How Is Yum! Brands Expanding Its Business?



Current operations

By the end of 3Q16, Yum! Brands (YUM) operated 43,085 restaurants. That number includes 7,330 restaurants in its China division, 15,065 in its KFC division, 14,179 in its Pizza Hut division, and 6,511 in its Taco Bell division. In 3Q16, the company added 475 new units, taking the total to 1,150 new restaurants in fiscal 2016.

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YUM’s China division

In the last 12 months, YUM’s China division increased its unit count by 463, which includes 133 new units in 3Q16. Currently, the division operates 5,087 KFC restaurants and 1,953 Pizza Hut restaurants.

During YUM’s 2Q16 earnings call, management said it would pause the additions of new Pizza Hut restaurants until same-store sales growth improves. YUM will focus instead on remodeling to improve customer experience at existing restaurants. In fiscal 2016, the company expects the division to add 525 new units.

Global brands

In the last 12 months, the KFC division has added 749 new restaurants to take its total to 15,065. In 3Q16, it added 138 new international restaurants, which includes 96 restaurants in emerging markets. YUM management said the company is on track to add 475 new international restaurants in fiscal 2016 and remodel its US restaurants.

The Pizza Hut division has increased its units by 563 in the last 12 months. The division opened 105 new international restaurants with 71 in emerging markets. The unit count for Taco Bell has increased 197 units in the last 12 months, with 63 new restaurants in 3Q16. YUM management added that it’s on track to add 300 new Taco Bell restaurants this year.

The company intends to increase the percentage of franchised restaurants to 96%. It has refranchised 470 restaurants in the last 12 months. In 3Q16, it refranchised 94 units, which includes 48 Pizza Hut restaurants.

Peer comparisons

In 3Q16, Yum! Brands increased its unit count by 192 units. Domino’s Pizza (DPZ), Papa John’s (PZZA), and Starbucks (SBUX) are expected to increase their unit counts by 218, 41, and 521, respectively.

Next, we’ll take a look at Yum! Brands’ EBIT (earnings before interest and tax) margins.


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