Analysts expect Yum! Brands (YUM) to post revenue of $1.38 billion, which represents a fall of 3.9% from $1.44 billion in the corresponding quarter of the previous year. The refranchising of company-owned restaurants is expected to lower the company’s revenue in the quarter.
To improve its operational efficiency, Yum! Brands plans to operate 98% of its restaurants as franchises by the end of 2018. To achieve that goal, it has been refranchising company-owned restaurants, leading to a decline in the company’s revenue. Compared to the third quarter of 2017, Yum! Brands operated 1,033 fewer company-owned restaurants at the end of the second quarter of 2018.
However, some of the declines are expected to be offset by the net addition of franchised restaurants and positive SSSG (same-store sales growth). The company operated 2,247 more franchised restaurants at the end of the second quarter of 2018 compared to the third quarter of 2017.
To drive its SSSG, KFC is focusing on menu innovations, operational excellence, and value offerings. Pizza Hut’s SSSG is expected to be driven by the launch of its Double Cheesy Crust Pan Pizza in the second quarter, improved customer satisfaction, and balanced marketing initiatives.
Taco Bell’s $1 Nacho Fries, its $1 Triple Melt Burrito and Nachos, and Naked Chicken Chalupa are expected to drive its SSSG. Also, the company’s partnership with GrubHub is expected to expand the delivery services for both KFC and Taco Bell.
Peer comparison and outlook
For 2018, Yum! Brands management expects its SSSG to be at the lower end of its earlier guidance of 2% to 3% and unit growth to be at the higher end of its earlier guidance of 3% to 4%. For the same period, analysts expect the company’s revenue to be at $5.71 billion, which represents a fall of 2.9% from $5.88 billion in 2017. Next, we will look at analysts’ EPS expectations for the third quarter.