Yum! Brands (NYSE:YUM) reported third-quarter results shaped by the completed divestiture of Pizza Hut and an industry-wide food safety issue that pressured Taco Bell’s U.S. sales during the summer. The company said it is entering its next phase with a narrower focus on its remaining brands and its “Raise the B.A.R.” priorities, which center on consumer relevance, restaurant economics and digital capabilities.
Excluding Pizza Hut, Yum! grew its restaurant unit count 7%, system sales 3% and core operating profit 1% in the quarter, Chief Financial Officer Ranjith Roy said. Year-to-date core operating profit growth, excluding Pizza Hut, was 6%.
The Pizza Hut divestiture, completed in September, generated approximately $2.4 billion in net proceeds and a pretax gain of about $1.7 billion. Yum! used part of the proceeds to repay its $675 million revolver balance and repurchase $543 million in stock during the quarter. Through the first nine months of the year, the company returned $1.8 billion to shareholders through dividends and share repurchases.
Taco Bell sales recovery gains traction
Taco Bell’s third-quarter same-store sales declined 4%, reflecting a 4% decline in the U.S. that Yum! attributed to the food safety issue. International same-store sales rose 5%.
Chief Executive Officer Chris Turner said the brand’s U.S. sales improved progressively from a low point in July and began outperforming the quick-service restaurant industry in same-store sales growth after the end of September. Roy said Taco Bell same-store sales were up about 1% quarter-to-date and approximately 3% over the trailing four weeks through the prior Friday.
“The recovery to date, I think, has been one of the fastest” following an event of this type in the restaurant industry, Turner said during the question-and-answer session.
Yum! said Taco Bell used loyalty offers, value promotions, menu innovation and marketing partnerships to drive its recovery. The company said heavy-user visits had fully rebounded, while visits from medium and light users were at 95% of prior levels. Consumers acquired since the disruption were spending 5% more and visiting 6% more frequently than consumers lost during the period, according to Turner.
Taco Bell’s U.S. loyalty membership grew 25% year-over-year during the quarter. The company said loyalty members returned to the brand twice as quickly as non-loyalty users after the initial sales decline.
Taco Bell’s restaurant-level margin was 20.2% in the quarter, despite lower sales in company-operated restaurants, investment in value offers and store-level labor spending. Yum! expects Taco Bell’s fourth-quarter restaurant-level margins to range from 21.5% to 23.5%, supported by continued sales improvement and easing year-over-year beef-cost inflation.
KFC grows internationally as modernization strategy expands
KFC, which Yum! said represents 62% of divisional operating profit excluding Pizza Hut, posted 6% system sales growth. Unit growth was 7% and same-store sales growth was 1%.
KFC International, excluding China, generated 9% system sales growth and 4% same-store sales growth. The company cited value offerings, localized menu innovation, and digital and delivery growth. Turner highlighted growth in markets including the Middle East, India, Asia and Latin America, while the United Kingdom recorded 6% same-store sales growth.
Yum! is working to modernize KFC through a refreshed brand identity, value offerings, menu upgrades, sauces, beverages, loyalty and its Byte technology platform. The company plans to expand elements of that strategy across KFC’s top 20 markets through 2027.
KFC China produced 3% system sales growth, driven by unit expansion, while same-store sales declined because of severe weather in August and a difficult comparison with the prior year, when delivery-platform subsidies benefited results. KFC U.S. continued to face a competitive environment, though Turner said Popcorn Chicken received a strong consumer response and sold out at many restaurants.
KFC restaurant-level margins were 12.3%, down 140 basis points from the prior year. Roy said the decline primarily reflected mix changes related to 15 lower-margin test stores operating under the Saucy brand.
Across Yum!, the company opened 955 gross new restaurants excluding Pizza Hut. KFC opened 878 units and surpassed 35,000 restaurants worldwide. Taco Bell opened 73 units, including 36 in the U.S. and 37 internationally. Yum! expects 2026 to be a record year for KFC development and said it expects full-year unit growth excluding Pizza Hut to exceed its 5% long-term algorithm.
Digital investments and balance-sheet plans
Yum! said Byte by Yum! remains central to its operating strategy. The company’s kitchen display system is being rolled out in KFC U.S. restaurants, where limited early deployment has produced 8% faster drive-through speeds, a 12% reduction in refunds and delivery-driver wait times more than 20 seconds shorter.
More than 900 Taco Bell restaurants use Voice AI in drive-throughs, with the company targeting more than 1,500 locations by year-end. In deployed restaurants, Yum! reported a 6% improvement in overall drive-through satisfaction, about a 1.5% sales increase from higher average checks, and improved employee retention relative to a control group.
Roy said the company ended the quarter with $2.1 billion of cash and cash equivalents and approximately $3.6 billion of total available liquidity, including its undrawn revolver. Yum! expects to address $1.6 billion of maturing debt between the fourth quarter and the first half of next year.
The company expects fourth-quarter general and administrative expense, excluding special items, to be between $285 million and $305 million. That figure includes about $2.5 million per month of corporate costs previously allocated to Pizza Hut. Transition-services fees from Pizza Hut will be reported in other income and are expected to taper off by mid-2027.
Yum! also said it will transition its U.S. brands and selected international markets to calendar-based reporting beginning with first-quarter 2027 results, replacing its period-based convention in those markets.
About Yum! Brands (NYSE:YUM)
Yum! Brands, Inc is a global restaurant company that operates, franchises and licenses quick-service and fast-casual restaurants. Its principal brands are KFC, which specializes in fried and other chicken products; Taco Bell, which offers Mexican-inspired food; Pizza Hut, which sells pizzas and related menu items; and The Habit Burger Grill, a fast-casual burger restaurant chain.
The company’s business is primarily franchise-based, with restaurants operated by independent franchisees and licensees alongside company-operated locations.
