Q2 2025 Yum! Brands Inc Earnings Call

Hello everyone. And thank you for joining the young brand 2025 second quarter earnings call.

My name is Sammy and I'll be coordinating your call today.

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I would now like to hand over to our host. Matt Morris head of investor relations to begin.

Please go ahead, Matt. Good morning, everyone and thank you for joining us today on our call our daily Gibbs, our CEO, Chris Turner, our CFO and Dave, Russell our senior vice president and corporate controller. Following your marks from David and Chris will open the call to questions.

please note that this call includes 4 living statements that are subject to future events and uncertainties that could cause her actual results to differ materially from these statements

all 4 looking statements are made only as of the date of this call and should be considered in conjunction with the cautionary statements on our earnings release and the risk factors discussed and our SEC filings

Please refer to today's release and filings with the SEC to find disclosures definitions and reconciliations of non-gaap financial measures.

Please note that during today's call system sales and operating profit growth will exclude the impact of foreign currency for more information on our reporting calendar for each market, please visit the financial reports section of the IR website.

We are broadcasting this conference call via our website. This call is also being recorded and will be available for playback. We would like to make you aware that our third quarter earnings will be released on November 4th, with a conference call on the same day.

Now, I'll turn it over to David.

Thank you, Matt, and good morning everyone. Thank you for joining us today.

Before we dive into this quarter's results, I want to acknowledge that this will be my final earnings call as CEO before. I officially pass the Baton to Chris on October 1st as 1 of the biggest champions of Our Brands and having personally recruited Chris to Young. Many years ago. I am thrilled that the board unanimously elected Chris as our. Next CEO, yet again, demonstrating the strength of yums internal Talent.

I couldn't think of a better person to lead this company.

To ensure a seamless transition, I will serve as an adviser until the end of 2026.

Now, turning to the second quarter results.

I'm proud that young Brands delivered, another strong quarter in a tough consumer environment system. Sales grew 4% driven by strong unit, growth at KFC International and persistent market share gains at Taco Bell us.

With both businesses, delivering positive transaction growth.

Yum delivered 386, net, new units, including 871, Grouse openings reflecting the enduring appeal of Our Brands and the strength of our Diversified system.

This quarter, yum achieved a new digital sales Milestone with digital mix reaching 57%.

7 percentage points higher year-over-year. Notably, KFC's digital sales grew 22%, and mix climbed to over 60%.

Digital sales growth is undeniably due to the continued expansion of digital channels and the global rollout of Bite, in which we made additional progress in international deployments and new service offerings across our U.S. portfolio.

We also made strides in expanding AI-driven, personalized 1-to-1 advertising, for which having a high digital mix will become a massive strategic advantage.

I'll now discuss the strategic drivers that underline our commitment to being the most loved, deeply connected, and always trusted brands for consumers around the world. Afterwards, Chris will provide a deep dive on our second quarter results, balance sheet position, and capital strategy, followed by our current outlook for 2025.

starting with KFC.

KFC contributes 52% of Yum's divisional. Operating profit with KFC International Accounting for 85% of our International operating profit.

KFC International grew same-store sales 3%, driven by strong performance in key markets, including South Africa, Spain, Canada, Japan, and the UK.

Even with a solid overall, Topline performance. We have opportunities to improve performance in underperforming regions such as the US and parts of Europe where challenges stem from gaps. In value, perception, inconsistent consumer experience and Innovation that has not fully resonated with consumers.

Recently introduced the Kentucky, Fried comeback campaign aimed at striking, the right balance between Innovative relevant products and strong consumer value.

In Europe, the teams are focused on delivering distinctive product offerings, and meaningful partnership activations. That resonate with local consumers, along with tailoring, individual and snacking occasions in the 3 to 5 Euro price range.

On March 1st Scott, Minsky assumed the role of KFC's CEO bringing fresh energy and a Clear Vision for the Brand's next chapter.

Scott has articulated a compelling strategy focused on energizing the brand enhancing, its cultural relevance and deepening consumer engagement worldwide leaning on his findings at Taco Bell.

A key pillar of his approach involves modernizing the brand to attract younger consumers in part by leveraging, local standout Innovations, like the Korean barbecue chicken sandwich, inspired by squid game in Spain, a product. The team has recently introduced in select additional European markets as part of ongoing efforts to learn and scale Regional successes.

Scott is encouraging boldness, and creativity and Innovation and marketing.

As an example, the United Kingdom elevated KFC's visibility and appeal with a younger audience through successful launches such as the Dirty Louisiana Burger and strategic cultural partnerships like Limitless Live, the UK's largest free music event, leading to a 5% increase in same-store sales.

Moving to Taco Bell, which accounts for 37% of our divisional, operating profit with Taco Bell us accounting for 82% of Yum's us profit.

Taco Bell delivered 4% same-store sales growth, outpacing the limited service category in the U.S. by 4 percentage points.

I'm thrilled that the progress. Taco Bell made to elevate and broaden its menu with new occasions, including its focus on crispy chicken and an expanded beverage lineup. This quarter Taco Bell reintroduced crispy nuggets and Unleashed full flavor and full-size versions of crispy chicken in the Innovative new items to start Q3 such as the crispy chicken taco and crispy chicken burrito.

The success of growing our chicken sales layer is undeniable with total Chicken sales up over 50% in 2 years.

We expect the momentum and chicken to continue as crispy. Chicken becomes a permanent platform in 2026 while the momentum behind new occasions will continue with shredded beef later this year.

As for beverages, the team has bold Ambitions to make beverages as iconic as their food aiming for 5 billion dollars in total system sales by 2030.

At the very start of Q3 they took a significant step with the release of a nationwide lineup of flavorful refreshes and announced plans to expand its innovative beverage concept live mas Cafe.

Despite executing an unprecedented level of limited time. Offer Innovation, Taco, Bell's, order accuracy has improved and maintained exceptional drive-through performance in the US.

Internationally, Taco, Bell's, momentum remained robust, same store sales being 5% in Europe, with double digit increases in Canada and India.

Moving on to Pizza Hut which accounts for 11% of Yum's divisional operating profits.

In the US Innovation with cheesy bites and Ranch lovers flights mixed well with existing consumers, but an insufficient value. Message amid a competitive value landscape resulted in transactions softness

The team has learned from this and going forward. The US team is establishing compelling value, propositions including the recent launch of Wing Wednesday and Tuesday's 2 dollar, personal pan pizzas

Following the recent new mobile app, launched this year, the team plans to double down on mobile app, Acquisitions to start the third quarter.

Internationally, Pizza Hut grew. Same-store sales increased by 2%, driven by the Middle East, positive transaction growth recovery in the UK, and strong performance in South Asia.

Habit Burger and Grill year-over-year system sales trends in Q2 declined 1%, consistent with the trend observed in Q2 last year. The decline reflects continued softness in consumer demand, with some impacts associated with the recent events in the LA area.

Meal deals in June, in select markets priced, at $68 and ten dollars.

Encouragingly this emphasis on brand, right? Abundant value lifted sales, starting in June. And that positive momentum has continued into July.

Looking ahead. I'm optimistic that increased marketing investments will further support sales, momentum, and build on the traction. We're already seeing

In fact, recently, for the second year in a row habit has been ranked. The number 1 best burger. And number 1, best side for our tempura, green beans. And now it's been named the number 1. Best best casual restaurant by USA. Today is 10 best Readers Choice Awards.

Continue to push the boundaries of what's possible with bold strategic initiatives to keep us ahead of the competition and future proof our business.

At Taco Bell live mas Cafe is part of the team's bold bet to go after the 25th and the us. And we'll bring a new layer of hospitality and culinary creativity to the brand.

The cafe was inspired by gen Z's, love for curated, customizable drinks and offers over 30 signature beverages from churro chillers and Specialty coffees to Refreshers and dirty Mountain Dew Baja Blast. Dream sodas

With a live mas Cafe. Our test store has seen a significant increase in transactions. While more beverage users are visiting the cafe and choosing to dine in.

The team announced last month that they will expand. Live. Mas Cafe. Within existing, Taco, Bell restaurants to 30 locations, across Southern, California, and Texas, by year end.

In the U.S., we are moving forward with plans to expand our 1 unit test of Saucy.

We will open several additional test units by the end of the year near our existing Orlando location. We continue to be encouraged that our weekly sales have averaged materially higher than the pre-existing KFC since opening, and that we're connecting with a younger demographic, as one-third of Saucy consumers are under the age of 30.

We have a lot of learning ahead of us and we are eager to Leverage. The invaluable consumer insights relevant for our larger KFC, us system.

In the connected pillar, our progress continues to accelerate, leading us to become the world's most connected restaurant platform.

Digital sales. Now total a record portion of our system sales

In Taco Bell us 41% of our orders are digital fueled by loyalty offers and unique digital activations. Like Mike's hot, honey, Tuesday, drop and feed the beep, record Club box.

Taco, Bell's unique, activations helped grow active, loyalty consumers, nearly 45% year-over-year,

Is supercharging our marketing. Over 200 million AI generated Communications have been sent this year delivering up to 5 times incrementality compared to traditional approaches.

This is not just marketing Evolution, it's a revolution and we're only getting started in addition as our systems become more connected. We're finding more opportunities to strengthen our operations. For instance, this quarter, we completed the conversion to a more advanced voice of the consumer product that helps aggregate consumer reviews from social channels and third-party delivery platforms and allows us to integrate such insights into bite, coach to deliver more effective operations routines to restaurant general managers.

Corporate citizenship and sustainability, play a key role in ensuring Our Brands remain. Trusted everywhere we operate.

We recently issued a 2024 global citizenship and sustainability report, which highlights our efforts across our people food and Planet pillars.

Highlights from the report include achieving 89% of yum approved, suppliers being certified or on the path to Global food. Safety initiative, recognized certification. Yum. Also Now sources 94% cage-free eggs across 25,000 restaurants including in the US and Western Europe. Additionally we reduced emissions by 25% on an absolute basis for company-owned restaurants and corporate offices since 2019.

These are just a few examples of how we are future-proofing the world's largest restaurant company. Congratulations to the teams around the world who are driving this important sustainability work. Every day, your efforts are making a real impact on our business and our bottom line.

People are building career connections and strong communities.

Pizza Hut Sri Lanka's equal slice. For everyone program offers up to 6 months of training for youth to gain restaurant skills, and certification before joining the workforce,

In Thailand, KFC's bucket, search helps youth who left? School regain confidence Explorer vocations and return to education.

This program is impacted the lives of hundreds of young people since 2023.

I'm immensely proud of the work that is being done around the globe to ensure young Brands is positively impacting, the markets, where we operate and the people who live there,

To close. I want to extend my deepest, thanks to our restaurant teams, franchises, and support centers across the globe.

Despite the challenges, we faced in the second quarter driven in part by softer consumer sentiment, our results stand as a powerful Testament to the strength of our Global Brands and the dedication of our people

I'll share more final thoughts after Q&A reflecting on my nearly 4 decades at yum, including the past 6 years as a CEO.

It has truly been an incredible journey.

Your partnership insights and long-term perspective, have pushed us to become a better company, better positioned for sustained long-term success.

We've expanded our iconic Brands by opening an additional 22,000 stores and together. We've navigated both challenges and Milestones in our shared commitment to building a culture, rooted in growth purpose and performance, we built industry-leading digital capabilities. We once thought, unimaginable and dramatically accelerated, the pace of unit development,

as I look ahead, I couldn't be more confident. That yum is well positioned to continue to deliver sustainable growth and long-term value for our shareholders.

Thank you.

With that Chris over to you. Thanks, David and good morning, everyone. I want to start by saying how truly honored and excited. I am to step into the role of CEO of this incredible organization.

David recruited me into yam, and while I'm deeply grateful for that, I'm even more grateful. For the way he has led over the past 6 years, he has guided our system through a global pandemic, geopolitical, instability and inflationary pressures. Unlike anything, we've seen in recent memory and through it all together, with our teams and franchises, he has delivered Transforming Our digital capabilities, reigniting development, and laying a strong foundation for the future.

I'm thankful, he will continue, advising me and the company. As we turn the page to yams next chapter.

Let me now turn to our second quarter Financial results.

We achieved solid system sales growth of 4% driven by 3% unit growth and 2% same store sales despite the tough consumer backdrop.

Digital sales grew in astonishing 18%. Thanks to our ongoing expansion of digital channels and bite. Deployments pushing our digital mix to a record 57% or up 2 points from last quarter.

Total restaurant level margins were 16.3% down roughly 150 basis points. Year-over-year due to an unfavorable commodity Lab at Taco Bell and KFC's higher mix of overall restaurant profit from our newly acquired, UK stores.

Since our acquisition of 216 restaurants in the UK last year, we've been very pleased with the progress. We're making on improving the margins. In those restaurants, where sales performance has been ahead of our projections

However, this quarter still reflects the anticipated negative impact of those stores on year-over-year company margins.

X special GNA expense was 274 million up, 18 million, or 7% year-over-year.

In line with our plan and included lapping, lower incentive comp from Q2 last year.

Reported GNA was 302 million and includes 28 million and special expense, primarily relating to our ongoing resource optimization program and recent office consolidation.

Franchise and property expense increased 16 million dollars driven by incremental spend tied to our Global franchise convention that we hold every 2 years as well as lapping. Prior year. Bad debt, recoveries at KSC

2% to 646 million.

Second quarter X special EPS was $144 cents, up 7% year-over-year.

To EPS was $1.33.

Moving to development, we opened 871 Grouse new units in the quarter largely consistent with Q2 of last year and translating to 386 net new units at KFC. We opened 566 Grouse new units across 58 countries, fueled by China, India and Japan.

We feel good about the development momentum with the long-term Global white space remaining highly attractive.

particularly in Europe and East Asia, where the opportunity is fast at Pizza Hut, we opened 254 Grouse new units, across 32 countries with growth, led by China, the US and India,

Pizza Huts openings were just ahead of last year's Q2 Pace, Taco Bell, delivered a notable acceleration in this quarter opening 50. Gross new restaurants for twice, the number in q1.

18 of those openings were in international markets across 9 countries.

The team remains on track to meet its commitment of 100. International net, new units. This year led by unit growth in the UK and Spain as well as planned entry into several new markets.

I'll now discuss our connected brand strategy that continues to revolutionize digital and Technology across our system.

Strengthening operations enhancing consumer experience and unlocking new insights.

As 1 example of the power of bite, let me share with you a new tool we've developed which we call bite. Connect bite, connect is Young's menu and Order integration platform for third-party delivery providers which launched in Q2 and is now scaling a cross. Our Pizza Hut us system. Saving our franchisees significant cost.

This service is typically provided to restaurant companies at a significant cost per order by a third party, but we are able to offer it to our franchisees, using the bite stack at a more affordable price.

this platform serves as the essential infrastructure for All Our Brands, to better support our sizable third-party delivery business,

Might connect reduces order cancellation, and is priced at a discount relative to similar capabilities in the market.

Might connect is a great example of the power of the bite platform. We are able to build Innovative new capabilities like bike connect and scale them quickly to All Brands leveraging. The common technology chassis provided by bite.

Equally as exciting is how AI is accelerating. Our Innovation timeline by leveraging developer AI tools. We reduce the time of bike connect ideation to National launch from an estimated 9 months down to 3 months.

Another key aspect to our connected strategy is our industry Partnerships. Our current voice AI solution. Now in 600 restaurants continues to enhance our team member and consumer experience and is outperforming everyone in the industry.

That said we are always looking to raise the bar.

The partnership we announced last quarter with Nvidia plays a key role in our bite strategy as we collaborate on Cutting Edge, models, and Technology.

we have exciting plans for the next 6 months, including expanding, our internally developed voice, AI solution developed, on the Nvidia stack to our first drive-through restaurant in Q3,

Now let me highlight the significant strides across our easy experiences, easy operations and easy, insights pillars.

Starting with our easy experiences pillar, which is focused on making consumer interactions more seamless.

We've continued the expansion of bite Commerce scaling, our web and app ordering platform to Pizza, Hut, Canada and Mexico, this quarter.

While preparing for 2 additional Pizza Hut markets by year-end.

Early results from Pizza Hut. Mexico are strong. The market is seeing nearly 40% month-over-month app transaction growth since the launch of bite Commerce in Q2

Within easy operations. We're focused on simplifying. The restaurant team member experience.

Through Solutions, like bite, kitchen, and Fleet, bite coach, and bite inventory, more than 30,000 restaurants. Now, have ai informing restaurant, manager, decisions,

For bite coach, we've rolled out additional AI features, including Dynamic routines, which incorporate feedback? From my wider catchment of consumer reviews to inform store, specific, routines,

Adoption of bike coach across our system provides us with a scale platform to deliver AI recommendations that take the guesswork out of running a restaurant to our rgms and team members. As David mentioned bite, coach is now powering operational excellence across nearly all Pizza, Hut stores globally. Excluding China.

Lastly, within our easy insights pillar. We're harnessing our powerful data ecosystem to drive smarter faster decisions, across the organization.

As part of our ai-driven personalization strategy. We launched a proprietary consumer insights product tailored for international markets. This quarter in Pizza Hut UK.

This platform will enhance the consumer journey by offering more relevant personalized items suggestions directly within the cart.

We plan to expand this offering to 3 additional markets by year end.

Next, I'll provide an update on our balance sheet and liquidity position.

Net, capital expenditures for the quarter, total of 54 million, reflecting 17 million, in refrigerating, proceeds, and 71 million in Gross Capital expenditures.

During the quarter. We repurchased approximately 740,000 shares for a total of 108 million. Bringing our year-to-date repurchases to 336 million,

This reflects our commitment to returning excess Capital, alongside a prudent approach to credit facility utilization. While we plan the refinancing of our 2026 debt maturity over the coming months.

Our net leverage ratio ended the quarter at 3.8 times.

As I've previously shared subject to market conditions after the refinancing, we expect to maintain a net leverage ratio of approximately 4 times over the medium-term by issuing incremental debt as our business grows.

Overall, our Capital priorities remain unchanged. We continue to focus on maximizing shareholder value. Through strategic investments in the business, maintaining a strong and flexible balance sheet offering a competitive dividend and returning excess cash to shareholders.

Now, let me share, our latest outlook for the balance of the year, the global operating environment remains Dynamic and complex. Our teams are staying agile with their marketing playbooks and leveraging key strengths including digital capabilities and operational scale.

At Taco Bell us which represents over 80% of our us operating profit. We're on track to deliver 24 to 25% restaurant level margins.

Development, Trends are encouraging across the portfolio. While there's no observable impact to our development pipelines, we are expecting inflation. Pressures across several key Building Products, sourced from Mexico and Canada.

Fortunately 90% of yams development, occurs outside the US, unlike many of our competitors. So, our exposure to the impact of tariffs on the business is limited. And with industry-leading margins, Taco, Bell is not expecting a material change to pay backs. In fact we expect to meet or exceed the total number of gross bills from last year for All Brands leading us to 4% unit growth or 5%. Excluding the turkey Market exit.

Moving to GNA.

We expect GNA X special and XFX the land at the high end of our previously, guided mids, single digit increase due to 1 off expenses related to an accelerated CEO, transition, and KFC's headquarter consolidation.

In Q3 we expect GNA to increase double digits, owing to lapping. The significantly reduced incentive comp booked in Q3 last year.

With Q4 GNA growing near the low end of our full year guide.

Subject to market conditions, we do expect re-anchor expenses.

While this reduces some contingency in our profit guide. We still expect to achieve 8% core operating profit growth. Excluding the 53rd week this year, with Q4 in double digits. In part due to easing Compares related. To our elevated bad debt last year,

Below the line. We expect interest expense to land between 500 million and 520 million. Excluding the interest from any incremental debt.

Finally on FX at current spot rates. We expect a 20 million Tailwind to gaap operating profits for the remainder of the year.

To close. I am incredibly proud of how our teams are navigating this Dynamic environment.

Our second quarter results, reflects strong development. Momentum continued growth in digital sales, and healthy, same store, sales, increases driven by Rising traffic and our twin growth engines.

as I prepare to step into the role of CEO, I'm spending time with our leaders and teams board members and franchise partners and rolling up my sleeves and restaurants alongside our amazing Frontline teams to reflect on our strengths and where we can raise the bar,

Throughout this process, I've become even more energized by the possibilities ahead and buy the privilege of leading this world-class organization.

Home to iconic Brands and Incredibly talented people. I'm confident that together, we'll build on our momentum and shape and even stronger, future for young.

With that operator, we are ready to take any questions.

Thank you very much.

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Our first question comes from David tantino from bed. Your line is open David please. Go ahead.

Hi. Hi. Good morning. Um first, uh, David congrats on a, a great career again. Um, and uh, wish you well in your retirement, I've enjoyed, uh, working with you and, and Chris, uh, congrats on, on your new role at CEO. Um, my, my question, um, is really about the guidance for this year. I think, Chris you mentioned maybe removing some some cushion. I forget the exact words, but, um, just wanted to, to get your your thoughts on your degree of confidence and getting to that 8% operating profit growth for the year. And I guess what are the puts and takes that could could push it 1 way or another, uh, in the back half.

Yeah, uh, thanks. Uh, David appreciate the kind comments, uh, about David and, and, uh, my new role, uh, you know, David's been an incredible job and it's a, a big honor for me to step into his big footsteps. Uh, as we look into the back, half of the year on The Profit plan, uh, we remain on track to deliver our full year algorithm of 8% core operating profit growth. You know, I'll start with sales, uh, the back half, doesn't require a dramatic sales acceleration versus the first half, uh, just solid performance. Uh, you know, roughly in line to, to slightly help.

Of where we were in the first half. Um, so then you get to the big uh, you know uh drivers of uh profit in the second half in terms of black versus last year. Uh, first is Company Store profit while we're primarily asset light, you know, our own stores do matter. Uh we had strong Company Store profit growth in the first half and we expect even stronger Company. Store profit growth in the second half, that's driven in part by Taco Bell. Where you heard us mention that we still expect to land on Taco. Bell us with 24 to 25% margins on the full year, which implies a bit of a back half weighted plan on margins there. Uh, we also expect continued to uh, improvement in our KFC Equity estate. So as KFC, UK stores that we acquired last year, as you can imagine, in the second half, we were digging in optimizing those. We're seeing better performance.

And we expect that to continue into the second half, also better performance in other parts of the KFC Equity State, including in Australia. Uh, the other big bucket is, are some discrete items. So last year in the back half, uh, we had about 30 million in bad debt, exposure from a couple of situations 1, our uh, franchisee in turkey and Germany. Uh, and another a Pizza Hut, uh, situation uh, in Europe. Uh, so there's some 30 million bad debt, uh, expense that we expect the lap this year. Uh, and as I mentioned, we've got re-anchor

Gains and the plan, there is a bit back, voted in the year. So in total, that's $4 million in Tailwind, in the back part of the year. Uh, if you think about the shape on Q3 and Q4 the biggest, um, GNA lab will happen in Q3, that's why we shared that. We expect double digit GNA increase in Q3 that's simply because last year, when we adjusted for incentive, comp the biggest adjustment was in in Q3 we had some true-ups for 21 and Q2, uh, so we expect uh profit growth to be stronger in Q4 than Q3 this year.

David Palmer from evercore.

Isi, your line is open for David, please. Go ahead.

Thank, thank you. Uh, congrats David on your career, a lot of value creation of your time. And uh, Best of You Chris, I wanted to follow up on all of your comments on on Tech capabilities and and maybe invite you to speak about what your examples, or your, your, your top Tech, uh, platform initiatives will do to comps or other metrics that you think people would care about, uh, yam shareholders. Um, so for example, you mentioned hyper personalized, digital marketing, perhaps being in ramp mode, that sounds pretty exciting. That you know, how important could that be to comps? You just you in the past talked about Taco Bell, roll out of of uh AI enabled drive-thru. Um, how's that coming along? And how important can that be? When could that be the majority of drive-through orders? And then, and then you listed all those things you were talking about with bike, connect by Commerce by coach,

And maybe what is that doing for profitability or some other metrics that ultimately will lead to unit? Growth acceleration and thank you.

Yeah. Uh thanks. Uh, you know as we look at the bite strategy, uh we are very pleased with the progress and we're very pleased with the impact that it's having on the business. If you go back to the Taco Bell consumer day earlier this year, we shared some data there that had the correlation of digital sales Mix Change at the store level in Taco Bell, and the correlation between that and absolute Topline dollar sales growth at the store level and even at growth at the store level, for our Taco Bell stores in the US very strong correlation on both, which we think demonstrates. The impact that bite has on both top and bottom line, and, of course, Taco Bell us is where we have the most components of bite implemented uh versus any other brand country combination around the globe. Uh as you mentioned on Topline AI enabled, marketing is a big component of that. We're excited about the piloting that we're doing there. Uh, we've got 11 different use cases that we've laid out 7 of. Those are in action right now. We shared

Uh, in my earlier comments that we're seeing significantly higher return on targeted Communications, uh, through that, of course, the, you know, uh, bigger driver of the Top Line growth through digital are, uh, just making an easier experience for consumers. Uh, allowing them more easily to customize their orders, uh, and more easily to, you know, expand, uh, check side everywhere. We increase digital mix, we see higher, check sizes, and

Higher frequency from our consumers. Of course, consumer insights. And loyalty will be a big part of that as well, uh, on the operational side and helping our franchise Partners. Uh, ensure they have strong unity and economics. I actually got to experience this uh working in a Taco Bell restaurant, a couple of weeks ago uh spent a Saturday working with the team there. Uh, the technology that makes the the lines flow easier was, uh, really easy to use. Uh, and then I was working at the window and got to where the headset and listen in on voice, AI interacting with our consumers. Um, I, you know, I'd known from the team that it was doing a good job. I was actually amazed at how seamless those consumer conversations were in wearing the headset, uh, for an hour and a half, to 2 hours. Uh, there was only 1 of those conversations where we needed to intervene from a team member in the store and, uh, the voice AI made that job dramatically easier. And that's why we're seeing lower turnover in restaurants, where we have

Implemented voice AI. So, uh, lots of good things happening with bite, but we are still in. In the early phases of generating, the value from it, we've got more to do to get it around the globe and we're excited to continue that Journey.

Our next question, got from John Evancho from JP Morgan. Your line is open, John, please. Go ahead.

Hi, thank you very much, David. I look forward to seeing you on the senior tour. I have no doubt with, maybe an extra round or 2. You'll be able to uh you'll be able to make it and probably win a few tournaments.

so uh, yeah, the the question you know, which I have um,

Sure company unit development might uh influence the overall business strategy and capex specifically. Thank you.

Yeah, uh thanks John. Um, in terms of the capital strategy nothing's changing in terms of young, being an asset like company that's uh what we came out of the transformation with as 1 of The Guiding principles of the company. Uh, we're still at 2% restaurant ownership impact, over the last several years, we have grown the overall estate faster than we have grown our company-owned estate. Uh and so it's important, you know, for us to continue to uh acquire stores, periodically to ensure we have strong capability from an operation standpoint. Uh but whenever we do that we typically are buying uh you know, High Ave, High performing, uh restaurants. Uh and there's also a strategic reason that might go along with it. We may pick up a few stores and 1 geography. And then, uh, you know, we see that as an area where we potentially could unlock new development, uh, and we always see strong returns, uh, immediate, uh, you know, ibadat,

Increases whenever we do that uh and then strong returns over time. So I think we're going to continue to be be a very Capital efficient uh company uh you know on the tech side. All of the Investments that we make their we want to ensure that those are high return for our shareholders uh as well. And since many of the benefits of those blow to the

Bottom line of our franchises, they share in those Investments, uh, over time. So, uh, no dramatic change. In terms of us being an asset like company,

Our next question comes from Christine. Cho Goldman Sachs. Your line is open. Christine, please go ahead.

Great. Thank you for taking my question. Congrats David. I'm such a successful career, uh, and congrats Chris on your new role as CEO. Um, you've announced your plans to scale the landlord's Cafe to 30 locations by end of 2025. And we did see some steps up in beverage Focus across several qsr, competitors, as well. Um, could you kind of walk us through how you're approaching that 5 billion long-term beverage opportunities for Taco Bell and how you plan to differentiate our offerings versus peers. Uh, any further color in terms of scale timeline required investment or some of your key learnings have for the pilot so far. Uh, will be appreciated. Thank you.

Thanks Christine and thanks for everybody's nice comments. Uh, and the retirement, uh, in particularly John's comments on my golf game, although I will not be playing on the senior tour. Uh, beverages is 1 of those things that, uh, I think we're incredibly excited about it's no secret. That the industry uh, has been embracing beverages in the last few years and you've seen a lot of success, with some of our competitors. Nobody is more naturally position.

Positioned to succeed in beverages and Taco Bell. We already have a proprietary beverage with Baja Blast. That's wildly successful. Um, so what you saw with the opening of our first live mas, Cafe is putting a lot of our theories and ideas about beverages into action with and doing it in a big way. Not just, uh, you know, a small addition to the menu. Um, and the, the, the results were obviously, uh, you know, stellar and prompted us to really lean in and create a plan to be much more aggressive and beverages, uh, at Taco Bell which leads to the test units that you've talked about. Um, so you've got the live mas Cafe test, um, which we truly believe will, you know, then lead to a broader expansion in the system. And then you also have what, you know, what you saw in Q2, which is the launch of refrescos, which was part of the success at Taco Bell had in Q2. So yeah. And I would add, you know, while Taco Bell this sort of leading the way on uh, getting into new, you know, category entry points on beverages.

For yum, we see the same opportunity for KFC and KFC has their own program quench, uh, which is now going into test, um, and very, very excited about the impact that that can have on the business.

Our next question comes from Dennis, Gaggia UBS.

Your line is open. Dennis, please go ahead.

Thank you. And congratulations, David, on a terrific career. I very much appreciate the partnership over the years. And, of course, Chris, congrats—well deserved. I'm wondering if you could talk a little bit more about the difficult consumer environment in the U.S. that you both referenced. Any commentary on maybe the low-income consumer in particular, or any other notable consumer cohort? Pressures to call out, and more importantly, how the brands in the U.S. are positioned to win with those consumers. Thank you.

Yeah, sure. Yeah obviously it's well documented that the US is a challenged environment to operate in right now. Um in our industry. Uh, others have talked about that. Obviously, we are playing a little bit of a different game at yum uh given that more than 80% of our profit in the US comes from Taco Bell. And in many ways this sets up as a really nice environment from poor Taco Bell, you're seeing it in the results. Um the data that we look at about, you know, consumer Behavior shows clear trade in from consumers and fast casual into the Taco Bell brand. Uh, and when you even pull apart the income bands, although I know, you know, the lower income consumers are pulling back. That's been well documented by our competitors. We aren't seeing that at Taco Bell. In fact, we've had if you pull all the income bands in Q2, we've had sales and trans growth across all income bands. At Taco Bell, very consistently very little difference, uh, from 1 income ban to another, and I think it just it, it's just more evident.

Of the power of the Taco Bell model and our ability to take share in this environment even though it is a pressure consumer, just a little bit more on, you know, Taco, Bell's, uh, performance that, you know, that found this stat the other day, which was sort of, you know, proud of only if you take the top 10 companies that are publicly traded top 10 restaurant Brands, um, in the world Taco Bell is the only 1 that has had positive quarterly.

Sales for 5 years in a row.

This year, we haven't had a single negative week for Taco Bell. So most people are reporting negative quarters. We haven't even had a negative week for Taco Bell and while the 1 year numbers can be a little choppy based on some unusual lapse from last year, we've been very consistent in the, you know, on the 2-year basis in that you know plus 9 plus 10%, same store sales growth uh and we expect honestly in Q3, you know, we expect to see sequential improvement in our 1 year. Same store, sales growth and consistent to your performance coming out of q1 and Q2. So the brand is truly on a roll. Why is that? You know, it's because of all the great Innovation crispy chicken. Uh, you know, that what we did with Refreshers, improving Ops, you know, the value, menu, 579, all of that contributed to Q2, but what gets me most excited, um, which I'm going to be excited to be watching from the sidelines is what we have coming.

Uh, in Q3 and Q4 in the next few weeks. You know, we'll be launching Baja Blast midnight, at Taco Bell, we've got 3 dollar burritos coming, we've got cheesy Street chalupas and then in Q4 we're bringing back, uh, the decades menu. Um, and we even have devonte's House coming back, which I know is a favorite of a lot of our customers. So there's lots to get it be excited about Taco Bell. Despite the softer us consumer environment. Um, in fact, in many ways, we welcome

That environment because we're taking share from the competition and talk about clearly on a role.

Our next question comes from Brian Bittner. Oppenheimer company. Your line is open, Brian, please. Go ahead.

Thanks. Good morning and and of course, congratulations. David on your inspiring Korea, yum. And and of course, a big congrats to you as well. Chris. Um, I think it's pretty clear that the, the bite by Young platform is a very unique Catalyst for your business relative to the competitive set and I know there's different components to it, but can you help us understand how many units have the full platform today? And what, what, what is the Cadence of the roll out? Look like as you go across your Global portfolio through 2026 and you know, what do you see as just the greatest unlocks going forward for for your bite by Young platform for the franchises.

Yeah, a good question. I think we've shared previously that about 25,000 restaurants around the globe, have some component of bite uh, operating in the today. Uh, but in a number of cases that is just 1 component or 2 components today. Um, you know, the place where we have the most components of bite operating in 1 brand country combination, as I mentioned earlier, is in Taco Bell. So the expansion Journey, uh,

A lot of progress in the us, but as we shared on the last call, it was at our Global franchise convention in Sydney earlier this year, where we really made the bite unveil to our Global franchise base and we essentially hosted what was a trade show that where those uh, franchises from around the globe, were able to spend time with Joe Park and our technology leaders uh who are building and developing and deploying each part of bite. Uh there's now significant demand from those franchises and we are in conversations with them to help them understand how we could bring those to life in their market. So there's still, uh, some steps to go through in terms of, um, you know, ensuring that the bike capabilities are ready to deploy in each specific geography and then of course, there's some implementation work to be done. So it's, you know, this will be a process that we will work through, but we're looking for ways to accelerate that, uh, and and right now we believe that demand uh, provide is not our problem. It's how do we work through that process to get deployment?

Our next question comes from Sarah Senator Bank of America. Your line is open, please go ahead.

Great, thank you very much. Um, now I'll have my congratulations as well to both of you. Uh, I I wanted to just, um, maybe to clarify a couple of comments, if you if I could the first is, I think you mentioned bite, connect is pressed at, uh, price at a discount to 3, p offerings trying to understand is that because the cost to you is lower, um, you know, for because of your scale or or something else um or is this effectively a kind of a subsidy to franchisees and the reason I ask is because um you know I think a comp a conversation that's ongoing is about kind of tech tech costs as they show up in your um GNA perhaps and I wanted to see if there's been kind of a shift in the philosophy or maybe just understand it. Um and then the other clarification is I think there is a mention that Taco Bell's taking share from fast. Casual. Does that mean you're not seeing it? Come from other traditional qsrs I I have bought the fast. Casual maybe it was just too small to explain kind of how robust the the performance has been. Thank you.

Yeah, thanks Sarah. Let me start with the first 1 on bite and let me start with a couple of uh sort of high level. Um uh statements about my first. It is the only multi-brand multi-market restaurant. Technology platform built by restaurant tours for restaurant tours. Uh, and it's part of that, you know, our, uh, commitment to our franchisees is to give them Leading Edge capabilities at a price that is better than they can.

Get on the market. And so if we think about bite connect, uh, there is a, you know, there, there are some other Solutions on the market built by tech companies, not restaurants, uh, companies, um, that many of our uh, franchises are accessing today at a certain price, um, through our internal development, uh, which allows us to accomplish the same, uh, you know, functional objectives for our franchise Partners. Um, because of our scale, we're able to offer that to our franchise partners that, uh, at a lower cost than they could get on the market. So that creates a competitive Advantage for them. Uh, it actually helps their pnl. They end up spending, uh, Less in total on Tech as a result whenever they migrated over to uh to bike connect. Um, and of course, uh, given that that benefit flows to their p&l. We uh, expect our franchise Partners to share in that investment with us through the fees that are generated, uh, into yam. Uh, and that, of course, is part of

how we're bending the curve on the GNA impact of our Tech strategy on our p&l. Um, so, you know, all part of how we leverage our scale and, and our Tech capability and expertise our ownership, and our talent for the benefit of our franchise partners.

However, with Taco Bell's performance, it's clear, we're taking share from a lot of competitors, not just in past schedule. We're taking it from the qsr industry in general. Uh, and obviously, you know, when we, when we look at this environment, it's 1 that not only can we, you know, win and we can really Thrive and really, take market share put ourselves in a better position going forward.

Operator, we have time.

For 1 more question.

Yes, thank you very much. Our final question will come from Brian. Harbour from Morgan Stanley? Your line is open dry

Please go ahead.

Thanks. Uh good morning and congratulations again to, to both of you. I guess, could you just elaborate on? Um, the comments I I there are separate comments but I think, you know, you talked about value perception that.

At KFC, you talked about, sort of, you know, I think the value menu lineup at Pizza Hut. What, um, what needs to be done differently there? And I'm not sure if those were, you know, comments that apply across different markets, or, you know, is this sort of a broader opportunity for those two brands?

Yeah, I think the comments on value clearly. Um, this is an environment softer. Uh, consumer environment all around the world, where value matters. It's never value, never doesn't matter. Um, but it's a particular importance in this environment and what we're seeing around the world is we can win when we have that, when we do value the right way, Taco Bell with 579, craving value menu is a great example, but we have all sorts of other examples, all around the world. Um, and I think Scott mazinsky coming out of the Taco Bell world where they play, volume better than just about anybody else in the industry has been quite helpful to him. Spreading that gospel at KFC, around the world. And you're starting to see, you know, some of the results from that as we go into Q3 in the second half of the Year, we're seeing the business strengths and on the backs of embracing value in this environment.

I think with that, um, I'm just going to close out real quickly. Uh, appreciate all the nice comments today, um, from everybody, uh, really have enjoyed working with all of you. Um, you know, and as I reflect on, you know, my tenure as CEO and my career with you, um, obviously, I'm proud of so much that we've done to create shareholder value, improve the business, the work we did, you know, to dramatically ramp up the pace of development. Uh, the be going from a lagger to a leader on Tech. Um, the strength of our twin growth engines, today has never been stronger, um, well, positioned for success. But when you pull all of that apart, it all

Comes down to the people. In this organization, the culture and talented. Young is the best in the industry, really the best. And just about any company that there is out there, um, we're, our ability to attract develop and retain people is what sets us apart, and it's why we've achieved so many great things, uh, over the years,

That is at all levels of the company, it's our franchise Partners, it's from our team members all around the world, um, up to the leadership team that runs this company, the best example that I can think of of that is Chris Turner. He joined 6 years ago, um, and our ability to even attract him and get him to come join. Young was a real coup. Uh, and you can see from his career here, he's had a massive impact on the company, as CFO, nobody is better positioned to take over this company than Chris. I'm so excited to be able to, uh, stay connected to him as an adviser and watch him lean in on New Growth strategies to take the business to new heights, and accelerate the pace of growth, uh, and nobody will be cheering. This company on more strongly than me, um, excited about the next chapter of my life. Uh, as I move into retirement and proud of the company that we built and the future of it could not be brighter. Thank you so much for your time today. It's been a pleasure.

This concludes today's call. We thank everyone for your time. You may now disconnect your lines.