Struggles persist for KFC and Pizza Hut within the American market.
Yum Brands Faces Challenges in KFC and Pizza Hut, but Taco Bell Thrives
In a "softer consumer environment" where value is key, Yum Brands, the parent company of KFC, Pizza Hut, and Taco Bell, is facing some hurdles, particularly with KFC and Pizza Hut. According to David Gibbs, CEO of Yum, the primary issues at KFC are gaps in value perception, while Pizza Hut struggles with an insufficient value message and a competitive value landscape.
During the second quarter, U.S. sales at KFC and Pizza Hut declined by 5%, while Taco Bell’s sales grew by 4%. KFC suffered its sixth consecutive quarter of same-store sales declines, impacted by market share loss to rivals like Popeyes, Chick-fil-A, and Raising Cane’s. Pizza Hut also faced profitability issues due to increased spending on digital transformation and franchise restructuring.
To address these challenges, Yum Brands is implementing several measures. At KFC, a new CEO with experience from Taco Bell is driving a strategy focused on energizing the brand, increasing relevance, and deepening customer engagement through innovative product launches and value campaigns. Pizza Hut is investing in long-term digital transformation and brand revitalization, despite near-term margin pressure. Taco Bell, on the other hand, is expanding its successful menu innovation pipeline and digital ordering capabilities, which account for over 50% of sales.
Yum also plans to continue unit growth, particularly through international expansion of KFC and Taco Bell, capitalising on digital and menu strategies globally. The company is optimistic about the future, with digital sales now representing 57% of Yum Brands sales, up seven percentage points compared with a year ago.
Despite the challenges, Yum Brands reported a decline in sales for their restaurant chains (excluding Taco Bell) in the second quarter. However, revenues at Yum grew 10% to $1.9 billion, with net income rising 2% to $374 million, or $1.33 per share. Taco Bell, which represents 82% of Yum’s U.S. profit, reported a 4% growth in same-store sales during the second quarter.
Meanwhile, the fast-casual burger chain Habit Burger & Grill reported a 4% decline in same-store sales during the second quarter. Yum executives blamed weakness at Habit on a soft consumer landscape but said sales improved in June with new marketing.
In the coming months, Yum plans more marketing for Habit to continue building on that momentum, while KFC is planning to open more locations of its chicken tenders concept Saucy in Orlando later this year.
In short, while KFC and Pizza Hut face challenges due to value perception gaps and competitive pressures, Taco Bell’s growth benefits from innovation and digital strength. Yum Brands is addressing these issues through leadership changes, product innovation, digital transformation, and expansion efforts.
- The challenges faced by Yum Brands, particularly with KFC and Pizza Hut, highlight the significance of finance in the restaurant industry, as they work to improve their value messages and market positioning to boost sales.
- As Taco Bell continues thriving due to successful menu innovation and digital strength, its positive impact on Yum Brands' overall business finance demonstrates the essential role of such strategies in the quick-service restaurant industry.
