YUM changes
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- About
- Yum! Brands owns KFC, Taco Bell, and Habit Burger & Grill. After it sold Pizza Hut in 2026, it has more than 44,000 restaurants in 151 countries. Franchisees run almost all of them. Yum makes most of its money from franchise fees and royalties, which are a percentage of each restaurant's sales. So franchisees pay most of the cost to build and run the stores. KFC is the biggest brand, with about 34,700 restaurants, and about 90% of them are outside the US. KFC also makes the most profit: $1.5 billion of division operating profit in 2025, against $1.1 billion for Taco Bell. Most Taco Bell restaurants are in the US. Yum also builds its own restaurant software, called Byte by Yum!, for ordering, kitchens, and delivery. Digital orders were removed: 61% added: more than 60% of added: system sales in Q2 2026, not counting Pizza Hut.
- Thesis
- Yum Brands trades at a discount because a large Cyclospora outbreak at Taco Bell in July 2026 raised doubt about how fast the brand recovers. removed: It was added: State health officials called it the largest US Cyclospora outbreak on record, with 12,883 cases. Taco Bell makes about 43% of Yum's division profit without Pizza removed: Hut, and most of Yum's US profit. added: Hut. Yum said Taco Bell US same-store sales fell 2% in added: Q3 through July 27, a period that includes the added: first weeks removed: after added: of the outbreak, and it expects a lower Taco Bell US restaurant margin in Q3. Higher interest rates add a second pressure. The 10-year Treasury yield rose from about 4% in February 2026 to above 5% removed: in September added: from mid-September 2026, and this lowers the price investors pay for steady franchise royalties. Yum also carries about $12.3 billion of below-investment-grade debt. KFC is the larger profit engine and was not affected by the outbreak, but its same-store sales grew only 2% in Q2 2026. For the gap to close, Taco Bell US same-store sales must turn positive again by Q1 2027. KFC unit growth removed: outside the US must stay at 5% or more. Yum must removed: spend most of added: use the about $2.3 billion from the Pizza Hut sale removed: on buybacks, added: to repay its $675 million revolver and added: buy back shares, and refinance about $1.6 billion of debt that matures in 2027 at a reasonable cost. The first test is Yum's Q3 2026 report, expected in early November 2026, and above all what management says about October sales. If Taco Bell recovers on that path, the discount can close over the next two to four quarters. The main risk is that customer trust returns more slowly than the outbreak ended, while low-income customers cut back and competitors fight on price.
- Risks
- Taco Bell makes about 43% of Yum's division profit without Pizza Hut. The July 2026 Cyclospora outbreak pushed its US same-store sales down, and Yum expects a lower margin at its own US Taco Bell restaurants in Q3. If customers stay away longer than expected, Yum's profit growth slows. Several proposed class-action lawsuits also add legal costs. Higher interest rates lower the price investors pay for steady franchise royalties. The 10-year Treasury yield rose from about 4% in February 2026 to above 5% in September 2026. The direct cost is small, because about 96% of Yum's removed: term debt has added: debt, not counting the revolver, had a fixed removed: rate. added: rate at June 30, 2026, after swaps. Yum had about $12.3 billion of debt at June 30, 2026, with a below-investment-grade credit rating (BB+ at S&P, Ba2 at Moody's). It targets net debt of about 4 times EBITDA. About $1.6 billion matures in removed: 2027 at rates added: 2027: $884 million of added: securitization notes at 1.95% added: in February and removed: 4.75%, so refinancing added: $750 million of notes at 4.75% in June. Refinancing will cost more. If Yum does not refinance added: most of its June 2027 notes removed: in time, added: by March 2, 2027, its removed: bank loans added: Term Loan A and its revolver also come due early. Lower-income customers are cutting back on fast food, and competitors such as McDonald's and Burger King push low-price deals. Weight-loss drugs such as GLP-1s can also reduce how much people eat out. These trends can slow traffic and lower prices at Taco Bell. KFC same-store sales grew only 2% in Q2 2026, and KFC US system sales fell 2%. In 2026, Yum stopped reporting KFC US and international same-store sales separately. KFC's growth depends more and more on new stores outside the US, and China is about 26% of KFC system sales. Yum has a new removed: CEO, CFO, and Taco Bell CEO added: and a new CFO since October 2025, and its COO leaves on November 1, 2026. It still provides its Byte by Yum! software and other services to Pizza Hut after the sale, and added: a $75 million part of the price depends on removed: an earn-out added: Pizza Hut profit targets through removed: 2030. added: 2029.
- Balance sheet
- Cash: $674M Debt: $12.3B Net debt: $11.6B EBITDA, last 12 months: removed: $3.0B added: $2.9B Net debt / EBITDA: removed: 3.9× added: 4.0× (medium) Interest cover: 5.0× Ratings: S&P BB+, Moody's Ba2 Yum had a shareholders' deficit of $7.1 billion at June 30, 2026, because for years it has used debt to fund large buybacks and dividends. The debt supports buybacks, but it leaves little room if Taco Bell profit falls, and ratings are below investment grade. Yum targets net debt of about 4.0 times EBITDA and adds debt as profit grows. added: EBITDA is for the 12 months to June 2026 and includes Pizza Hut, and interest cover is first-half 2026 operating profit over net interest. At June 30, 2026, the debt was in four layers. The first layer is $4.3 billion of securitization notes, secured by US Taco Bell franchise royalties. A special-purpose removed: subsidiary (Taco added: subsidiary, Taco Bell removed: Funding) holds added: Funding, issued them. The second is a secured bank credit agreement. Under it, Yum has a $488 million Term Loan A, a $1.42 billion Term Loan B and $675 million drawn on a $1.5 billion revolver. The third is $750 million of subsidiary unsecured notes due June 1, 2027. The fourth is $4.55 billion of unsecured notes at the parent. After swaps, about 96% of the removed: term debt added: other than the revolver and leases had a fixed rate, at an average of about 4.5%. removed: EBITDA is for added: About $1.6 billion matures in 2027. $884 million of securitization notes are due in February 2027. If Yum does not repay them on time, all the removed: 12 months added: securitization notes start to removed: June 2026, and interest cover is first-half 2026 operating profit over net interest. added: pay down principal early. The removed: main near-term issue is added: $750 million of subsidiary notes cause a springing maturity. removed: Yum must repay or refinance at least $500 added: If more than $250 million of added: them are still outstanding on March 2, 2027, the removed: June 2027 subsidiary notes 91 days before they mature. If it does not, the Term Loan A and the revolver removed: also come due. Thus the balance sheet showed removed: the bank added: these two loans as short-term removed: debt. added: debt, with the notes that mature in 2027. The same two loans also come due on December 15, 2027, if more than $250 million of the Term Loan B is still outstanding then. Yum completed the sale of Pizza Hut on September 1, 2026, for about $2.3 billion of expected net proceeds. removed: The added: Yum said that it will use the proceeds added: to repay the revolver and removed: fund added: use most of added: the remainder for buybacks, under a $4 billion removed: buyback program to June 2028. added: By October 12, 2026, Yum had not reported a debt repayment or a refinancing after June 30. As of Jun 30, 2026.
- Checkpoints
- Sep 1, 2026: Pizza Hut sale to LongRange Capital completes. Passed. Watch: Closing of both Pizza Hut sales with about $2.3 billion of net proceeds passes; a failed or delayed closing fails. Outcome: Yum completed the sale on September 1, 2026, after the Yum China part closed on August 7, for $2.7 billion in total plus an earn-out of up to $75 million. Nov 3, 2026 (estimate): Q3 2026 results: Taco Bell recovery after the outbreak. Pending. Watch: Taco Bell US same-store sales that improve each month to positive in October, and a Taco Bell US margin within 19% to 21%, pass; a deeper decline or a lower margin fails. added: Feb 2027 (estimate): Repay $884 million of securitization notes due February 2027. Pending. Watch: Repaying or refinancing the notes on time at a reasonable rate passes; a missed date, which makes all the securitization notes start to pay down principal early, fails. Mar 2, 2027: Refinance June 2027 subsidiary notes before springing maturity. Pending. Watch: Repaying or refinancing at least $500 million of the $750 million notes by this date at a reasonable rate passes; a missed date, which makes the removed: bank loans added: Term Loan A and the revolver come due, fails. Apr 2027 (estimate): Q1 2027 results: Taco Bell US same-store sales positive. Pending. Watch: Positive Taco Bell US same-store sales and KFC unit growth of 5% or more removed: outside the US pass; negative Taco Bell sales fail.
- Recent events
- Sep 17, 2026: Third-party foot-traffic data (Placer.ai) showed Taco Bell US visits per restaurant down 12.2% from a year earlier, on average, from July 6 to September 11, 2026. This average includes the worst days of the removed: outbreak, down added: outbreak. On July 17, visits were about 31% removed: on added: below the average for the same weekday from January 1 to July removed: 17. It added: 6. The data does not show the level in mid-September. Sep 11, 2026: The CDC declared the Cyclospora outbreak over. It counted 12,883 illnesses in 21 states, removed: at least 570 hospitalizations, and 2 deaths. The source was added: processed iceberg lettuce from Taylor Farms de Mexico. removed: This was added: State health officials and news reports called it the largest US Cyclospora outbreak on record. Sep 9, 2026: At removed: an investor conference, added: the Barclays Global Consumer Staples Conference, Yum's removed: CFO added: CFO, Ranjith Roy, said Taco Bell's recovery removed: was "tracking as planned," added: "remains on plan," with several days of positive removed: same-store sales. added: sales in the US. He added: also said removed: growth among households earning under $100,000 added: that it was removed: slightly slower. Yum did not change its guidance. added: too early to declare a full recovery. Sep 1, 2026: Yum completed the sale of Pizza Hut outside Mainland China to LongRange Capital, for $1.488 billion in removed: cash plus up added: cash, subject to added: adjustments. Yum can also get a $75 million removed: more added: earn-out payment by removed: 2030, based added: 2030 if Pizza Hut meets profit targets. Pizza Hut's CEO, Aaron Powell, left Yum on removed: future results. added: the same day. Yum now has more than 44,000 restaurants in 151 countries. Aug 11, 2026: added: News reports said that Taco removed: Bell, Taylor Farms, added: Bell and removed: a franchisee added: Taylor Farms were named in several proposed class-action lawsuits over the Cyclospora outbreak. added: The first lawsuits were filed in mid-July. Aug 7, 2026: Yum China completed its purchase of the Pizza Hut brand in Mainland China from Yum! Brands, for $1.2 billion. Jul 30, 2026: Yum reported Q2 2026 results. Revenue was $2.17 billion, up 12% from last year. Adjusted EPS was $1.62. Excluding Pizza Hut, system sales grew 7% and core operating profit grew 8%. Taco Bell US same-store sales grew 7%, and KFC same-store sales grew 2%. Jul 30, 2026: Management said Taco Bell US same-store sales were down 2% in Q3 through July 27, after the Cyclospora outbreak, but that the decline was getting smaller. It expects the margin at Taco Bell's own US restaurants to be 19% to 21% in Q3, against 26.2% in Q2. Jul 17, 2026: removed: A multistate Cyclospora outbreak, traced to added: Taylor Farms recalled lettuce removed: from a supplier, was linked to added: a multistate Cyclospora outbreak at Taco Bell restaurants. added: The CDC first reported the outbreak on July 14. Taco Bell traffic dropped, and YUM shares fell about 8.5% from July 13 to July 17. Jun 16, 2026: Yum agreed to sell Pizza Hut for $2.7 billion in total: Pizza Hut in Mainland China to Yum China for $1.2 billion, and the rest of Pizza Hut to LongRange Capital, plus removed: an earn-out of up to added: a $75 removed: million. added: million earn-out if Pizza Hut meets profit targets in 2027, 2028, or 2029. The board also approved a new $4 billion share buyback that runs until June 30, 2028. Jun 2, 2026: Yum said its Chief Operating Officer, Tracy Skeans, will step down on November 1, 2026. Apr 29, 2026: Yum reported Q1 2026 results. Revenue was $2.06 billion and adjusted EPS was $1.50, up 15% from last year. Taco Bell same-store sales grew 8%. Nov 4, 2025: Yum started a review of strategic options for Pizza Hut, after Pizza Hut same-store sales fell for most of 2025. Oct 1, 2025: Chris Turner, formerly Yum's CFO and Chief Franchise Officer, became CEO. He replaced David Gibbs, who removed: retired. added: moved to an advisory role before he retires in 2026. Ranjith Roy became CFO on the same day.