Yum Brand has mastered the art of growing globally while spending less. Its franchise-first business model delegates capital expenditures to franchisees and allows the company to collect high-margin royalties without the heavy burden of owning restaurants. This lean strategy fuels profits and spurs expansion, dividend growth, and share buybacks to enhance shareholder value.
Yum Brand is also positioning itself as a digital-first restaurant empire. With 55% of system sales now digital, and advanced AI tools streamlining certain operations, the company is future-proofing its service model.
Meanwhile, the stock trades at 24.2 times forecast earnings.
YUM! BRANDS INC. (New York symbol YUM) operates over 60,000 restaurants in more than 155 countries. Its main banners are KFC (fried chicken), Pizza Hut and Taco Bell (Mexican food). Franchisees now operate 98% of outlets.
In the past few years, Yum has shifted most of its outlets to franchisees—they now operate 98% of all locations. It gets most of its revenue from the fees it charges those operators, usually 3% to 6% of their sales.
On November 1, 2016, Yum spun off its outlets in China as a new firm called Yum China Holdings Inc. Investors received one share of Yum China for each Yum Brands share they held. The new firm pays its former parent a licencing fee equal to 3% of its system sales.
Yum opened 751 gross new outlets (it did not report store closures) in the three months ended March 31, 2025. As a result, its revenue rose 11.8%, to $1.79 billion from $1.60 billion a year earlier. However, that missed the consensus forecast of $1.85 billion.
On a same-store basis, overall sales improved 3% (excluding currency rates). By chain, same-store sales rose 9% at Taco Bell and 2% at KFC, but fell 2% at Pizza Hut.
If you exclude the costs of moving KFC’s headquarters from Kentucky to Texas and other unusual items, earnings gained 13.0%, to $1.30 a share from $1.15. That topped the consensus estimate of $1.29.
Growth Stocks: Digital innovation helps drive sales growth
The company fuels its growth by expanding its online ordering platforms and home delivery services. In 2024, sales through digital platforms rose 15% and accounted for over 50% of its total sales.
Yum also recently launched “Byte by Yum!,” a new cloud-based software platform that uses artificial intelligence tools to boost sales based on customer preferences.
The new software will also helps franchisees optimize various functions, such as food ordering and inventories, and cut their costs.
Despite the current economic uncertainty, the company continues to open new stores. It also continues to develop new menu items and expand its digital ordering platforms. As a result, Yum’s earnings for all of 2025 will probably rise 10% to $6.00 a share. The stock trades at 24.2 times that forecast, which is a reasonable p/e in light of Yum’s popular brands.
Yum also raised your quarterly dividend by 6.0% with the March 2025 payment. Investors now receive $0.71 per share instead of $0.67. The new annual rate of $2.84 yields 2.0%.
Recommendation in Wall Street Stock Forecaster: Yum Brands Inc. is a buy.
