World’s Largest Restaurant Company Scouts More Places for KFC, Taco Bell, Pizza Hut
Rising sales are edging Yum Brands back to pre-pandemic levels of brick-and-mortar location growth, as one of the world’s largest restaurant operators doubles down on digital technologies gobbling more of its chicken, taco and pizza sales.
Over the past few weeks, the parent company of fast-food chains including KFC and Pizza Hut acquired two technology companies and opened its first U.S. Taco Bell with digital-only ordering in New York City’s Times Square neighborhood.
“Overall, we are pleased with the momentum at the end of 2020 and into the early part of 2021, and this increases our confidence that we can return to 4% annual unit growth sooner rather than later,” Chief Financial Officer Chris Turner said during a first-quarter earnings call with analysts. “In 2021, we're optimistic that we will accomplish at least 3% unit growth.”
Yum Brands, based in Louisville, Kentucky, and its franchisees operate more than 50,000 locations of KFC, Taco Bell, Pizza Hut and Habit Burger Grill in more than 150 countries.
Executives said the company opened 660 outlets and closed 225 others in the first quarter, for a net increase of 435. Struggles of the past few years have been declining as new franchisees take over numerous Pizza Hut locations and close underperforming stores.
Yum Brands reported an 11% increase in total revenue for its first quarter ended March 31, reaching $1.49 billion, with a 9% increase in same-store sales. Net income was $326 million, up considerably from $83 million in the year-earlier quarter.
CEO David Gibbs said Yum Brands and its global franchisees, many of which are privately held and don’t report sales and earnings, racked up a record $5 billion in digital sales made through app-enabled pickups and deliveries during the first quarter, up 45% from a year prior. More than 39,000 Yum-branded restaurants offered delivery at the end of the quarter, up 16% from the year-earlier quarter.
More tech expansion is on tap as the industry moves away from counter sales originating in dining rooms. Yum Brands' “digital only” Taco Bell in New York’s highly trafficked Times Square will serve as a test of the concept for potential future expansion. The location has limited seating, but all orders must be placed with an app or on one of 10 on-site kiosks.
Last month, Yum Brands acquired Tel Aviv, Israel-based Tictuk Technologies, which enables food ordering on social media and messaging apps, and marketing data analytics firm Kvantum Inc., based in Plano, Texas, for undisclosed prices.
Tictuk provides an "opportunity to expand access by providing frictionless ordering through text, social media and other conversational channels in literally just a few clicks,” Gibbs told analysts, noting the platform has been deployed in approximately 900 KFC, Pizza Hut and Taco Bell restaurants in 35 countries, primarily outside the United States so far. “In fact, we have several examples of customers completing orders on the Tictuk platform in under 10 seconds, a truly seamless experience.”
On the real estate side, Gibbs said Yum Brands seeks to have at least 100 locations within a given metropolitan region in order to optimize its marketing, development and other capital investments. While most of its recent growth has taken place in Asia, including the first-ever opening of Taco Bell in Malaysia earlier this month, Yum Brands is “leaning more into development” in the United States as per-unit economics improve with the overall economy.
“The opportunities in the U.S. real estate landscape are there, and our franchise partners are financially healthy and eager to go after them in concert with our team and picking the right opportunities that make money for them,” Gibbs said.