YUM - Earnings call transcript Q1 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Shelby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Yum! Brands Q1 2018 First Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank like call now to turn to would over the Mr. I Relations Vice President Siegner, and of Keith Investor Treasurer. ahead, go Please sir.

Keith R. Siegner

are: CEO; Thank you, CFO; and us. today Corporate joining thank and you Creed, Shelby. Good Senior morning, On everyone, Dave Russell, Controller. our Vice President Gibbs, our David and our for Greg and our President call

Following Greg and to remarks David, call from questions. we'll open the

I'd conference get started, like call forward-looking we you this to Before that includes statements. remind

that be could subject differ cautionary to future conjunction release uncertainties risk included earnings results statements. events Forward-looking and with our our statements to SEC. factors cause and in materially All are actual forward-looking considered the these filings from our in the the statements statements should in with

the Yum! call. for may that the Please refer of disclosures following section basis find to regarding please call. Brands' presentation www.yum.com, used reconciliations addition, of today's financial the and our note on today's In to non-GAAP website, be measures Investors of

the First, system sales results impact of currency. foreign exclude

Second, impact special of was core adopted revenue the on foreign exclude accounting prospectively recognition the figures And third, and January items. currency X. profit growth operating standard

reminder, GAAP timing recognition and the cash. on upfront a change adjusting of effect from to this incentive have fees a received franchisees, made impact no is of payments the required which As of

being will a income included also We're if you this is conference that you broadcasting upcoming In will addition, our question, playback. and it expenses This of We'd Please requires it be the XX-Q provided any available gross-up debt for at call of statement. advised offsetting within time Form call advertising fund will events. ask future revenues pertaining in Yum! our be the and the website. be via recorded our to capital like and of the following conference to of use live structure quarter in Group in the Restricted our in first Disclosures filing. be outstanding investor changes recording. aware make both

Second conference our on same August June X, Artie I'd available over President, released the remainder quarter of Oppenheimer Consumer key Pizza now, earnings turn presenting XXXX dates website. at with XX the are on Starrs, The the the like call earnings will And Conference U.S. be day. will Mr. Annual to Boston, in Hut Greg Creed. Massachusetts. call be XXth to on the on

Greg Creed

Thank you, with X% for the of quarter was and flat, first maintaining system everyone. X% XXXX first X% Brands and constant including of and Keith, core growth. unit currency, good full morning, our sales quarter growth aspects new profit guidance. delivered growth in same-store Consistent we sales are year operating expectations, Yum! growth net our all

associated full percentage X approximately As operating recognition X savings, and X year timing points flat to profit impact a G&A the of core includes reminder, accounting refranchising of headwind with standard. guidance along our points percentage X revenue of from the headwind of to from

of more easy talent. leadership I X% are you recently restaurant was Turkey. focused, culture the drivers: stack relevant growth brand Russia Regarding relevant track XX%, the X%. strong Then of our sales and to Yum! efforts a We've over and and sales Internationally, powerful grew culture discussed is and sales talent. And system and follow becoming developments; XX% unit brands; back sales transformation remain company. focusing impressed that how development. same-store more franchise idea X% with to them and some Turkey, key pleased full journey. will distinctive, two efficient by capability; distinctive, operating examples with and unrivaled franchise with easy. of quarter David unmatched of capability franchised about on I of relevant to embraced first our of our talk of X%. bold time to I with growth the going and in-store easy and to The with KFC, and growth up second of of has a I'll and unrivaled with to countries. we unmatched is the report team executive I'll leadership am brands and accelerate year four and in initiatives, building and by restaurant this same-store transformation this At our traveled marks year bold operating executing transformation start overnight growth same-store distinctive, more culture brand net on And ensure journey the part more quarter sales both basics grew begin and well. and new

they Our in of gross by units drive the supported over is key are ensuring menu last growth. sales eighth some on unit menu and same-store XX quarter months. trained grew their properly items. success In to quarter new India, their weekend also their invested India's XX%, has XX consecutive have first the growth, growth occasions: designed local around had members, velocity Turkey team opening three snacking; sales marking great core groups; and same-store delivery. franchisees focus

same-store quarter, we growth. opening digital quarter into sandwich the markets of with Reba by innovation Hot, the option to the over continue has to runway the our Nashville sandwich significant to India XX an classic Barbecue, XX Colonel, the Mountain or has introduced our These in first growth advertise platform, adding In gross profiles chicken. months. enjoying flavor our for value, the Barbecue the both second addition, why Turkey, McEntire, like including are and believe market also the female their examples two Smoky sales flat U.S., has transactions. customers And of growth TV assets consumers gives our delicious version KFC flavor first last profile new Gold In which Smoky has Extra to launch innovative Crispy using grown base, of units a new and fillet. Colonel, added Georgia Crispy Mountain the to of extra with the continued crispy The

new they about momentum sustain these and offerings successfully believe excited forward. business drive long-term are what innovative and need are this we to We and our

to suffered our like want as spirit their address hard the with are UK deck, advertising on in our hours and manner. franchisees to-date the efforts been to around a this positive have a our a with could team I correct KFC, wrap-up I the to to culture in take the progress truly of and unique when challenges, our I responding clock team, to result Despite clever new partners, a disruptions Encouragingly, partners. rose and to which leveraged the issue, business, hands distribution all supply voice. setback the worked quarter changed we very Before to say countless occasion, and as second customers would thank even not work. our you brand's local the our collaborative our accomplished without responding working in

are hours. the restaurants today, Approximately the supplier. one-third open running all up restaurants the from restaurants and receiving for of of product are supplier XXX their with and two-thirds are former remaining successfully of new the normal As the

from we world. else incident, lessons As in we does learned happen the this recover clearly, the to not are our ensure anywhere applying

grew of the X%. Now Hut, growth X%, system sales same-store sales U.S., to in with Pizza

I've encouragingly, units While with of brand turnaround compared unit build. the sequentially. the said U.S. a will gradual net to before, flat year, new what in development prior the declined be X% Consistent was

hot, the Agreement Transformation continue and a result and as being reliable. to of positive see we fast on However, focus momentum

NFL of weekend kicked Our the more Thursday grew delivery paying result fan Monday, official improvements including opportunity NCAA, the Hut Hut partnership system of investment conversion operating in at to In put we us center proud and everything X%. Pizza even with the now and strong are Pizza new last way off providing this with owns doing. advertising being in the team draft. off the of are digital, tandem at official operations, continued X% metrics, International, has of unit sponsor times. In a as week's sponsor are of and is full we sales February, online net the of the internal to growth delivery the At we drivers, announced from we now the

as benefit the franchisee, several from ago, capitalized capable, committed. possess has our division resulted we growth teams healthy who three unit realignment in being of as partners solid resulting the leadership and well Cs Our years dedicated a brand of undertook new

rate. same-store sales recent we growth unit sustain reasons, confident these the Hut will not are Pizza healthy said, is and simply remain That a results acceptable. For iconic brand, global a

do of to seeing quarters turn we While have to around. seven are lot in pockets of we such same-store a sales sales strength, we work of understand India, as consecutive growth

taking are the our in we following steps Specifically, each markets. of three

strong in and First digital and is taste on ensuring operations deliver place speed, to have ease. we execution

For consistent The are offering compelling we And sure of positioning. making Pizza is communication of brand our Love third Second is value.

progress. at each steps you working are markets to will we our We these update as and implement diligently of international

their grew product the Web U.S., last due better, than X% Now XX Nacho Fries. growth successful of same-store weeks, orders. of Fries X%, faux four Nacho In launch enjoy with innovative, movie as the result customer's to Selling about limited-time were quarter same-store we lapped into our seasoning Fries five customers in first Fries an the net sales one a of more was and the Taco the X% growth the Bell, Cheese in part successfully could success, of of large sales X% where sauce. offering million very year, part in extended growth. to we new Nacho only of Mexican praiseworthy Even trailer for sales to this system $X. first unit and from every Everything orders this April. And

featuring to see the I number the visited of beef or wrapped alongside warm is and quarter flour for my crispy new I'm Nachos, mozzarella second and is a we home for a country, the off also recently $X value Internationally, jack only The making a openings. on in future is great this very to without unit by Burrito restaurant momentum in Fries to Brisbane, a to These pepper growth. plan hometown are and Bell planning seasoned to example first delicious offering Triple net tortilla melted Australia, our in products Australia encouraged delivering another and Taco Melt franchisee excited are flying Following in cheddar, the set over cheese, of compromise, aggressively success $X. the of record expand are seeing and watch to for nachos. market a start. is the

share UK, markets leveraging right U.S. continue innovative we the we taking to And global in forum up brand steps innovations success Canada the and our bringing Brazil, practices across scale. best franchisees internationally forward. brand of to excited we move potential from to for I'm Taco are leadership together this the and expansion the our know Bell the our world, launch see in menu and the owners items priority other in rapid are addition, wrapping international through In in first India. in of

part Lastly, delivery more about with easy, potential and distinctive, with Grubhub. as and of very And I'm opportunity like even our fully update their with our to pleased with Grubhub. I'd you We partnership through provide an supportive excited about relevant enthusiastic making brands are Grubhub. franchisees on our that remain our

of KFC have agreement unique fully the integrated Grubhub, and is Bell Taco the the aspects of of will the to delivery. restaurants aid at and POS significantly order One speed which of all the accuracy the with

by our forward and work is more are a We available integration markets with we completed as the look are in nationwide. complete you As KFC updating to this teams and initial select Grubhub Taco encouraged few to integration, Bell Grubhub is testing and results.

great Bloomberg in parity unrivaled coalition, Parity talent, a I companies leadership senior into employees culture who leaders XXX to XX we've status and culture with opportunity. globally leadership operate. advance gender second we achieving than proud I'm more that product Gender-Equality moving the diverse environment our company men equality a and women community confident strongly pleasure which and our have with the I is results the inaugural and new And leadership, in lay work. Chief Brands Index, statistics, President returns more are gender-conscious believe academics where to very Fortune now, year a In becoming women introduce our remain drivers This named It our inclusive one to growth for the XXX pleased enhances Now, where commitment unrivaled and delivering and place norm one internal commitment measured gives well committed that journey Yum! in employee of global policies, we our of marketplace it talent and in in reflect results, with and David and progress shareholders. our achieve transformation Yum! for that our made four fuels Yum! underway. growth me Gibbs. Yum! know power, for corporate a why was support across business Paradigm Officer, And That's great and also and increased our as and towards initiatives of a this must sectors on A builds the senior offerings. gender to long-term foundation engagement, equal of I'm full Financial World to around work our external XXXX. in by as greater to XXXX CEOs, recognized movement More new summary, upon aligns for

David W. Gibbs

associated discuss: flat was timing growth standard. revenue capabilities. the Thank our our morning, as initiatives; result first capabilities, core savings restaurant results, bold and mismatch To begin, towards accounting our headwinds good you, expectations, will a and the between to and of first progress quarter four Today, growth profit consistent our unmatched and with Greg, quarter development results; operating G&A the refranchising franchise transformation of everyone. recognition related our I two operating and

weighted quarter. X more X we percentage clarify, of And refranchising accounting X fourth and standard. level Greg aspects to all timing is profit headwinds of mentioned, in typically which the the fourth openings the higher confident the guidance. XXXX impact approximately we in be revenue between of as anticipate percentage revenue recognition to to points to incorporates result, X accounting to growth, the quarter. As of the savings, remain related a core associated points unit related full recognition operating G&A achieving mismatch flat This the and standard includes heavily our the year towards To

investment lower excluding effective investment as First investment booked is this in an rate Special our was the XX%. and least quarterly was investment our than rate year EPS of prior And, made that rules Also continue first quarter. exercises. $X.XX. for reflecting EPS in the of of at a income our in impacting expected in our XXXX Grubhub. of option was quarter $X.XX, Items, tax recently-closed as in beginning $XX $X.XX in deal impact of the to result quarter result, target require Grubhub quarter million $X.XX Note EPS, Included the full due was Accounting that excluding we to a Items we announcement. Special increase value pre-tax change fair commitment of to begin this related first the of our any the our timing exclude will This mark-to-market stock EPS the adjustments. to to to our

were growth sales been in sales KFC at X% by growth been X% same-store for interruptions we quarter same-store of UK First KFC's X%. Yum! this, sales and same-store would impact X% Yum!'s of KFC estimate supply at Adjusting growth have would the our the impacted have business. and

core impact profit X% X% core operating first approximately the an estimate we in approximately to Additionally, quarter. to and impact KFC's Yum!'s an profit operating

Yum! set operating partners estimated KFC they up brands are our be and a customers the of are business continues across and The for management and our same-store of estimated franchise Yum! geographies. And basis the recover. profit back to for us impact and for track. is local and franchise to with to success, be Yum! collaborating is for points growth points demonstrates to positively full-year our are growth XX While significant power basis model for impact X% KFC responding The sales to collaborated XX our we and event impact ensure to mentioned, to Greg full-year As the team this get core worked limited UK X% market on is tirelessly diversified franchisees for the as

As the UK full despite we disruption. supply year guidance, maintaining our are such,

and to we proceeds components rate year, the the transformation to our and million sales; franchise On approximately KFC, key to to system least in of mix XX initiatives, end Pizza by XX including restaurants XX% of of deliver at we strategy at journey units this track where run franchise million. our Now, XXX of remain our EPS G&A of: franchise of quarter, on current XXXX of during XX refranchised XXXX; CapEx mix; XX% the least Bell Taco turning pre-tax $XXX at in XX% mix least X.X% $XXX $X.XX. for first and Hut achieving reducing

the As Further, at million of $X.X to was and repurchased XXXX. capital the $XXX re-priced for April, we We share. basis support million returning share to I'm million of interest continued the market and regarding we which by B, dividends $XX. shareholders, during points our rate LIBOR returned beginning reduces $X.XX successfully part to since strategies. committed excited to expected reduce our some price quarter target to million the nearly with we we to times X.X paid billion and markets' shares of financial Loan between to capital transformations our making $X per news XX business X plus billion in enhancements $X Term approximately good support EBITDA to billion our an $X our by commitment are $XXX million. of is $X.XX return XXXX. of average leverage. and capital Total further capital $XXX X.XX% also at I'm from to annual XXXX structure billion the interest pleased remain cash In first

to key growth our Next, drivers. two of I'd like four discuss

quarter, prevalent as Japan continues net to achieved to units asset as Latin our two and in unit U.S., year. format. opened XXX step-up last XXX remain growth this, quarter. units at X,XXX representing quarter our during in urban excited walk-in remodeled their approximately the units alcohol. development; XXth of of Bell opened X%, we unit walk-in U.S., markets of formats, had as rates end our Pizza the Hut improve from recent most in years, U.S. At Taco cantina restaurants to Pizza investing opening on Bell of by recent Brooklyn the unit in the XX in three a All-in, which or have of At mentioned. decline. and we restaurant the we previously urban years asset asset we the America, International, Greg and new new this KFC we Hut development strong flat development the asset bold including the through on units, image the most Showman KFC American this First, the new for net nearly XX% last grow make over pace base, during gross historical Taco represents first subset such serves and we Internationally, are quarter, the UK. in and the new see in The first franchisees asset the the

track We on a be for XXXX with year pace significant consecutive to the development. ramp-up in of the third are

the have are U.S. in of significant untapped through formats We space drive brands geographies new long-term. and and asset which is white new growth net there confident over a our growth unit the mindset for each internationally, will

This of committed. being the capitalized next the have a the a restaurants. alive driver U.S. In our results. U.S. our capability. And Franchisee: KFC unmatched possessing one-third capable, and Greg stores positive They restaurants the ones hands Our changed come months. it in leadership, over their means for in translates and which three the could the franchisees is Yum! of Franchise growth operating restaurants. U.S. sense attended recently pride and their of making X,XXX Hut business, are new Convention experience culture last these nearly franchise I Cs have under traditional fuels the are this feel and XX culture customer Pizza into is

great I'm scores quarter, objectives. committed during we that, To speed fostering capitalized dark culture confident Last of our restaurants, developed I the conjunction grows, that franchisees, transformation. through brand the Nacho that program dinner last targeting are X:XX after and are and operational p.m. growing after summer, results on during peaks. and improved with with of strategic and make speed Taco we leaders we maintaining highlighted service, quarter are world-class pleased continue highest satisfaction ensure at capable brand's customer unique the have to And delivering running pleased to a Bell on the We existing while our satisfaction Fries. improvements while conclusion, further maximizing the the daypart, focused Bell over momentum progress implementing continue launch strategic quarter, in first a to our of late-night has In our Taco the

optimize mismatch the in underlying operating operating quarter core First near the I'm as our recognition base expected. and savings right set and strength are and confident solid profit accounting for decisions and disciplined up refranchising associated us and between we taking standard, value to was shareholder for profit long-term. adjusted G&A will revenue the timing was the steps

I team to the your are and happy Now, questions. take

Operator

comes question [ISI]. (sic) from first Matt McGinley Evercore Your of SI

Matthew Robert McGinley

on Thank core you. operating profit. My the first question is

Greg Creed

Hang to trying Matt, a we're on. bit. get the up little volume just

Okay, try again.

Matthew Robert McGinley

Okay can now? my hear question you – me

Greg Creed

Yes.

Keith R. Siegner

Yes.

David W. Gibbs

Yes.

Matthew Robert McGinley

great. Okay,

is question be core for my year, expected So the you on flat that the profit to overall. operating

UK. will in X the reduction probably quarter, quarter, that you more get gets have, think year in progresses, of half. fourth would that revenue perspective the as you'll you You the headwind were year that that than despite what I impact in you out point as called run flat from a worse And a back what the would the G&A the rate first recognition progresses? negatively that from as more Other that change

David W. Gibbs

David. is This

of profit as the year, for operating a flat Let for year. work the that cadence little guidance the how we during me full will sense give you to get

be that second probably which we core of quarter report year's quarter out will quarter point one-time expect weakest in I worth benefits the the $X negative at last year, we're operating as call. during second KFC, lapping The profit. second to out of million we our quarter called would

and, are one-timers the present obviously, lap So part of some headwind. those

being also lapping a we we quarters XXX the Pizza presents the Transformation the a spend contributing quarter as last also remember be better to fourth we'll in the expect will year, operating And We refranchising goes million the get $XX close of quarter, that tailwind tougher quarter When lapping, to get fourth year, to year that the and have on. And terms you profit of fourth Pizza lap. spend we're Hut actually guys Agreement reported impact so we for from in transformation quarter refranchised Hut growth. the units. of that us last to

build We be toll we obviously, any much tailwind so it's that one will, then they offset much will about have before to get year, won't by point bigger quarter, but fourth not rata quarter. G&A, that. G&A as reductions will to once mostly obviously on from So And taking a during little that the the if the get refranchising. of headwind us lapping they're the think the to G&A we your but it, a than is of as we pro the the a that year, in course occur more a unfortunately to bit but impact of from

year you how basically flat. that's So build the to

Matthew Robert McGinley

for back this Just to those think the you customer a you product, moved of inability that or are I And from of closures you're issues moved on on past curious issues and understand have immediately? don't system the issues residual the if fully fully then come into I there, sort standpoint or is second the quarter. from have in those that but you that. a a issues KFC there the is when still impact sales kind that you supply residual Thanks customers some UK, the had or those if

David W. Gibbs

caution, We're past abundance out confident mostly back full have to an and can media and that make we there mostly the that But timely supply restaurants back we of basis. of the we that we're the turn waiting challenges we on sure on. in and running. Obviously, are before get a until XXX% we're ensure up No. supply

Greg Creed

advertising ad the supply. in but, of obviously, that's a key middle Yeah, we Yes, were thought, we rather have didn't I I point. ran, think crisis when we stopped the we clever a while

I be think we're back excited to turn all machine. and we'll marketing XXX on restaurants So get to excited the

we'll was going when think good a lot on. this realizes turn who issue. get very of back support a from to distribution I think we get the marketing a response machine the And customer, I we're

David W. Gibbs

Yeah.

the some the the impact event quarter felt the into being later quarter most continued to first likely. marketing being turn also on contributing worst reported of second will Obviously, we in well, quarter the year, second was on. impact the we've should quarter, So see the as which in the of the And month.

Matthew Robert McGinley

Okay. Thank you.

Operator

Your Stanley. from question John comes Glass of Morgan next

John Glass

Good Thanks. morning.

the decline, saw Hut first, broader much just seeing specific issues Is to On to look China any delivery? markets of kind it the comp you last a is way those could the or simply Pizza the where and what versus And a you're International talk it dimensions maybe due night, about that issue, weakness? how results, are? versus or there that on this we strength of was two dine-in which is at

David W. Gibbs

On numbers, for the flat it. actual International, you on to it's let China, comment I closer think out back I'll if but Greg

Greg Creed

Yeah.

When we dine-in we value numbers the you John, like I numbers. it numbers it's get think very at look the than versus you right we and hot do well. when right, fast, out everything. if broke and dine-in and delivery, get delivery get the obviously, product And, are we stronger,

we're We're I those confident improve got specific performance sales So in with that three obviously, growth same-store going we've taking. in my that International. to presentation, the markets Hut to Pizza as will think, I alluded our actions that and, to we're need take in

John Glass

recovery recovery on for you into the would company, some just benefit then, or that And Did sort insurance UK, there is Okay. or forecast was there from upside to example? that's some insurance or other that this distributor be your source, get of the some other might you if available you? from put that

David W. Gibbs

is to the helped a the in his back think we've we we've really point track back we responsible, the our but that parties a through situation. yes. can't can to settlement. discussions and Greg get as speech, that, in mentioned quickly franchisees We get everybody on into get very reached numbers. this baked we've And on The And business go healthy were where them. with that's Obviously, details been that into why, any

John Glass

Got it. you. Thank

Greg Creed

John. Thanks,

Operator

next of Geiger question Your comes from Dennis UBS.

Dennis Geiger

improvements early Morning. in you are else Pizza Thanks for but loyalty, stages, spend, Thanks. I solid but the trends, marketing pace from in franchisees place the increased very detail recently-launched a continued assessing new app, what the bit I about what and, know the Greg, anything you you're know internal of metrics, initiatives seeing obviously, year customer you provide satisfaction on about the Hut in thermal the on more metrics at telling thinking the talked question. all turnaround? just we as pouch, think about one Could U.S.? just

Greg Creed

Sure, Dennis.

I product. the to just the numbers improving added you as We loyalty more so are said, think, obviously, pizza, growing. cheese we're

quarter. conversion definitely the Our improved numbers in

during improved the speed Our quarter.

delivery So I doing, drivers, think pouches. all hot the the that hiring we're things

is food It's Conversion hotter. the stronger. faster. getting is So there

So we're David our seeing with that franchisees is, the operating X,XXX changed is And are best alluded some franchisees that's what seeing what's interesting these our metrics. we're restaurants of all across metrics. What of new actually of some delivering hands. have to, as new

that the So franchisees in putting that these we're metric on we're of actually board, strategy place, new and the top as encouraged Artie's new seeing to tactics embrace franchisees operating come these the jump that performance. the

Dennis Geiger

you. Thank

Operator

of Your Chris next question comes Stifel. from O'Cull

Chris O'Cull

rewards to the And the be from will I point-of-sale system this Grub that and Thanks. customer offers, have integrated cetera? will will Bell's the Grub incentive with access know the with Grub's. to orders? customers Good updates, Does Taco ordering company fully allow mean mentioned you data guys you communicate morning. back KFC integration this to et

Greg Creed

about the have KFC the is Taco so as Taco we the and to part access access we'll Bell Grub, I data. to with have deal access Obviously, mean -- will of the sense customers to Bell keen KFC. customers, the will have access of our to the data have

then, both of both QX, the you'll at was obviously, to long-term is, conventions Bell think, is I to in at David Grubhub access it focused relationship and conventions. I the alluded and thing, positive franchise the very that presented think KFC response which David to teams integration. going and are now having So And see Taco were what positive have those the presentations to I both on we're Grubhub. with and I And the and The critical. to think very third – data

Keith R. Siegner

Thank you.

Next question, please.

Operator

question comes Farmer Wells Jeff next from Your Fargo. of

Jeff D. Farmer

that expect is where next level where reaches quarters, franchise ownership your global today? restaurant that run it you roughly, over consolidated When rate the or I Thanks. so versus settle mix guess, to coming margin XX% do

David W. Gibbs

Yeah.

margin consistent own few very stores. I far think We're XX% XX% not been misleading now, at so today, can we've is on company away. that we because in be saying margin, that the so

X,XXX. on to company units get at our we're think below journey I X,XXX

for stores margin by We've those example, Hut over Hut Pizza we're to learn, model represent only at committed in stores. stores us at very bother so XXX stores all. a that spur represented development margins, And And do So, in and depress stores is XX,XXX got market own franchise don't trying XXX to we'll by may Pizza We that out that show make testing all. capital markets where front having where partners margin our in we in entry. stores this may want stores to own the and we'll we're then. put few to our company doesn't in system; to those we invest

too be, focused represent margins such would nor So become I the I the business. wouldn't our as of going get a overall they of give small really where on them subset forecast system. performance of the They don't a to are company

Jeff D. Farmer

to on but place that color where And refranchise, just touched of should it, to those few any across left take Okay. divisions? the we hundred-plus expect you refranchising to units as

David W. Gibbs

you We refranchise XXX, Taco way. all can you give the left for imagine, tell Yeah, can together. also the want apart. Pizza the Deals there's to KFC Hut going fall with to we refranchise. down ourselves the yeah, a reveal Bell to remaining be don't would where lot so, plans to brands. come it obviously, right get as and not number to we're more Deals flexibility there, But, I to the

Greg Creed

Yeah.

the get own we will restaurants than X,XXX confident the XX% less of we David remain said, year. I to and that really by as end think, this

Jeff D. Farmer

Thank right. All you.

Operator

Your next question from JPMorgan. Ivankoe comes John of

John William Ivankoe

Hi. Great, thank you.

release. guys we and obviously International Pizza across in disparate the press it your of some prepared remarks see what markets, sounds You least what your that's correlation like are can seeing at some tables Hut in in also

outperforming there know can go that's changing bit make we So, delivery dine-in, that. guess, XXXX? a the but little in deeper hopefully is anything point early did And that you into I is I

if dine-in can that the that dine-in we offset to can weaker way converged you were two can lessons And to offer delivery the from currently tick-up that now as remind any materially sales? models have delivery? what and U.S., Firstly, secondly, us various different percent stores And together, internationally apply there of markets? with international being especially the learned percent a

Greg Creed

and and address the Okay. markets, Well, are on we're take for learning I can from imperative most I'll we first internationally. clearly, that. value, an think one, is that focused which value remains obviously what all the U.S. Great brands we

makes new taste we're then that cheese So great that keeps making the product, just in U.S., think we've great more and on our on plus obviously, I because, delivers sure product we're more also And pouches. products only not time. the announced it hot it hotter better, value, the the cheese heat, putting

think and markets has I executing is that just fast. great has hot about and and great sure making value, of executing it's really the fundamentals So a product the each

David W. Gibbs

Yeah.

delivery, And on are as stores far just to Pizza the a XX%. shape. Hut the markets contrast of good S. in have internationally, Hut, is U. lot where we pretty actually dine-in As mostly percentage dine-in the internationally, offering of Pizza color stores And it's healthy, as in the business more generally

family And higher-end brand Pizza as in more a it's a market, not dine-in in to up a the analogy in really in Hut, on brands, delivery brand brand it's our be where a what's perfect other another, markets, between in been unique tend going market-to-market, than dine-in So dining built some more does one another. U.S. a

bit terms little complex of from we market take another. more a in to it's how So one learnings

the with billions in team we Hut, lot learnings where digital learnings best another working closely we're digital and have obviously, know-how. there's dollars think international world, sure the those Pizza of of is take with, many to our a of on we the the as example sharing digital make side. sales However, U.S., around of experience

John William Ivankoe

in follow that XX% that terms I that materially stores can up, higher be of delivery? mean, offer And

David W. Gibbs

Yeah.

delivery team move way. also the but fact, a nice big A done is Delco. their really names, casual Pizza as Hut Super this all right of Greg to component, face we in is success, assets we of which a part internationally, that we has that today, the a they up that Hut and forward to call has set capability. set the on better is That's goes the the delivery Delco number lean model doing continue mentioned. or the our U.S. in different we delivery getting of a know just still delivery, better for more do with we by a as up fast to And Pizza In have challenge long-term job dine-in can what back-of-house face It internationally. of has developing

strategy internationally. is part digital-centric this and So of delivery a big

John William Ivankoe

you. Thank

Operator

Your next of question comes Gregory Bank Francfort of America. from

Gregory R. Francfort

Hey.

not softer the Just much piece Bell are Nacho margins, to now, How a the on this a company that Taco stores right base the was of but little of the question know big quarter. I due and a Fries? bit

David W. Gibbs

Sure.

we As great basis. Bell at comparison a that. factor in mentioned, launch on Taco you but had of definitely was margins softer a The Fries

and best as launched product learned we staffed operationalize I we the did about right the team think up we and sure made how can the it. thing

factor And margin the of that a big impact. in so, some was

quarter value. air then were refranchising. remind that We also all with would on impact I had you dollar And we from long, little a

margin bit, margins things pressuring So margins. context the we guidance, in little of number our our a had good still long-term of a and but all-in-all

Gregory R. Francfort

from my digital over device going phone? equation a Yeah, to I do consumer consumer, just going or in what a couple one you have the it. apps And a Thanks. got or mobile ordering how plays aggregation three app? out think four Am I then, have brand be will side years? curious you long-term perspective? am order think on the I'm the As of Greg, just to side consumer-facing

Greg Creed

be as Hut, on get interesting, and you'll I the habit all, page Taco find with app somewhere So got front Hut right? Bell do and the that of also in was think having Grubhub the think at phones, a Pizza we'll actually and other phones. obviously, Pizza lot bad I early I same do mobile think we will of ordering. people's looking at more, day through this I there And first saw of think, their of way. I have What's now I the business same I with

I do to out And more another on think to brand apps. relevant, do orders I think reason They're your one two brand that's that's people grow. will not will So make I every or put than have the potentially it relevance app there. distinctive to their going mobile just are make distinctive, pay, the either I because apps. that easy, customer, mind will will to easy ones order, page that the and easy offer see in easy to customers' be front to think and get, the as brands think

Operator

from comes question next Sara Bernstein. Your of Senatore

Sara Harkavy Senatore

very you Thank much.

Grub, follow-up a on and a then Bell Just question please. Taco about

And So, Doritos on mentioned Nacho Fries than had I launch. that at perhaps, Taco Bell, you read we stronger how the think were. successful Locos, even

I X% but the about check extent or segment a daypart talk working was guess it comps dollar you're menu question, I lapping please. what maybe have maybe bit a to I another well? So, a value was a a could an compare, weren't then, was And as the you versus compression push just or menu and just comparison that not a stronger. function difficult of do bit from surprised Granted,

Greg Creed

they're X%. incremental. we was of it And saw incidence, going given was Obviously, Fries part like, plus is Well what helped also I was happy with we XX% quarter business the out the I X% a on great. the Sure. think orders Obviously, is we was a what's in lapped good We lot tough a of with Fries, the think a helped that $X marketplace. drive $X, fact number the what that which lap, going news and of to were it incidence.

that, the did check help think I obviously, probably helped in check. So It quarter.

will Taco really word. believe right the a around is do continue with that I got this Bell. tricks We've And so the QX, got news is not we're sure not of Triple to lot a a comes Nachos very value. we've smart pony now and in value. the I'm lot – to We've that good think think in tough we of one-trick very marketplace Burrito I got well brand plays it when a I Melt like

Sara Harkavy Senatore

through Grubhub. on ordering last you decision a talk partnership? China Because kind trying to to some their from little was from heard shift are follow-up away the Can and own of night little just bit know just then, they to And doing just we platform these more Yum the a investment actually about you. I versus an aggregators. Thank their that of make bit things Great.

to that having just decision So sort again, contextualize of trying of partnership tie some and, than I'm just of trends sort contractual a a agreement. to global closer in terms

David W. Gibbs

this lot just an delivery aggregators, thought, with that we for seat of but, And that's why best we our obviously, pickup scale Yeah, through businesses. offer their what a a in the wanted understand and partner us. have Hut how to to run brand, all at is grow an to and the opportunity we – we given to knowledge aggregator and aggregator our we had to partner. about and business the we time, going business model have Pizza could industry is front in And the same with both wanted think the we it best to utilize the also together

companies was board you seat up terms this commercial team right you had on where on in to getting Obviously, a just months, has We're actually senior our do with stock just a to than of share and visit entities. a going the having knowledge between two responded commercial We at the things be different them Grubhub the a more directors do. up. thing two But the other the we pleased level. a partnership to of terms. with and to between couple our partnership, if that was wouldn't of thought want investment board deeper more planning and it we're we kind a was at parcel and positively part really is seat it getting So investment about

Greg Creed

investment Grubhub I expand to enables also think that our distribution national quicker. gain to

quickly. penetrating getting markets into think I are more about So more spoke they they actually

to that the like us obviously, fact is we get better because, the for money Grubhub, So our integration complete. that, could be the do once them of we the it broader directed the helping presence

think I So really partnership. a good it's

was I great think a investment. it

behind national will have the see expands get things great integration it's I come complete, it you marketing think distribution. great and we board And the once put think I to Grubhub the we this, effort their seat. from

is both this upside for think parties. I all

Operator

Your Andrew Company. of Cowen next comes from Charles & question

Andrew Charles

Thank you.

upcoming partnership, dark Bell the the benefit to summer? you marketing layer dark Grubhub most presumably initiative customer-facing to as which after initiative after Taco initiative, the should in this does tie will night? with to Grubhub the in the late at On be go And how opportunities you through

Greg Creed

two Well, there on. is going things I think

late was obviously of about talking what do We that huge was First of one David all, think the dinner upside. other to night. dayparts is amount believe to and operationally a we I applying focus apply there's

competitive operators summer. will know after that. refrain and those speed service, so just dark for the as let on want late we best that want too of and to interest, I for night reasons, key through But all I'll think or our metrics – in customer away you to our consumer-facing we're from going much our additional accuracy I to focus we put service, of on are don't both we dinner operating the our go doing not give That from what be a perspective. would

Keith R. Siegner

will last question. Next question, our be please. This

Operator

Your Tarantino question David of Baird. final from comes

David E. Tarantino

in to changed in needed of a that's growth has transactions your you've there deliver your getting you morning. lot momentum. on get confidence unit thoughts And the to of could your be following how goal My unit Hi, X% seems good growth? was whether you level update question's particular, these picking wondering system refranchising just up of on give if And development, I which completed. sales on us an to that

David W. Gibbs

Yes.

less unit as up first that coming to some to XXXX. yesterday. mentioned I had XXX confidence we quarter XXX open put board. China, reported about the increasing net results half compares we That from on our that's of which so We pickup, last new in unit in start think XXX is development the about year units

commented paybacks noted you They on Hut. they some their guidance And and also cash they're unit getting up. Pizza great may KFC of have the on took

guidance used as point to largest about the other to and franchisees of I opportunity we refranchising We're calls, seeing that's numbers some the sure our then growth refranchising think pick positive all developers in we've And your that typically development an when of refranchising, those to very make one So is we've actual are committed have up. increase. mentioned agreements part taking well-capitalized the as as deals. then their

Development place. put done, So in for pipeline, as is we our these of with development up pipeline get Agreements more the unit more and our building being refranchising new

couple in to which would this We the at units So, certainly XXXX. important really the to not step-up than yeah, guys we're And part more a an a the past. looking in stopping XXXX, getting do a have We're we're we you same versus of in a development thing XXXX. from excited. is noted, think hundred reliable there. had number have We development get journey contribution higher X% is to in

David E. Tarantino

if more these pipeline And, gradual up? I you and year up XXXX with build, last could ramp is just David, we've going bit than seen refranchising that for a think do on you kind follow in XXXX to take assume, we'll of and it I would what see and a think bigger that, year time to a or be inflection this transactions do a that little of

David W. Gibbs

it's keep we we stores, thing equity note that get our pipeline in refranchising development, years. we the hand might continued the to guidance ramping markets the year, we've franchisees. of to talking pipeline about and our as up have we've where to as future one done equity build the that the is up Certainly we own then Maybe hope end we to start but for that

want somebody would market there and point buy we to So in would have at development a that where didn't the time. no situation be

development really But build and It's hand-off area about that field of the we're avoid the in proud stronger by lulls in that to the development. hard caused doing a leaning certainly and stronger units. we've work an in to are the very optimistic tried So any teams of pipeline.

David E. Tarantino

you. Great. Thank

Greg Creed

Okay.

thank the closing. guess want of you a call. all all, thoughts to I first for I So few being on in just

need to making look stay for we're to to and the suggested, performance. the sales we again, pleased more brands in the stronger unit QX you to solid distinct history. And as openings think net start we I clear same-store obviously speaking strongest August. relevant, to Thanks, with the new on KFC drive It's in even year, adjusting and recent impact easy forward in focused UK. of a after

Operator

today's concludes call. This conference

You may disconnect. now

Yum! Brands (YUM) 2 May 182018 Q1 Earnings call transcript