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Story Highlights
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Taco Bell is recovering from the fallout of a lettuce-linked parasitic outbreak this summer, and sales are strengthening each week, Yum Brands CEO Chris Turner said.
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KFC is opening restaurants in international markets at an impressive clip, but its domestic locations are still struggling.
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Completion of the sale of Pizza Hut will allow Yum to prioritize building market share and addressing restaurant unit economics, Turner said.
For the first time since the pandemic-altered second quarter of 2020, Taco Bell this week reported a drop in same-store sales. The chain saw a 4 percent decline in that metric for its U.S. stores in the third quarter as restaurant traffic continued to lag following a July cyclospora parasitic outbreak .
System sales for the brand likewise took a hit, down 2 percent to $4.3 billion.
But the brand's recovery sped up in recent weeks, and executives at parent company Yum Brands said Taco Bell has started outpacing its quick-service competitors in same-store sales.
The company utilized strategic marketing, bringing back fan favorites from its Decades Menu, adding value items and driving buzz through collaborations with Mexican music artist Peso Pluma, to "give consumers more reason to engage," said CEO Chris Turner, during Yum's Tuesday morning quarterly earnings call.
In recent weeks, Taco Bell saw significant increases in membership to its loyalty program, and it's partnering with Olivia Rodrigo in the fourth quarter on a Baja Blast promotion.
"I'm incredibly proud of how the Taco Bell team and our franchise partners have come together with urgency and focus to drive a rapid recovery from a low point in July," Turner said. "Taco Bell U.S. same-store sales strengthened week after week, and since the end of September the brand has been outperforming the QSR industry on same-store sales growth."
Internationally, Taco Bell's same-store sales increased by 5 percent during the quarter.
The Rest of the Results
Yum completed its deals to sell Pizza Hut during the quarter. The company had agreed in June to a $2.7 billion split sale with Yum China Holdings to acquire its Mainland China business and LongRange Capital to acquire the remainder of the Pizza Hut brand. Those transactions closed in August and September, respectively.
Yum also opened 955 gross new units in the third quarter. Most of those new locations, 878, were KFCs, as the chicken chain passed 35,000 units across more than 60 countries during the quarter. It added 15 test stores of the KFC spinoff Saucy, and Yum overall saw 7 percent unit growth and 3 percent systemwide sales growth.
The company returned $1.8 billion to shareholders through dividends and share repurchases.
KFC had global systemwide sales growth of 6 percent, supported by unit growth of 7 percent, and same-store sales growth of 1 percent.
In the U.S., however, system sales dropped 6 percent for the quarter.
"The U.S. team is advancing its turnaround strategy," Turner said. "More work lies ahead and the team is taking steps to return KFC U.S. to sustainable growth."
KFC is more than a year into its "comeback plan" to regain a dominant position in the chicken category. It brought back Colonel Sanders as a major character in its marketing, began emphasizing tenders and dipping sauces, and reintroduced popcorn chicken boxes and buckets, among other refreshes.
Its international division, excluding China, grew systemwide sales by 9 percent and same-store sales by 4 percent. Same-store sales increases specifically in India and the Middle East were 4 percentage points and 6 percentage points, which Turner attributed to rolling out value platforms mixed with discount offers and innovative products, such as the Double Chicken Dynamite offering in India.
Going Forward: Raise the B.A.R.
KFC's international performance also reflected Yum's Raise the B.A.R. strategy that includes its aim for KFC to be the most modern QSR chicken chain globally.
"This initiative will include a refreshed brand identity, a more buzzworthy marketing calendar, an always-on pipeline of innovation, a famous value platform, and a broader menu that will feature items such as upgraded tenders, crave-worthy sauces and unique beverages," Turner said.
Raise the B.A.R. is Yum's operational strategy introduced earlier this year for modernizing and scaling its brands, which also include Habit Burger & Grill .
Following the divestiture of Pizza Hut, Turner promised a sharper focus on these priorities, which including building market share through long-term customer loyalty, digital innovation, marketing and menu evolution; accelerating restaurant unit economics; and reaching the potential of Byte by Yum, its proprietary digital, tech and AI ecosystem.
"These priorities will accelerate growth and deliver high-quality, consistent shareholder returns over the long term," Turner said.
Chief Financial Officer Ranjith Roy added that the focus on shorter paybacks for restaurants will accelerate the new store pipeline, and technology adaptation will improve the customer experience and create efficiencies for operators.
"With our unmatched scale, proprietary technology platforms, and world-class talent, Byte by Yum Brands is creating better consumer experiences, simplifying operations, and providing greater value to franchise partners," Roy said. "We will continue to further develop our technology suite and to deploy it in additional markets around the globe."
Lean Into Loyalty
Turner focused on the importance of and efforts to grow loyalty programs across Yum's brands. KFC saw a 48 percent increase in loyalty members in its international division that excludes China and expects to have programs in 18 of its top 20 markets by the end of the year.
Taco Bell had a 25 percent increase in membership throughout the year, which helped it drive a quicker-than-expected recovery from the cyclospora outbreak.
"Loyalty is central to our Raise the B.A.R. priority of battling for future consumers who seek more personalized, relevant and seamless experiences," Turner said. "It also helps us build deeper, more direct relationships with them. We witnessed the power of our loyalty programs in Q3 at Taco Bell. Following the initial sales decline from the industry-wide food safety issue, loyalty users returned to the brand two times faster than no-loyalty users."
