Q1 2026 Yum! Brands Inc Earnings Call

April 29, 2026

Operator: Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Yum! Brands, Inc. 2026 Q1 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star and one. Please limit all comments to one question. I would now like to turn the call over to Matt Morris, Head of Investor Relations. You may begin.

Speaker #2: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad.

Speaker #2: If you'd like to withdraw your question, again, press the star and 1. Please limit all comments to one question. I would now like to turn the call over to Matt Morris, Head of Investor Relations, you may begin.

Speaker #1: Good morning, everyone, and thank you for joining us today. On our call are Chris Turner, our CEO; Ranjith Roy, our CFO; and Dave Russell, our Senior Vice President and Corporate Controller.

Matt Morris: Good morning, everyone, and thank you for joining us today. On our call are Chris Turner, our CEO, Ranjith Roy, our CFO, and David Russell, our Senior Vice President and Corporate Controller. Following the remarks from Chris and Roy, we'll open the call to questions. 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 and risk factors discussed in 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.

Speaker #1: Following the remarks from Chris and Roy, we'll open the call to questions. 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.

Speaker #1: 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 and risk factors discussed in our SEC filings.

Speaker #1: 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.

Speaker #1: For more details on our reporting calendars by market, please refer to the financial reports section of our IR website. We are broadcasting this conference call via our website.

Matt Morris: For more details on our reporting calendars by market, please refer to the financial report section of our IR website. We are broadcasting this conference call via our website. This call is also being recorded and will be available for playback. We'd like to make you aware that our Q2 earnings will be released on 30 July with a conference call on the same day. Now, I'll turn the call over to our CEO, Chris Turner.

Speaker #1: This call is also being recorded and will be available for playback. We'd like to make you aware that our second quarter earnings will be released on July 30th with a conference call on the same day.

Speaker #1: Now, I'll turn the call over to our CEO, Chris Turner.

Speaker #2: Thank you, Matt. And good morning, everyone. At Yum, we remain committed to our mission to grow iconic restaurant brands globally by building the world's most loved, trusted, and connected brands.

Chris Turner: Thank you, Matt, good morning, everyone. At Yum!, we remain committed to our mission to grow iconic restaurant brands globally by building the world's most loved, trusted, and connected brands. In support of that mission, we recently unveiled our Raise the Bar priorities to drive our next chapter of global growth. These priorities include battling for the future consumer, accelerating restaurant unit economics, and reaching the full potential of Byte. Our world-class franchisees, along with our unrivaled culture and talent, are critical enablers of these priorities, giving us the scale and expertise to win across the 155 countries in which we operate. We expect Raise the Bar to come to life over time, and the momentum reflected in Q1 across these priorities and key parts of our business is encouraging.

Speaker #2: In support of that mission, we recently unveiled our Raise the Bar priorities to drive our next chapter of global growth. These priorities include battling for the future consumer, accelerating restaurant unit economics, and reaching the full potential of BITE.

Speaker #2: Our world-class franchisees, along with our unrivaled culture and talent, are critical enablers of these priorities, giving us the scale and expertise to win across the 155 countries in which we operate.

Speaker #2: We expect Raise the Bar to come to life over time, and the momentum reflected in Q1 across these priorities and key parts of our business is encouraging.

Speaker #2: Yum's Q1 results mark a solid start to the year, with our fundamentals as strong as ever. We are incredibly pleased with the company's top-line performance, the integration of new company-owned Taco Bell stores, improved KFC restaurant-level margins, and disciplined G&A spend.

Chris Turner: Yum!'s Q1 results mark a solid start to the year, with our fundamentals as strong as ever. We are incredibly pleased with the company's top-line performance, the integration of new company-owned Taco Bell stores, improved KFC restaurant-level margins, and disciplined G&A spend. All of which contributed to strong profit growth. To give more context, I'll review Q1 performance and the momentum across our priorities, starting with KFC, which represents 53% of our divisional operating profit. In Q1, KFC delivered 6% system sales growth. To battle for the future consumer, KFC is elevating its menus through high-impact collaborations and innovation, and expanding its sauces platform, building on insights and best practices from Saucy by KFC. The platform includes globally deployable dunked and dripped flavor lineups, enabling faster speed to market and more consistent execution across geographies.

Speaker #2: All of which contributed to strong profit growth. To give more context, I'll review Q1 performance and the momentum across our priorities starting with KFC, which represents 53% of our divisional operating profit.

Speaker #2: In Q1, KFC delivered 6% system sales growth. To battle for the future consumer, KFC is elevating its menus through high-impact collaborations and innovation, and expanding its sauces platform, building on insights and best practices from Saucy by KFC.

Speaker #2: The platform includes globally deployable, dunked, and dripped flavor lineups, enabling faster-speed-to-market and more consistent execution across geographies. Eight of KFC's top 20 markets are reactivating or launching one of these sauce platforms in 2026, including South Africa, India, Germany, the UK, France, and the Middle East.

Chris Turner: Eight of KFC's top 20 markets are reactivating or launching one of these sauce platforms in 2026, including South Africa, India, Germany, the UK, France, and the Middle East. In parallel, KFC is leveraging its new global innovation pantry, which helps markets replicate successful, proven menu innovations. For instance, KFC UK is off to a very strong start, with a 7% increase in Q1 same-store sales growth and is seeing strong momentum to start Q2, driven by the Pickle Mania menu, which featured 4 pickle-topped items. Pickle Mania is the most successful limited time offer in KFC UK history. The UK team pulled this concept from KFC's global innovation pantry after Canada had a successful launch in 2025. Cultural relevance is essential to drive engagement with the next generation of consumers.

Speaker #2: In parallel, KFC is leveraging its new global innovation pantry, which helps markets replicate successful, proven menu innovations. For instance, KFC UK is off to a very strong start, with a 7% increase in Q1 same-store sales growth and is seeing strong momentum to start Q2, driven by the pickle-mania menu, which featured four pickle-topped items.

Speaker #2: Pickle-mania is the most successful limited-time offer in KFC UK history. The UK team pulled this concept from KFC's global innovation pantry after Canada had a successful launch in 2025.

Speaker #2: Cultural relevance is essential to driving engagement with the next generation of consumers and, as a result, KFC continues to add more food options with rice bowls, boneless chicken, and occasion-led innovation.

Chris Turner: As a result, KFC continues to add more food options with rice bowls, boneless chicken, and occasion-led innovation. A great example in Q1 is the Tteumbak Kimchi Bap bowl that launched in Korea, which rapidly became a fan favorite and sustained double-digit weekly growth into its fifth week. On top of KFC's distinctiveness and innovation, the brand is driving system sales through industry-leading development, with 7% unit growth in Q1 and a record number of Q1 gross builds. KFC added new stores in 45 countries. Strong unit economics are a key factor behind this momentum. In partnership with its franchisees, KFC is working to accelerate restaurant economics even further across several key markets. Recently, KFC brought one of its best franchisees into Brazil, who is innovating its store formats. The franchisee recently opened one of its first prefabricated restaurants in Chile.

Speaker #2: A great example in Q1 is the Tumbak Kinji Bap bowl that launched in Korea, which rapidly became a fan favorite and sustained double-digit weekly growth into its fifth week.

Speaker #2: On top of KFC's distinctiveness and innovation, the brand is driving system sales through industry-leading development, with 7% unit growth in Q1 and a record number of Q1 gross builds.

Speaker #2: KFC added new stores in 45 countries, strong unit economics are a key factor behind this momentum, in partnership with its franchisees, KFC is working to accelerate restaurant economics even further across several key markets.

Speaker #2: Recently, KFC brought one of its best franchisees into Brazil, who is innovating its store formats. The franchisee recently opened one of its first prefabricated restaurants in Chile.

Speaker #2: These stores are assembled in a manufacturing facility over 45 days, and only require 15 days to assemble on-site. This represents a reduction in construction time of 17 weeks versus traditional builds.

Chris Turner: These stores are assembled in a manufacturing facility over 45 days and only require 15 days to assemble on-site. This represents a reduction in construction time of 17 weeks versus traditional builds. This is just one small example of the ways in which we will encourage our teams and franchisees to take bold ideas to improve franchisee unit economics. Moving to Taco Bell, which represents 39% of our divisional operating profit, Taco Bell's magic formula is firing on all cylinders. Taco Bell US reported 8% same-store sales growth, meaningfully outperforming the industry. This is Taco Bell's 8th consecutive quarter of US same-store sales growth ahead of the industry. On a 2-year basis, Taco Bell's US same-store sales have grown 18%, miles ahead of the overall QSR industry.

Speaker #2: This is just one small example of the ways in which we will encourage our teams and franchisees to take bold ideas to improve franchisee unit economics.

Speaker #2: Moving to Taco Bell, which represents 39% of our divisional operating profit, Taco Bell's magic formula is firing on all cylinders. Taco Bell US reported 8% same-store sales growth, meaningfully outperforming the industry.

Speaker #2: This is Taco Bell's eighth consecutive quarter of US same-store sales growth ahead of the industry. On a two-year basis, Taco Bell's US same-store sales have grown 18%, miles ahead of the overall QSR industry.

Speaker #2: Same-store sales growth in the quarter reflects 3 percentage points of transaction growth, with value scores and value mix both increasing, thanks to the successful launch of the Luxe Value menu.

Chris Turner: Same-store sales growth in the quarter reflects 3 percentage points of transaction growth, with value scores and value mix both increasing thanks to the successful launch of the Luxe Value menu. As the Taco Bell leadership team laid out in their 2030 ambitions at Consumer Day in March 2025, the brand has a clear multi-year plan to expand its offerings with long-term targets that reflect persistent market share gains. As one example of the impact of the strategy, expanded use occasions among light consumers has led to perception gains for Taco Bell on factors including good for dinner, good for large groups, and good for healthier options. These expanded perceptions show that Taco Bell is driving not only short-term sales momentum, but importantly, long-term brand strength. Taco Bell is battling for the future consumer by pairing unbeatable value and innovation with cultural relevance.

Speaker #2: As the Taco Bell leadership team laid out in their 2030 ambitions at Consumer Day in March 2025, the brand has a clear, multi-year plan to expand its offerings, with long-term targets that reflect persistent market share gains.

Speaker #2: As one example of the impact of the strategy, expanded use occasions among light consumers has led to perception gains for Taco Bell on factors including good-for-dinner, good-for-large groups, and good-for-healthier options.

Speaker #2: These expanded perceptions show that Taco Bell is driving not only short-term sales momentum but, importantly, long-term brand strength. Taco Bell is battling for the future consumer by pairing unbeatable value and innovation with cultural relevance.

Speaker #2: The power of this combination was on display at its Live Más Live event last month, where the brand unveiled more than 20 menu innovations for 2026.

Chris Turner: The power of this combination was on display at its Live Más LIVE event last month, where the brand unveiled more than 20 menu innovations for 2026. The event was streamed on Peacock with headline-making guest appearances from Doja Cat, Davante Adams, Ariana Madix, Benson Boone, Yeat, Fernando Mendoza, Jason Sudeikis, DJ Pee .Wee, Myke Towers, and many, many more. Social media mentions and media coverage were 60% higher than last year, and Taco Bell believes the event can be even bigger next year. Live Más LIVE is a powerful example of Taco Bell's unique ability to create a marquee brand moment, amplify innovation at scale, and reinforce its position at the center of culture. Furthermore, Taco Bell's success is fueled by more than value and innovation. Operationally, Taco Bell is executing at a superior level on key measures, including consumer satisfaction and order accuracy.

Speaker #2: The event was streamed on Peacock with headline-making guest appearances, from Doja Cat, Davante Adams, Ariana Madix, Benson Boone, Yeet, Fernando Mendoza, Jason Sudeikis, DJ Pee-Wee, Mike Towers, and many, many more.

Speaker #2: Social media mentions and media coverage were 60% higher than last year, and Taco Bell believes the event can be even bigger next year. Live Moss Live is a powerful example of Taco Bell's unique ability to create a marquee brand moment amplify innovation at scale, and reinforce its position at the center of culture.

Speaker #2: Furthermore, Taco Bell's success is fueled by more than value and innovation. Operationally, Taco Bell has executing at a superior level on key measures including consumer satisfaction and order accuracy.

Speaker #2: Taco Bell improved its consumer satisfaction scores in every period since March of last year. The brand relentlessly tracks order accuracy, in part by monitoring consumer complaints, which have declined this year since rolling out operational improvements in 2025.

Chris Turner: Taco Bell improved its consumer satisfaction scores in every period since March of last year. The brand relentlessly tracks order accuracy, in part by monitoring consumer complaints, which have declined this year since rolling out operational improvements in 2025. I am confident that Taco Bell will continue to lead the industry, thanks not only to value and innovation, but also improved consumer experiences coming to life through superior execution, superior speed, and superior digital and loyalty platforms. At our smallest brand, Habit Burger & Grill, we are pleased with the top-line momentum generated from aggressive moves to enhance value, bring new innovation like the Baja Crispy Fish Sandwich to its menu, and to elevate brand distinctiveness. The positive impact comes while the team continues working to mitigate the ongoing bottom-line impact of inflation, particularly from beef prices.

Speaker #2: I am confident that Taco Bell will continue to lead the industry, thanks not only to value and innovation but also improved consumer experiences coming to life through superior execution, superior speed, and superior digital and loyalty platforms.

Speaker #2: At our smallest brand, Habit Burger and Grill, we are pleased with the top-line momentum generated from aggressive moves to enhance value, bring new innovation like the Baja Crispy Fish Sandwich to its menu, and to elevate brand distinctiveness.

Speaker #2: The positive impact comes while the team continues working to mitigate the ongoing bottom-line impact of inflation, particularly from beef prices. One bold move to enhance brand positioning in Habit's home market of Southern California is the new partnership with the LA Dodgers.

Chris Turner: One bold move to enhance brand positioning in Habit's home market of Southern California is the new partnership with the Los Angeles Dodgers. I had an opportunity recently to experience the amazing new Habit location inside Dodger Stadium and the nearby Dodgers-themed restaurant in Echo Park. Yum! is also investing smartly in testing bolder bets around innovations to keep our brands ahead of consumer shifts. For instance, through findings from Collider Lab, our in-house consumer insights agency, Taco Bell and KFC are leaning into the fast-growing beverage category by introducing highly differentiated offerings. Starting with Taco Bell, in 2025, 62% of the brand's orders included a beverage, making this an important area in which to increase the pace of innovation and deepen consumer engagement. From the beginning, the team has been intentional from ideation to development to ensure that even the Taco Bell beverage platform becomes a category of one.

Speaker #2: I had an opportunity recently to experience the amazing new Habit location inside Dodger Stadium, and the nearby Dodgers-themed restaurant in Echo Park. Yum is also investing smartly in testing bolder bets around innovations to keep our brands ahead of consumer shifts.

Speaker #2: For instance, through findings from Collider, our in-house consumer insights agency, Taco Bell and KFC are leaning into the fast-growing beverage category by introducing highly differentiated offerings.

Speaker #2: Starting with Taco Bell, in 2025, 62% of the brand's orders included a beverage, making this an important area in which to increase the pace of innovation and deepen consumer engagement.

Speaker #2: From the beginning, the team has been intentional from ideation to development to ensure that even the Taco Bell beverage platform becomes a category of one.

Speaker #2: Taco Bell continues to pilot Live Moss Cafe in 38 restaurants, and a unique set of Taco Bell-style drinks that won't be found anywhere else such as Churro Chillers and a sweet empanada and cream chiller.

Chris Turner: Taco Bell continues to pilot Live Más Café in 38 restaurants and a unique set of Taco Bell style drinks that won't be found anywhere else, such as Churro Chillers and a Sweet Empanadas & Cream Chiller. Taco Bell is already leveraging learnings from the pilot to broaden the beverage menu across the entire system with proven successes such as Midnight Baja Blasts and Agua Refrescas. In fact, 43% of Taco Bell's specialty beverage sales are standalone orders without food, proving the opportunity for incrementality is very high. Similar excitement for beverages is building at KFC. This year, KFC is scaling its Kwench beverage platform to the UK, Australia, and Canada and building a pipeline of additional markets for further expansion. On top of better operational execution, buzz-worthy innovation and compelling value, our brands are also delivering superior results through our digital channels.

Speaker #2: Taco Bell is already leveraging learnings from the pilot to broaden the beverage menu across the entire system with proven successes such as Midnight Baja Blast and Agua Refrescas.

Speaker #2: In fact, 43% of Taco Bell's specialty beverage sales are standalone orders without food, proving the opportunity for incrementality is very high. Similar excitement for beverages is building at KFC.

Speaker #2: This year, KFC is scaling its quenched beverage platform to the UK, Australia, and Canada, and building a pipeline of additional markets for further expansion.

Speaker #2: On top of better operational execution, buzzworthy innovation, and compelling value, our brands are also delivering superior results through our digital channels. This quarter, digital mix increased to 63%, and digital sales approached $11 billion.

Chris Turner: This quarter, digital mix increased to 63% and digital sales approached $11 billion. Expanding loyalty is fundamental to growing our digital business and broadening consumer appeal. This year, KFC is planning a loyalty expansion to 20 additional markets, putting the brand on a path to triple its 90-day active user base. Our proprietary Byte by Yum! technology platform powers our digital business. A key element of our efforts to reach the full potential of Byte is expansion into new markets. This quarter, Taco Bell UK became the first international market to roll out both the digital ordering and Smart Ops bundles. Shifting to Byte from previous disparate third-party technologies provides the business with a single unified platform, enabling greater agility and consistency in execution.

Speaker #2: Expanding loyalty is fundamental to growing our digital business, and broadening consumer appeal. This year, KFC is planning a loyalty expansion to 20 additional markets, putting the brand on a path to triple its 90-day active user base.

Speaker #2: Our proprietary Bite by Yum technology platform powers our digital business, a key element of our efforts to reach the full potential of Bite is expansion into new markets.

Speaker #2: This quarter, Taco Bell UK became the first international market to roll out both the digital ordering and smart ops bundles, shifting to Bite from previous disparate third-party technologies provides the business with a single, unified platform enabling greater agility and consistency in execution.

Speaker #2: The capabilities in the Bite platform provide Taco Bell UK with more integrated digital and restaurant experiences and greater opportunities for personalization on digital channels and in the restaurant.

Chris Turner: The capabilities in the Byte platform provide Taco Bell UK with more integrated digital and restaurant experiences and greater opportunities for personalization on digital channels and in the restaurant. In addition, use cases for AI continue to multiply, reinforcing the value of Yum! owning our digital ecosystem. This gives Yum! a powerful advantage. Our global data assets, coupled with Byte's reach, allow us to scale new AI features quickly for consumers. We also benefit from AI-driven efficiency gains within our digital and technology teams, benefits about which Roy will share more in a moment. All of our bold ambitions, from redefining beverages to earning the right to host star-studded streamed innovation events, are made possible by our people and our franchisees. We remain unified by our pursuit of accelerating growth into the future.

Speaker #2: In addition, use cases for AI continue to multiply. Reinforcing the value of Yum owning our digital ecosystem. This gives Yum a powerful advantage. Our global data assets coupled with Bite's reach allow us to scale new AI features quickly for consumers.

Speaker #2: We also benefit from AI-driven efficiency gains within our Digital and Technology teams—benefits about which Roy will share more in a moment. All of our bold ambitions, from redefining beverages to earning the right to host star-studded streamed innovation events, are made possible by our people and our franchisees.

Speaker #2: We remain unified by our pursuit of accelerating growth into the future. As testament to that, right now, in our Plano office, nearly 500 KFC marketing, development, and franchise leaders and GMs from around the globe are gathered for KFC's marketing planning meeting and development summit.

Chris Turner: As testament to that, right now in our Plano office, nearly 500 KFC marketing, development and franchise leaders and GMs from around the globe are gathered for KFC's marketing planning meeting and development summit, sharing insights and best practices, showcasing what's working locally and how it can scale globally, all in service of Raise the Bar in our largest brand. Stepping back, what encourages me most is that the Q1 results reflect the strengths we believe matter most. We have incredible brands that our consumers love. Our brands are benefiting from strong long-term consumer consumption trends in the categories in which we play. Specifically, Mexican and chicken are projected to grow well ahead of the overall limited service restaurant market over the next 5 years. We have world-class franchise partners who are experts at navigating dynamic environments.

Speaker #2: Sharing insights and best practices, showcasing what's working locally and how it can scale globally—all in service of raising the bar in our largest brand.

Speaker #2: Stepping back, what encourages me most is that the first quarter results reflect the strengths we believe matter most. We have incredible brands that our consumers love.

Speaker #2: Our brands are benefiting from strong, long-term consumer consumption trends in the categories in which we play, specifically Mexican and chicken are projected to grow well ahead of the overall limited service restaurant market over the next five years.

Speaker #2: We have world-class franchise partners who are experts at navigating dynamic environments. We have proprietary digital and technology capabilities that create seamless experiences for consumers and enable more productive restaurant operations for our franchisees.

Chris Turner: We have proprietary digital and technology capabilities that create seamless experiences for consumers and enable more productive restaurant operations for our franchisees. We are still early in 2026, and we know the environment remains dynamic, but our teams are executing with focus, our brands are staying close to the consumer, and we remain confident in the opportunities ahead as we raise the bar. With that, Roy, over to you.

Speaker #2: We are still early in 2026, and we know the environment remains dynamic, but our teams are executing with focus, our brands are staying close to the consumer, and we remain confident in the opportunities ahead as we raise the bar.

Speaker #2: With that, Roy, over to you. Thanks, Chris, and good morning, everyone. I'll begin with reviewing our first quarter results before discussing Yum's balance sheet, liquidity position, and guidance for the year.

Ranjith Roy: Thanks, Chris, and good morning, everyone. I'll begin with reviewing our Q1 results before discussing Yum!'s balance sheet, liquidity position, and guidance for the year. Beginning with the top line, in Q1, Yum! system sales grew 6%. We grew new units by 5% and same store sales globally at 3%. Digital sales approached $11 billion, with digital mix reaching a new high, now at 63%. Taco Bell US achieved restaurant level margins of 23.9%. We are pleased that despite significant inflation, Taco Bell has again demonstrated its ability to expand US company-owned margins. KFC restaurant level margins were 10.3%, up 100 basis points year-over-year, driven by a 240 basis point increase in UK restaurant margins. Ex special G&A was $284 million and was up 4%.

Speaker #2: Beginning with the top line, in the first quarter, Yum System sales grew 6%. We grew new units by 5%, and same-store sales globally at 3%.

Speaker #2: Digital sales approached $11 billion, with the digital mix reaching a new high now at 63%. Taco Bell US achieved restaurant-level margins of 23.9%. We are pleased that despite significant inflation, Taco Bell has again demonstrated its ability to expand US company-owned margins.

Speaker #2: KFC restaurant-level margins were 10.3%, up 100 basis points year over year, driven by a 240 basis point increase in UK restaurant margins. Ex-Special GNA was 284 million, and was up 4%.

Speaker #2: Franchise and license expense was $43 million, $9 million higher year over year, primarily due to the investment in marketing and innovation testing as part of the HUT Forward program.

Ranjith Roy: Franchise and license expense was $43 million, $9 million higher year-over-year, primarily due to the investment in marketing and innovation testing as part of the Hut Forward program. Excluding Pizza Hut, Yum! system sales grew 7%, G&A grew 3%, and core operating profit grew 10%. Now on to development. We opened 1,030 new stores in the quarter. KFC opened 648 new stores, driven by a strong start in China and development across 45 countries. As we focus on our Raise the Bar priorities, you can imagine we are actively prioritizing ways to further accelerate unit economics, including optimizing restaurant build costs, and introducing new equipment suppliers and specifications. Additionally, KFC's creativity around innovation is playing a role in accelerating unit economics.

Speaker #2: Excluding Pizza Hut, Yum System sales grew 7%, G&A grew 3%, and core operating profit grew 10%. Now, onto development. We opened 1,030 new stores in the quarter.

Speaker #2: KFC opened 648 new stores, driven by a strong start in China, and development across 45 countries. As we focus on our Raise the Bar priorities, you can imagine we are actively prioritizing ways to further accelerate unit economics.

Speaker #2: Including optimizing restaurant build costs and introducing new equipment suppliers and specifications. Additionally, KFC's creativity around innovation is playing a role in accelerating unit economics.

Speaker #2: The brand's new beverage platform, Quench, provides attractive, refit ROI with paybacks under three years as seen on existing UK stores. But this package also improves overall paybacks on new restaurant builds.

Ranjith Roy: The brand's new beverage platform, Kwench, provides attractive refit ROI with paybacks under 3 years as seen on existing UK stores. This package also improves overall paybacks on new restaurant builds. Our innovation and growth mindset continues to help us identify, attract, and support world-class franchise partners who are eager to join our system and take advantage of these opportunities. We expect further momentum in KFC markets that have recently transitioned franchise partners, including in Turkey, Italy, and Japan, where total units are up 9% year-over-year. While the Middle East conflict creates uncertainty globally, the impact on development has thus far been relatively minor and has included short-term delays to obtain government permits and procure equipment in select markets, such as the UAE and Turkey.

Speaker #2: Our innovation and growth mindset continues to help us identify attract and support world-class franchise partners who are eager to join our system and take advantage of these opportunities.

Speaker #2: We expect further momentum in KFC markets that have recently transitioned franchise partners, including in Turkey, Italy, and Japan, where total units are up 9% year over year.

Speaker #2: While the Middle East conflict creates uncertainty globally, the impact on development has thus far been relatively minor and has included short-term delays to obtain government permits and procure equipment in select markets, such as the UAE and Turkey.

Speaker #2: At this time, we see no change to our KFC development plans for the year, and note that 90% of KFC's development outside of China is contractual through development agreements with our well-capitalized franchisee base that believes in the brand.

Ranjith Roy: At this time, we see no change to our KFC development plans for the year and note that 90% of KFC's development outside of China is contractual through development agreements with our well-capitalized franchisee base that believes in the brand. Moving to Taco Bell, the brand opened 30 gross units in Q1, including 14 in the US and 16 internationally. In the US, the brand has a long-term opportunity of 10,000 plus stores, representing over a decade of future growth and capturing exciting new opportunities such as college campuses and airports. In international markets, Taco Bell total international system sales were up 16% in Q1. This is backed by strong performance in many key markets, including two-year stacked same-store sales growth of 23% in the UK, 18% in Canada, and 45% in India.

Speaker #2: Moving to Taco Bell, the brand opened 30 gross units in the first quarter, including 14 in the US and 16 internationally. In the US, the brand has a long-term opportunity of $10,000 plus stores, representing over a decade of future growth and capturing exciting new opportunities such as college campuses and airports.

Speaker #2: In international markets, Taco Bell total international system sales were up 16% in Q1. This is backed by strong performance in many key markets, including two-year stacked same-store sales growth of 23% in the UK, 18% in Canada, and 45% in India.

Speaker #2: Success in these larger markets is generating increased interest from new partners to launch Taco Bell in other new markets, such as Poland and Germany.

Ranjith Roy: Success in these larger markets is generating increased interest from new partners to launch Taco Bell in other new markets, such as Poland and Germany. Recall, Taco Bell entered five new markets last year and plans to expand its market count further this year. Shifting to technology, we continue to raise the bar on modern QSR technology and digital experiences with Byte by Yum. As we mentioned on our previous earnings call, the UK and Australia markets for KFC are on track to roll out Byte bundles this year, representing 2,000 incremental restaurant locations native to Byte once that rollout is complete. As Chris said, in Q1, Taco Bell UK became the first international market to onboard both the Byte digital ordering and Smart Ops bundles, demonstrating the platform scalability across markets and brands.

Speaker #2: Recall, Taco Bell entered five new markets last year and plans to expand its market count further this year. Shifting to technology, we continue to raise the bar on modern QSR technology and digital experiences with Bite by Yum.

Speaker #2: As we mentioned on our previous earnings call, the UK and Australia markets for KFC are on track to roll out Bite Representing 2,000 incremental restaurant locations native to Bite once that rollout is complete.

Speaker #2: And as Chris said, in Q1, Taco Bell UK became the first international market to onboard both the Bite digital ordering and Smart Ops bundles.

Speaker #2: Demonstrating the platform's scalability across markets and brands. Within Bite and beyond, our digital and technology leaders are focused on the myriad ways we can adopt AI, which can be a powerful enabler of Yum's long-term growth.

Ranjith Roy: Within Byte and beyond, our digital and technology leaders are focused on the myriad ways we can adopt AI, which can be a powerful enabler of Yum!'s long-term growth. We are embedding AI in our consumer-facing technologies and innovations across our restaurant operations. In Q1, Taco Bell US piloted AI-driven A/B testing in the drive-thru, with plans to roll out the technology nationwide this year. This new feature can dynamically change the layout, content, and visuals on a car-by-car basis, allowing the brand to generate insights more quickly and make more effective national adjustments.

Speaker #2: We are embedding AI in our consumer-facing technologies and innovations across our restaurant operations. In Q1, Taco Bell US piloted AI-driven A/B testing in the drive-through, with plans to roll out the technology nationwide this year.

Speaker #2: This new feature can dynamically change the layout, content, and visuals on a car-by-car basis, allowing the brand to generate insights more quickly and make more effective national adjustments.

Speaker #2: Whether it is voice AI in the drive-through, or AI-driven dynamic menu boards, the seamless rollout of these new tech features has been made possible due to the physical and digital assets we have developed and deployed over the years.

Ranjith Roy: Whether it is voice AI in the drive-thru or AI-driven dynamic menu boards, the seamless rollout of these new tech features has been made possible due to the physical and digital assets we have developed and deployed over the years, including the underlying integrated Byte technology and the physical investments in digital menu boards that we and our franchisees rolled out over several years. Similar AI-driven enhancements will be tested and scaled across our brands to drive loyalty adoption and growth. Beyond consumer-facing technologies, as Chris mentioned, Yum is also uniquely positioned to capture efficiency improvements from AI that will accelerate productivity within our enterprise.

Speaker #2: Including the underlying integrated Bite technology and the physical investments in digital menu boards that we and our franchisees rolled out over several years. Similar AI-driven enhancements will be tested and scaled across our brands to drive loyalty adoption and growth.

Speaker #2: Beyond consumer-facing technologies, as Chris mentioned, Yum is also uniquely positioned to capture efficiency improvements from AI that will accelerate productivity within our enterprise. We are currently building an enhanced version of the Bite Kitchen display system, with an overall team that is half the size of what it would have been in the past.

Ranjith Roy: We are currently building an enhanced version of the Byte kitchen display system with an overall team that is half the size of what it would have been in the past, enable us to accelerate the pace of technology innovation substantially and expand the pipeline of value-added digital and technology initiatives our team members can work on. We are excited about the potential that AI provides to our business. I'll provide an update on our balance sheet and liquidity position. For the quarter, gross capital expenditures totaled $75 million. Our net leverage ratio ended the quarter at approximately 3.8x. During the quarter, we repurchased approximately 1.2 million shares for a total of $185 million. As a reminder, we generate a run rate of approximately $1.8 billion in operating cash flow ex Pizza Hut.

Speaker #2: Enable us to accelerate the pace of technology innovation substantially and expand the pipeline of value-added digital and technology initiatives our team members can work on.

Speaker #2: We are excited about the potential that AI provides to our business. Next, I'll provide an update on our balance sheet and liquidity position. For the quarter, gross capital expenditures totaled $75 million.

Speaker #2: Our net leverage ratio ended the quarter at approximately 3.8 times. During the quarter, we repurchased approximately $1.2 million shares for a total of $185 million.

Speaker #2: As a reminder, we generate a run rate of approximately 1.8 billion dollars in operating cash flow ex-pizza hut. When you couple that with the additional debt capacity we generate each year from our profit growth and our four times net leverage ratio expectation, that is a run rate of over 2.5 billion dollars of cash generated annually that we expect to grow at a healthy clip each year going forward.

Ranjith Roy: When you couple that with the additional debt capacity we generate each year from our profit growth and our 4x net leverage ratio expectation. That is a run rate of over $2.5 billion of cash generated annually that we expect to grow at a healthy clip each year going forward. We are disciplined around our priorities in the use of this capital to maximize shareholder value through, first, prioritizing strategic investments in the business. Second, maintaining a strong and flexible balance sheet. Third, offering a competitive dividend, and fourth, returning any remaining excess cash to shareholders. As we refinance upcoming maturities, we will have the ability to upsize debt offerings and return substantial excess capital to shareholders. Subject to financing market conditions, we intend to do so.

Speaker #2: We are disciplined around our priorities in the use of this capital to maximize shareholder value through, first, prioritizing strategic investments in the business; second, maintaining a strong and flexible balance sheet; third, offering a competitive dividend; and fourth, returning any remaining excess cash to shareholders.

Speaker #2: As we refinance upcoming maturities, we will have the ability to upsize debt offerings and return substantial excess capital to shareholders. And, subject to financing market conditions, we intend to do so.

Speaker #2: For this year, we expect our full-year interest expense to fall in the range of $510 to $520 million excluding any potential debt issuances. More broadly, as we look ahead to the balance of the year, we remain very confident in our ability to meet or exceed each component of our long-term growth algorithm when excluding Pizza Hut.

Ranjith Roy: For this year, we expect our full-year interest expense to fall in the range of $510 to 520 million, excluding any potential debt issuances. More broadly, as we look ahead to the balance of the year, we remain very confident in our ability to meet or exceed each component of our long-term growth algorithm when excluding Pizza Hut. We now expect Taco Bell US restaurant-level margins to be between 24.5% and 25.5%, reflecting better top-line momentum and higher margins than originally planned from the acquired Taco Bell stores. As we shared last quarter, full-year ex special GNA growth, excluding Pizza Hut, is expected to be up mid-single digits.

Speaker #2: We now expect Taco Bell US restaurant-level margins to be between 24.5% and 25.5%, reflecting better top-line momentum and higher margins than originally planned from the acquired Taco Bell stores.

Speaker #2: As we shared last quarter, full-year ex-special G&A growth, excluding Pizza Hut, is expected to be up mid-single digits. As a reminder, amortization of reacquired franchise rights is anticipated to increase $30 million this year, largely due to the acquisition of franchise stores by Taco Bell in Q4 2025.

Ranjith Roy: As a reminder, amortization of reacquired franchise rights is anticipated to increase $30 million this year, largely due to the acquisition of franchise stores by Taco Bell in Q4 2025. To help model the shape of the year, we expect Q2 to reflect high single-digit growth year-over-year ex special, ex Pizza Hut G&A due to the timing of project spend. We expect approximately $5 million of non-cash closure expenses for Habit as we opportunistically optimize our store network by making a small number of closures in subscale markets. Turning to Pizza Hut, the brand saw strength across many international markets. Note 11% system sales growth in the Middle East and 8% system sales growth in both China and Latin America.

Speaker #2: To help model the shape of the year, we expect Q2 to reflect high single-digit growth, year-over-year ex-special ex-Pizza Hut G&A, due to the timing of project spend.

Speaker #2: Additionally, we expect approximately $5 million of non-cash closure expenses for Habit as we opportunistically optimize our store network by making a small number of closures in sub-scale markets.

Speaker #2: Turning to Pizza Hut, the brand saw strength across many international markets, note 11% system sales growth in the Middle East and 8% system sales growth in both China and Latin America.

Speaker #2: Pizza Hut's Q1 core operating profit growth was in line with our guidance, and we expect Q2 core operating profit of approximately $70 million. Both Q1 and Q2 core operating profit includes expense-related to the one-time Hut Forward investment that we previously disclosed.

Ranjith Roy: Pizza Hut's Q1 core operating profit growth was in line with our guidance. We expect Q2 core operating profit of approximately $70 million. Both Q1 and Q2 core operating profit includes expense related to the one-time Hut Forward investment that we previously disclosed. With regard to the strategic options review for Pizza Hut, that process has progressed since our last earnings call. We remain on track to complete the review in 2026. As previously communicated, the objective of the review is to create value for Yum, Pizza Hut, and its franchise partners by determining the optimal approach to capitalize on Pizza Hut's structural advantages, its strong brand equity, experienced franchise partners, and meaningful scale. In closing, Yum delivered a strong start to 2026, with core operating profit growth excluding Pizza Hut of 10%.

Speaker #2: With regard to the strategic options review for Pizza Hut, that process has progressed since our last earnings call, and we remain on track to complete the review in 2026.

Speaker #2: As previously communicated, the objective of the review is to create value for Yum, Pizza Hut, and its franchise partners by determining the optimal approach to capitalize on Pizza Hut's structural advantages.

Speaker #2: Its strong brand equity, experienced franchise partners, and meaningful scale. In closing, Yum delivered a strong start to 2026, with core operating profit growth excluding Pizza Hut off 10%.

Speaker #2: We are only in the early innings of executing against our raise-the-bar priorities that will help refine Yum's next chapter of growth. We are excited for the journey ahead, and with that, operator, we are ready to take questions.

Ranjith Roy: We are only in the early innings of executing against our Raise the Bar priorities that will help refine Yum!'s next chapter of growth. We are excited for the journey ahead. With that operator, we are ready to take questions.

Speaker #1: At this time, I would like to remind everyone in order to ask a question, press stars, and the number one on your telephone keypad.

Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Please limit all comments to one question. Your first question comes from the line of David Palmer with Evercore. Your line is open.

Speaker #1: Please limit all comments to one question. Your first question comes from the line of David Palmer with Evercore. Your line is open.

Speaker #3: Thanks. Always enjoy getting some color from you on global demand trends and what you're seeing out there. It looks like as we look at the system sales results by market for KFC, China and Canada may be a little bit of slowing in a one and two-year basis, but Asia, India, Middle East look very strong, if not accelerating.

David Palmer: Thanks. always enjoy getting some color from you on global demand trends and what you're seeing out there. It looks like, as we look at the system sales results by market for KFC, you know, China, Canada may be a little bit of slowing on a one and two-year basis, but Asia, India, Middle East look very strong, if not accelerating. Europe, pretty stable. Any, any color as you look around the globe in terms of demand trends as we think about the rest of the year? Thank you.

Speaker #3: Europe, pretty stable. So any color as you look around the globe in terms of demand trends as we think about the rest of the year.

Speaker #3: Thank you.

Speaker #4: Yeah, thanks, David. We're pleased with the progression in KFC International. If you look over the last four quarters, we've seen acceleration on a two-year same-store sales basis.

Ranjith Roy: Yeah. Thanks, David. You know, we're pleased with the progression in KFC International. If you look over the last 4 quarters, we've seen acceleration on a 2-year same-store sales basis in each of those quarters in KFC International. Lots of good things happening. As you said, if you look across those markets, you got plenty of double-digit system sales growth markets. We gave a few examples in the speeches. You know, UK is at the lead of bringing to life a more vibrant consumer proposition, leveraging innovation, expanding consumer use occasions. Korea, I was with the Korea team from KFC earlier this week. They have doubled their system sales over the last few years. They've reached the highest rate of unit development last year, nearly 3 to 4 times their previous pace.

Speaker #4: In each of those quarters in KFC International, lots of good things happening. As you said, if you look across those markets, you've got plenty of double-digit system sales growth markets.

Speaker #4: And we gave a few examples in the speeches. UK is at the lead of bringing to life a more vibrant consumer proposition, leveraging innovation, expanding consumer use occasions.

Speaker #4: Korea was with the Korea team from KFC earlier this week. They have doubled their system sales over the last few years. They've reached the highest rate of unit development last year.

Speaker #4: Nearly three to four times their previous pace. In Latin America, as the Serrano Group moves into Brazil, we're seeing great things. But if you step back and say, "What's driving that?" Scott Mazvinsky has now been in the business for a year.

Ranjith Roy: In Latin America, as the Serrano Group moves into Brazil, we're seeing great things. But if you step back and say, "What's driving that?" You know, Scott Mezvinsky has now been in the business for a year. He, of course, was part and parcel of building the Taco Bell strategy that we laid out last year. He's bringing the same things. He's setting a very high aspiration, he's creating some specific targets, and then he's building the strategies that will bring that to life. Of course, given 150 markets, that's gonna take some time to come to life, but those countries that I mentioned are proof points that his strategy is working, and we're excited about the momentum ahead.

Speaker #4: He, of course, was part and parcel of building the Taco Bell strategy that we laid out last year. And he's bringing the same things.

Speaker #4: He's setting a very high aspiration. He's creating some specific targets. And then he's building the strategies that will bring that to life. Of course, given $150 markets, that's going to take some time to come to life, but those countries that I mentioned are proof points that his strategy is working and we're excited about the momentum ahead.

Speaker #1: And your next question comes from the line of David Tarantino with Baird. Your line is open.

Operator: Your next question comes from the line of David Tarantino with Baird. Your line is open.

Speaker #5: Hi, good morning. Chris, another question on international. And I guess mine's more focused on the franchisee appetite for unit growth, given all the geopolitical issues that are out there.

David Tarantino: Hi, good morning. Chris, another question on international, I guess mine's more focused on the franchisee appetite for unit growth, given all the geopolitical issues that are out there. I know you mentioned on the call that there was still a good pipeline for this year. Thinking more into next year or the next few years, are you seeing any signs of pause related to the unit growth, either for KFC or Taco Bell? I know Taco Bell International is a big opportunity for you, if you can comment on that as well, that'd be great. Thanks.

Speaker #5: And I know you mentioned on the call that there was still a good pipeline for this year but thinking more into next year or the next few years.

Speaker #5: Are you seeing any signs of pause related to the unit growth, either for KFC or Taco Bell? I know Taco Bell International is a big opportunity for you, so if you can comment on that as well.

Speaker #5: That'd be great. Thanks.

Speaker #4: Yeah, thanks. Thanks, David. As we look at our unit development outlook, we have high confidence. We just said a new record for Q1 unit development in KFC.

Chris Turner: Yeah, thanks, David. You know, as we look at our unit development outlook, we have high confidence. We just set a new record for Q1 unit development in KFC. The Taco Bell international unit development story continues to grow. If you think about KFC, you know, as we mentioned on the call, we're actually with our KFC franchisees and our development leaders here this week in Plano. We're talking about the elements of the Raise the Bar strategy. Of course, the first part of that's battling for the future consumer, which should lead to higher same-store sales growth and higher AUVs. The A is accelerating restaurant economics, and the R is reaching the full potential of Byte.

Speaker #4: The Taco Bell International unit development story continues to grow. If you think about KFC, as we mentioned on the call, we're actually with our KFC franchisees and our development leaders here this week in Plano.

Speaker #4: We're talking about the elements of the raise-the-bar strategy. Of course, the first part of that's battling for the future consumer. Which should lead to higher same-store sales growth and higher AUVs.

Speaker #4: The A is accelerating restaurant economics and the R is reaching the full potential of bite. But that accelerating restaurant economics is about leveraging those higher AUVs over time and leveraging our scale in supply chain.

Chris Turner: That accelerating restaurant economics is about leveraging those higher AUVs over time and leveraging our scale in supply chain, in prototype design, in the scale that Byte provides us to improve unit economics. That will ultimately help us to broaden the number of markets from which we get strong unit development. We have incredible unit economics in our biggest unit development markets today, China, India, and Middle East. We know there is so much white space that we can get to if we can improve paybacks in broader markets. Europe is a prime example of that. Our team and our franchise partner in Italy has shown us that that is possible. If we go to Taco Bell International, you know, we're continuing to see great growth.

Speaker #4: In prototype design, in the scale that Bite provides us to improve unit economics. And that will ultimately help us to broaden the number of markets from which we get strong unit development.

Speaker #4: We have incredible unit economics in our biggest unit development markets today, China, India, Middle East. But we know there is so much white space that we can get to if we can improve paybacks in broader markets.

Speaker #4: Europe is a prime example of that. Our team and our franchise partner in Italy has shown us that that is possible. If we go to Taco Bell International, we're continuing to see great growth.

Speaker #4: You look at those system sales numbers and those same-store sales growth numbers, that Roy shared, a lot of great things happening there. It was in 2021 that we had 100 units in Spain.

Chris Turner: You look at those system sales numbers and those same-store sales growth numbers, that Roy shared, a lot of great things happening there. You know, it was in 2021 that we had 100 units in Spain. We're now at 180 units today. 2022 is when we had 100 units in India and the UK. We're now at 156 and 142 in those two markets. Canada will probably be the next market that gets to 100 units, and we're adding new markets all the time. We're pleased with the progress there. Our long-term aspiration is to sustain or even accelerate our pace of unit development.

Speaker #4: We're now at 180 units today. 2022 is when we had 100 units in India and the UK. We're now at 156 and 142 in those two markets.

Speaker #4: Canada will probably be the next market that gets to 100 units, and we're adding new markets all the time. So we're pleased with the progress there.

Speaker #4: Our long-term aspiration is to sustain or even accelerate our pace of unit development.

Ranjith Roy: Hey, David, I'll just add to that. If you look at history in KFC, there's no more consistent unit developer than KFC Global over time, because it's underwritten by a really strong investment case in many markets around the world and amazing well-capitalized franchisees. If you look in times of disruption in the past, 2021 and 2022, you had a lot of supply chain disruption. KFC grew net new units 8% and 11% in those years. In 2024 and 2025, you're talking about the Middle East crisis and its aftermath. We saw 7% net new unit growth in both years, when you exclude the impact of Turkey and Russia exits.

Speaker #6: And David, I'll just add to that. If you look at history in KFC, there's no more consistent unit developer than KFC global over time.

Speaker #6: Because it's underwritten by a really strong investment case in many markets around the world and amazing well-capitalized franchisees. So if you look in times of disruption in the past, 2021 and 2022, you had a lot of supply chain disruption.

Speaker #6: KFC grew net new units 8% and 11% in those years. In 2024 and 2025, you're talking about the Middle East crisis and its aftermath.

Speaker #6: We saw 7% net new unit growth in both years. When you exclude the impact of Turkey and Russia exits. And as for the current conflict and its relevance to unit growth, the entire Middle East represents less than 150 units in our current pipeline.

Ranjith Roy: As for the current conflict and its relevance to unit growth, the entire Middle East represents less than 150 units in our current pipeline. As of today, our partners in that region expect no change to plans. We have a lot of confidence in KFC, both based on track record as well as what we're seeing on the ground.

Speaker #6: And as of today, our partners in that region expect no change to plans. And so we have a lot of confidence in KFC, both based on track record as well as what we're seeing on the ground.

Speaker #1: And your next question comes from the line of John Ivanko with JPMorgan. Your line is open.

Operator: Your next question comes from the line of John Ivankoe with JP Morgan. Your line is open.

Operator: Your next question comes from the line of John Ivankoe with JPMorgan. Your line is open.

John Ivankoe: Yes. Hi. You know, I was curious how you're currently thinking about, you know, the organization post Pizza Hut. You know, you obviously have an opportunity, including the use of modern AI, to really rethink your organization from a top-to-bottom perspective. It's really an opportunity, if you will, for Yum! to kind of restart itself and how it thinks about managing the business from the store level all the way up. You know, how should we think about, you know, total dollars spent? You know, whether it's G&A as a percentage of system sales, whether we should just revert back, you know, to kind of AI, you know, AI and Byte specifically bending the curve on G&A, just to give us some guideposts in terms of how you're thinking about this potentially big overall efficiency and effectiveness opportunity for the overall Yum!

Speaker #7: Yes, hi. I was curious how you're currently thinking about the organization post-Pizza Hut. You obviously have an opportunity including the use of modern AI to really rethink your organization from a top-to-bottom perspective.

Speaker #7: It's really an opportunity, if you will, for Yum to kind of restart itself and how it thinks about managing the business from the store level all the way up.

Speaker #7: So how should we think about total dollar spent, whether it's G&A's percentage of system sales, whether we should just revert back to kind of AI and Bite specifically bending the curve on G&A just to give us some guideposts in terms of how you're thinking about this potentially big overall efficiency and effectiveness opportunity for the overall Yum G&A spend?

Chris Turner: G&A spend. Thank you. Yeah. Hey, hey. Thanks, John. Of course, the Pizza Hut process, as we said, continues to progress well. We'll share more once we conclude that process. If I step back and think broadly about the impact of AI on the organization, we're very pleased with the progress we're making. Of course, it is enabled by the fact that we have gotten to more consistent platforms through Byte by Yum!, and that's both across our restaurant footprint, particularly in the US, and we'll be expanding more and more internationally, but also in our above store systems. You know, if I think about our philosophy as it relates to AI, first and foremost, we want to use AI to drive growth.

Speaker #7: Thank you.

Speaker #4: Yeah, hey, thanks, John. Of course, the Pizza Hut process, as we said, continues to progress well. We'll share more once we conclude that process.

Speaker #4: But if I step back and think broadly about the impact of AI on the organization, we're very pleased with the progress we're making. Of course, it is enabled by the fact that we have gotten to more consistent platforms through Bite by Yum.

Speaker #4: And that's both across our restaurant footprint, particularly in the US, and we'll be expanding more and more internationally, but also in our above-store systems.

Speaker #4: And if I think about our philosophy as it relates to AI, first and foremost, we want to use AI to drive growth. That's what's exciting in our business.

Chris Turner: That's what's exciting in our business, and you're gonna see us have use cases like the one we mentioned. You know, being the leader in rolling out A/B testing to our digital drive-throughs in Taco Bell is all about driving growth and getting a better consumer experience out there faster. We're also gonna use AI to elevate our team members, whether in the restaurants or in our above restaurant roles. We want to help make our jobs easier and allow people to be more productive and do things faster. Just a couple of examples from an org standpoint, that are pretty interesting. I was with our GM of KFC UK this week. That team has really embraced AI.

Speaker #4: And you're going to see us have use cases like the one we mentioned. Being the leader in rolling out A/B testing to our digital drive-thrus in Taco Bell is all about driving growth and getting a better consumer experience out there faster.

Speaker #4: We're also going to use AI to elevate our team members, whether in the restaurants or in our above-restaurant roles. We want to help make our jobs easier and allow people to be more productive and do things faster.

Speaker #4: And so, just a couple of examples from an org standpoint that are pretty interesting. I was with our GM of KFC UK this week.

Speaker #4: That team has really embraced AI. They now have 10 different AI agents that are playing roles in the organization. For example, there's a virtual team member on the KFC UK development team that's helping with permitting.

Chris Turner: They now have 10 different AI agents that are playing roles in the organization. For example, there's a virtual team member on the KFC UK development team that's helping with permitting, and it's taking care of a lot of the basic analysis and fact gathering, which is speeding up our applications for permits on new units there. Our corporate learning and development team has a virtual team member, Judy, who is doing some great work in helping us build training programs, getting those out faster, and being more productive in how we do it. We're really pleased with the progress. More to come there, but we're gonna use it to drive growth and make our jobs more productive and easier for our team members.

Speaker #4: And it's taking care of a lot of the basic analysis and fact gathering, which is speeding up our applications for permits on new units there.

Speaker #4: Our corporate learning and development team has a virtual team member, Judy, who is doing some great work in helping us build training programs and getting those out faster and being more productive in how we do it.

Speaker #4: So we're really pleased with the progress. More to come there, but we're going to use it to drive growth and make our jobs more productive and easier for our team members.

Operator: Your next question comes from the line of Dennis Geiger with UBS.

Speaker #1: And your next question comes from the line of Dennis Geiger with UBS. Your line is open.

Operator: Your next question comes from the line of Dennis Geiger with UBS.

Speaker #8: Great. Morning, guys. I wanted to ask a bit more about Taco Bell's impressive momentum and the outlook. For the US with Taco Bell, Chris, you give a lot of good color in the prepared remarks.

Dennis Geiger: Great morning, guys. I wanted to ask a bit more about Taco Bell's impressive momentum and the outlook for the US with Taco Bell. Chris, you gave a lot of good color in the prepared remarks. Could you touch a little bit more on how the brand generates these strong results even in this particularly difficult consumer environment? The second piece, just as it relates to, you know, the dynamic around the Live Más Cafés, anything more to share on what you're seeing there and sort of the potential for those Cafés looking ahead? Thank you.

Speaker #8: But could you touch a little bit more on how the brand generates these strong results, even in this particularly difficult consumer environment? And the second piece, just as it relates to the dynamic around the Livemos cafes, anything more to share on what you're seeing there and sort of the potential for those cafes looking ahead?

Speaker #8: Thank you.

Speaker #4: Yeah, yeah, thanks a bunch. Look, the Taco Bell team has continued to put up quarter after quarter of great results. It's an amazing business.

Chris Turner: Yeah, thanks a bunch. Look, the Taco Bell team has continued to put up quarter after quarter of great results. It's an amazing business. If you dig into why does Taco Bell continue to perform, it's really about delivering what consumers need in any environment. It's not just one thing, it's multiple things. You know, that's grounded in structural advantage. The Mexican category is growing ahead of the overall restaurant space, and Taco Bell was a category of one in that space. We also have a business model there that allows us to deliver value while also ensuring high margins for our franchise partners. Structural advantage is one piece, and then you got a great strategy. Sean and his team laid that out very clearly last year at the Consumer Day event. They raised their aspirations.

Speaker #4: And if you dig into why this Taco Bell continued to perform, it's really about delivering what consumers need in any environment. It's not just one thing.

Speaker #4: It's multiple things. That's grounded in structural advantage. The Mexican category is growing ahead of the overall restaurant space, and Taco Bell is a category of one in that space.

Speaker #4: We also have a business model there that allows us to deliver value while also ensuring high margins for our franchise partners. So, structural advantage is one piece.

Speaker #4: And then you got a great strategy. Sean and his team laid that out very clearly last year at the Consumer Day event. They raised their aspirations.

Speaker #4: They set a very specific target to strive for $3 million AUVs by 2030. And then they laid out an actionable strategy to bring that to life.

Chris Turner: They set a very specific target to strive for $3 million AUVs by 2030. They then laid out an actionable strategy to bring that to life. We are on track with that strategy. They're doing a great job executing it. Of course, that strategy covers ensuring we have a culturally relevant brand. We mentioned some examples of that, cravable innovation that is broadening the consumer use occasion. It's given more consumers more reason to come to the brand more frequently. That is driving transaction growth at all income levels. It's allowing us to expand with families with children. We also have very easy experiences. The fastest drive-thru of any large scale QSR player, and those operations are getting better, as we mentioned. Of course, we deliver unbeatable value.

Speaker #4: And we are on track with that strategy. They're doing a great job executing it. Of course, that strategy covers ensuring we have a culturally relevant brand.

Speaker #4: We mentioned some examples of that. Cravable innovation. That is broadening the consumer use occasion. So it's given more consumers, more reason to come to the brand, more frequently.

Speaker #4: And that is driving transaction growth at all income levels. It's allowing us to expand with families, with children. We also have very easy experiences.

Speaker #4: The fastest drive-thru of any large-scale QSR player. And those operations are getting better, as we mentioned. And, of course, we deliver unbeatable value. The luxe value menu that we revamped in Q1 is performing very well.

Chris Turner: The Luxe Value menu that we revamped in Q1 is performing very well. 1/3 of all Taco Bell tickets have an item from the value menu there, and people are really building meals with a lot of variety using the value menu. Lots of strength, but we're just in a, you know, the starting stages of the strategy that Sean laid out, we're very excited about future continued momentum in Taco Bell. As we go to beverages, the Live Más Café, you know, I think of right now as the seed for broader beverage expansion already across the entire Taco Bell business. If I open up my Taco Bell app right now, I can find 15 different specialty beverages available there. Some of those came from Live Más Café, like the refrescas. You got dirty sodas, you've got freezes.

Speaker #4: One-third of all Taco Bell tickets have an item from the value menu there. And people are really building meals with a lot of variety using the value menu.

Speaker #4: So lots of strength. But we're just in the starting stages of the strategy that Sean laid out. So we're very excited about future continued momentum in Taco Bell.

Speaker #4: As we go to beverages, the Livemos Cafe, I think of right now as the seed for broader beverage expansion already across the entire Taco Bell business.

Speaker #4: If I open up my Taco Bell app right now, I can find 15 different specialty beverages available there. Some of those came from Livemos Cafe, like the refrescos.

Speaker #4: But you got dirty sodas. You've got freezes. So already a really distinctive business, coupled with our proprietary in-QSR Baja Blast platform through our partnership with PepsiCo.

Chris Turner: Already a really distinctive business coupled with our proprietary in QSR Baja Blast platform through our partnership with PepsiCo. We're already getting tremendous returns from the Live Más Café investments. We'll continue to see how that pilot goes to see where we take the specific concept.

Speaker #4: So we're already getting tremendous returns from the Livemos Cafe investments. We'll continue to see how that pilot goes to see where we take the specific concept.

Speaker #1: And your next question comes from the line of Gregory Frankfurt with Guggenheim Securities. Your line is open.

Operator: Your next question comes from the line of Gregory Francfort with Guggenheim Securities. Your line is open.

Gregory Francfort: Hey, hey, thanks for the question. I just maybe a clarification. Are you guys disclosing the KFC US and international comps anymore? And then my question is on Saucy and the thought process. I think, Chris, you made some comments about taking elements of Saucy and bringing them to different markets around the world. I guess, are you viewing this as maybe a testing hub for the rest of the system? And I guess, do you expect to maybe bring some elements of it into the US system at some point in 2026 or 2027? Thank you.

Speaker #7: Hey, thanks for the question. I just—maybe a clarification. Are you guys disclosing the KFC US and International comps anymore? And then my question is on Saucy and the thought process.

Speaker #7: I think, Chris, you made some comments about taking elements of saucy and bringing them to different markets around the world. I guess, are you viewing this as maybe a testing hub for the rest of the system?

Speaker #7: And I guess, do you expect to maybe bring some elements of it into the US system at some point in 26 or 27? Thank you.

Speaker #4: Yeah, thanks. Let me start with the KFC business. It is strategically important business for us. It's our biggest brand. It's our home market in a vibrant chicken market.

Chris Turner: Yeah, thanks. Let me start with the KFC business. It is a strategically important business for us. It's our biggest brand. It's our home market in a vibrant chicken market. You know, we've said over the last few years we've been dissatisfied with the trajectory of performance in that business, and we're very pleased with what the US leadership team is doing to change the trajectory there. Some, you know, good moves in Q1. The partnership with Maddie Madison, which is increasing relevance to a broader consumer set. We, of course, are still serving the core. We have the build your own bucket $20 value offering in Q1. As we came into Q2, we've rolled out a revamped value construct with $7, $9, $11 options.

Speaker #4: We've said over the last few years, we've been dissatisfied with the trajectory of performance in that business. And we're very pleased with what the US leadership team is doing to change the trajectory there.

Speaker #4: Some good moves in Q1. The partnership with Matty Matheson, which is increasing relevance to a broader consumer set. We are, of course, still serving the core—we have the Build Your Own Bucket $20 value offering in Q1.

Speaker #4: And as we came into Q2, we've rolled out a revamped value construct with 7, 9, and $11 options. So lots of good things happening there.

Chris Turner: Lots of good things happening there, and they have a big pipeline of innovation that they are working. That ties to Saucy by KFC. Similar to Live Más Café, we are already earning a big return on the Saucy investment across the global business. If you were in our marketing planning meetings here in Plano this week, you would see how the Saucy learnings are leading to tenders innovation globally, to sauce innovation, the process that we use to identify the specific sauce formulation that will resonate with consumers in any market, and even concept inspiration. Christophe Poirier, who developed the Saucy concept, is now the KFC Global Chief Concept Officer. We are leveraging Saucy in a big way in terms of powering the broader KFC business.

Speaker #4: And they are they have a big pipeline of innovation that they are working. That ties to saucy by KFC. Similar to Livemos Cafe, we are already earning a big return on the saucy investment across the global business.

Speaker #4: So if you were in our marketing planning meetings here in Plano this week, you would see how the saucy learnings are leading to tenders innovation globally, to sauce innovation, the way the process that we use to identify the specific sauce formulation that will resonate with consumers in any market.

Speaker #4: And even concept inspiration. Christophe Poirier, who developed the saucy concept, is now the KFC global chief concept officer. So we are leveraging saucy in a big way in terms of powering the broader KFC business.

Speaker #5: Yeah, and in terms of your question on the disclosure, look, we're always focused on providing the appropriate level of transparency and disclosure. If you noticed in our press release, we've moved KFC US from being a subsegment where more details are disclosed to the system sales table.

Ranjith Roy: Yeah, in terms of your question on the disclosure. Look, you know, we're always focused on providing the appropriate level of transparency and disclosure. If you noticed in our press release, we've moved KFC US from being a sub-segment where more details are disclosed to the system sales table. It's still in the system sales table and restaurant counts. You know, as we look this quarter, you know, we periodically review our disclosure to ensure that it aligns with drivers of growth and profitability that are most relevant to everyone, you know, following our releases. US KFC's place on our disclosure now is reflective of its scale in the overall Yum! portfolio, where it currently comprises materially less than 5% of Yum! operating profit, ex Pizza Hut.

Speaker #5: So it's still in the system sales table and restaurant counts. But as we look this quarter, we periodically review our disclosure to ensure that it aligns with drivers of growth and profitability that are most relevant to everyone following our releases.

Speaker #5: US KFC's place on our disclosure now is reflective of its scale in the overall Yum portfolio, where it currently comprises maturely less than 5% of Yum operating profit, X Pizza Hut, and of course, we'll continue to focus on a strategically but from a disclosure standpoint, that's where it landed.

Ranjith Roy: Of course, we'll continue to focus on it strategically, but from a disclosure standpoint, that's where it landed.

Speaker #1: And your next question comes from the line of Andrew Charles with TD Cohen. Your line is open.

Operator: Your next question comes from the line of Andrew Charles with TD Cowen. Your line is open.

Speaker #8: Great, thank you. Quick clarification on the question. So the clarification is, does the KFC development guidance for the year reflect the ripple effect of the Middle East conflict and what we're hearing about LPG shortages in some international markets outside of the Middle East?

Andrew Charles [Managing Director, Consumer: Great, thank you. Quick clarification and a question. The clarification is, does the KFC development guidance for the year reflect the ripple effect of the Middle East conflict and what we're hearing about LPG shortages in some international markets outside the Middle East? Are you just speaking to the direct Middle East region faring okay? Roy, my question was about just helping to level set investor expectations on Taco Bell. What do you believe to be the most instructive way for investors to think about this as for the remainder of 2026, following Q1 strength? In the past, we've heard about holding 2 years stack steady. Is that a fair way to think about how the remainder of the year should progress for Taco Bell? Is that overly simplistic amid gas prices north of $4 a gallon?

Andrew Charles: Great, thank you. Quick clarification and a question. The clarification is, does the KFC development guidance for the year reflect the ripple effect of the Middle East conflict and what we're hearing about LPG shortages in some international markets outside the Middle East? Are you just speaking to the direct Middle East region faring okay? Roy, my question was about just helping to level set investor expectations on Taco Bell. What do you believe to be the most instructive way for investors to think about this as for the remainder of 2026, following Q1 strength? In the past, we've heard about holding 2 years stack steady. Is that a fair way to think about how the remainder of the year should progress for Taco Bell? Is that overly simplistic amid gas prices north of $4 a gallon?

Speaker #8: Or are you just speaking to the direct Middle East region, fearing OK? And then, Roy, my question was about just helping to level set investor expectations on Taco Bell.

Speaker #8: What do you believe to be the most instructive way for investors to think about this for the remainder of 2026, following 1Q's strength? In the past, we've heard about holding two-year stacks steady.

Speaker #8: Is that a fair way to think about how the remainder of the year should progress for Taco Bell? Or is that overly simplistic amid gas prices north of $4 a gallon?

Speaker #4: Yeah, hey, Andrew, first on the Middle East with KFC, just to clarify, what Roy shared earlier, we are confident in global KFC unit development on this year and beyond.

Chris Turner: Yeah. Hey, Andrew. First, on the Middle East with KFC, just to clarify what Roy shared earlier. You know, we are confident in global KFC unit development on this year and beyond. You know, as he mentioned, the Middle East represents mid-single digit percentage of our total unit development plan in KFC. There have been some, you know, supply chain implications on equipment, so the lead times may be a little longer and some costs may be a little higher, but our franchise partners in the region are doing a really nice job navigating that situation. Of course, their first priority is keeping team members safe and keeping consumers safe in this environment, but they're doing a great job navigating the business. Overall, no change to KFC's unit development outlook.

Speaker #4: As he mentioned, the Middle East represents mid-single-digit percentage of our total unit development plan in KFC. There have been some supply chain implications on equipment.

Speaker #4: So the lead times may be a little longer and some costs may be a little higher. But our franchise partners in the region are doing a really nice job navigating that situation.

Speaker #4: And of course, they're first priority is keeping team members safe and keeping consumers safe in this environment. But they're doing a great job navigating the business.

Speaker #4: So overall, no change to KFC's unit development outlook. On Taco Bell, look, as I mentioned, this is a multi-year strategy that the team laid out.

Chris Turner: You know, on Taco Bell, look, as I mentioned, this is a multi-year strategy that the team laid out. Of course, they're continuing to refine and elevate that strategy for the long term. But you saw at Live Más LIVE the innovation agenda for the year that's gonna come to life. It is incredibly exciting. It continues to add and build new consumer use occasions. There are other elements of the strategy that are helping us to retain these consumers who we are attracting to the brand. If I just take loyalty and digital, you know, and we're now approaching a 50% digital mix in Taco Bell US, and our loyalty program continues to grow.

Speaker #4: Of course, they're continuing to refine and elevate that strategy for the long term. But you saw at Livemos Live the innovation agenda for the year that's going to come to life.

Speaker #4: It is incredibly exciting. It continues to add and build new consumer use occasions. There are other elements of the strategy that are helping us to retain these consumers who we are attracting to the brand.

Speaker #4: If I just take loyalty and digital, we're now approaching a 50% digital mix in Taco Bell US. And our loyalty program continues to grow.

Speaker #4: We had 30% growth in loyalty sales year over year. And it's because the loyalty program is resonating with consumers. And it's helping people to engage with the brand more and more frequently.

Chris Turner: We had 30% growth in loyalty sales year-over-year, and it's because the loyalty program is resonating with consumers, and it's helping people to engage with the brand more and more frequently. A broad range of drivers that will drive the strategy going forward. We're confident in Taco Bell's continued strength.

Speaker #4: So a broad range of drivers that will drive the strategy going forward. We're confident in Taco Bell's continued strength.

Speaker #5: And I think on your question around the remainder of the year, look, we're not going to give quarter-to-quarter guidance. But I will say from our prepared remarks and what you're hearing in our voice, we have confidence in Taco Bell momentum.

Ranjith Roy: I think on your question around the remainder of the year, look, we're not gonna give quarter-to-quarter guidance. I will say from our prepared remarks and what you're hearing in our voice, we have confidence in Taco Bell momentum. You know, I'd say more confidence than we had even you know, earlier this year. You're hearing that from us, and I'd say that's not just top line, but also on the margin front, where we've taken up guidance on margins. Just know, you know, when you think about Q1, what's really impressive is you have not just the backdrop of the consumer, but you have the backdrop of inflation. We launched a rebrand of our value platform and expanded restaurant margins at the same time.

Speaker #5: I'd say more confidence than we had even early in this year. And you're hearing that from us. And I'd say that's not just top line, but also on the margin front, where we've taken up guidance on margins.

Speaker #5: Just know when you think about Q1, what's really impressive is you have not just the backdrop of the consumer, but you have the backdrop of inflation.

Speaker #5: We launched a rebrand of our value platform and expanded restaurant margins at the same time. And so that gives us a lot of confidence in Taco Bell as we look towards the remainder of the year.

Ranjith Roy: That gives us a lot of confidence in Taco Bell as we look towards the remainder of the year and to Chris's point, beyond as well.

Speaker #5: And at Christmas point, beyond as well.

Speaker #1: And your next question comes from the line of Christine Chow with Goldman Sachs. Your line is open.

Operator: Your next question comes from the line of Christine Cho with Goldman Sachs. Your line is open.

Speaker #6: Yes, thank you so much. And congrats on a great quarter. A few quarters ago, I think you mentioned plans to appoint a Chief Scale Officer.

Christine Cho: Yes, thank you so much. Congrats on a great quarter. A few quarters ago, I think you mentioned plans to appoint a Chief Scale Officer. I think I'd love to hear your latest thinking on how you intend to align and incentivize the organization and leadership to really focus on driving improvements in unit economics globally. That seems to be central to your Raise the Bar framework. Thank you.

Speaker #6: And I think I'd love to hear your latest thinking on how you intend to align and incentivize the organization and leadership to really focus on driving improvements in unit economics globally.

Speaker #6: That seems to be central to your Raise the Bar framework. Thank you.

Speaker #4: Yeah, yeah, thanks so much. Look, we've got an amazing leadership team in our business. Of course, we're powered by the best talent and culture in the industry.

Chris Turner: Yeah. Yeah, thanks so much. Look, we've got an amazing leadership team in our business. Of course, we're powered by the best talent and culture in the industry. We do still intend to add that Chief Scale Officer role. We're taking our time to make sure we get that, you know, right from an organizational standpoint. We're not delaying our focus on the scale benefits that can come from those teams. The teams that would sit underneath that leader are in place today, and they are doing great work. If I took the global supply chain organization, which we pulled together over the last 1 to 2 years, we've got an incredible team there. They are focused on the international sourcing across markets. They are bringing great leverage.

Speaker #4: We do still intend to add that chief scale officer role. We've taken our time to make sure we get that right from an organizational standpoint.

Speaker #4: But we're not the LeHeng. Our focus on the scale benefits that can come from those teams. The teams that would sit underneath that leader are in place today.

Speaker #4: And they are doing great work. If I took the global supply chain organization, which we pulled together, over the last one to two years, we've got an incredible team there.

Speaker #4: They are focused on the international sourcing across markets. They are bringing great leverage. They're going category by category with specific goals for how to drop dollars to the bottom line for our franchise partners, leveraging young scale.

Chris Turner: They're going category by category with specific goals for how to drop dollars to the bottom line for our franchise partners leveraging Yum! scale. They've already got many wins on the board and many more to come. We are focused on that. Of course, our brand leaders, as part of Raise the Bar, have, you know, specific efforts that they are taking on in conjunction with that to ensure that we're accelerating restaurant economics. Lots of good work happening there. As we, you know, move further on filling that role, we'll share updates when they're ready.

Speaker #4: They've already got many, many wins on the board and many more to come. So we are focused on that. And of course, our brand leaders as part of Raise the Bar have specific efforts that they are taking on in conjunction with that to ensure that we're accelerating restaurant economics.

Speaker #4: So lots of good work happening there as we move further on filling that role. We'll share updates when they're ready.

Speaker #1: And your next question comes from the line of Andy Barish with Jefferies. Your line is open.

Operator: Your next question comes from the line of Andy Barish with Jefferies. Your line is open.

Speaker #5: Hey, good morning, guys. Just back on Taco Bell, kind of if you wouldn't mind sharing sort of philosophically your thoughts on equity ownership. Obviously, the deal in the 4Q.

Andy Barish: Hey, good morning, guys. Just back on Taco Bell, kind of, if you wouldn't mind sharing sort of philosophically, your thoughts on equity ownership. Obviously, the deal in Q4, I think there was a small cleanup deal in Australia in Q1 or early Q2. Just kind of how should we think about where, you know, kinda the Taco Bell franchise system is at least domestically?

Speaker #5: And I think there was a small cleanup deal in Australia in the 1Q or early 2Q. And just kind of how should we think about where kind of the Taco Bell franchise system is, at least domestically?

Chris Turner: I sense a few different parts to that question. The first one I'd say is like about you talked about the equity portfolio in Taco Bell. Can you clarify, is it about our equity ownership or about our franchise base?

Speaker #4: I sense a few different parts of that question. The first one, I'd say, is about you talked about the equity portfolio in Taco Bell.

Speaker #4: Can you clarify? Is it about our equity ownership or about our franchise base?

Speaker #5: No, no. It's about your philosophy in terms of being opportunistic in buying more Taco Bell stores.

Andy Barish: No, no. It's about your philosophy in terms of, you know, being opportunistic in buying more Taco Bell stores.

Chris Turner: Got it. Okay. Look, you know, we love being an asset-light business. We continue to have amazing franchise partners around the world in KFC, Taco Bell who run world-class restaurants. Historically, we made, as you know, opportunistic acquisitions that are relatively small. If you think about the Q4 Taco Bell acquisition we made of 128 restaurants out of a worldwide base of 60,000 restaurants that we have, it's relatively small. That said, you know, these strategic acquisitions we view them as providing a number of benefits. First, there's a financial benefit. You know, when you think about the returns we get buying at reasonable multiples and driving growth in those restaurants itself, we can drive returns that materially exceed the hurdle rates we have for investment. Second, the strategic benefits.

Speaker #4: got it. OK, look, we love being an asset-light business. We continue to have amazing franchise partners around the world. In KFC, Taco Bell, who run world-class restaurants.

Speaker #4: Historically, we made, as you know, opportunistic acquisitions that are relatively small. If you think about the Q4 Taco Bell acquisition we made of $128 restaurants, out of a worldwide base of 60,000 restaurants that we have, it's relatively small.

Speaker #4: That said, these strategic acquisitions, we view them as providing a number of benefits. First, there's a financial benefit. When you think about the returns we get buying at a reasonable multiples and driving growth in those restaurants itself, we can drive returns that materially exceed the hurdle rates we have for investment.

Speaker #4: Second, the strategic benefits. So you think about some of the acquisitions we made, like the KFC UK restaurants and the Taco Bell Southeast restaurants.

Chris Turner: You know, you think about some of the acquisitions we made like the KFC UK restaurants and the Taco Bell Southeast restaurants and the results that drives in those markets and the ability to open up white space that are strategic benefits to the broader system that are way beyond the actual investment that we actually made. Thirdly, you know, it does add mindset and muscle in those markets where, you know, you have to run a restaurant and you have to think like an operator, and that provides broader benefits. Look, I'd say there's a number of benefits that we see from those, and we're gonna do it selectively and strategically. When we do it'll be for specific reasons where it has maximum impact. We're gonna keep our eyes open for the opportunities that provide that.

Speaker #4: And the results that drive in those markets and the ability to open up white space that are strategic benefits to the broader system. That are way beyond the actual investment that we actually made.

Speaker #4: And thirdly, it does add mindset and muscle in those markets where you have to run a restaurant and you have to think like an operator.

Speaker #4: And that provides broader benefits. So look, I'd say there's a number of benefits that we see from those. And we're going to do it selectively and strategically and when we do it, it'll be for specific reasons where it has maximum impact we're going to keep our eyes open for the opportunities that provide that.

Speaker #5: Alfredo, we have time for one more question.

Matt Morris: Operator, we have time for one more question.

Speaker #1: And your final question comes from the line of Jeffrey Bernstein with Barclays. Your line is open.

Operator: Your final question comes from the line of Jeffrey Bernstein with Barclays. Your line is open.

Speaker #5: Great. Thank you very much. Chris, just a question on the broader QSR segment and positioning. I'm just thinking about it from an industry perspective.

Jeffrey Bernstein: Great. Thank you very much. Chris, just a question on the broader QSR segment positioning. Just thinking about it from an industry perspective. I don't think anybody's more knowledgeable on QSR trends with your global portfolio. In the past, US macro slowdowns, I think most people thought QSR was well-positioned, retaining the lower income with value, inheriting trade down from above. It does feel like this go around is increasing investor concerns that QSR is maybe losing the lower income with less value and not inheriting from above. Just to be clear, clearly, you're not seeing that at Taco Bell. Just wondering, as you look across the QSR segment more broadly, I guess more of an industry question, do you think QSR positioning has changed at all, or should QSR again be the beneficiary in the more challenged macro? Thank you.

Speaker #5: I don't think anybody's more knowledgeable on QSR trends with your global portfolio. But in the past, US macro slowdowns I think most people thought QSR was well-positioned.

Speaker #5: Retaining the lower income with value inheriting trade down from above. But it does feel like this go around is increasing investor concerns that QSR is maybe losing the lower income with less value and not inheriting from above.

Speaker #5: So to be clear, clearly you're not seeing that at Taco Bell, but just wondering, as you look across the QSR segment more broadly, I guess it's more of an industry question.

Speaker #5: Do you think QSR positioning has changed at all? Or should QSR again be the beneficiary in the more challenged macro? Thank you.

Speaker #4: You know, look, as I look at the US macro landscape and the US consumer, I have to look at it through the lens of our business and our largest business in the US is Taco Bell.

Chris Turner: You know, look, as I look at the US macro landscape and the US consumer, I have to look at it through the lens of our business. Our largest business in the US is Taco Bell. I think what you're seeing is that when you deliver what consumers want and need, you can win with consumers in any environment. Taco Bell is bringing that combination that we mentioned earlier, a culture leading brand, craveable food with great innovation, an easy experience that is enabled by digital and technology, and of course, leading value. I think if Taco Bell were just bringing one or two of those things, you wouldn't see these results. It's the combination that is winning with consumers. Of course, they've got the structural advantage that will allow us to sustain that.

Speaker #4: And I think what you're seeing is that when you deliver what consumers want and need, you can win with consumers in any environment. And Taco Bell is bringing that combination that we mentioned earlier, a culture-leading brand craveable food with great innovation and easy experience that is enabled by digital and technology and, of course, leading value.

Speaker #4: And I think if Taco Bell were just bringing one or two of those things, you wouldn't see these results. It's the combination that is winning with consumers.

Speaker #4: And of course, they've got the structural advantage that will allow us to sustain that. And we see that in all of our markets around the globe.

Chris Turner: We see that in all of our markets around the globe. You know, the consumer has had various pressures across markets for a number of years now. We continue to prove that when you deliver what consumers want and need, you can win with those consumers. Thank you all for making time for the call. We appreciate you being here. We've got a great start to 2026. Really proud of the performance that our teams are delivering. Our largest brands are performing well, enabled by structural advantage, strategies that are working, and an incredibly scaled digital presence that will continue to grow over time. That's leading to growth and sustainable market share gains, all while we Raise the Bar for the future. Thanks so much.

Speaker #4: The consumer has had various pressures across markets for a number of years now. And we continue to prove that when you deliver what consumers want and need, you can win with those consumers.

Speaker #4: So thank you all for making time for the call. We appreciate you being here. We've got a great start to 2026. Really proud of the performance that our teams are delivering.

Speaker #4: Our largest brands are performing well enabled by structural advantage, strategies that are working, and an incredibly scaled digital presence that will continue to grow over time.

Speaker #4: That's leading to growth and sustainable market share gains, all while we raise the bar for the future. Thanks so much.

Operator: This concludes today's conference call. You may now disconnect.

Q1 2026 Yum! Brands Inc Earnings Call

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