse development drivers beginning with the KFC division, which opened 385 gross units this quarter.
Speaker 5: China, India and our Latin America markets led the charge this quarter with each opening more than 20 units.
Speaker 5: I'd like to recognize our KFC team in the Philippines for their efforts to drive our good growth agenda by using solar panels to build more sustainable restaurants. As for the Pizza Hut Division, the team opened 271 gross units this quarter, including the China, India, and Turkey markets, each opening more than 20 units.
Speaker 5: As we had anticipated, we exited our Pakistan Pizza Hut franchise partner and closed all 77 stores in the market. We are committed to partnering with capable, committed, and well-capitalized franchisees. In some instances, the best thing for our brands and business in the long term.
Speaker 5: is to exit a market and reopen with the right 3C franchise partner, which is exactly what we plan to do in this situation. Turning to Taco Bell, the team opened 79 gross units in Q1. The Taco Bell team continues to leverage unique store designs to enhance both the digital and drive-thru experience for our customers.
Speaker 5: Taco Bell International is off to a record-breaking start with 46 units open this quarter, and Taco Bell China becoming our fourth international market to cross the 100 unit threshold along with Spain, the UK, and India.
Speaker 5: These top four markets accounted for 60% of new builds this quarter, illustrating the power and scale to drive accelerated growth.
Speaker 5: In summary, we remain confident in our ability to maintain our industry-leading development momentum.
Speaker 5: Next, I'll discuss our unmatched operating capabilities and the three pillars of our digital strategy.
Speaker 5: easy experiences, easy operations, and easy insights. First, our commitment as a franchise-first organization and unmatched operating capabilities are contributing to our position as the global franchisor of choice.
Speaker 5: We mentioned on our fourth quarter earnings call that Taco Bell was ranked number one in entrepreneur magazines franchise 500 ranking in North America.
Speaker 5: Building on that recognition, just last week, Entrepreneur Magazine announced its 2023 Top Global Franchise rankings and our three largest brands made the top five, led by KFC in the number one spot. THE:: oxygen neutralized
Speaker 5: Moving on to the pillars of our digital strategy. Beginning with the easy experiences pillar, we continued to enhance our digital ordering capabilities and launched new ordering channels. In fact, TickTook completed its single largest market deployment for chat ordering to date this quarter.
Speaker 5: Customers are now able to order KFC across 1,000 stores in South Africa using WhatsApp. Early results in the market show this new ordering channel is sticky, with more than 40% of users placing multiple orders in the first 90 days after launch.
Speaker 5: Within the EZ operations pillar, Dragon Tail launched in over 1,000 stores across KFC and Pizza Hut this quarter, led by the Pizza Hut US system, which doubled its store count to reach approximately 1,000 restaurants in total.
Speaker 5: Additionally, KFC Canada launched nearly 400 restaurants on the platform.
Speaker 5: Restaurants that implement Dragon Tail consistently see improvements in product quality and customer satisfaction scores as the order sequencing algorithm and driver dispatch capabilities ensure customers' favorite young products arrive hot and fresh. Additionally, the first quarter marked an exciting collaboration milestone for our restaurant
Speaker 5: It allows us to scale mobile first technology for our restaurant managers more quickly across our brands and ensures continued product enhancement and future AI-based innovation under the YUM Super App Band. Finally, for our easy insights pillar, we rolled out recommended ordering to nearly 600 additional stores.
Speaker 5: and are live in over 3,600 stores in KFC and Taco Bell, US.
Speaker 5: Recommended ordering is an AI module that recommends the quantity of product a restaurant manager should order each week. It reduces the time restaurant managers spend ordering product, improves forecast accuracy, and reduces waste and time-consuming off-cycle orders and cross-store transfers.
Speaker 5: At Taco Bell we have seen a 70% reduction in off-cycle orders and store transfers, which frees up our managers to focus on delivering great guest experiences.
Speaker 5: Lastly, I'll provide an update on our balance sheet and liquidity position. Our capital priorities remain unchanged. Invest in the business, maintain a resilient balance sheet, offer a competitive dividend, and continuously evaluate the optimal use of our excess cash.
Speaker 5: We constantly revisit the allocation of our capital to optimize shareholder returns.
Speaker 5: Our net leverage ratio ended the quarter at 4.9 times. As a reminder, we expect our leverage ratio to drift modestly lower this year. Our net capital expenditures for the quarter were $57 million, reflecting $5 million in re-pranchising proceeds and $62 million in gross capex.
Speaker 5: As it relates to our share buyback program, during the quarter we repurchased approximately 400,000 shares at an average share price of $129 per share, totaling approximately $50 million.
Speaker 5: To close, we're incredibly pleased with our results for the quarter. With a great start to the year, we're confident in delivering on our long-term growth algorithm in 2023. Our relevant and iconic brands consistently demonstrate that they are uniquely positioned to thrive in any macroenvironment and create lasting shareholder value.
Speaker 5: With that, operator, we are ready to take any questions.
Speaker 1: Thank you. Ladies and gentlemen, if you like to ask a question, please press star followed by 1 on your telephone keypad.
Speaker 1: That's star followed by one on your telephone keypad. Please do limit to one question and do also remember to unmute your microphone when it's your turn to speak.
Speaker 6: Okay, thanks for the question. First of all, I have your comments on staffing environment and the labor environment getting better. Sounds like globally, but also definitely the US. Thank you.
Speaker 6: Are you seeing changes in wage inflation and in your core markets in the US market or is it mostly staffing? I'm just curious any more details you can provide there would be helpful. Thanks. Yes, good question around the the labor environment, you know, if you step back at a macro level, you know we think about this in developed versus emerging markets.
Speaker 5: at or near 2019 levels and we've seen labor inflation abate in those markets, which is helping our franchisees from a margin standpoint. If we go globally, because of the position of our brands and the employment markets in those emerging markets, we really haven't had big labor challenges there. And we've seen less labor inflation throughout the last three to four years. And that trend continues. I'm sure there's some pockets where franchisees are dealing with that. But in general, the Yum culture and focus on talent, plus the way that our franchisees have led their teams during the last couple of years.
Speaker 5: Plus, our digital innovations in our easy operations area, which make running the restaurants easier, are all contributing to an improving labor environment.
Speaker 1: Our next question comes from Brian , Bitner from Openheimer. Brian , your line is now open. Please go ahead.
Speaker 6: core operating profit of at least 8% for the year kind of in line with with your long-term algorithm I'm wondering if you can unpack whether this is possibly tilting a bit conservatively after your strong results in the first quarter Or maybe you can guide us through the puts and takes as the year unfolds with your core operating profit. Thank you Yeah, thanks Brian obviously It was a strong quarter from a core operating profit standpoint and as you say we have further upside as we step through the year if China's results continue As you know our long-term algorithm is just that it's a long-term algorithm over many years And we don't revise it every quarter, but clearly we have we've gotten off to a strong start to the year
Speaker 6: a growing concern, particularly with what's happening with regional banks, that franchisees might have difficulty accessing capital and therefore perhaps having challenges growing in the U.S. I think your brands are positioned differently and you guys are in a different spot than smaller competitors, but I was hoping you could kind of dive into that a little bit, please. Thank you.
Yeah, thanks, John . Good question. I'm going to step back and start at a global level. And if you think about our development, keep in mind, more than 90% of our development is outside of the US. And when you think about where that development is driven, we shared at the investor day that 60% of our global development is driven by 15 publicly traded franchisees. All of a sudden I loved Mary who is being discriminatory so this was really super important
If you go look at the financial factors on those franchisees, you see that they've got on average less than one turn of leverage. The two largest have significant cash on hand with no debt. So the financial health in general of our 3C franchisee base around the globe is very strong. And we think gives us a competitive advantage in this sort of environment.
to continue to strengthen development, whereas competitors whose franchise systems aren't as strong, we think will be at a disadvantage. If I drill into the U.S., keep in mind that Taco Bell is the vast majority of our development in the U.S. Our margins at Taco Bell U.S. have continued to be strong.
You saw our restaurant margins this year were a slight improvement versus last year. So we continue to drive strong growth at Taco Bell with strong margins. Those are strong returns on those new units. So we feel like we're in a very competitively advantaged position relative to that issue. We really haven't heard anecdotes and stories of franchisees getting concerned.
Hi, thank you. Yeah, I think a pretty consistent theme that's emerging, you know, for 2023 or some of the bigger well-capitalized, more desirable brands that are really coming back and focusing and enforcing on operational standards that maybe we're back to 19 levels or even maybe even better, you know, than 19 levels.
as our systems are so desirable and so many people want to be a part of them. So, it's always hard to talk about multiple brands across a global business, but can you kind of grade if you can, your operational execution across the brands? Do you see any big pockets of opportunity? I'm not really problems. So, you have any big pockets of opportunity that you see.
And I say in general, we all know that providing a great customer experience at the restaurant is critical to our business. And if you look at our sales growth results, double digit growth in from a system sales standpoint for all three of our big global brands, we feel like in general, we're doing a very good job of that. Are we always looking to improve? Of course.
I go to our digital capabilities as one example of how we're elevating operations. You go to that easy operations pillar, one of three areas of our digital strategy, and we talked about we continue to implement tools that make the restaurant easier to operate and that improve the customer experience.
Dragon Tail being a great example. David and I were in the UK just a couple of weeks back, and we got to see in Pizza Hut how Dragon Tail times the pizzas coming out of the oven with the delivery drivers getting to the restaurant. That's translating to a better customer experience. They're getting hotter pressure pizzas faster. So that's just one example of how we elevate on that front.
Where we do have small pockets of significant improvement opportunity, we manage those situations and we reference that on the call. We talked about the Pakistan situation where we felt it was the right move to make a move in our franchise base. The strength of our overall global development gave us the room to do that. But that's just one example of where we made a targeted change to improve our...
We headed in the right direction. We have leaders at the brand, such as CyberSami, at KFC, who was the Chief Operating Officer of KFCs. We're putting a very strong emphasis on operations. We know that they can pay off. The other component of this is, as Chris mentioned, getting the right franchisees in. In the U.S., as you know, we had a big change in terms of the ownership of our largest pizza franchisee. That's having a very positive pay off for us.
Great, thank you. Given the momentum that you've got in the business and across the brands, even in a tough environment, I'm just wondering if you could talk a little bit more about the momentum that you expect to continue going through the rest of the year, particularly in the US. And within that, just wondering if you could touch high level at least on pricing, presumably rolling off some in the US.
And sort of how you think about the traffic outlook and therefore the overall outlook for sales momentum to continue, if you could touch on that. Thank you. Yeah, thanks, Dennis. Obviously, we had a strong start to the year with Q1. And we don't normally comment on trends in the quarter. But what I will say is, we have a strong outlook for the year.
We're off to another strong start in Q2, no significant change in momentum from Q1. Of course, the puts and takes will look different. Some businesses are doing a little better than in Q1, some have tougher laps. But it gives us a lot of confidence that our teams are doing all the right things to connect with consumers. And this environment is a healthy environment for us, particularly with our brands. When you talk about the US consumer, Taco Bell is just so well positioned.
to whether any kind of, yeah, there was some kind of pullback, you know, as you saw from the strength they have in Q1, their ability to offer value menu offerings on their $2. Cravings value menu, but also offer innovation like the grilled cheese burrito for people that might be trading into the category if the economy started to soften.
From where we sit, we feel really good about the momentum in the business and the pricing actions that you reference will probably start to roll off a little bit, but at the same time we've seen inflation abate. I'll give you another good fun stat. In Q1.
consumer-based lifting sales was from low-income consumers because they did a great job connecting with them through that offering. Same thing could be said with Pizza Hut and their 699 melts. So we know we have all the tools in our arsenal to win in these competitive environments.
Our next question comes from David Palmer from Evercore. David, your line is now open. Please go ahead.
Thanks, good morning. Wondering if you could provide any details on the ongoing sales recovery versus pre-COVID levels for key KFC international markets. We don't often get to see some of the country level statistics. And I'm wondering how you're thinking about that multi-year recovery.
Where is it still accelerating? And perhaps if it's slowing in certain places, why would that be maybe shifting patterns between delivering at home or other consumer weakness, perhaps cropping up here or there? Thanks so much.
Yeah, just talking in terms of trends, David, you saw from the sales breakouts in our release that we've got widespread system sales growth at the numbers that we report. In fact, the vast majority of the businesses that we track are up double digits.
And we're now entering a phase in which I think we're sort of more back to the normal cadence of developed markets and emerging markets contributing to our growth.
So I we can obviously we have 300 brand country combinations We could talk about a lot of different ones But I think that gives you a pretty good sense of what the landscapes like and that's why we've talked a number of times today Already about returning more to a normal cadence in the business, which is good for us Our next question comes from Andrew Charles from TD Cohen. Andrew your lines now open, please go ahead
Great, thank you. I recognize that 1Q is a seasonally-like development quarter, but can you speak to sequential cadence of growing 5.9% net rest time growth and 4Q that fell a bit to 5.3%. You know, in 1Q and in school, Russia, you know, 1Q certainly exceeded the 5% ongoing guidance, but it was perhaps a bigger step down than we were expecting. I appreciate time.
You guys spoke about the robust development commitment, and so I'm just curious, I mean, do you expect that the percentage of your re-agro is going to pick up perhaps as 223 progresses? Yeah, thanks a bunch. Good question. If we talk about Q1 specifically, I think all the factors that David mentioned around our confidence in long-term development trajectory.
still hold. We've got strong unit economics, we've got tremendous franchise partners, we've got lots of white space out there, and we've got the best development teams in the business. If I go into Q1, you know, keep in mind, don't read too much, we said that this year would be more weighted toward later parts of the year, but in Q1, we put up 746 gross new units. That's our second highest total ever. That reflects that our franchise is going to be more weighted
If I go to the net new unit side, one of the things that we're doing is we're using our strength in gross development to advance our asset, to strengthen our global asset base. You know, I talked about how we, in certain cases, strengthen the France ISE base with the Pakistan situation.
Another thing we're doing is continuing the Pizza Hut asset transformation, where when we close a unit, we're opening another one in the same trade area that is a stronger, higher performing unit. And the third thing we're doing is when we have a few low volume units that need to be cleaned up, we'll take advantage of opportunities to do that. But in general, we remain really confident about the long-term trajectory. And as I said, we expect this year to look similar to 2021.
draw too many conclusions from one data point at the beginning of the year. It's historically is not correlated. And it was a strong quarter. It was a really strong quarter. So we're proud of what happened in Q1 and feel good about 2023 looking just like 21 and 22.
customer serve opportunity. It feels like Taco Bell has always been about serving individuals rather than big portions for big families, but does seem like there's been a major change in menu strategy elsewhere.
KFC and just recently between the sandwiches, the nuggets and the wraps all for individuals and Pizza Hut seemingly doing well with the melts. I'm just wondering if you can maybe just talk about the mix of business.
for each of your brands for family versus single serve.
and maybe whether these new products change your mix of sales by day part. I would think that would help build a lunch business, especially at Pizza Hut. But presuming this is a conscious decision at all brands, just wondering if you can give some high-level thoughts on the mix of business and family versus singles and day part opportunity. Thank you.
Yeah, a good question and your spot on obviously. Our goal obviously is to be there for our customers for every occasion, not just for family meals or just for individual meals. Pete's a hot as a very conscious strategy through melts in the US which has gotten a lot of the headlines.
but also an offering that they have called MyBop, which is an individual meal offered around the world to go after more individual occasions. It's traditionally a family sharing occasion. So pizza and KFC with buckets skew more towards family sharing and Taco Bell with their multiple individual items that you can piece together to...
to lean in on ways that they can capture more of the family sharing occasion and then Taco Bell and and then pizza, hot end, KFC are leaning more on individual meals. Obviously nuggets, the $5 rap deal and other offerings we have around the world, the launch of sandwiches.
You know, more recently are all designed for individual meals. Operator, we have time for one more question, please. Okay, our last question comes from David Tarantino from Baird. David, your lines are not open. Please go ahead. Hi, good morning. I'm just a couple of clarification.
just wanted to clarify that. And then secondly, I was wondering if you have an update on your G&A guidance for the year. Thanks. Yeah, thanks, David. First on development, of course, you know, our long-term growth algorithm specifies 5% net new unit growth. We've been a little ahead of that. And we're working hard to continue our development momentum. And as we've said multiple times on the call, we can
We had said on the last call that this year our year over year increases would be weighted a little more to the beginning of the year. There were really two factors that drove that. So coming into the year we had obviously planned to make some targeted investments in G&A in specific parts of the business to support our long-term growth strategies. The second part we did encounter some expenses that
We were not anticipating prior to the year, primarily related to the cyber event that we had in January . But still, when we step back and we look at the plan for the full year, we still expect full year GNA to land at approximately 1.15 billion and we'll provide further updates on the Q2 call as needed.
Well, thanks everybody. I appreciate all the good questions. And obviously we're excited about the strong start to the year, the momentum that we have continuing into Q2 and the fact that we've raised our algorithm and are beating it on all measures today. Look forward to updating you on our progress on our Q2 call. Thank you.
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you.