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What changed in Yum! Brands's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Yum! Brands's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+373 added−365 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-20)

Top changes in Yum! Brands's 2024 10-K

373 paragraphs added · 365 removed · 300 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur Growth agenda is based on four key drivers: • Unrivaled Culture and Talent: Leverage our culture and people capability to fuel brand performance and franchise success • Unmatched Operating Capability: Recruit and equip the best restaurant operators in the world to deliver great customer experiences • Relevant, Easy and Distinctive Brands: Innovate and elevate iconic restaurant brands people trust and champion • Bold Restaurant Development: Drive market and franchise unit expansion with strong economics and value Information about Operating Segments As of December 31, 2023, YUM consists of four operating segments: • The KFC Division which includes our worldwide operations of the KFC concept • The Taco Bell Division which includes our worldwide operations of the Taco Bell concept • The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept • The Habit Burger Grill Division which includes our worldwide operations of the Habit Burger Grill concept Franchise Agreements The franchise programs of the Company are designed to promote consistency and quality, and the Company is selective in granting franchises.
Biggest changeInformation about Operating Segments As of December 31, 2024, YUM consists of four operating segments: • The KFC Division which includes our worldwide operations of the KFC concept • The Taco Bell Division which includes our worldwide operations of the Taco Bell concept • The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept • The Habit Burger & Grill Division which includes our worldwide operations of the Habit Burger & Grill concept Franchise Agreements The franchise programs of the Company are designed to promote consistency and quality, and the Company is selective in granting franchises.
Each year YUM and our franchisees around the world create thousands of restaurant jobs, which are part-time, entry-level opportunities to grow careers at our KFC, Taco Bell, Pizza Hut and The Habit Burger Grill brands.
Each year YUM and our franchisees around the world create thousands of restaurant jobs, which are part-time, entry-level opportunities to grow careers at our KFC, Taco Bell, Pizza Hut and Habit Burger & Grill brands.
As evidence of the opportunities these positions create, approximately 80% of the Company-owned Restaurant General Managers (“RGMs”) located in the U.S. have been promoted from other positions in our brands’ restaurants and such RGMs often earn pay greater than the average American household income.
As evidence of the opportunities these positions create, approximately 80% of the Company-owned Restaurant General Managers (“RGMs”) 7 located in the U.S. have been promoted from other positions in our brands’ restaurants and such RGMs often earn pay greater than the average American household income.
The Habit Burger Grill is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. At December 31, 2023, 98% of our Concepts’ units are operated by independent franchisees or licensees under the terms of franchise or license agreements.
Habit Burger & Grill is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. At December 31, 2024, 98% of our Concepts’ units are operated by independent franchisees or licensees under the terms of franchise or license agreements.
In addition to the persons employed by the Company and its subsidiaries, our approximately 57,000 franchise restaurants around the world are responsible for the employment of over an estimated 1 million people who work in and support those restaurants.
In addition to the persons employed by the Company and its subsidiaries, our approximately 60,000 franchise restaurants around the world are responsible for the employment of over an estimated 1 million people who work in and support those restaurants.
Overview of Business YUM has over 58,000 restaurants in more than 155 countries and territories primarily operating under the four concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger Grill (the “Concepts”). The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-style food and pizza categories, respectively.
Overview of Business YUM has over 61,000 restaurants in more than 155 countries and territories primarily operating under the four concepts of KFC, Taco Bell, Pizza Hut and Habit Burger & Grill (the “Concepts”). The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-inspired food and pizza categories, respectively.
In the U.S., approximately 90% of our Company-owned restaurant employees are part-time and approximately 50% have been employed by the Company for less than a year. Some of our International employees are subject to labor council relationships whose terms vary due to the diverse countries in which the Company operates.
In the U.S., approximately 85% of our Company-owned restaurant employees are part-time and approximately 40% have been employed by the Company for less than a year. Some of our International employees are subject to labor council relationships whose terms vary due to the diverse countries in which the Company operates.
Digital sales include transactions where consumers at system restaurants utilize ordering interaction that is primarily facilitated by automated technology. In 2023, our system restaurants generated digital sales of $29 billion, representing over 45% of overall system sales. The Company and its Concepts own numerous registered trademarks.
Digital sales include transactions where consumers at system restaurants utilize ordering interaction that is primarily facilitated by automated technology. In 2024, our system restaurants generated digital sales of $33 billion, representing over 50% of overall system sales. The Company and its Concepts own numerous registered trademarks.
Competition The retail food industry, in which our Concepts compete, is made up of supermarkets, supercenters, warehouse stores, convenience stores, coffee shops, snack bars, delicatessens and restaurants (including those in the QSR segment), and is intensely competitive with respect to price and quality of food products, new product development, digital engagement, advertising levels and promotional initiatives, customer service reputation, restaurant location and attractiveness and maintenance of properties.
Seasonal Operations The Company does not consider its operations to be seasonal to any material degree. 6 Competition The retail food industry, in which our Concepts compete, is made up of supermarkets, supercenters, warehouse stores, convenience stores, coffee shops, snack bars, delicatessens and restaurants (including those in the QSR segment), and is intensely competitive with respect to price and quality of food products, new product development, digital engagement, advertising levels and promotional initiatives, customer service reputation, restaurant location and attractiveness and maintenance of properties.
Human Capital Management Overview As of December 31, 2023, the Company and its subsidiaries employed approximately 35,000 persons (collectively referred to throughout this filing as "our employees" or "YUM employees"), including approximately 25,000 employees in the U.S. and approximately 10,000 employees outside the U.S. Approximately 85% of our employees work in restaurants while the remainder work in our restaurant-support centers.
Human Capital Management As of December 31, 2024, the Company and its subsidiaries employed approximately 40,000 persons (collectively referred to throughout this filing as "our employees" or "YUM employees"), including approximately 23,000 employees in the U.S. and approximately 17,000 employees outside the U.S. Approximately 85% of our employees work in restaurants while the remainder work in our restaurant-support centers.
Of our over 57,000 franchised units at December 31, 2023, approximately 35% operate under our master franchise programs, including over 13,700 units in mainland China. The remainder of our franchise units operate under store-level franchise agreements.
Of our over 60,000 franchised units at December 31, 2024, approximately 35% operate under our master franchise programs, including over 15,400 units in mainland China. The remainder of our franchise units operate under store-level franchise agreements.
All suppliers and distributors are expected to provide products and/or services that comply with all applicable laws, rules and regulations in the state and/or country in which they operate as well as comply with our internal standards.
Our international franchisees generally select and manage their own third-party suppliers and distributors, subject to our internal standards. All suppliers and distributors are expected to provide products and/or services that comply with all applicable laws, rules and regulations in the state and/or country in which they operate as well as comply with our internal standards.
In recent years the Company has focused on building and acquiring a distinctive set of solutions with next-generation capabilities tailored for our brands and scaling these common digital and technology platforms across the globe.
In recent years the Company has focused on building and acquiring a distinctive set of solutions with next-generation capabilities tailored for our brands and scaling these common digital and technology platforms across the globe. In 2024, we accelerated our technology transformation by integrating our digital and technology teams into a unified global team.
Our and our Concepts’ franchisees’ restaurants outside the U.S. are subject to national and local laws and regulations which have similarities to those affecting U.S. restaurants but may differ among jurisdictions. The restaurants outside the U.S. are also subject to tariffs and regulations on imported commodities and equipment, laws regulating foreign investment and anti-bribery and anti-corruption laws.
Our and our Concepts’ franchisees’ restaurants outside the U.S. are subject to national and local laws and regulations which have similarities to those affecting U.S. restaurants but may differ among jurisdictions.
Working Capital Information about the Company’s working capital is included in MD&A in Part II, Item 7 and the Consolidated Statements of Cash Flows in Part II, Item 8. Seasonal Operations The Company does not consider its operations to be seasonal to any material degree.
Working Capital Information about the Company’s working capital is included in MD&A in Part II, Item 7 and the Consolidated Statements of Cash Flows in Part II, Item 8.
The use of certain of these marks by franchisees has been authorized in our franchise agreements. Under current law and with proper use, the Company’s rights in our marks can generally last indefinitely. The Company also has certain patents on restaurant equipment and technology which, while valuable, are not currently considered material to our business.
The use of certain of these marks by franchisees has been authorized in our franchise agreements. Under current law and with proper use, the Company’s rights in our marks can generally last indefinitely.
When prices increase, the Concepts may attempt to pass on such increases to their customers, although there is no assurance that this can be done in practice.
The principal items purchased include chicken, cheese, beef and pork products, paper and packaging materials. Prices paid for these supplies fluctuate. When prices increase, the Concepts may attempt to pass on such increases to their customers, although there is no assurance that this can be done in practice.
Given the various types and vast number of competitors, our Concepts do not constitute a significant portion of the retail food industry in terms of number of system units or system sales, either on a worldwide or individual country basis. 6 Environmental Matters The Company is not aware of any federal, state or local environmental laws or regulations that will materially affect our earnings or competitive position, or result in material capital expenditures.
Given the various types and vast number of competitors, our Concepts do not constitute a significant portion of the retail food industry in terms of number of system units or system sales, either on a worldwide or individual country basis.
The Company does not typically experience significant continuous shortages of supplies, and alternative sources for most of these supplies are generally available. 5 In the U.S., the Company, along with the representatives of the Company’s KFC, Taco Bell and Pizza Hut franchisee groups, are members of Restaurant Supply Chain Solutions, LLC (“RSCS”), a third party which is responsible for purchasing certain restaurant products and equipment.
In the U.S., the Company, along with the representatives of the Company’s KFC, Taco Bell and Pizza Hut franchisee groups, are members of Restaurant Supply Chain Solutions, LLC (“RSCS”), a third party which is responsible for purchasing certain restaurant products and equipment. Additionally, Habit Burger & Grill entered into a purchasing agreement with RSCS effective July 31, 2020.
Master franchisees are typically responsible for overseeing development within their territories and performing certain other administrative duties with regard to the oversight of sub-franchisees.
Master franchisees are typically responsible for overseeing development within their territories and performing certain other administrative duties with regard to the oversight of sub-franchisees. In exchange, 4 master franchisees retain a certain percentage of fees payable by the sub-franchisees under their franchise agreements and often pay lower fees for the restaurants they operate.
Equity, Inclusion & Belonging In connection with our focus on equity, inclusion and belonging, our areas of focus include the following: • Continually building upon ongoing inclusion efforts to help ensure our workplaces are environments where all people can be successful. • Consistent with our Code of Conduct, making employment-related decisions based on an individual's abilities and merit, not personal characteristics that are unrelated to the job. • Significantly increasing the number of women in our senior leadership globally, with a goal of achieving gender parity by 2030.
Our commitments and progress towards our vision of culture, opportunity and belonging are reflected below. • Continually building upon ongoing inclusion efforts to help ensure our workplaces are environments where all people can be successful. • Consistent with our Code of Conduct, making employment-related decisions based on an individual's abilities and merit, not personal characteristics that are unrelated to the job. • Measuring YUM employee engagement regularly.
The Habit Burger Grill restaurant concept is built around a distinctive and diverse menu that includes chargrilled burgers and sandwiches made-to-order over an open flame and topped with fresh ingredients.
The Habit Burger & Grill restaurant concept is built around a distinctive and diverse menu that includes chargrilled burgers and sandwiches made-to-order over an open flame and topped with fresh ingredients. Business Strategy Through our Recipe for Good Growth we intend to deliver iconic restaurant brands and consistently drive better customer experiences, improved unit economics and higher rates of growth.
The most recent survey conducted was in 2023 and reflected an engagement level among our employees significantly exceeding the average engagement levels of benchmarked companies. • Providing YUM employees with training and development that builds world-class leaders and drives business results.
The most recent survey conducted was in 2023 and reflected an engagement level among our employees significantly exceeding the average engagement levels of benchmarked companies. • Providing YUM employees with training and development that builds world-class leaders and drives business results. • Enabling a culture that fuels results and cross-brand collaboration on operational execution, people capability and customer experience initiatives throughout our system. • Assessing progress towards lowering turnover and increasing retention rates, particularly at the restaurant-employee level.
However, the Company cannot predict the effect on our operations due to possible future environmental legislation or regulations. During 2023, there were no material capital expenditures for environmental control facilities and no such material expenditures are anticipated. Government Regulation U.S. Operations.
During 2024, there were no material capital expenditures for environmental control facilities and no such material expenditures are anticipated. Government Regulation U.S. Operations.
The following is a brief description of each Concept and a summary of our Concepts’ operations as of and for the year ended December 31, 2023: Number of Units % of Units International Number of Countries and Territories % Franchised System Sales (a) (in Millions) KFC Division 29,900 87 % 149 99 % $ 33,863 Taco Bell Division 8,564 14 % 32 94 % 15,915 Pizza Hut Division 19,866 67 % 109 99 % 13,315 Habit Burger Grill Division 378 3 % 3 19 % 696 YUM 58,708 69 % 157 98 % $ 63,789 (a) Constitutes sales of all restaurants, both Company-owned and franchised.
The following is a brief description of each Concept and a summary of our Concepts’ operations as of and for the year ended December 31, 2024: Number of Units % of Units International Number of Countries and Territories % Franchised System Sales (a) (in Millions) KFC Division 31,981 89 % 150 99 % $ 34,452 Taco Bell Division 8,757 13 % 33 94 % 17,193 Pizza Hut Division 20,225 68 % 111 99 % 13,108 Habit Burger & Grill Division 383 2 % 3 17 % 713 YUM 61,346 70 % 156 98 % $ 65,466 (a) Constitutes sales of all restaurants, both Company-owned and franchised.
As our largest master franchisee, Yum China, pays the Company a continuing fee of 3% on system sales of our Concepts in mainland China.
On October 31, 2016, we completed the spin-off of our China business into an independent, publicly-traded company under the name of Yum China Holdings, Inc. (“Yum China”). As our largest master franchisee, Yum China, pays the Company a continuing fee of 3% on system sales of our Concepts in mainland China.
Our investment in people includes creating a culture of engagement that attracts, retains and grows the best people and creates high performance in our restaurants. We are also highly focused on building an inclusive culture among our employees, franchisees, suppliers and partners to reflect the diversity of our customers and communities.
Our investment in people includes creating a culture of engagement that attracts, retains and grows the best people and creates high performance in our restaurants.
See Item 1A “Risk Factors” of this Form 10-K for a discussion of risks relating to federal, state, local and international regulation of our business.
Like restaurants in the U.S., restaurants outside the U.S. are subject to certain regulations and tariffs on imported commodities and equipment, laws regulating foreign investment and anti-bribery and anti-corruption laws. See Item 1A “Risk Factors” of this Form 10-K for a discussion of risks relating to federal, state, local and international regulation of our business.
Most food products, paper and packaging supplies, and equipment used in restaurant operations are distributed to individual restaurant units by third-party distribution companies. In the U.S., McLane Foodservice, Inc. is the exclusive distributor for the majority of items used in Company-owned restaurants and for a substantial number of franchisee restaurants.
The Company also believes that RSCS fosters closer alignment of interests and a stronger relationship with our franchisee community. Most food products, paper and packaging supplies, and equipment used in restaurant operations are distributed to individual restaurant units by third-party distribution companies.
This arrangement combines the purchasing power of the Company-owned and franchisee restaurants, which the Company believes leverages the system’s scale to drive cost savings and effectiveness in the purchasing function. The Company also believes that RSCS fosters closer alignment of interests and a stronger relationship with our franchisee community.
The core mission of RSCS is to provide the lowest possible sustainable store-delivered prices for restaurant products and equipment. This arrangement combines the purchasing power of the Company-owned and franchisee restaurants, which the Company believes leverages the system’s scale to drive cost savings and effectiveness in the purchasing function.
Outside the U.S., we and our Concepts’ franchisees primarily use decentralized sourcing and distribution systems involving many different global, regional and local suppliers and distributors. Our international franchisees generally select and manage their own third-party suppliers and distributors, subject to our internal standards.
In the U.S., McLane Foodservice, Inc. is the distributor for the majority of items used in Company-owned restaurants and for a substantial number of franchisee restaurants. Outside the U.S., we and our Concepts’ franchisees primarily use decentralized sourcing and distribution systems involving many different global, regional and local suppliers and distributors.
Supply and Distribution The Company and franchisees of the Concepts are substantial purchasers of a number of food and paper products, equipment and other restaurant supplies. The principal items purchased include chicken, cheese, beef and pork products, paper and packaging materials. Prices paid for these supplies fluctuate.
The Company also has certain patents on restaurant equipment and technology which, while valuable, are not currently considered material to our business. 5 Supply and Distribution The Company and franchisees of the Concepts are substantial purchasers of a number of food and paper products, equipment and other restaurant supplies.
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Business Strategy Through our Recipe for Good Growth we intend to unlock the growth potential of our Concepts and YUM, drive increased collaboration across our Concepts and geographies and consistently deliver better customer experiences, improved unit economics and higher rates of growth. Key enablers include accelerated use of digital and technology and better leverage of our systemwide scale.
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Key enablers include accelerated use of digital and technology, increased collaboration and better leverage of our systemwide scale. This is done through a framework of three pillars: being Loved, Trusted and Connected. Loved: We grow by delighting customers with craveable food and a distinctive experience.
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Our global citizenship and sustainability strategy is reflected in our Good agenda, which includes our priorities for social responsibility, risk management and sustainable stewardship of our people, food and planet.
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We innovate and elevate our iconic restaurant brands that people trust and champion, resulting in relevant, easy and distinctive brands. Trusted: We operate responsibly with consistency and efficiency in our restaurants, across our system and in our communities. This includes a commitment to our priorities for social responsibility, risk management and sustainable stewardship of our people, food and planet.
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In exchange, master franchisees retain a certain percentage of fees payable by the sub-franchisees under their franchise agreements and often pay lower fees for the restaurants they operate. 4 On October 31, 2016, we completed the spin-off of our China business into an independent, publicly-traded company under the name of Yum China Holdings, Inc. (“Yum China”).
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Connected: We use our teamwork, technology and global scale to serve every customer, everywhere, anytime. Our unmatched operating capability allows us to recruit and equip the best restaurant operators in the world to deliver great customer experiences. And our commitment to bold restaurant development drives market and franchise unit expansion with strong economics.
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The Company's technology initiatives are aligned with the “Easy” element of its Relevant, Easy and Distinctive Brands growth driver: easy experiences for our customers, easy operations for our team members and franchisees and easy insights from our data. Together, our technological initiatives are designed to simultaneously enhance the experience for our customers and restaurant-level employees while driving profitable sales growth.
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Our unrivaled culture and talent and leading with smart, heart and courage are key to our success, fueling brand performance and franchise success.
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Additionally, The Habit Burger Grill entered into a purchasing agreement with RSCS effective July 31, 2020. The core mission of RSCS is to provide the lowest possible sustainable store-delivered prices for restaurant products and equipment.
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Additionally, we have introduced our Byte by Yum! platform, a comprehensive collection of proprietary software as a service and artificial intelligence ("AI") driven products that enables easy operations for team members and improved experiences for customers, while consolidating essential systems into a cohesive, easy-to-manage platform.
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Our commitments and progress towards executing this strategy are reflected below. Culture & Talent We believe that our culture and talent provide us with a competitive advantage with respect to the performance of our business. Our areas of focus in this regard include the following: 7 • Measuring YUM employee engagement regularly.
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The Byte by Yum! platform includes online and mobile app ordering, point of sale, kitchen and delivery optimization, menu management, inventory and labor management and team member tools.
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We promote these efforts through initiatives such as our leadership development program (Heartstyles), our unconscious bias program (Inclusive Leadership) and training programs with respect to our compliance polices, including our Code of Conduct.
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The implementation of Byte by Yum! is also designed to enable a faster and more impactful adoption of AI by YUM and its brands, and offers franchisees leading technology capabilities with advantaged economics made possible by the scale of YUM all with a goal of unlocking new insights and driving profitable sales growth.
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Our Heartstyles program is also available to our franchisees so that their employees may benefit as well. • Enabling a culture that fuels results and cross-brand collaboration on operational execution, people capability and customer experience initiatives throughout our system. • Assessing progress towards lowering turnover and increasing retention rates, particularly at the restaurant-employee level.
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The Company does not typically experience significant continuous shortages of supplies, and alternative sources for most of these supplies are generally available.
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In 2022, approximately 43% of our global corporate leadership roles were held by women and approximately 52% of our global workforce were women. • Continuing to make Inclusive Leadership training and anti-racism training available across our system.
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Environmental Matters The Company is not aware of any federal, state or local environmental laws or regulations that will materially affect our earnings or competitive position, or result in material capital expenditures. However, the Company cannot predict the effect on our operations due to possible future environmental legislation or regulations.
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We intend to expand our Inclusive Leadership training to employees and franchisees around the world and have started development of an online module of this training program to help provide even greater access.
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We are also highly focused on building an inclusive culture among our employees, franchisees, suppliers and partners that reflects all of our customers and communities, which we believe provides us with a competitive advantage with respect to the performance of our business.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor example, the reputation of our Concepts’ brands could be damaged by claims or perceptions about the quality, safety or reputation of our products, suppliers, distributors or franchisees or by claims or perceptions that we, founders of our Concepts, our Concepts’ franchisees or other business partners have acted or are acting in an unethical, illegal, racially-biased or socially irresponsible manner or are not fostering an inclusive and diverse environment, including with respect to the service and treatment of customers at our Concepts’ restaurants, and our or our Concepts’ franchisees’ treatment of employees, regardless of whether real or perceived.
Biggest changeFor example, the reputation of our Concepts’ brands could be damaged by negative publicity, or claims or perceptions (whether real or perceived) regarding the quality, safety or reputation of our products, suppliers, distributors or franchisees; that we, founders of our Concepts, our Concepts’ franchisees or other business partners have acted or are acting in an unethical, illegal, racially-biased or socially irresponsible manner, are not fostering an equitable, inclusive and diverse environment or have an actual or perceived allegiance towards one community over another, including with respect to the service and treatment of customers at our Concepts’ restaurants, and our or our Concepts’ franchisees’ treatment of employees; Company action or brand imagery; misconduct by any of our or our Concepts’ franchisees’ employees; utilization of emerging technologies such as AI; or a real or perceived failure of corporate governance.
These risks, which can vary substantially by country, include political, financial or social instability or conditions, corruption, increasing anti-American sentiment and perception of our Concepts as American brands, social and ethnic unrest, natural disasters, military conflicts and terrorism, as well as exposure to the macroeconomic environment in such markets, the regulatory environment (including the risks of operating in markets in which there are uncertainties regarding the interpretation and enforceability of legal requirements and the enforceability of contract rights and intellectual property rights), and income and non-income based tax rates and laws.
These risks, which can vary substantially by country, include political, financial or social instability or conditions, corruption, increasing anti-American sentiment and perception of our Concepts as American brands, social and ethnic unrest, natural disasters, military conflicts and terrorism, as well as exposure to the macroeconomic environment in such markets, the regulatory environment (including the risks of operating in markets in which there are uncertainties regarding the interpretation and enforceability of legal requirements and contract and intellectual property rights), and income and non-income based tax rates and laws.
There is no assurance that any remedial actions will meaningfully limit the success of future attempts to breach our IT Systems, particularly because malicious actors are increasingly sophisticated and 13 utilize tools and techniques specifically designed to circumvent security measures, avoid detection and obfuscate forensic evidence, which means we may be unable to identify, investigate or remediate effectively or in a timely manner.
There is no assurance that any remedial actions will meaningfully limit the success of future attempts to breach our IT Systems, particularly because malicious actors are increasingly 13 sophisticated and utilize tools and techniques specifically designed to circumvent security measures, avoid detection and obfuscate forensic evidence, which means we may be unable to identify, investigate or remediate effectively or in a timely manner.
If we or our Concepts’ franchisees fail to adequately control fraudulent credit card and debit card transactions or to comply with the global Payment Card Industry Data Security Standards, we or our Concepts’ franchisees may face civil liability, diminished public perception of our security measures, fines and assessments from the card brands, and significantly higher credit card and debit card related costs, any of which could adversely affect us.
If we or our Concepts’ franchisees fail to comply with the global Payment Card Industry Data Security Standards or fail to adequately control fraudulent credit card and debit card transactions, we or our Concepts’ franchisees may face civil liability, diminished public perception of our security measures, fines and assessments from the card brands, and significantly higher credit card and debit card related costs, any of which could adversely affect us.
Developing and implementing consumers’ evolving technology demands may place a significant financial burden on us and our Concepts’ franchisees, and our Concepts’ franchisees may have differing views on investment priorities. Our strategic digital and technology initiatives may not be timely implemented or may not achieve the desired results.
Developing and implementing consumers’ evolving technology demands may place a significant financial burden on us and our Concepts’ franchisees, and our Concepts’ franchisees may have differing views on investment priorities. Our strategic digital and technology initiatives may not be implemented timely or may not achieve the desired results.
In addition, third-party delivery services typically charge restaurants a per order fee, and as such utilizing third-party delivery services may not be as profitable as sales directly to our customers, and may also 15 introduce food quality and customer satisfaction risks outside of our control.
In addition, third-party delivery services typically charge restaurants a per order fee, and as such utilizing third-party delivery services may not be as profitable as sales directly to our customers, and may also introduce food quality and customer 15 satisfaction risks outside of our control.
In addition, in the U.S., the Company and the Company’s KFC, Taco Bell and Pizza Hut franchisee groups are members of Restaurant Supply Chain Solutions, LLC (“RSCS”), which is a third party responsible for purchasing certain restaurant products and equipment. The Habit Burger Grill entered into a purchasing agreement with RSCS in 2020.
In addition, in the U.S., the Company and the Company’s KFC, Taco Bell and Pizza Hut franchisee groups are members of Restaurant Supply Chain Solutions, LLC (“RSCS”), which is a third party responsible for purchasing certain restaurant products and equipment. Habit Burger & Grill entered into a purchasing agreement with RSCS in 2020.
These labor market conditions and the ongoing inflationary environment in markets where we operate have increased in recent years, and may continue to increase, the labor costs for our Concepts and their franchisees, including due to the payment of higher wages to attract or retain qualified employees (including franchisee management, restaurant managers and other crew members) and due to increased overtime 17 costs to meet demand.
These labor market conditions and the ongoing inflationary environment in markets where we operate have increased in recent years, and may continue to increase, the labor costs for our 17 Concepts and their franchisees, including due to the payment of higher wages to attract or retain qualified employees (including franchisee management, restaurant managers and other crew members) and due to increased overtime costs to meet demand.
Our level of indebtedness could have important potential consequences, including, but not limited to: • increasing our vulnerability to, and reducing our flexibility to plan for and respond to, adverse economic and industry conditions and changes in our business and the competitive environment; • requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and interest on, indebtedness, thereby reducing or eliminating the availability of such cash flow to fund working capital, capital expenditures, acquisitions, dividends, share repurchases or other corporate purposes; • increasing our vulnerability to a downgrade of our credit rating, which could adversely affect our cost of funds, liquidity and access to capital markets; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; • placing us at a disadvantage compared to other less leveraged competitors or competitors with comparable debt at more favorable interest rates; • increasing our exposure to the risk of increased interest rates insofar as current and future borrowings are subject to variable rates of interest or we are forced to refinance indebtedness at higher interest rates, which risks are heightened by the current elevated interest rate environment; • increasing our exposure to the risk of discontinuance, replacement or modification of certain reference rates; • making it more difficult for us to repay, refinance or satisfy our obligations with respect to our debt; • limiting our ability to borrow additional funds in the future and increasing the cost of any such borrowing; • imposing restrictive covenants on our operations due to the terms of our indebtedness, which, if not complied with, could result in an event of default, which if not cured or waived, could result in the acceleration of the applicable debt, and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies; and • increasing our exposure to risks related to fluctuations in foreign currency as we earn profits in a variety of currencies around the world and our debt is primarily denominated in U.S. dollars.
Our level of indebtedness could have important potential consequences, including, but not limited to: • increasing our vulnerability to, and reducing our flexibility to plan for and respond to, adverse economic and industry conditions and changes in our business and the competitive environment; • requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and interest on, indebtedness, thereby reducing or eliminating the availability of such cash flow to fund working capital, capital expenditures, acquisitions, dividends, share repurchases or other corporate purposes; • increasing our vulnerability to a downgrade of our credit rating, which could adversely affect our cost of funds, liquidity and access to capital markets; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; • placing us at a disadvantage compared to other less leveraged competitors or competitors with comparable debt at more favorable interest rates; • increasing our exposure to the risk of increased interest rates insofar as current and future borrowings are subject to variable rates of interest or we are forced to refinance indebtedness at higher interest rates, which risks are heightened by the current elevated interest rate environment; • increasing our exposure to the risk of discontinuance, replacement or modification of certain reference rates; • making it more difficult for us to repay, refinance or satisfy our debt obligations; • limiting our ability to borrow additional funds in the future and increasing the cost of any such borrowing; • imposing restrictive covenants on our operations due to the terms of our indebtedness, which, if not complied with, could result in an event of default, which if not cured or waived, could result in the acceleration of the applicable debt, and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies; and • increasing our exposure to risks related to fluctuations in foreign currency as we earn profits in a variety of currencies around the world and our debt is primarily denominated in U.S. dollars.
We and/or our Concepts’ franchisees have taken, and may continue to take, certain actions as a result of recent inflationary increases in food and other operating costs noted above, including by increasing food prices beyond typical pricing patterns at certain of our Concepts’ restaurants, attempting to negotiate favorable pricing terms with our suppliers and/or shifting to suppliers with more favorable pricing where feasible, and utilizing forward contracts and commodity futures and options contracts where possible to hedge commodity prices.
We and/or our Concepts’ franchisees have taken, and may continue to take, certain actions as a result of inflationary increases in food and other operating costs noted above, including by increasing food prices beyond typical pricing patterns at certain of our Concepts’ restaurants, attempting to negotiate favorable pricing terms with our suppliers and/or shifting to suppliers with more favorable pricing where feasible, and utilizing forward contracts and commodity futures and options contracts where possible to hedge commodity prices.
In addition, our operations could be disrupted if any employees at our, our Concepts’ franchisees’ restaurants or our business partner employees had or were suspected of having the avian flu or swine flu, or other highly communicable illnesses such as hepatitis A or norovirus, since this could require us, our Concepts’ franchisees, or our business partners to quarantine some or all of such employees and close facilities, including restaurants.
In addition, our operations could be disrupted if any employees at our, our Concepts’ franchisees’ restaurants or our business partner employees had or were suspected of having avian flu or swine flu, or other highly communicable illnesses such as hepatitis A or norovirus, since this could require us, our Concepts’ franchisees, or our business partners to quarantine some or all of such employees and close facilities, including restaurants.
If our Concepts’ franchisees fail to adequately capitalize their businesses or incur too much debt, if their operating expenses or commodity prices increase or if economic or sales trends deteriorate such that they are unable to operate profitably or repay existing debt, it could result in their financial distress, including insolvency or bankruptcy, or the inability to meet development targets or obligations.
If our Concepts’ franchisees fail to adequately capitalize their businesses or incur too much debt, if their operating expenses or commodity prices increase or if economic or sales trends deteriorate such that franchisees are unable to operate profitably or repay existing debt, it could result in their financial distress, including insolvency or bankruptcy, or the inability to meet development targets or obligations.
Other risks that could impact our ability to open new restaurants include: (i) economic conditions and trade or economic policies or sanctions, (ii) our ability to attract new franchisees, (iii) new restaurant construction and development costs, (iv) our Concepts’ franchisees’ ability to meet new restaurant permitting, 10 construction, development and team member training timelines, and (v) supply chain challenges, including our ability to secure sufficient supply to support new restaurants.
Other risks that could impact our ability to open new restaurants include: (i) economic conditions and trade or economic policies or sanctions, (ii) our ability to attract new franchisees, (iii) new restaurant construction and development costs, (iv) our Concepts’ franchisees’ ability to meet new restaurant permitting, construction, development and team member training timelines, and (v) supply chain challenges, including our ability to secure sufficient supply to support new restaurants.
If our IT Systems or the information systems of any of our franchisees are disrupted or compromised, or the information systems of businesses with which we interact, such as suppliers or distributors or third-party delivery providers, are disrupted or compromised, in a manner which impacts us or our IT Systems, as a result of a cyber-attack, data or security breach, or other security incident, or if our employees, franchisees or vendors fail to comply with applicable laws and regulations or fail to meet contractual and industry standards in connection therewith, any such developments could result in liabilities and penalties, have an adverse impact on our financial results and growth prospects, damage our brands and reputation, cause interruption of normal business operations, cause us to incur substantial costs, result in a loss of consumer confidence and sales and disrupt our supply chain, business and plans.
If our IT Systems or the information systems of any of our franchisees, or other third parties which we interact, such as suppliers, distributors or third-party delivery providers, are disrupted or compromised, in a manner which impacts us or our IT Systems, as a result of a cyber-attack, data or security breach, or other security incident, or if our employees, franchisees, suppliers or vendors fail to comply with applicable laws and regulations or fail to meet contractual and industry standards in connection therewith, any such developments could result in liabilities and penalties, have an adverse impact on our financial results and growth prospects, damage our brands and reputation, cause interruption of normal business operations, cause us to incur substantial costs, result in a loss of consumer confidence and sales and disrupt our supply chain, business and plans.
There is no assurance that the security measures we take to reduce the risk of such incidents and protect our systems will be sufficient. There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information.
There is no assurance that the security measures we take to reduce the risk of such incidents and protect our systems will be sufficient or that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information.
For example, nutritional, health and other scientific studies and conclusions, which constantly evolve and may have contradictory implications, drive popular opinion, litigation and regulation (including initiatives intended to drive consumer behavior) in ways that may affect perceptions of our Concepts’ brands generally or relative to alternatives.
For example, nutritional, health and other scientific studies and conclusions, which constantly evolve and may have contradictory implications, drive popular opinion, litigation and regulation (including initiatives intended to drive consumer behavior) in ways that may affect perceptions of our 18 Concepts’ brands generally or relative to alternatives.
We are regularly involved in legal proceedings, which include regulatory claims or disputes by claimants such as franchisees, suppliers, employees, customers, governments and others related to operational, foreign exchange, tax, franchise, contractual or employment issues.
We are regularly involved in legal proceedings, which include regulatory claims or disputes by claimants such as franchisees, suppliers, employees, customers, governments and others related to operational, commercial, foreign exchange, tax, franchise, contractual or employment issues.
If any of these facts, assumptions, 21 representations or undertakings are incorrect or not satisfied, we may not be able to rely on these opinions of outside counsel. Accordingly, notwithstanding receipt of the opinions of outside counsel, the conclusions reached in the tax opinions may be challenged by the IRS.
If any of these facts, assumptions, representations or undertakings are incorrect or not satisfied, we may not be able to rely on these opinions of outside counsel. Accordingly, notwithstanding receipt of the opinions of outside counsel, the conclusions reached in the tax opinions may be challenged by the IRS.
Additionally, Chinese law regulates Yum China’s business conducted in mainland China, and as such our license fee from the Yum China business is subject to numerous uncertainties based on Chinese laws, regulations and policies, which may change from time to time.
Additionally, Chinese law regulates Yum China’s business conducted in mainland China, and as such our license fee from the Yum China business is subject to numerous uncertainties based on Chinese laws, regulations and policies, which may change 11 from time to time.
Additionally, such events could result in the loss, misappropriation, corruption or unauthorized access, acquisition, use or disclosure of data or inability to access data, the release of Confidential Information about our operations and subject us to litigation and government enforcement actions.
Additionally, such events could result in the loss, misappropriation, corruption or unauthorized access, acquisition, use or disclosure of data or inability to access data, the release of Confidential Information about our operations and subject us to claims, litigation and government enforcement actions.
As a result of these increased expectations and evolving requirements, as well as our commitment to social and environmental sustainability matters, we may continue to establish or expand goals, commitments or targets, and take actions to meet such goals, commitments and targets.
As a result of these expectations and evolving requirements, as well as our commitment to social and environmental sustainability matters, we may continue to establish or expand goals, commitments or targets, and take actions to meet such goals, commitments and targets.
In addition, the health and environmental risks of certain ubiquitous substances (including per-and polyfluoroalkyl substances (PFAS)) commonly found in packaging have been the subject of increased regulatory scrutiny and lawsuits against other restaurant companies.
In addition, the health and environmental risks of certain ubiquitous substances (including per-and polyfluoroalkyl substances (PFAS)) commonly found in packaging have been the subject of increased regulatory scrutiny and lawsuits against us and other restaurant companies.
Internal Revenue Code. The opinions relied on various facts and assumptions, as well as certain representations as to factual matters and undertakings (including with respect to future conduct) made by Yum China and us.
Internal Revenue 21 Code. The opinions relied on various facts and assumptions, as well as certain representations as to factual matters and undertakings (including with respect to future conduct) made by Yum China and us.
Future shortages or disruptions could also be caused by factors such as natural disasters, health epidemics and pandemics, social unrest, the impacts of climate change, inaccurate forecasting of customer demand, problems in production or distribution, restrictions on imports or exports including due to trade disputes or restrictions, the inability of vendors to obtain credit, political instability in the countries in which the suppliers and distributors are located, the financial instability of suppliers and distributors, suppliers’ or distributors’ failure to meet our standards or requirements, transitioning to new suppliers or distributors, product quality issues or recalls, inflation, food safety warnings or advisories, the cancellation of supply or distribution agreements or an inability to renew such arrangements or to find replacements on commercially reasonable terms.
Future shortages or disruptions could also be caused by factors such as natural disasters, health epidemics and pandemics, social unrest, the impacts of climate change, inaccurate forecasting of customer demand, problems in production or distribution, restrictions on imports or exports including due to trade disputes or restrictions, the inability of vendors to obtain credit, political instability in the countries in which the suppliers and distributors are located, the financial instability of suppliers and distributors, suppliers’ or distributors’ failure to meet our standards or requirements, transitioning to new suppliers or distributors, product quality issues or recalls, inflation, labor unrest or work stoppages, food safety warnings or advisories, the cancellation of supply or distribution agreements or an inability to renew such arrangements or to find replacements on commercially reasonable terms.
However, from time to time, we become aware of other persons or companies using names and marks that are identical or confusingly similar to our brands’ names and marks, or using other proprietary intellectual property we own.
However, from time to time, we become aware of other persons or companies using names and marks that are 16 identical or confusingly similar to our brands’ names and marks, or using other proprietary intellectual property we own.
If our or our Concepts’ franchisees’ IT Systems are damaged or fail to function properly, we may incur substantial costs to repair or replace them, and may experience loss of critical data and interruptions or delays in our ability to manage inventories or process transactions, which could result in lost sales, customer or employee dissatisfaction, or negative publicity that could adversely impact our reputation, growth prospects, results of operations and financial condition.
If our or our Concepts’ franchisees’ IT Systems are damaged or fail to function properly, we may incur substantial costs to repair or replace them, and may experience loss of critical data and interruptions or delays in our ability to manage inventories or process transactions, which could result in lost sales, customer or employee dissatisfaction, or negative publicity that could adversely impact our reputation, growth prospects, and financial results.
In this regard, we and our Concepts’ franchisees have been adversely impacted by, and may continue to be adversely impacted by, negative macroeconomic conditions in certain markets where we and our Concepts’ franchisees operate, including impacts from increased commodity prices and other inflationary pressures, elevated interest rates, challenging labor market conditions, ongoing geopolitical instability, supply chain disruption, and increases in real estate costs in certain domestic and international markets.
In this regard, we and our Concepts’ franchisees have been adversely impacted by, and may continue to be adversely impacted by, negative macroeconomic conditions in certain markets where we and our Concepts’ franchisees operate, including impacts from increased commodity prices and other inflationary pressures, elevated interest rates, challenging labor market conditions, ongoing geopolitical instability, changes in political conditions, supply chain disruption, and increases in real estate costs in certain domestic and international markets.
A failure of us, our employees, our Concepts’ franchisees or third parties acting at our direction or on our behalf, or others perceived to be associated with us or our Concepts’ franchisees, to abide by applicable laws and regulations regarding the use of social media, or to appropriately use social media, could adversely impact our Concepts’ brands, our reputation, our business and our growth prospects, result in negative publicity, or subject us or our Concepts’ franchisees to fines, other penalties or litigation.
A failure of us, our employees, our Concepts’ franchisees or third parties acting at our direction or on our behalf, or others perceived to be associated with us or our Concepts’ franchisees, to abide by applicable laws and regulations regarding the use of social media, or to appropriately use social media, could adversely impact our Concepts’ brands, our reputation and our business, result in negative publicity, or subject us or our Concepts’ franchisees to fines, other penalties or litigation.
These claims or disputes may relate to personal injury, employment, real estate, environmental, tort, intellectual property, breach of contract, technology services, data privacy, securities, consumer protection, derivative and other litigation matters. See the discussion of legal proceedings in Note 20 to the Consolidated Financial Statements included in Item 8 of this Form 10-K.
These claims or disputes may relate to personal injury, employment, real estate, environmental, tort, intellectual property, false advertising, breach of contract, technology services, data privacy, securities, consumer protection, derivative and other litigation matters. See the discussion of legal proceedings in Note 20 to the Consolidated Financial Statements included in Item 8 of this Form 10-K.
Additionally, if the demand for offerings at our Concepts’ restaurants and other fast-casual or quick service segments of the retail food industry decreases or shifts as a result of wellness trends or changing dietary preferences, including as a result of developments in or increased adoption of weight loss medications, our business, financial results and/or growth prospects may be adversely impacted.
Additionally, if the demand for offerings at our Concepts’ restaurants and other fast-casual or quick service segments of the retail food industry decreases or shifts as a result of wellness trends or changing dietary preferences, including as a result of developments in or increased adoption of weight loss medications, our business and/or financial results may be adversely impacted.
For example, the Organization for Economic Cooperation and Development (the “OECD”), the E.U. and other countries (including countries in which we operate) have committed to enacting substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed in an effort to limit perceived base erosion and profit shifting incentives.
For example, the Organization for Economic Cooperation and Development (the “OECD”), the E.U. and other countries (including countries in which we operate) have enacted or committed to enacting substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed in an effort to limit perceived base erosion and profit shifting incentives.
Some of the factors that may impact discretionary consumer spending and macroeconomic conditions include unemployment and underemployment rates, fluctuations in disposable income, the price of gasoline, other inflationary pressures, higher taxes, reduced access to credit, elevated interest rate levels, stock market performance and changes in consumer confidence.
Some of the factors that may impact discretionary consumer spending and macroeconomic conditions include unemployment and underemployment rates, fluctuations in disposable income, the price of gasoline, other inflationary pressures, higher taxes, reduced access to credit, elevated interest rate levels, stock market performance and changes in consumer confidence and cost consciousness.
Moreover, technology and consumer offerings continue to develop and evolve and we cannot predict consumer or team member acceptance of these existing and new technologies (e.g. automation, artificial intelligence, new delivery channels) or their impact on our business, and/or our growth prospects, nor can we be certain of our ability to implement or execute such technologies, which could result in loss of sales; dissatisfaction from our customers, employees, or employees of our Concepts’ franchisees; or negative publicity that could adversely impact our reputation or financial results.
Moreover, technology and consumer offerings continue to develop and evolve and we cannot predict consumer or team member acceptance of these existing and new technologies (e.g. automation, AI, new delivery channels) or their impact on our business, and/or our growth prospects, nor can we be certain of our ability to implement or execute such technologies, which could result in loss of sales; dissatisfaction from our customers, employees, or employees of our Concepts’ franchisees; or negative publicity that could adversely impact our reputation or financial results.
In the event of a strike, work slowdown or other labor unrest, the ability to adequately staff at the store level could be impaired, which could adversely impact our operations, growth prospects and distract management from focusing on our business and strategic priorities.
In the event of a strike, work slowdown or other labor unrest, the ability to adequately staff at the store level could be impaired, which could adversely impact our operations and distract management from focusing on our business and strategic priorities.
With respect to insured claims, a judgment for damages in excess of any insurance coverage could adversely affect our financial condition or results of operations and/or growth prospects. Any adverse publicity resulting from these allegations may also adversely affect our Concepts’ reputations, which could adversely affect our financial results.
With respect to insured claims, a judgment for damages in excess of any insurance coverage could adversely affect our financial condition and/or results of operations. Any adverse publicity resulting from these allegations may also adversely affect our Concepts’ reputations, which could adversely affect our financial results.
If the third-party aggregators that we utilize for delivery, including marketplace and delivery as a service, cease or curtail their operations, fail to maintain sufficient labor force to satisfy demand, provide poor customer service, materially change fees, access or visibility to our products, or give greater priority or promotions to our competitors, our reputation, business and/or growth prospects may be negatively impacted.
If the third-party aggregators that we utilize for delivery, including marketplace and delivery as a service, cease or curtail their operations, fail to maintain sufficient labor force to satisfy demand, provide poor customer service, materially change fees, access or visibility to our products, or give greater priority or promotions to our competitors, our business may be negatively impacted.
Any failure or alleged failure to comply with applicable laws or regulations or related standards or guidelines could adversely affect our reputation, global expansion efforts, growth prospects and financial results or result in, among other things, litigation, revocation of required licenses, internal investigations, governmental investigations or proceedings, administrative enforcement actions, fines and civil and criminal liability.
Any failure or alleged failure to comply with applicable laws or regulations or related standards or guidelines, or publicity associated therewith, could adversely affect our reputation, global expansion efforts, growth prospects and financial results or result in, among other things, litigation, revocation of required licenses, internal investigations, governmental investigations or proceedings, administrative enforcement actions, fines and civil and criminal liability.
Franchisee use of our Concepts’ trademarks are governed through franchise agreements and we monitor use of our trademarks by both franchisees and third parties, but franchisees or other third parties use or may refer to or make statements about our Concepts’ brands that do not make proper use of our trademarks or required designations, that improperly alter trademarks or branding, or that are critical of our Concepts’ brands or place our Concepts’ brands in a context that may tarnish their reputation.
Whilst franchisee use of our Concepts’ trademarks are governed through franchise agreements and we monitor use of our trademarks by both franchisees and third parties, franchisees or other third parties may use our trademarks in ways, or may refer to or make statements about our Concepts’ brands that do not make proper use of our trademarks or required designations, that improperly alter trademarks or branding, or that are critical of our Concepts’ brands or place our Concepts’ brands in a context that may tarnish their reputation.
There has been an increased focus, including from investors, the public and governmental and nongovernmental authorities, on social and environmental sustainability matters, such as climate change, greenhouse gases, packaging and waste, human rights, diversity, sustainable supply chain practices, animal health and welfare, deforestation, land, energy and water use and other corporate responsibility matters.
There has been an increased focus, including from investors, the public and governmental and nongovernmental authorities, on environmental, social and governance (“ESG”) matters, such as climate change, greenhouse gases, packaging and waste, human rights, diversity, sustainable supply chain practices, animal health and welfare, deforestation, land, energy and water use and other corporate responsibility matters.
Foreign Corrupt Practices Act, the UK Bribery Act and other similar applicable laws prohibiting bribery of government officials and other corrupt practices, and the laws and policies that govern foreign investment in countries where our Concepts’ restaurants are operated.
Bribery Act and other similar laws prohibiting bribery of government officials and other corrupt practices, and the laws and policies that govern foreign investment in countries where our Concepts’ restaurants are operated.
In addition, some third parties (including ESG groups) may object 19 to the scope or nature of our social and environmental program initiatives or goals, or any revisions to these initiatives or goals, which could give rise to negative responses by governmental actors (such as retaliatory legislative actions) or consumers (such as boycotts, lawsuits or negative publicity campaigns) that could adversely affect us or our brand value.
In addition, some third parties (including ESG groups) may object to the scope or nature of our social and environmental program initiatives or goals, or any revisions to these initiatives or goals (or those of our Concepts’ franchisees), which could give rise to negative responses by governmental actors (such as retaliatory legislative actions) or consumers (such as boycotts, lawsuits or negative publicity campaigns) that could adversely affect us or our brand value.
In addition, the governments in certain countries where our Concepts operate, including China and certain others, restrict the conversion of local currency into foreign currencies and, in certain cases, the remittance of currency out of the country.
In addition, the governments in certain countries where our Concepts operate, including China, restrict the conversion of local currency into foreign currencies and, in certain cases, the remittance of currency out of 12 the country.
If it becomes more difficult or more expensive for our Concepts’ franchisees to obtain financing to develop new restaurants, or if the perceived return on invested capital is not sufficiently attractive, the expected growth of our system could slow and our future financial results could be adversely impacted.
If it becomes more difficult or more expensive for our Concepts’ franchisees to obtain financing to develop new restaurants, or if the perceived return on invested capital is not sufficiently attractive, our expected growth and future financial results could be adversely impacted.
Changes in, or noncompliance with, legal requirements may adversely affect our business operations, growth prospects or financial condition. The Company, and our Concepts and their franchisees, are subject to numerous laws and regulations around the world. These laws and regulations change regularly and are increasingly complex.
Changes in, or non-compliance with, legal requirements may adversely affect our business operations, growth prospects or financial condition. The Company, and our Concepts and their franchisees, are subject to numerous laws and regulations around the world. These laws and regulations change regularly and are increasingly complex.
Additionally, we are subject to increasing legal requirements with respect to the use of artificial intelligence and machine learning applications and tools (including in relation to hiring and employment practices and in digitally marketing our Concepts), data collected from minors, and biometric information.
Additionally, we are subject to increasing legal requirements with respect to the use of AI and machine learning applications and tools (including in relation to hiring and employment practices and in digitally marketing our Concepts), data collected from minors, and biometric information.
For example, we are subject to numerous global laws, including but not limited to, the European Union’s (“E.U.”) General Data Protection Regulation (“GDPR”) and the UK General Data Protection Regulations, which impose strict data protection requirements and provide for significant penalties for noncompliance.
We are subject to numerous global laws, including but not limited to, the European Union’s (“E.U.”) General Data Protection Regulation (“GDPR”) and the U.K. General Data Protection Regulations, which impose strict data protection requirements and provide for significant penalties for noncompliance.
Moreover, regardless of whether any such lawsuits have merit, or whether we are ultimately held liable or settle, such litigation may be expensive to defend, may divert resources and management attention away from our operations, and may negatively impact our financial results.
Moreover, regardless of whether any such lawsuits have merit, or whether we are ultimately held liable or settle, such litigation may be expensive to defend, may divert resources and management attention, and may negatively impact our financial results.
In addition, if jurisdictions in which we or our Concepts operate enact tax legislation, modify tax treaties and/or increase audit scrutiny, it could increase our taxes and have an adverse impact on our results of operations, growth prospects and financial position.
In addition, if jurisdictions in which we or our Concepts operate enact tax legislation, modify tax treaties and/or increase audit scrutiny, it could increase our taxes and have an adverse impact on our financial results and growth prospects.
The inability to recruit and retain a sufficient number of qualified individuals at the store level may result in reduced operating hours, have a negative impact on service or customer experience, delay our planned use, development or deployment of technology, impact planned openings of new restaurants, or result in closures of existing restaurants by us and our Concepts’ franchisees, any of which could adversely affect our business.
The inability to recruit and retain a sufficient number of qualified individuals at the store level, coupled with increased labor rates, may result in reduced operating hours, have a negative impact on service or customer experience, delay our planned use, development or deployment of technology, impact planned openings of new restaurants, or result in closures of existing restaurants by us and our Concepts’ franchisees, any of which could adversely affect our business.
Our success depends in large part upon our ability and our Concepts’ franchisees’ ability to maintain and enhance our corporate reputation and the value and perception of our brands, and a key aspect of our growth strategy is based on innovating and elevating the perception of our restaurant brands.
Our success depends in large part upon our ability and our Concepts’ franchisees’ ability to maintain and enhance our corporate reputation and the value and perception of our brands, and a key aspect of our growth strategy is based on enhancing the perception of our restaurant brands.
Moreover, any significant cybersecurity event could require us to devote significant management time and resources to address such events, interfere with the pursuit of other important business strategies and initiatives, and cause us to incur additional expenditures, which could be material, including to investigate such events, remedy cybersecurity problems, recover lost data, prevent future compromises and adapt systems and practices in response to such events.
Moreover, any significant cybersecurity event which impacts us or our IT Systems could require us to devote significant management time and resources to address such events, interfere with our pursuit of other important business strategies and initiatives, and cause us to incur additional expenditures, which could be material, including to investigate such events, remedy cybersecurity problems, recover lost data, prevent future compromises and adapt systems and practices in response to such events.
As of December 31, 2023, our total outstanding short-term borrowings and long-term debt was approximately $11.2 billion. Subject to the limits contained in the agreements governing our outstanding indebtedness, we may incur additional debt from time to time, which would increase the risks related to our level of indebtedness.
As of December 31, 2024, our total outstanding short-term borrowings and long-term debt was approximately $11.4 billion. Subject to the limits contained in the agreements governing our outstanding indebtedness, we may incur additional debt from time to time, which would increase the risks related to our level of indebtedness.
For example, we are subject to: • The Americans with Disabilities Act in the U.S. and similar laws that provide protection to individuals with disabilities in the context of employment, public accommodations and other areas. • The U.S.
For example, we are subject to: • The Americans with Disabilities Act in the U.S. and similar laws that provide protection to individuals with disabilities in the context of employment, public accommodations and other areas. • Various laws related to employment, including the U.S.
Risks Related to Consumer Discretionary Spending and Macroeconomic Conditions Our business and/or our growth prospects may be adversely impacted by changes in consumer discretionary spending and macroeconomic conditions, including inflationary pressures and elevated interest rates, in markets in which we operate.
Risks Related to Consumer Discretionary Spending and Macroeconomic Conditions Our business may be adversely impacted by changes in consumer discretionary spending and macroeconomic conditions, including inflationary pressures and elevated interest rates, in markets in which we operate.
Family and Medical Leave Act as well as a variety of similar laws which provide protected leave rights to employees. • Employment laws related to workplace health and safety, non-discrimination, non-harassment, whistleblower protections, and other terms and conditions of employment. • Laws and regulations in government-mandated health care benefits such as the Patient Protection and Affordable Care Act in the U.S. • Laws and regulations relating to nutritional content, nutritional labeling, product safety, product marketing and menu labeling. • Laws relating to state and local licensing. • Laws relating to the relationship between franchisors and franchisees. • Laws and regulations relating to health, sanitation, food, workplace safety, child labor, including laws regulating the use of certain “hazardous equipment”, building and zoning, and fire safety and prevention. • Laws and regulations relating to union organizing rights and activities. • Laws relating to information security, privacy, cashless payments, and consumer protection. • Laws relating to our use of third party aggregators. • Laws relating to currency conversion or exchange. 20 • Laws relating to international trade and sanctions. • Anti-bribery and anti-corruption laws, including the U.S.
Family and Medical Leave Act and similar laws which provide protected leave rights to employees and laws related to workplace health and safety, meal and rest breaks, non-discrimination, non-harassment, whistleblower protections, and other terms and conditions of employment. • Laws and regulations in government-mandated health care benefits such as the Patient Protection and Affordable Care Act in the U.S. • Laws and regulations relating to nutritional content, nutritional labeling, product safety, product marketing and menu labeling. • Laws relating to state and local licensing. • Laws relating to the relationship between franchisors and franchisees. • Laws and regulations relating to health, sanitation, food, workplace safety, child labor, including laws regulating the use of certain “hazardous equipment”, building and zoning, and fire safety and prevention. • Laws and regulations relating to union organizing rights and activities. 20 • Laws relating to information and data security, privacy, cashless payments, consumer protection, and the use of AI and other emerging technologies. • Laws relating to our use of third party aggregators. • Laws relating to currency conversion or exchange. • Laws relating to international trade and sanctions. • Anti-bribery and anti-corruption laws, including the U.S.
The loss of key personnel, labor shortages and increased labor costs could adversely affect our business and/or growth prospects. Much of our future success depends on the continued availability and service of senior management personnel.
The loss of key personnel, labor shortages and increased labor costs could adversely affect our business. Much of our future success depends on the continued availability and service of senior management personnel.
If our data, processes and reporting with respect to social and environmental matters are incomplete or inaccurate, or if we fail to achieve progress with respect to these goals on a timely basis, consumer and investor trust in our brands may suffer.
If our or our Concepts’ franchisees’ data, processes and 19 reporting with respect to social and environmental matters are incomplete or inaccurate, or if we or our Concepts’ franchisees fail to achieve progress with respect to these goals on a timely basis, consumer and investor trust in our brands may suffer.
These goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we may be criticized for the accuracy, adequacy or completeness of disclosures.
These goals could be difficult and expensive to implement for us and our Concepts’ franchisees, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we or our Concepts’ franchisees may be criticized for the accuracy, adequacy or completeness of disclosures.
Past and potential future strategic transactions may not ultimately create value for us and may harm our reputation and adversely affect our business, growth prospects, financial condition and results of operations.
Past and potential future strategic transactions may not ultimately create value for us and may harm our reputation and adversely affect our business, growth prospects and financial results.
The failure to maintain satisfactory compliance with data privacy and data protection legal requirements may adversely affect our business and/or growth prospects and subject us to penalties. Data privacy is subject to frequently changing legal requirements, which sometimes conflict among the various jurisdictions where we and our Concepts’ franchisees do business.
The failure to maintain satisfactory compliance with l egal requirements regarding data privacy, data protection and emerging technologies may adversely affect our business and/or growth prospects and subject us to penalties. Data privacy is subject to frequently changing legal requirements, which sometimes conflict among the various jurisdictions where we and our Concepts’ franchisees do business.
Publicity about these matters (particularly directed at the quick service and fast-casual segments of the retail food industry) may 18 harm our Concepts’ reputations and adversely affect our business and/or our growth prospects.
Publicity about these matters (particularly directed at the quick service and fast-casual segments of the retail food industry) may harm our Concepts’ reputations and adversely affect our business.
Plaintiffs often seek recovery of large or indeterminate amounts, and lawsuits are subject to inherent uncertainties (some of which are beyond the Company’s control). Unfavorable rulings or developments may also occur in cases we are not involved in.
Plaintiffs often seek recovery of large or indeterminate amounts, and lawsuits are subject to inherent uncertainties (some of which are beyond the Company’s control). We may also be adversely affected by unfavorable rulings or developments in cases we are not involved in.
Such conflicts may affect our business and operations as result of, among other things, the economic consequences and disruptions from such conflicts, increased energy and supply prices, consumer boycotts of Western brands, consumer reaction to perceived acts or failures to act by us or our Concepts including maintaining operations in countries or regions that are linked to such conflicts, and economic sanctions restricting cross-border commerce.
Such conflicts have adversely affected, and may continue to adversely affect our business and operations as result of, among other things, the economic consequences and disruptions from such conflicts, increased energy and supply prices, weaker consumer sentiment for Western brands, consumer reaction to perceived acts or failures to act by us or our Concepts including maintaining operations in countries or regions that are linked to such conflicts, and economic sanctions restricting cross-border commerce.
In addition, failure to comply with applicable requirements may subject us and our Concepts’ franchisees to fines, sanctions, governmental investigation, lawsuits and other potential liability, as well as reputational harm. 14 Unreliable or inefficient restaurant technology or the failure to successfully implement technology initiatives in the future could adversely impact operating results, growth prospects and the overall consumer experience.
In addition, failure to comply with applicable requirements may subject us and our Concepts’ franchisees to fines, sanctions, governmental investigation, lawsuits and other potential liability, as well as reputational harm. Unreliable or inefficient restaurant technology or the failure to successfully implement technology initiatives could adversely impact our business and the overall consumer experience.
Raw materials purchased for use in our Concepts’ restaurants are subject to price volatility caused by any fluctuation in aggregate supply and demand, or other external conditions, such as weather and climate conditions, (which may be exacerbated by climate change), energy costs or natural events or disasters that affect expected harvests of such raw materials, taxes and tariffs (including as a result of trade disputes), industry demand, inflationary conditions, labor shortages, transportation issues, fuel costs, food safety concerns, product recalls, governmental regulation and other factors, all of which are beyond our control and in many instances are unpredictable.
Raw materials purchased for use in our Concepts’ restaurants are subject to price volatility caused by fluctuations in aggregate supply and demand, or other external conditions, such as weather and climate conditions, (which may be exacerbated by climate change), energy costs or natural events or disasters that affect expected harvests of such raw materials, taxes and tariffs (including potential tariffs or other adverse impacts resulting from restrictive trade policies or trade disputes), industry demand, inflationary conditions, labor shortages, transportation issues, fuel costs, food safety concerns, product recalls, governmental regulation and other factors, all of which are beyond our control and in many instances are unpredictable.
Our Concepts and their franchisees have experienced and may continue to experience increased labor shortages and employee turnover at many of our restaurants and increased competition for qualified employees, taking into account ongoing challenging labor market conditions.
Our Concepts and their franchisees have experienced and may continue to experience increased labor shortages and employee turnover at many restaurants and increased competition for qualified employees, given ongoing challenging labor market conditions.
Moreover, franchisee noncompliance with our franchise agreements may reduce the overall customer perception and goodwill of our Concepts’ brands, including by failing to meet health and safety standards, to engage in quality control or maintain product consistency or to comply with cybersecurity requirements, as well as through the participation in improper business practices.
Franchisee noncompliance with our franchise agreements and/or or brand standards may also adversely impact customer perception of our Concepts’ brands, including by failing to meet health and safety standards, to engage in quality control or maintain product consistency or to comply with cybersecurity requirements, as well as through the participation in improper business practices.
At the same time, other stakeholders and regulators have increasingly expressed or pursued opposing views, legislation and investment expectation with respect to sustainability initiatives, including so-called anti-environmental, social and governance (“ESG”) legislation or policies. We are and may become subject to changing rules and regulations promulgated by governmental and self-regulatory organizations with respect to social and environmental sustainability matters.
At the same time, other stakeholders and regulators have increasingly expressed or pursued opposing views, legislation and investment expectation with respect to sustainability initiatives, including so-called anti-ESG legislation or policies. Further, we and our Concepts’ franchisees are and may become subject to changing rules and regulations promulgated by governmental and self-regulatory organizations with respect to ESG matters.
Fair Labor Standards Act as well as a variety of similar laws, which govern matters such as minimum wages, and overtime, and the U.S.
Fair Labor Standards Act and similar laws, which govern matters such as minimum wages, and overtime; the U.S.
If public health conditions related to COVID-19 significantly worsen in markets where we conduct significant operations, our business and financial results could be adversely impacted, and we may be unable to effectively respond to any such developments.
If public health conditions related to the coronavirus (“COVID-19”) were to significantly worsen in markets where we conduct significant operations, our business and financial results could be adversely impacted, and we may be unable to effectively respond to any such developments.
For example, California's Assembly Bill No. 1228 (“AB 1228”) raises the minimum wage to $20 an hour beginning April 2024 (with annual increases through 2030) for workers at quick service restaurants in the state that are part of brands that have more than 60 establishments nationwide.
For example, effective April 1, 2024, California's Assembly Bill No. 1228 (“AB 1228”) raised the minimum wage to $20 an hour beginning April 2024 for workers at quick service restaurants in the state that are part of brands that have more than 60 establishments nationwide.
Foreign Corrupt Practices Act. • Environmental laws and regulations, including with respect to climate change and greenhouse gas emissions. • Federal and state immigration laws and regulations in the U.S.
Foreign Corrupt Practices Act. • Environmental laws and regulations, including with respect to climate change and greenhouse gas emissions. • Federal and state immigration laws and regulations in the U.S. • Public company compliance, disclosure and governance matters.
Taking into account ongoing inflationary conditions, we have recently experienced and expect to continue to experience, an increase in the price of various raw materials and other operating costs (such as rent and energy costs) as well as increased volatility in such prices and costs, which has adversely affected, and may continue to adversely affect our results of operations and/or our growth prospects.
While inflationary conditions have somewhat abated in recent periods, we have recently experienced and expect to continue to experience, an increase in the price of various raw materials and other operating costs (such as rent and energy costs) as well as increased volatility in such prices and costs, which has adversely affected, and may continue to adversely affect our results of operations.
We are subject to increasing and evolving expectations and requirements with respect to social and environmental sustainability matters, which could expose us to numerous risks.
We and our Concepts’ franchisees are subject to heightened and evolving expectations and requirements with respect to social and environmental sustainability matters, which expose us and our Concepts’ franchisees to numerous risks.
In addition, our business and/or growth prospects could be adversely impacted by various other future occurrences (which may be beyond our control), including health epidemics or pandemics, natural disasters, geopolitical events, acts of war, terrorism, political, financial or social instability, boycotts, social or civil unrest, workplace violence, or other events that lead to avoidance of public places or restrictions on public gatherings such as in our and our Concepts’ franchisees’ restaurants.
In addition, our business and/or growth prospects could be adversely impacted by various catastrophic or other unforeseen events (which may be beyond our control), including health epidemics or pandemics, natural disasters, geopolitical events, military conflict, terrorism, political, financial or social instability, boycotts, social or civil unrest, workplace violence, or other events that lead to avoidance of public places or restrictions on public gatherings such as in our and our Concepts’ franchisees’ restaurants, particularly if located in regions where we have significant operations.
If a significant franchisee of our Concepts becomes, or a significant number of our Concepts’ franchisees in the aggregate become, financially distressed our operating results could be impacted through reduced or delayed fee payments that cause us to record bad debt expense and reduced advertising fund contributions, and experience reduced new unit development.
If any significant franchisee of our Concepts individually or in the aggregate becomes, financially distressed, as has occurred from time to time, our operating results could be impacted through reduced or delayed fee payments that cause us to record bad debt expense and reduced advertising fund contributions, and we could experience reduced new unit development.
As a result of our global operations, we also have increased exposure to geopolitical events and instability. We have been adversely affected, and may continue to be adversely affected, by ongoing geopolitical instability arising from current events such as the military conflict between Russian and Ukraine, and the conflict in the Middle East.
As a result of our global operations, we also have significant exposure to geopolitical events and instability. We have been adversely affected, and may continue to be adversely affected, by events such as the conflict in the Middle East as well as the conflict between Russia and Ukraine, and ongoing geopolitical instability associated therewith.
The successful development of new units depends in large part on the ability of our Concepts’ franchisees to open new restaurants and to operate these restaurants profitably.
Our growth strategy depends on our and our Concepts’ franchisees’ ability to increase the number of restaurants around the world. The successful development of new units depends in large part on the ability of our Concepts’ franchisees to open new 10 restaurants and to operate these restaurants profitably.
Our growth may be impacted by our initiatives to implement proprietary technology, as well as third-party technology solutions (including point-of-sale processing in our restaurants, management of our supply chain, and various other processes and procedures) and gather and leverage data to enhance restaurant operations and improve the customer experience.
We and our Concepts’ franchisees rely heavily on IT Systems to efficiently operate our restaurants and drive the customer experience, sales growth and margin improvement, which may be impacted by our initiatives to implement proprietary technology, as well as third-party technology solutions (including, proprietary and third-party, point-of-sale processing 14 solutions in our restaurants, management of our supply chain, and various other processes and procedures), and gather and leverage data to enhance restaurant operations and improve the customer experience.
These digital ordering and payment platforms also could be damaged or interrupted by power loss, technological failures, user errors, cyber-attacks, other forms of sabotage, inclement weather or natural disasters and have experienced interruptions and could experience further interruptions, which could limit or delay customers’ ability to order through such platforms or make customers less inclined to return to such platforms.
These digital ordering and payment platforms used in connection with our restaurants also could be damaged or interrupted by power loss, technological failures, user errors, cyber-attacks, other forms of sabotage, inclement weather or natural disasters and have experienced, and may continue to experience, interruptions limiting or delaying customers’ ability to order through such platforms and potentially making customers less inclined to return to such platforms.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeTo supplement our own internal processes and controls, we regularly engage consultants and other third parties as part of our Program, including to periodically: • Test our information security defenses and to perform external penetration assessments; • Review and assess the Program and its maturity; and • Advise our Board of Directors and management regarding the structure and oversight of the program, incident response services and various cybersecurity related matters We also have processes to oversee and identify material cybersecurity risks associated with our use of third-party service providers and their information systems.
Biggest changeTo supplement our own internal processes and controls, we regularly engage consultants and other third parties as part of our Program, including to periodically: • Test our information security defenses and to perform external penetration assessments; and • Review and assess the Program and its maturity We also have processes to oversee and identify material cybersecurity risks associated with our use of third-party service providers and their information systems.
In addition, under the Plan, we have established a cross-functional management group comprised of our Chief Legal Officer, Chief Financial Officer, Vice President Internal Audit, Vice President Compliance, Senior Vice President Finance & Corporate Controller and CISO.
In addition, under the Plan, we have established a cross-functional management group comprised of our Chief Legal Officer, Chief Financial Officer, Chief Digital and Technology Officer, Vice President Internal Audit, Chief Compliance Officer, Senior Vice President Finance & Corporate Controller and CISO.
Our CISO and Chief Digital and Technology Officer advise the Audit Committee at least four times a year, and the Board of Directors regularly, on our management and oversight of information security risks, including data privacy and data protection risks.
Our CISO and Chief Digital and Technology Officer advise the Audit Committee at least four times a year, and the Board of Directors regularly, on our management and oversight of information security risks and data protection risks.
Additionally, we obtain System and Organization Controls (“SOC”) 1 or SOC 2 reports on an annual basis from vendors that host our significant financial applications to aid in our assessment of information security risk associated with our relationship with the host vendor.
Additionally, we obtain Type 1 and Type 2 System and Organization Controls (“SOC”) 2 reports on an annual basis from vendors that host our significant financial applications to aid in our assessment of information security risk associated with our relationship with the host vendor.
If a host vendor is not able to provide a SOC 1 or SOC 2 report, we take additional steps to assess information security risk associated with the relationship. Over 98% of our restaurants are owned and operated by franchisees who themselves are at risk of cyber-attacks or security incidents.
If a host vendor is not able to provide a SOC 2 report, we take additional steps to assess information security risk associated with the relationship. The vast majority (98%) of our restaurants are owned and operated by franchisees who themselves are at risk of cyber-attacks or security incidents.
Our CISO has expertise in cybersecurity risk management through, among other things, his past service in information security roles at the Company, prior IT and security leadership positions at other public companies, and certain technology and information security matters certifications.
Our CISO has expertise in cybersecurity risk management through, among other things, over 30 years of information security experience, prior CISO and security leadership positions at other public companies, and certain technology and information security matters certifications.
There is limited direct connectivity between the Company’s network and the networks on which our franchisees operate. We have established minimum information security standards for our franchisees, which are in process of being adopted.
We have established minimum information security standards for our franchisees through our Franchise Agreement Policy Manuals and Brand Standards and those minimum information security standards are in the process of being adopted.
Added
Whilst some of those franchisees do operate their restaurants utilizing the Company’s networks and systems, many use networks and systems which they manage themselves. In such instances, there is limited direct connectivity between the networks that the Company manages and the networks which our franchisees manage.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. As of year end 2023, the Company’s Concepts owned land, building or both for 326 restaurants worldwide in connection with the operation of our 1,017 Company-owned restaurants.
Biggest changeItem 2. Properties. As of year end 2024, the Company’s Concepts owned land, building or both for 362 restaurants worldwide in connection with the operation of our 1,311 Company-owned restaurants.
The Company currently also owns land, building or both related to approximately 450 franchise restaurants that it leases to franchisees and leases land, building or both related to approximately 250 franchise restaurants that it subleases to franchisees, principally in the U.S., United Kingdom, Australia and Germany.
The Company currently also owns land, building or both related to approximately 425 franchise restaurants that it leases to franchisees and leases land, building or both related to approximately 200 franchise restaurants that it subleases to franchisees, principally in the U.S., United Kingdom, Australia and Germany.
These restaurants are further detailed as follows: • The KFC Division owned land, building or both for 66 restaurants. • The Taco Bell Division owned land, building or both for 258 restaurants. • The Pizza Hut Division owned land, building or both for 2 restaurants.
These restaurants are further detailed as follows: • The KFC Division owned land, building or both for 100 restaurants. • The Taco Bell Division owned land, building or both for 260 restaurants. • The Pizza Hut Division owned land, building or both for 2 restaurants.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeFrom July 2009 to September 2011, she served as Director of Human Resources for Pizza Hut U.S and was on the Pizza Hut U.S. Finance team from September 2000 to June 2009. Christopher Turner , 49, is Chief Financial Officer of YUM, a position he has held since August 2019.
Biggest changeSkeans served as Chief People Officer of Pizza Hut Division from December 2013 to December 2014 and Chief People Officer of Pizza Hut U.S. from October 2011 to November 2013. From July 2009 to September 2011, she served as Director of Human Resources for Pizza Hut U.S and was on the Pizza Hut U.S.
Aaron Powell, 52, is Chief Executive Officer of Pizza Hut Division, a position he has held since September 2021. Before joining YUM, Mr. Powell served in various positions at Kimberly-Clark from September 2007 to August 2021. Prior to joining Kimberly-Clark, he served in various positions at Bain & Company and Proctor & Gamble.
Aaron Powell, 53, is Chief Executive Officer of Pizza Hut Division, a position he has held since September 2021. Before joining YUM, Mr. Powell served in various positions at Kimberly-Clark from September 2007 to August 2021. Prior to joining Kimberly-Clark, he served in various positions at Bain & Company and Proctor & Gamble.
Russell served in various positions at the Vice President level in the YUM Finance Department, including Controller-Designate from November 2010 to February 2011 and Vice President, Assistant Controller from January 2008 to December 2010. 26 Sabir Sami, 56, is Chief Executive Officer of KFC Division, a position he has held since January 2022.
Russell served in various positions at the Vice President level in the YUM Finance Department, including Controller-Designate from November 2010 to February 2011 and Vice President, Assistant Controller from January 2008 to December 2010. Sabir Sami, 57, is Chief Executive Officer of KFC Division, a position he has held since January 2022.
David Russell , 54, is Senior Vice President, Finance and Corporate Controller of YUM. He has served as YUM’s Corporate Controller since February 2011 and as Senior Vice President, Finance since February 2017. Prior to serving as Corporate Controller, Mr.
David Russell , 55, is Senior Vice President, Finance and Corporate Controller of YUM. He has served as YUM’s Corporate Controller since February 2011 and as Senior Vice President, Finance since February 2017. Prior to serving as Corporate Controller, Mr.
Item 4. Mine Safety Disclosures. Not applicable. Executive Officers of the Registrant. The executive officers of the Company as of February 20, 2024, and their ages and current positions as of that date are as follows: David Gibbs , 60, is Chief Executive Officer of YUM a position he has held since January 2020.
Item 4. Mine Safety Disclosures. Not applicable. Executive Officers of the Registrant. The executive officers of the Company as of February 19, 2025, and their ages and current positions as of that date are as follows: David Gibbs , 61, is Chief Executive Officer of YUM a position he has held since January 2020.
Sean Tresvant , 53, is Chief Executive Officer of Taco Bell Division. He joined Taco Bell in January 2022 as the Global Chief Brand Officer. In February 2023, he was elevated to Global Chief Brand & Strategy Officer, and in January 2024 he became Chief Executive Officer.
Finance team from September 2000 to June 2009. Sean Tresvant , 54, is Chief Executive Officer of Taco Bell Division. He joined Taco Bell in January 2022 as the Global Chief Brand Officer. In February 2023, he was elevated to Global Chief Brand & Strategy Officer, and in January 2024 he became Chief Executive Officer.
Mr. Gibbs served as Chief Financial Officer of YRI from January 2011 to April 2012. He was Chief Financial Officer of Pizza Hut U.S. from September 2005 to December 2010. Scott Catlett , 47, is Chief Legal and Franchise Officer and Corporate Secretary of YUM. He has served in this position since July 2020.
Mr. Gibbs served as Chief Financial Officer of YRI from January 2011 to April 2012. He was Chief Financial Officer of Pizza Hut U.S. from September 2005 to December 2010. Erika Burkhardt , 51, is Chief Legal Officer and Corporate Secretary of YUM. She has served in this position since November 2024.
Sami served in various leadership roles at Procter & Gamble, the Coca-Cola Company and Reckitt Benckiser. Tracy Skeans, 51, is Chief Operating Officer and Chief People Officer of YUM. She has served as Chief Operating Officer since January 2021 and Chief People Officer since January 2016. She also served as Chief Transformation Officer from November 2016 to December 2020.
Sami served in various leadership roles at Procter & Gamble, the Coca-Cola Company and Reckitt Benckiser. 26 Tracy Skeans, 52, is Chief Operating Officer and Chief People & Culture Officer of YUM. She has served as Chief Operating Officer since January 2021 and Chief People & Culture Officer since January 2016.
From January 2020 to December 2021 he served in a dual role as KFC Division Chief Operating Officer and Managing Director of KFC Asia. Prior to this, from April 2013 to December 2019, he was Managing Director for the KFC Middle East, North Africa, Pakistan and Turkey markets. Before joining YUM in 2009, Mr.
Prior to this, from April 2013 to December 2019, he was Managing Director for the KFC Middle East, North Africa, Pakistan and Turkey markets. Before joining YUM in 2009, Mr.
From January 2015 to December 2015, she was President of Pizza Hut International. Prior to this position, Ms. Skeans served as Chief People Officer of Pizza Hut Division from December 2013 to December 2014 and Chief People Officer of Pizza Hut U.S. from October 2011 to November 2013.
She also served as Chief Transformation Officer from November 2016 to December 2020. From January 2015 to December 2015, she was President of Pizza Hut International. Prior to this position, Ms.
He is responsible for driving Taco Bell’s global growth strategies, franchise operations and overall performance. He is also Vice Chairman of the Taco Bell Foundation. Previously he spent 15 years at Nike, most recently as Chief Marketing Officer of the Jordan Brand.
He is also Vice Chairman of the Taco Bell Foundation. Previously he spent 15 years at Nike, most recently as Chief Marketing Officer of the Jordan Brand. Christopher Turner , 50, is Chief Financial and Franchise Officer of YUM. He has served as Chief Financial Officer since August 2019 and Chief Franchise Officer since November 2024.
Prior to joining PepsiCo, he was a partner in the Dallas office of McKinsey & Company, a strategic management consulting firm. Executive officers are elected by and serve at the discretion of the Board of Directors. 27 PART II
Prior to joining PepsiCo, he was a partner in the Dallas office of McKinsey & Company, a strategic management consulting firm. Additionally, the following executive officer of the Company has been appointed: Scott Mezvinsky , 49, is President of Taco Bell North America and International, a position he has held since December 2023.
Removed
Prior to that, he served as General Counsel and Corporate Secretary of YUM from July 2018 to June 2020 and he served as Vice President and Deputy General Counsel of YUM from November 2015 to June 2018. From September 2007 to October 2015 Mr. Catlett held various YUM positions including Vice President & Associate General Counsel.
Added
Prior to that, she served as Associate General Counsel of YUM from July 2020 to November 2024 where she oversaw the Company’s trademark and employment law teams. She has been with the Company since 2004, including as Pizza Hut U.S. Human Resources & Litigation Counsel and Vice President, Brand Protection.
Added
He has informed the Company that he plans to resign as Chief Executive Officer of KFC Division on March 1, 2025. From January 2020 to December 2021 he served in a dual role as KFC Division Chief Operating Officer and Managing Director of KFC Asia.
Added
Effective March 1, 2025, he will become the Chief Executive Officer of KFC Division.
Added
Prior to his current role, he served as President of Taco Bell North America from September 2023 to December 2023, as Managing Director of Taco Bell North America from February 2023 to September 2023 and as Global Chief Strategy & Financial Officer for Taco Bell from February 2021 to February 2023. Since joining the Company in 2004, Mr.
Added
Mezvinsky has served in various positions at KFC and YUM, including General Manager of KFC Iberia, as well as roles in the KFC Latin America and Caribbean market, including Chief Development Officer and Vice President, Development and Operations. Executive officers are elected by and serve at the discretion of the Board of Directors. 27 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of December 31, 2023, we have remaining capacity to repurchase up to $1.7 billion of Common Stock under this authorization. 28 Stock Performance Graph This graph compares the cumulative total return of our Common Stock to the cumulative total return of the S&P 500 Index and the S&P 500 Consumer Discretionary Sector Index, a peer group that includes YUM, for the period from December 31, 2018 to December 29, 2023.
Biggest changeFiscal Periods Total number of shares purchased (thousands) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (thousands) Approximate dollar value of shares that may yet be purchased under the plans or programs (millions) 10/1/24 - 10/31/24 717 $ 135.00 717 $ 1,627 11/1/24 - 11/30/24 24 $ 133.10 24 $ 1,623 12/1/24 - 12/31/24 107 $ 131.77 107 $ 1,609 Total 848 $ 134.54 848 28 Stock Performance Graph This graph compares the cumulative total return of our Common Stock to the cumulative total return of the S&P 500 Index and the S&P 500 Consumer Discretionary Sector Index, a peer group that includes YUM, for the period from December 31, 2019 to December 31, 2024.
Future decisions to pay cash dividends continue to be at the discretion of the Company’s Board of Directors and will be dependent on our operating performance, financial condition, capital expenditure requirements and other factors that the Company’s Board of Directors considers relevant.
Future decisions to pay cash dividends continue to be at the discretion of the Company’s Board of Directors and will be dependent on our operating performance, financial condition, capital expenditure requirements and other factors that the Company’s Board of Directors consider relevant.
Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information and Dividend Policy The Company’s Common Stock trades under the symbol YUM and is listed on the New York Stock Exchange (“NYSE”). As of February 16, 2024, there were 34,276 registered holders of record of the Company’s Common Stock.
Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information and Dividend Policy The Company’s Common Stock trades under the symbol YUM and is listed on the New York Stock Exchange (“NYSE”). As of February 17, 2025, there were 32,381 registered holders of record of the Company’s Common Stock.
In 2023, the Company declared and paid four cash dividends of $0.605 per share. In January 2024, the Company’s Board of Directors declared a dividend of $0.67 per share to be distributed March 8, 2024, to shareholders of record at the close of business on February 21, 2024.
In 2024, the Company declared and paid four cash dividends of $0.67 per share. In February 2025, the Company’s Board of Directors declared a dividend of $0.71 per share to be distributed March 7, 2025, to shareholders of record at the close of business on February 21, 2025.
The graph assumes that the value of the investment in our Common Stock and each index was $100 at December 31, 2018, and that all cash dividends were reinvested. 12/31/2018 12/31/2019 12/30/2020 12/31/2021 12/30/2022 12/29/2023 YUM $ 100 $ 111 $ 122 $ 159 $ 150 $ 155 S&P 500 $ 100 $ 131 $ 156 $ 200 $ 164 $ 207 S&P Consumer Discretionary $ 100 $ 128 $ 171 $ 212 $ 134 $ 190 Source of total return data: Bloomberg
The graph assumes that the value of the investment in our Common Stock and each index was $100 at December 31, 2019, and that all cash dividends were reinvested. 12/31/2019 12/30/2020 12/31/2021 12/30/2022 12/29/2023 12/31/2024 YUM $ 100 $ 110 $ 143 $ 134 $ 140 $ 146 S&P 500 $ 100 $ 118 $ 152 $ 125 $ 157 $ 197 S&P Consumer Discretionary $ 100 $ 133 $ 166 $ 104 $ 149 $ 193 Source of total return data: Bloomberg
Issuer Purchases of Equity Securities During the quarter ended December 31, 2023, we did not repurchase shares of our Common Stock. In September 2022, our Board of Directors authorized share repurchases of up to $2.0 billion (excluding applicable transaction fees) of our outstanding Common Stock through June 30, 2024.
In May, 2024, our Board of Directors authorized share repurchases of up to $2.0 billion (excluding applicable transaction fees and excise taxes) of our outstanding Common Stock through December 31, 2026. As of December 31, 2024, we have remaining capacity to repurchase up to $1.6 billion of Common Stock under this authorization.
Added
Issuer Purchases of Equity Securities The following table provides information as of December 31, 2024, with respect to shares of Common Stock repurchased by the Company during the quarter then ended.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWhen determining applicable System sales growth percentages, the System sales excluding FX for the current year should be compared to the prior year System sales prior to adjustment for the prior year FX impact. 34 Non-GAAP Items Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, are presented below. 2023 2022 2021 Core Operating Profit Growth % 12 5 18 Diluted EPS Growth %, excluding Special Items 14 1 23 Effective Tax Rate excluding Special Items 20.6 % 20.9 % 21.4 % 2023 2022 2021 Company restaurant profit $ 368 $ 327 $ 381 Company restaurant margin % 17.2 % 15.8 % 18.1 % Year 2023 2022 2021 Reconciliation of GAAP Operating Profit to Core Operating Profit Consolidated GAAP Operating Profit $ 2,318 $ 2,187 $ 2,139 Detail of Special Items: (Gain) loss associated with market-wide refranchisings (a) 5 — 4 Operating (profit) loss impact from decision to exit Russia (b) 11 (44) — Charges associated with resource optimization (c) 21 11 9 Other Special Items (Income) Expense 2 — 3 Special Items (Income) Expense - Operating Profit 39 (33) 16 Negative (Positive) Foreign Currency Impact on Operating Profit 49 118 N/A Core Operating Profit $ 2,406 $ 2,272 $ 2,155 35 Special Items as shown above were recorded to the financial statement line items identified below: Year 2023 2022 2021 Consolidated Statement of Income Line Item General and administrative expenses $ 28 $ 19 $ 7 Franchise and property expenses 1 6 (1) Refranchising (gain) loss 5 — 4 Other (income) expense 5 (58) 6 Special Items (Income) Expense - Operating Profit $ 39 $ (33) $ 16 KFC Division GAAP Operating Profit $ 1,304 $ 1,198 $ 1,230 Negative (Positive) Foreign Currency Impact 41 98 N/A Core Operating Profit $ 1,345 $ 1,296 $ 1,230 Taco Bell Division GAAP Operating Profit $ 944 $ 850 $ 758 Negative (Positive) Foreign Currency Impact — 2 N/A Core Operating Profit $ 944 $ 852 $ 758 Pizza Hut Division GAAP Operating Profit $ 391 $ 387 $ 387 Negative (Positive) Foreign Currency Impact 8 18 N/A Core Operating Profit $ 399 $ 405 $ 387 Habit Burger Grill Division GAAP Operating Profit (Loss) $ (14) $ (24) $ 2 Negative (Positive) Foreign Currency Impact — — N/A Core Operating Profit (Loss) $ (14) $ (24) $ 2 Reconciliation of GAAP Net Income to Net Income excluding Special Items GAAP Net Income $ 1,597 $ 1,325 $ 1,575 Special Items (Income) Expense - Operating Profit 39 (33) 16 Special Items (Income) Expense - Interest Expense, net (d) — 28 34 Special Items (Income) Expense - Other Pension Income — — (1) Special Items Tax (Benefit) Expense (e) (161) (8) (270) Net Income excluding Special Items $ 1,475 $ 1,312 $ 1,354 Reconciliation of Diluted EPS to Diluted EPS excluding Special Items Diluted EPS $ 5.59 $ 4.57 $ 5.21 Less Special Items Diluted EPS 0.42 0.04 0.73 Diluted EPS excluding Special Items $ 5.17 $ 4.53 $ 4.48 Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate, excluding Special Items GAAP Effective Tax Rate 12.1 % 20.3 % 5.9 % Impact on Tax Rate as a result of Special Items (8.5) % (0.6) % (15.5) % Effective Tax Rate excluding Special Items 20.6 % 20.9 % 21.4 % 36 (a) Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with market-wide refranchisings.
Biggest changeNon-GAAP Items Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, are presented below. 2024 2023 2022 Core Operating Profit Growth % 9 12 5 Core Operating Profit Growth %, excluding the 53rd week 8 N/A N/A Diluted EPS Growth %, excluding Special Items 6 14 1 Diluted EPS Growth %, excluding Special Items and the 53rd week 4 N/A N/A Effective Tax Rate excluding Special Items 23.6 % 20.6 % 20.9 % Effective Tax Rate excluding Special Items and the 53rd week 23.5 % N/A N/A 2024 2023 2022 Company restaurant profit $ 432 $ 368 $ 327 Company restaurant margin % 16.9 % 17.2 % 15.8 % Year 2024 2023 2022 Reconciliation of GAAP Operating Profit to Core Operating Profit and Core Operating Profit, excluding the 53rd Week Consolidated GAAP Operating Profit $ 2,403 $ 2,318 $ 2,187 Detail of Special Items: (Gain) loss associated with market-wide refranchisings (a) 1 5 — Operating (profit) loss impact from decision to exit Russia (b) — 11 (44) Charges associated with resource optimization (c) 79 21 11 German acquisition and Turkey termination-related costs (d) 61 — — Other Special Items (Income) Expense — 2 — Special Items (Income) Expense - Operating Profit 141 39 (33) Negative (Positive) Foreign Currency Impact on Operating Profit 28 49 N/A Core Operating Profit 2,572 2,406 2,154 Impact of 53rd Week Operating Profit (36) N/A N/A Core Operating Profit, excluding the 53rd Week $ 2,536 $ 2,406 $ 2,154 Special Items as shown above were recorded to the financial statement line items identified below: Year 2024 2023 2022 Consolidated Statement of Income Line Item Franchise and property revenues $ 18 $ — $ — General and administrative expenses 84 28 19 Franchise and property expenses — 1 6 Refranchising (gain) loss 1 5 — Other (income) expense 38 5 (58) Special Items (Income) Expense - Operating Profit $ 141 $ 39 $ (33) 36 KFC Division GAAP Operating Profit $ 1,363 $ 1,304 $ 1,198 Negative (Positive) Foreign Currency Impact 22 41 N/A Core Operating Profit 1,385 1,345 1,198 Impact of 53rd Week (9) N/A N/A Core Operating Profit, excluding the 53rd Week $ 1,376 $ 1,345 $ 1,198 Taco Bell Division GAAP Operating Profit $ 1,049 $ 944 $ 850 Negative (Positive) Foreign Currency Impact — — N/A Core Operating Profit 1,049 944 850 Impact of 53rd Week (21) N/A N/A Core Operating Profit, excluding the 53rd Week $ 1,028 $ 944 $ 850 Pizza Hut Division GAAP Operating Profit $ 373 $ 391 $ 387 Negative (Positive) Foreign Currency Impact 6 8 N/A Core Operating Profit 379 399 387 Impact of 53rd Week (5) N/A N/A Core Operating Profit, excluding the 53rd Week $ 374 $ 399 $ 387 Habit Burger & Grill Division GAAP Operating Profit (Loss) $ — $ (14) $ (24) Negative (Positive) Foreign Currency Impact — — N/A Core Operating Profit (Loss) — (14) (24) Impact of 53rd Week (1) N/A N/A Core Operating Profit (Loss), excluding the 53rd Week $ (1) $ (14) $ (24) Reconciliation of GAAP Net Income to Net Income excluding Special Items and Net Income excluding Special Items and the 53rd week GAAP Net Income $ 1,486 $ 1,597 $ 1,325 Special Items (Income) Expense - Operating Profit 141 39 (33) Special Items (Income) Expense - Interest Expense, net (e) — — 28 Special Items Tax (Benefit) Expense (f) (66) (161) (8) Net Income excluding Special Items 1,561 1,475 1,312 Impact of 53rd Week (25) — — Net Income excluding Special Items and the 53rd Week $ 1,536 $ 1,475 $ 1,312 Reconciliation of Diluted EPS to Diluted EPS excluding Special Items and Diluted EPS excluding Special Items and the 53rd Week Diluted EPS $ 5.22 $ 5.59 $ 4.57 Less Special Items Diluted EPS (0.26) 0.42 0.04 Diluted EPS excluding Special Items 5.48 5.17 4.53 Less Impact of 53rd Week 0.09 — — Diluted EPS excluding Special Items and the 53rd Week $ 5.39 $ 5.17 $ 4.53 Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items and Effective Tax Rate excluding Special Items and the 53rd Week GAAP Effective Tax Rate 21.8 % 12.1 % 20.3 % Impact on Tax Rate as a result of Special Items (1.8) % (8.5) % (0.6) % Effective Tax Rate excluding Special Items 23.6 % 20.6 % 20.9 % Impact on Tax Rate as a result of the 53rd Week 0.1 % N/A N/A Effective Tax Rate excluding Special Items and the 53rd Week 23.5 % 20.6 % 20.9 % 37 (a) Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with market-wide refranchisings.
We use two consecutive years of operating losses as our primary indicator of potential impairment for our annual impairment testing of these restaurant 47 assets. We evaluate recoverability based on the restaurant’s forecasted undiscounted cash flows, which incorporate our best estimate of sales growth and margin improvement based upon our plans for the unit and actual results at comparable restaurants.
We use two consecutive years of operating losses as our primary indicator of potential impairment for our annual impairment testing of these restaurant assets. We evaluate recoverability based on the restaurant’s forecasted undiscounted cash flows, which incorporate our best estimate of sales growth and margin improvement based upon our plans for the unit and actual results at comparable restaurants.
The fair value of the reporting unit retained is based on the price a willing buyer would pay for the reporting unit retained and includes the value of franchise agreements. Appropriate adjustments are made to the fair value determinations if such franchise agreement is determined to not be at prevailing market rates.
The fair value of the reporting unit retained is based on the price a willing buyer would pay for the reporting unit retained and includes the value of franchise agreements. Appropriate adjustments are made to the fair value determinations if such franchise agreements are determined to not be at prevailing market rates.
Our chief operating decision maker does not consider the impact of Special Items when assessing segment performance. 31 Company restaurant profit is defined as Company sales less Company restaurant expenses, both of which appear on the face of our Consolidated Statements of Income.
Our chief operating decision maker does not consider the impact of Special Items when assessing segment performance. Company restaurant profit is defined as Company sales less Company restaurant expenses, both of which appear on the face of our Consolidated Statements of Income.
We believe System sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates our primary revenue drivers, Company and franchise same-store sales as well as net unit growth.
We believe System sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates our primary revenue drivers, Company and franchise same-store sales as well as net new unit growth.
We evaluate unrecognized tax benefits, including interest thereon, on a quarterly basis to ensure that they have been appropriately adjusted for events, including audit settlements, which may impact our ultimate payment for such exposures.
We 52 evaluate unrecognized tax benefits, including interest thereon, on a quarterly basis to ensure that they have been appropriately adjusted for events, including audit settlements, which may impact our ultimate payment for such exposures.
A 50 basis-point increase in this discount rate would have decreased these U.S. plans’ PBOs by approximately $40 million at our measurement date. Conversely, a 50 basis-point decrease in this discount rate would have increased our U.S. plans’ PBOs by approximately $45 million at our measurement date.
A 50 basis-point increase in this discount rate would have decreased these U.S. plans’ PBOs by approximately $40 million at our measurement date. Conversely, a 50 basis-point decrease in this discount rate would have increased these U.S. plans’ PBOs by approximately $40 million at our measurement date.
Our allocation strategy for investing activities includes: • Run-rate capital expenditures consisting of company restaurant repairs, maintenance and remodels, support of our digital and technology initiatives and project-specific capital expenditures, • Targeted new company unit development to spur additional growth that is largely funded through refranchising a comparable number of existing company units, and • Strategic investments that create incremental value for shareholders and franchisees.
Our allocation strategy for investing activities includes: • Run-rate capital expenditures consisting of company restaurant repairs, maintenance and remodels, support of our digital and technology initiatives and project-specific capital expenditures, • Targeted new company unit development to spur additional growth that is partially funded through refranchising a comparable number of existing company units, and • Strategic investments that create incremental value for shareholders and franchisees.
The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-style food and pizza categories, respectively. The Habit Burger Grill is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Of the over 58,000 restaurants, 98% are operated by franchisees.
The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-style food and pizza categories, respectively. The Habit Burger & Grill is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Of the over 61,000 restaurants, 98% are operated by franchisees.
Fair value is an estimate of the price a willing buyer would pay for the intangible asset and is generally estimated by discounting the expected future after-tax cash flows associated with the intangible asset. Our most significant indefinite-lived intangible asset is our Habit Burger Grill brand asset with a book value of $96 million at December 31, 2023.
Fair value is an estimate of the price a willing buyer would pay for the intangible asset and is generally estimated by discounting the expected future after-tax cash flows associated with the intangible asset. Our most significant indefinite-lived intangible asset is our Habit Burger & Grill brand asset with a book value of $96 million at December 31, 2024.
Brands, Inc. and its subsidiaries (collectively referred to herein as the “Company”, “YUM”, “we”, “us” or “our”) franchise or operate a system of over 58,000 restaurants in more than 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger Grill (collectively, the “Concepts”).
Brands, Inc. and its subsidiaries (collectively referred to herein as the “Company”, “YUM”, “we”, “us” or “our”) franchise or operate a system of over 61,000 restaurants in more than 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and Habit Burger & Grill (collectively, the “Concepts”).
We believe this rate is appropriate given the composition of our plan assets and historical market returns thereon. A 100 basis point change in our expected long-term rate of return on plan assets assumption would impact our 2024 U.S. net periodic benefit cost by approximately $8 million.
We believe this rate is appropriate given the composition of our plan assets and historical market returns thereon. A 100 basis point change in our expected long-term rate of return on plan assets assumption would impact our 2025 U.S. net periodic benefit cost by approximately $8 million.
As it relates to our Habit Burger Grill reporting unit, which includes a goodwill balance of $66 million as of the end of 2023, the assumptions that are most impactful to our fair value estimate include margin improvement, sales growth from net new units and same-store sales growth.
As it relates to our Habit Burger & Grill reporting unit, which includes a goodwill balance of $66 million as of the end of 2024, the assumptions that are most impactful to our fair value estimate include margin improvement, sales growth from net new units and same-store sales growth.
The net periodic benefit cost we will record in 2024 is also impacted by the discount rate, as well as the long-term rates of return on plan assets and mortality assumptions we selected at our measurement date.
The net periodic benefit cost we will record in 2025 is also impacted by the discount rate, as well as the long-term rates of return on plan assets and mortality assumptions we selected at our measurement date.
It is our intent to use these operating cash flows to continue to invest in growing our business and pay a competitive dividend, with any remaining excess then returned to shareholders through debt paydowns and share repurchases.
It is our intent to use these operating cash flows to continue to invest in growing our business and pay a competitive dividend, with any remaining excess then returned to shareholders through share repurchases.
The fair values of all our reporting units with goodwill balances were in excess of their respective carrying values as of our fourth quarter 2023 goodwill testing date, with all but the Habit Burger Grill reporting unit having fair values that were substantially in excess of their respective carrying values.
The fair values of all our reporting units with goodwill balances were in excess of their respective carrying values as of our fourth quarter 2024 goodwill testing date, with all but the Habit Burger & Grill reporting unit having fair values that were substantially in excess of their respective carrying values.
Significant changes in the 48 assumptions used in our analysis could result in a future goodwill impairment charge.
Significant changes in the assumptions used in our analysis could result in a future goodwill impairment charge.
Additionally, interest on the underpayment is estimated to be approximately $1.1 billion through December 31, 2023. The proposed underpayment relates primarily to a series of reorganizations we undertook during that year in connection with the business realignment of our corporate and management reporting structure along brand lines.
Additionally, interest on the underpayment is estimated to be approximately $1.4 billion through December 31, 2024. The proposed underpayment relates primarily to a series of reorganizations we undertook during that year in connection with the business realignment of our corporate and management reporting structure along brand lines.
Restaurants India Private Limited (“YRIPL”) of approximately Indian Rupee 11 billion, or approximately $135 million, primarily relating to alleged violations of operating conditions imposed in 1993 and 1994.
Restaurants India Private Limited (“YRIPL”) of approximately Indian Rupee 11 billion, or approximately $130 million, primarily relating to alleged violations of operating conditions imposed in 1993 and 1994.
From time-to-time restaurants may be temporarily closed due to remodeling or image enhancement, rebuilding, natural disasters, health epidemic or pandemic, landlord disputes or other issues. The system sales of restaurants we deem temporarily closed remain in our base for purposes of determining same-store sales growth and the restaurants remain in our unit count (see below).
From time-to-time restaurants may be temporarily closed due to remodeling or image enhancement, rebuilding, natural disasters, health epidemic or pandemic, landlord disputes, boycotts, social or civil unrest or other issues. The system sales of restaurants we deem temporarily closed remain in our base for purposes of determining same-store sales growth and the restaurants remain in our unit count (see below).
Additionally, during the years ended December 31, 2023, 2022 and 2021, we recorded net refranchising gains of $34 million, $27 million and $39 million, respectively, that have not been reflected as Special Items. These net refranchising gains relate to refranchising of restaurants unrelated to market-wide refranchisings that we believe are indicative of our expected ongoing refranchising activity.
Additionally, during the years ended December 31, 2024, 2023 and 2022, we recorded net refranchising gains of $35 million, $34 million and $27 million, respectively, that have not been reflected as Special Items. These net refranchising gains relate to refranchising of restaurants unrelated to market-wide refranchisings that we believe are indicative of our expected ongoing refranchising activity.
Our estimated long-term rate of return on U.S. plan assets is based upon the weighted-average of historical and expected future returns for each asset category. Our expected long-term rate of return on U.S. plan assets, for purposes of determining 2024 pension expense, at December 31, 2023, was 6.35%, net of administrative and investment fees paid from plan assets.
Our estimated long-term rate of return on U.S. plan assets is based upon the weighted-average of historical and expected future returns for each asset category. Our expected long-term rate of return on U.S. plan assets, for purposes of determining 2025 pension expense, at December 31, 2024, was 6.85%, net of administrative and investment fees paid from plan assets.
Throughout this MD&A, we commonly discuss the following performance metrics: 30 • Same-store sales growth is the estimated percentage change in system sales of all restaurants that have been open and in the YUM system for one year or more (except as noted below), including those temporarily closed.
Throughout this MD&A, we commonly discuss the following performance metrics: • Same-store sales growth is the estimated percentage change in system sales of all restaurants that have been open and in the YUM system for one year or more, including those temporarily closed.
In addition to the results provided in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”), the Company provides the following non-GAAP measurements. • Diluted Earnings Per Share excluding Special Items (as defined below); • Effective Tax Rate excluding Special Items; • Core Operating Profit.
In addition to the results provided in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”), the Company provides the following non-GAAP measurements. • Diluted Earnings Per Share ("EPS") excluding Special Items (as defined below) and, in 2024, Diluted EPS excluding Special Items and the 53rd week; • Effective Tax Rate excluding Special Items and, in 2024, Effective Tax Rate excluding Special Items and the 53rd week; • Core Operating Profit and, in 2024, Core Operating Profit excluding the 53rd week.
Additionally, every 100 basis point variation in actual return on plan assets versus our expected return of 6.35% will impact our unrecognized pre-tax actuarial net loss by approximately $8 million. We have an unrecognized pre-tax actuarial net loss of $84 million included in Accumulated other comprehensive income for these U.S. plans at December 31, 2023.
Additionally, every 100 basis point variation in actual return on plan assets versus our expected return of 6.85% will impact our unrecognized pre-tax actuarial net loss by approximately $8 million. We have an unrecognized pre-tax actuarial net loss of $125 million included in Accumulated other comprehensive income for these U.S. plans at December 31, 2024.
Our purchase obligations relate primarily to marketing, information technology and supply agreements. We have purchase obligations of approximately $425 million at December 31, 2023, with approximately $250 million due within the next 12 months. In addition to our contractual and other obligations, we seek to pay a competitive dividend and return excess cash to shareholders through share repurchases.
Our purchase obligations relate primarily to marketing, information technology and supply agreements. We have purchase obligations of approximately $525 million at December 31, 2024, with approximately $325 million due within the next 12 months. In addition to our contractual and other obligations, we seek to pay a competitive dividend and return excess cash to shareholders through share repurchases.
Over 99% of the Pizza Hut Division units were operated by franchisees as of the end of 2023.
Over 99% of the Pizza Hut Division units were operated by franchisees as of the end of 2024.
The net deferred tax assets primarily relate to temporary differences in profitable U.S. federal, state and foreign jurisdictions and net operating losses in certain foreign jurisdictions, the majority of which do not expire.
The net deferred tax assets primarily relate to temporary differences and tax credit carryforwards in profitable U.S. federal, state and foreign jurisdictions and net operating loss carryforwards in certain foreign jurisdictions, the majority of which do not expire.
(14.4) ppts. (a) See Note 4 for the number of shares used in this calculation.
(a) See Note 4 for the number of shares used in this calculation.
A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement. At December 31, 2023, we had $151 million of unrecognized tax benefits, $102 million of which would impact the effective income tax rate if recognized.
A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement. At December 31, 2024, we had $126 million of unrecognized tax benefits, $81 million of which would impact the effective income tax rate if recognized.
Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance internally; • Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below). These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP.
Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance internally; • Net Income excluding Special Items and, in 2024, Net Income excluding Special Items and the 53rd week; • Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below). 31 These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP.
During the years ended December 31, 2023 and 2021, we recorded net refranchising losses of $5 million and $4 million, respectively, that have been reflected as Special Items.
During the years ended December 31, 2024 and 2023, we recorded net refranchising losses of $1 million and $5 million, respectively, that have been reflected as Special Items.
For discussion of our results of operations for 2022 compared to 2021, refer to the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 27, 2023. 2023 financial highlights: % Change System Sales, ex FX Same-Store Sales Units GAAP Operating Profit Core Operating Profit KFC Division +12 +7 +8 +9 +12 Taco Bell Division +9 +5 +4 +11 +11 Pizza Hut Division +5 +2 +4 +1 +3 Worldwide +10 +6 +6 +6 +12 Additionally: • Foreign currency translation unfavorably impacted Divisional Operating Profit by $49 million for the year ended December 31, 2023.
For discussion of our results of operations for 2023 compared to 2022, refer to the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 20, 2024. 2024 financial highlights: % Change System Sales, ex FX Same-Store Sales Units GAAP Operating Profit Core Operating Profit KFC Division +3 (2) +7 +4 +6 Taco Bell Division +8 +4 +2 +11 +11 Pizza Hut Division (1) (4) +2 (5) (3) Worldwide +4 (1) +4 +4 +9 32 Results Excluding 53rd Week in 2024 (% Change) System Sales, ex FX Core Operating Profit KFC Division +3 +5 Taco Bell Division +6 +9 Pizza Hut Division (1) (4) Worldwide +3 +8 Additionally: • Foreign currency translation negatively impacted Divisional Operating Profit by $28 million for the year ended December 31, 2024.
The Pizza Hut Division uses multiple distribution channels including delivery, dine-in and express (e.g. airports) and includes units operating under both the Pizza Hut and Telepizza brands. % B/(W) % B/(W) 2023 2022 2023 2022 2021 Reported Ex FX Reported Ex FX System Sales $ 13,315 $ 12,853 $ 12,955 4 5 (1) 3 Same-Store Sales Growth (Decline) % 2 Even 7 % N/A N/A N/A N/A Company sales $ 14 $ 21 $ 46 (33) (33) (55) (55) Franchise and property revenues 622 607 597 3 4 2 5 Franchise contributions for advertising and other services 383 376 385 2 2 (2) (1) Total revenues $ 1,019 $ 1,004 $ 1,028 1 2 (2) — Company restaurant profit $ — $ — $ 3 NM NM NM NM Company restaurant margin % 0.1 % (2.2) % 6.8 % 2.3 ppts. 2.3 ppts.
The Pizza Hut Division uses multiple distribution channels including delivery, dine-in and express (e.g. airports) and includes units operating under both the Pizza Hut and Telepizza brands. % B/(W) % B/(W) 2024 2023 2024 2023 2022 Reported Ex FX Ex FX and 53rd Week in 2024 Reported Ex FX System Sales $ 13,108 $ 13,315 $ 12,853 (2) (1) (1) 4 5 Same-Store Sales Growth (Decline) % (4) % 2 % Even N/A N/A N/A N/A N/A Company sales $ 8 $ 14 $ 21 (45) (45) (47) (33) (33) Franchise and property revenues 622 622 607 Even 1 Even 3 4 Franchise contributions for advertising and other services 378 383 376 (1) (1) (3) 2 2 Total revenues $ 1,008 $ 1,019 $ 1,004 (1) (1) (2) 1 2 Company restaurant profit $ — $ — $ — NM NM NM NM NM Company restaurant margin % (0.6) % 0.1 % (2.2) % (0.7) ppts.
A 50 basis-point change in our discount rate assumption at our 2023 measurement date would impact our 2024 U.S. net periodic benefit cost by approximately $5 million. The impacts of changes in net periodic benefit costs are reflected primarily in Other pension (income) expense.
A 50 basis-point change in our discount rate assumption at our 2024 measurement date would impact this 2025 U.S. net periodic benefit income by approximately $1 million. The impacts of changes in net periodic benefit income are reflected primarily in Other pension (income) expense.
(e) The below table includes the detail of Special Items Tax (Benefit) Expense: Year 2023 2022 2021 Tax (Benefit) Expense on Special Items Operating Profit and Interest Expense $ (8) $ 2 $ (11) Tax (Benefit) Expense - Other Income tax impacts from decision to exit Russia (7) 72 — Tax (Benefit) - Intra-entity transfers and valuations of intellectual property (183) (82) (251) Tax Expense - Other Income tax impacts recorded as Special 37 — (8) Special Items Tax (Benefit) Expense $ (161) $ (8) $ (270) Tax (Benefit) Expense on Special Items Operating Profit and Interest Expense was determined by assessing the tax impact of each individual component within Special Items based upon the nature of the item and jurisdictional tax law.
(f) The below table includes the detail of Special Items Tax (Benefit) Expense: 38 Year 2024 2023 2022 Tax (Benefit) Expense on Special Items Operating Profit and Interest Expense $ (28) $ (8) $ 2 Tax (Benefit) Expense - Other Income tax impacts from decision to exit Russia — (7) 72 Tax (Benefit) - Intra-entity transfers and valuations of intellectual property (32) (183) (82) Tax (Benefit) Expense - Other Income tax impacts recorded as Special (6) 37 — Special Items Tax (Benefit) Expense $ (66) $ (161) $ (8) Tax (Benefit) Expense on Special Items Operating Profit and Interest Expense was determined by assessing the tax impact of each individual component within Special Items based upon the nature of the item and jurisdictional tax law.
In November 2022, YRIPL was notified that an administrative tribunal bench had been constituted to hear an appeal by DOE of certain findings of the January 2020 order, including claims that certain charges had been wrongly dropped and that an insufficient amount of penalty had been imposed.
In November 2022, YRIPL was notified that an administrative tribunal bench had been constituted to hear an appeal by DOE of certain findings of the January 2020 order, including claims that certain charges had been wrongly dropped and that an insufficient amount of penalty had been imposed. A hearing with the administrative tribunal has been rescheduled to March 18, 2025.
We have received the IRS Examination Division’s Rebuttal to our Protest and the case has been accepted by the IRS Office of Appeals. Also, as discussed in Note 20, on January 29, 2020, we received an order from the Special Director of the Directorate of Enforcement (“DOE”) in India imposing a penalty on Yum!
We have received the IRS Examination Division’s Rebuttal to our Protest and the matter is proceeding with the IRS Office of Appeals. Also, as discussed in Note 20, on January 29, 2020, we received an order from the Special Director of the Directorate of Enforcement (“DOE”) in India imposing a penalty on Yum!
Our annual operating cash flows have been in excess of $1.3 billion in each of the past five years and we expect that to continue to be the case in 2024.
Our annual operating cash flows have been in excess of $1.4 billion in each of the past four years and we expect that to continue to be the case in 2025.
As of December 31, 2023, YUM consists of four operating segments: • The KFC Division which includes our worldwide operations of the KFC concept • The Taco Bell Division which includes our worldwide operations of the Taco Bell concept • The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept • The Habit Burger Grill Division which includes our worldwide operations of the Habit Burger Grill concept Through our Recipe for Good Growth we intend to unlock the growth potential of our Concepts and YUM, drive increased collaboration across our Concepts and geographies and consistently deliver better customer experiences, improved unit economics and higher rates of growth.
As of December 31, 2024, YUM consists of four operating segments: • The KFC Division which includes our worldwide operations of the KFC concept • The Taco Bell Division which includes our worldwide operations of the Taco Bell concept • The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept • The Habit Burger & Grill Division which includes our worldwide operations of the Habit Burger & Grill concept Through our Recipe for Good Growth we intend to deliver iconic restaurant brands and consistently drive better customer experiences, improved unit economics and higher rates of growth.
We expect net periodic benefit income for our U.S. plans of $3 million in 2024 compared to $4 million of periodic benefit income in 2023, which represents a decrease in 49 benefit of $1 million year-over-year.
We expect net periodic benefit income for these U.S. plans of $2 million in 2025 compared to $3 million of periodic benefit income in 2024, which represents a decrease in benefit of $1 million year-over-year.
This authorization does not obligate the Company to acquire any specific number of shares. 46 Contingencies As discussed in Note 20, as a result of an audit by the Internal Revenue Service (“IRS”) for fiscal years 2013 through 2015, in August 2022, we received a Revenue Agent’s Report (“RAR”) from the IRS asserting an underpayment of tax of $2.1 billion plus $418 million in penalties for the 2014 fiscal year.
Contingencies As discussed in Note 20, as a result of an audit by the Internal Revenue Service (“IRS”) for fiscal years 2013 through 2015, in August 2022, we received a Revenue Agent’s Report (“RAR”) from the IRS asserting an underpayment of tax of $2.1 billion plus $418 million in penalties for the 2014 fiscal year.
The Company owned 84% of the Habit Burger Grill units in the U.S. as of December 31, 2023. % B/(W) % B/(W) 2023 2022 2023 2022 2021 Reported Ex FX Reported Ex FX System Sales $ 696 $ 661 $ 588 6 6 12 12 Same-Store Sales Growth (Decline) % (3) % (1) % 16 % N/A N/A N/A N/A Total revenues $ 586 $ 567 $ 525 3 3 8 8 Operating Profit (Loss) $ (14) $ (24) $ 2 42 42 NM NM % Increase (Decrease) Unit Count 2023 2022 2021 2023 2022 Franchise 71 63 42 13 50 Company-owned 307 286 276 7 4 Total 378 349 318 8 10 Corporate & Unallocated % B/(W) (Expense)/Income 2023 2022 2021 2023 2022 Corporate and unallocated G&A $ (326) $ (297) $ (260) (10) (14) Unallocated Franchise and property income (expense) (1) (6) 1 NM NM Unallocated Refranchising gain (loss) (See Note 5) 29 27 35 NM NM Unallocated Other income (expense) (9) 52 (14) NM NM Investment income (expense), net (See Note 5) 7 11 86 NM NM Other pension income (expense) (See Note 15) 6 (9) (7) NM NM Interest expense, net (513) (527) (544) 3 3 Income tax provision (See Note 18) (221) (337) (99) 35 (242) Effective tax rate (See Note 18) 12.1 % 20.3 % 5.9 % 8.2 ppts.
The Company owned 84% of the Habit Burger & Grill units in the U.S. as of the end of 2024. % B/(W) % B/(W) 2024 2023 2024 2023 2022 Reported Ex FX Ex FX and 53rd Week in 2024 Reported Ex FX System Sales $ 713 $ 696 $ 661 2 2 1 6 6 Same-Store Sales Growth (Decline) % (4) % (3) % (1) % N/A N/A N/A N/A N/A Total revenues $ 600 $ 586 $ 567 2 2 1 3 3 Operating Profit (Loss) $ — $ (14) $ (24) 99 99 90 42 42 % Increase (Decrease) Unit Count 2024 2023 2022 2024 2023 Franchise 67 71 63 (6) 13 Company-owned 316 307 286 3 7 Total 383 378 349 1 8 Corporate & Unallocated % B/(W) (Expense)/Income 2024 2023 2022 2024 2023 Corporate and unallocated G&A $ (346) $ (326) $ (297) (6) (10) Unallocated Company restaurant expenses (See Note 19) (8) — — NM NM Unallocated Franchise and property revenues (See Note 19) (18) — — NM NM Unallocated Franchise and property expenses — (1) (6) NM NM Unallocated Refranchising gain (loss) (See Note 5) 34 29 27 NM NM Unallocated Other income (expense) (See Note 19) (44) (9) 52 NM NM Investment income (expense), net (See Note 5) (21) 7 11 NM NM Other pension income (expense) (See Note 15) 7 6 (9) NM NM Interest expense, net (489) (513) (527) 5 3 Income tax provision (See Note 18) (414) (221) (337) (88) 35 Effective tax rate (See Note 18) 21.8 % 12.1 % 20.3 % (9.7) ppts. 8.2 ppts.
In the second quarter of 2023, we completed our exit from the Russia market by selling the KFC business in Russia. Our GAAP operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of sale or transfer, within their historical financial statement line items and operating segments.
Our GAAP operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC and Pizza Hut prior to the dates of sale or transfer, within their historical financial statement line items and operating segments.
We intend to support this growth and development through a capital and operating structure that: • Invests capital in a manner consistent with an asset light, franchisor model; • Allocates G&A in an efficient manner that provides leverage to operating profit growth while at the same time opportunistically investing in strategic growth initiatives; • Maximize shareholder return through a combination of paying a competitive dividend and returning excess free cash flow through debt paydowns and share repurchases; and • Targets a consolidated net leverage ratio that balances shareholder returns, cost of capital and flexibility against various risk factors.
We intend to support this growth and development through a capital and operating structure that: • Invests capital in a manner consistent with an asset light, franchisor model; • Allocates G&A in an efficient manner that provides leverage to operating profit growth while at the same time opportunistically investing in strategic growth initiatives; • Targets a consolidated net leverage ratio that balances shareholder returns, cost of capital and flexibility against various risk factors; and • Maximizes shareholder return through a combination of paying a competitive dividend and returning excess free cash flow through share repurchases. 30 We intend for this MD&A to provide the reader with information that will assist in understanding our results of operations, including performance metrics that management uses to assess the Company’s performance.
The Company owned 7% of the Taco Bell units in the U.S. as of the end of 2023. % B/(W) % B/(W) 2023 2022 2023 2022 2021 Reported Ex FX Reported Ex FX System Sales $ 15,915 $ 14,653 $ 13,280 9 9 10 11 Same-Store Sales Growth (Decline) % 5 % 8 % 11 % N/A N/A N/A N/A Company sales $ 1,069 $ 1,002 $ 944 7 7 6 6 Franchise and property revenues 918 837 742 10 10 13 13 Franchise contributions for advertising and other services 654 598 552 9 9 8 8 Total revenues $ 2,641 $ 2,437 $ 2,238 8 8 9 9 Company restaurant profit $ 252 $ 236 $ 225 7 7 5 5 Company restaurant margin % 23.7 % 23.6 % 23.9 % 0.1 ppts. 0.1 ppts.
The Company owned 7% of the Taco Bell units in the U.S. as of the end of 2024. % B/(W) % B/(W) 2024 2023 2024 2023 2022 Reported Ex FX Ex FX and 53rd Week in 2024 Reported Ex FX System Sales $ 17,193 $ 15,915 $ 14,653 8 8 6 9 9 Same-Store Sales Growth % 4 % 5 % 8 % N/A N/A N/A N/A N/A Company sales $ 1,155 $ 1,069 $ 1,002 8 8 6 7 7 Franchise and property revenues 997 918 837 9 9 7 10 10 Franchise contributions for advertising and other services 708 654 598 8 8 7 9 9 Total revenues $ 2,860 $ 2,641 $ 2,437 8 8 7 8 8 Company restaurant profit $ 283 $ 252 $ 236 12 12 9 7 7 Company restaurant margin % 24.4 % 23.7 % 23.6 % 0.7 ppts. 0.7 ppts. 0.6 ppts. 0.1 ppts. 0.1 ppts.
This quarterly dividend will be distributed March 8, 2024, to shareholders of record at the close of business on February 21, 2024, and will total approximately $190 million. In September 2022, our Board of Directors authorized share repurchases of up to $2 billion (excluding applicable transaction fees) of our outstanding Common Stock through June 30, 2024.
This quarterly dividend will be distributed March 7, 2025, to shareholders of record at the close of business on February 21, 2025, and will total approximately $200 million. In May 2024, our Board of Directors authorized share repurchases of up to $2 billion (excluding applicable transaction fees and excise taxes) of our outstanding Common Stock through December 31, 2026.
The Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations. Company restaurant profit and Company restaurant margin % as presented may not be comparable to other similarly titled measures of other companies in the industry.
The Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations.
We will recognize approximately $1 million of loss in net periodic benefit cost in 2024 versus $1 million of gain recognized in 2023. Income Taxes At December 31, 2023, we had valuation allowances of $386 million to reduce our $1,758 million of deferred tax assets to amounts that are more likely than not to be realized.
We will recognize approximately $2 million of this loss in 2025 versus $1 million of loss recognized in 2024. Income Taxes At December 31, 2024, we had valuation allowances of $369 million to reduce our $1,768 million of deferred tax assets to amounts that are more likely than not to be realized.
To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.25 billion Revolving Facility under our Credit Agreement (see Note 11) that was undrawn as of December 31, 2023.
To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.5 billion Revolving Facility under our Credit Agreement (see Note 11) which had $350 million outstanding as of December 31, 2024.
This included a negative impact to our KFC Division Operating Profit of $41 million for the year ended December 31, 2023. 2023 2022 % Change GAAP EPS $5.59 $4.57 +23 Special Items EPS $0.42 $0.04 NM EPS Excluding Special Items $5.17 $4.53 +14 • Gross unit openings for the year were 4,754 units resulting in 3,349 net new units. 32 Worldwide GAAP Results Amount % B/(W) 2023 2022 2021 2023 2022 Company sales $ 2,142 $ 2,072 $ 2,106 3 (2) Franchise and property revenues 3,247 3,096 2,900 5 7 Franchise contributions for advertising and other services 1,687 1,674 1,578 1 6 Total revenues 7,076 6,842 6,584 3 4 Company restaurant expenses $ 1,774 $ 1,745 $ 1,725 (2) (1) G&A expenses 1,193 1,140 1,060 (5) (8) Franchise and property expenses 123 123 117 (1) (4) Franchise advertising and other services expense 1,683 1,667 1,576 (1) (6) Refranchising (gain) loss (29) (27) (35) NM NM Other (income) expense 14 7 2 NM NM Total costs and expenses, net 4,758 4,655 4,445 (2) (5) Operating Profit 2,318 2,187 2,139 6 2 Investment (income) expense, net (7) (11) (86) NM NM Other pension (income) expense (6) 9 7 NM NM Interest expense, net 513 527 544 3 3 Income before income taxes 1,818 1,662 1,674 9 (1) Income tax provision 221 337 99 35 (242) Net Income $ 1,597 $ 1,325 $ 1,575 21 (16) Diluted EPS (a) $ 5.59 $ 4.57 $ 5.21 23 (12) Effective tax rate 12.1 % 20.3 % 5.9 % 8.2 ppts.
This included a negative impact to our KFC Division Operating Profit of $22 million for the year ended December 31, 2024. 2024 2023 % Change GAAP EPS $5.22 $5.59 (7) Special Items EPS $(0.26) $0.42 NM EPS Excluding Special Items $5.48 $5.17 +6 • Gross unit openings for the year were 4,535 units resulting in 2,757 net new units. • Full-year EPS excluding Special Items and 53rd Week was $5.39. 33 Worldwide GAAP Results Amount % B/(W) 2024 2023 2022 2024 2023 Company sales $ 2,552 $ 2,142 $ 2,072 19 3 Franchise and property revenues 3,295 3,247 3,096 1 5 Franchise contributions for advertising and other services 1,702 1,687 1,674 1 1 Total revenues 7,549 7,076 6,842 7 3 Company restaurant expenses $ 2,120 $ 1,774 $ 1,745 (20) (2) G&A expenses 1,181 1,193 1,140 1 (5) Franchise and property expenses 134 123 123 (8) (1) Franchise advertising and other services expense 1,711 1,683 1,667 (2) (1) Refranchising (gain) loss (34) (29) (27) NM NM Other (income) expense 34 14 7 NM NM Total costs and expenses, net 5,146 4,758 4,655 (8) (2) Operating Profit 2,403 2,318 2,187 4 6 Investment (income) expense, net 21 (7) (11) NM NM Other pension (income) expense (7) (6) 9 NM NM Interest expense, net 489 513 527 5 3 Income before income taxes 1,900 1,818 1,662 5 9 Income tax provision 414 221 337 (88) 35 Net Income $ 1,486 $ 1,597 $ 1,325 (7) 21 Diluted EPS (a) $ 5.22 $ 5.59 $ 4.57 (7) 23 Effective tax rate 21.8 % 12.1 % 20.3 % (9.7) ppts. 8.2 ppts.
Operating Profit In 2023, the increase in Operating Profit was driven by same-store sales growth and unit growth partially offset by higher restaurant operating costs and higher G&A. 42 Pizza Hut Division The Pizza Hut Division has 19,866 units, 67% of which are located outside the U.S.
Operating Profit In 2024, the increase in Operating Profit, excluding the impacts of the 53rd week, was driven by same-store sales growth, unit growth and lower G&A partially offset by higher restaurant operating costs. Pizza Hut Division The Pizza Hut Division has 20,225 units, 68% of which are located outside the U.S.
The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2024, and subsequent interim periods, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the impact of the standard on our disclosures.
The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2027, and subsequent interim periods, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is permitted. We are currently evaluating the impact of the standard on our disclosures.
Additionally, gross unit openings and net new unit growth are generally reflective of the economic returns to us and our franchisees from opening and operating our Concept restaurants. • System sales and System sales excluding the impacts of foreign currency translation (“FX”) reflect the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants.
Additionally, gross unit openings and net new unit growth are generally reflective of the economic returns to us and our franchisees from opening and operating our Concept restaurants. • System sales, System sales excluding the impacts of foreign currency translation (“FX”) and, in 2024, System sales excluding FX and the 53rd week for our U.S. subsidiaries and certain international subsidiaries that operate on a weekly periodic calendar, reflect the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants.
The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of December 31, 2023. 2024 2025 2026 2027 2028 2029 2030 2031 2032 2037 2043 Total Securitization Notes $ 938 $ 884 $ 595 $ 589 $ 737 $ 3,743 Credit Agreement $ 48 $ 53 661 15 1,399 2,176 Subsidiary Senior Unsecured Notes 750 750 YUM Senior Unsecured Notes $ 800 1,050 $ 2,100 $ 325 $ 275 4,550 Total $ 48 $ 53 $ 1,599 $ 1,649 $ 1,994 $ 589 $ 800 $ 1,787 $ 2,100 $ 325 $ 275 $ 11,219 Interest payments on the outstanding long-term debt in the table above total approximately $3.1 billion, with approximately $500 million due within the next twelve months on the outstanding amounts on a nominal basis.
We currently have credit ratings of BB (Standard & Poor’s)/Ba2 (Moody’s). 47 The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of December 31, 2024. 2025 2026 2027 2028 2029 2030 2031 2032 2037 2043 Total Securitization Notes $ 938 $ 884 $ 595 $ 589 $ 737 $ 3,743 Credit Agreement $ 21 27 34 1,424 438 1,944 Revolving Facility 350 350 Subsidiary Senior Unsecured Notes 750 750 YUM Senior Unsecured Notes $ 800 1,050 $ 2,100 $ 325 $ 275 4,550 Total $ 21 $ 965 $ 1,668 $ 2,019 $ 1,377 $ 800 $ 1,787 $ 2,100 $ 325 $ 275 $ 11,337 Interest payments on the outstanding long-term debt in the table above total approximately $2.7 billion, with approximately $500 million due within the next twelve months on the outstanding amounts on a nominal basis.
Due to their size and the fact that they are not indicative of our ongoing interest expense, these amounts have been reflected as Special Items.
(e) Amounts recorded in connection with redemptions of long-term debt. See Note 5. Due to their size and the fact that they are not indicative of our ongoing interest expense, these amounts have been reflected as Special Items.
G&A expenses $ 204 $ 191 $ 174 (7) (7) (9) (10) Franchise and property expenses 32 33 33 4 4 1 — Franchise advertising and other services expense 644 599 553 (7) (7) (8) (8) Operating Profit $ 944 $ 850 $ 758 11 11 12 12 % Increase (Decrease) Unit Count 2023 2022 2021 2023 2022 Franchise 8,081 7,754 7,329 4 6 Company-owned 483 464 462 4 — Total 8,564 8,218 7,791 4 5 Company sales and Company restaurant margin % In 2023, the increase in Company sales was driven by company same-store sales growth of 5% and unit growth partially offset by refranchising.
G&A expenses $ 199 $ 204 $ 191 3 3 4 (7) (7) Franchise and property expenses 33 32 33 (3) (3) (2) 4 4 Franchise advertising and other services expense 708 644 599 (10) (10) (8) (7) (7) Operating Profit $ 1,049 $ 944 $ 850 11 11 9 11 11 % Increase (Decrease) Unit Count 2024 2023 2022 2024 2023 Franchise 8,253 8,081 7,754 2 4 Company-owned 504 483 464 4 4 Total 8,757 8,564 8,218 2 4 Company sales and Company restaurant margin % In 2024, the increase in Company sales, excluding the impacts of the 53rd week, was driven by company same-store sales growth of 3% and unit growth.
Due to their scope and size, the charges over the life of the program, which have primarily resulted from severance associated with positions that have been eliminated or relocated and consultant fees, are being recorded as Special Items. (d) Amounts recorded in connection with redemptions of long-term debt. See Note 5.
Due to their scope and size, the charges over the life of the program, which have primarily resulted from severance associated with positions that have been eliminated or relocated and consultant fees, are being recorded within Corporate and unallocated G&A and have been reflected as Special Items.
KFC Division The KFC Division has 29,900 units, 87% of which are located outside the U.S.
KFC Division The KFC Division has 31,981 units, 89% of which are located outside the U.S.
Additionally, 99% of the KFC Division units were operated by franchisees as of the end of 2023. % B/(W) % B/(W) 2023 2022 2023 2022 2021 Reported Ex FX Reported Ex FX System Sales $ 33,863 $ 31,116 $ 31,365 9 12 (1) 6 Same-Store Sales Growth (Decline) % 7 % 4 % 11 % N/A N/A N/A N/A Company sales $ 484 $ 491 $ 596 (2) 2 (18) (11) Franchise and property revenues 1,698 1,645 1,557 3 6 6 12 Franchise contributions for advertising and other services 648 698 640 (7) (6) 9 16 Total revenues $ 2,830 $ 2,834 $ 2,793 — 2 1 8 Company restaurant profit $ 67 $ 65 $ 106 2 7 (39) (33) Company restaurant margin % 13.7 % 13.2 % 17.7 % 0.5 ppts. 0.6 ppts.
Additionally, 99% of the KFC Division units were operated by franchisees as of the end of 2024. 42 % B/(W) % B/(W) 2024 2023 2024 2023 2022 Reported Ex FX Ex FX and 53rd Week in 2024 Reported Ex FX System Sales $ 34,452 $ 33,863 $ 31,116 2 3 3 9 12 Same-Store Sales Growth (Decline) % (2) % 7 % 4 % N/A N/A N/A N/A N/A Company sales $ 801 $ 484 $ 491 66 64 60 (2) 2 Franchise and property revenues 1,685 1,698 1,645 (1) 1 Even 3 6 Franchise contributions for advertising and other services 613 648 698 (5) (6) (6) (7) (6) Total revenues $ 3,099 $ 2,830 $ 2,834 10 10 9 Even 2 Company restaurant profit $ 98 $ 67 $ 65 48 47 43 2 7 Company restaurant margin % 12.2 % 13.7 % 13.2 % (1.5) ppts.
The change was primarily driven by lower net borrowings, partially offset by lower current year share repurchases. Liquidity and Capital Resources We have historically generated substantial cash flows from our extensive franchise operations, which require a limited YUM investment, and from the operations of our Company-owned stores.
Liquidity and Capital Resources We have historically generated substantial cash flows from our extensive franchise operations, which require a limited YUM investment, and from the operations of our Company-owned stores.
In 2023, the increase in Company restaurant margin percentage was driven by same-store sales growth partially offset by higher labor costs, commodity inflation and increases in other restaurant operating costs. Franchise and property revenues In 2023, the increase in Franchise and property revenues was driven by franchise same-store sales growth of 6% and unit growth.
In 2024, the increase in Company restaurant margin percentage, excluding the impacts of the 53rd week, was driven by same-store sales growth partially offset by higher labor costs, commodity inflation and an increase in other restaurant operating costs.
In addition, we reassessed certain deferred tax liabilities associated with the Russia business given the expectation that the existing basis difference would reverse by way of sale. 37 Special Items Tax (Benefit) Expense includes $183 million, $82 million and $251 million of tax benefit recorded in the years ended December 31, 2023, 2022 and 2021 respectively, associated with intra-entity transfers and valuations of certain IP rights. • The benefit recorded in the year ended December 31, 2023, resulted primarily from $99 million of deferred tax benefit arising from the remeasurement of deferred tax assets associated with previously transferred IP rights in Switzerland as a result of an increase in our jurisdictional tax rate, as well as a $29 million deferred tax benefit associated with credits granted by local Swiss tax authorities.
Special Items Tax (Benefit) Expense includes $32 million, $183 million and $82 million of tax benefit recorded in the years ended December 31, 2024, 2023 and 2022 respectively, associated with intra-entity transfers and valuations of certain IP rights. • The benefit recorded in the year ended December 31, 2024, resulted primarily from the tax liquidation of certain subsidiaries in Israel and Australia as well as the intra-entity transfer of software from those subsidiaries to subsidiaries in the U.S. • The benefit recorded in the year ended December 31, 2023, resulted primarily from $99 million of deferred tax benefit arising from the remeasurement of deferred tax assets associated with previously transferred IP rights in Switzerland as a result of an increase in our jurisdictional tax rate, as well as a $29 million deferred tax benefit associated with credits granted by local Swiss tax authorities.
We believe that our ongoing cash from operations, cash on hand, which was approximately $500 million at December 31, 2023, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months. Our material cash requirements include the following contractual and other obligations.
We believe that our ongoing cash from operations, cash on hand, which was approximately $600 million at December 31, 2024, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months. Borrowings under our Revolving Facility in 2024 had original maturities of three months or less.
We deny liability and intend to continue vigorously defending this matter. See the Lease Guarantees section of Note 20 for discussion of our off-balance sheet arrangements.
The stay order remains in effect, and the next in the Delhi High Court has been rescheduled to April 29, 2025. We deny liability and intend to continue vigorously defending this matter. See the Lease Guarantees section of Note 20 for discussion of our off-balance sheet arrangements.
We believe same-store sales growth is useful to investors because our results are heavily dependent on the results of our Concepts' existing store base. Additionally, same-store sales growth is reflective of the strength of our Brands, the effectiveness of our operational and advertising initiatives and local economic and consumer trends.
We believe same-store sales growth is useful to investors because our results are heavily dependent on the results of our Concepts' existing store base.
Debt Obligations and Interest Payments As of December 31, 2023, approximately 94%, including the impact of interest rate swaps, of our $11.2 billion of total debt outstanding, excluding finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.6%. We ended 2023 with a consolidated net leverage ratio of 4.2x EBITDA .
Debt Obligations and Interest Payments As of December 31, 2024, approximately 96%, including the impact of interest rate swaps, of our $11.0 billion of total debt outstanding, excluding the Revolving Facility balance, finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.5%.
The estimated interest payments related to the variable rate portion of our debt, net of our interest rate swaps, are based on current Secured Overnight Financing Rate (“SOFR”) interest rates.
The estimated interest payments related to the variable rate portion of our debt, net of our interest rate swaps, are based on current Secured Overnight Financing Rate (“SOFR”) interest rates. See Note 11 for details on the Securitization Notes, the Credit Agreement, Subsidiary Senior Unsecured Notes and YUM Senior Unsecured Notes.
Performance Metrics % Increase (Decrease) Unit Count 2023 2022 2021 2023 2022 Franchise 57,691 54,371 52,373 6 4 Company-owned 1,017 990 1,051 3 (6) Total 58,708 55,361 53,424 6 4 2023 2022 2021 Same-Store Sales Growth (Decline) % 6 4 10 System Sales Growth (Decline) %, reported 8 2 16 System Sales Growth (Decline) %, excluding FX 10 6 13 33 Our system sales breakdown by Company and franchise sales was as follows: Year 2023 2022 2021 Consolidated Company sales (a) $ 2,142 $ 2,072 $ 2,106 Franchise sales 61,647 57,211 56,082 System sales 63,789 59,283 58,188 Negative (Positive) Foreign Currency Impact (b) 1,169 2,653 N/A System sales, excluding FX $ 64,958 $ 61,936 $ 58,188 KFC Division Company sales (a) $ 484 $ 491 $ 596 Franchise sales 33,379 30,625 30,769 System sales 33,863 31,116 31,365 Negative (Positive) Foreign Currency Impact (b) 965 2,102 N/A System sales, excluding FX $ 34,828 $ 33,218 $ 31,365 Taco Bell Division Company sales (a) $ 1,069 $ 1,002 $ 944 Franchise sales 14,846 13,651 12,336 System sales 15,915 14,653 13,280 Negative (Positive) Foreign Currency Impact (b) (3) 52 N/A System sales, excluding FX $ 15,912 $ 14,705 $ 13,280 Pizza Hut Division Company sales (a) $ 14 $ 21 $ 46 Franchise sales 13,301 12,832 12,909 System sales 13,315 12,853 12,955 Negative (Positive) Foreign Currency Impact (b) 207 499 N/A System sales, excluding FX $ 13,522 $ 13,352 $ 12,955 Habit Burger Grill Division Company sales (a) $ 575 $ 558 $ 520 Franchise sales 121 103 68 System sales 696 661 588 Negative (Positive) Foreign Currency Impact (b) — — N/A System sales, excluding FX $ 696 $ 661 $ 588 (a) Company sales represents sales from our Company-operated stores as presented on our Consolidated Statements of Income.
Performance Metrics % Increase (Decrease) Unit Count 2024 2023 2022 2024 2023 Franchise 60,035 57,691 54,371 4 6 Company-owned 1,311 1,017 990 29 3 Total 61,346 58,708 55,361 4 6 2024 2023 2022 Same-Store Sales Growth (Decline) % (1) 6 4 System Sales Growth %, reported 3 8 2 System Sales Growth %, excluding FX 4 10 6 System Sales Growth %, excluding FX and 53rd week 3 N/A N/A 34 Our system sales breakdown by Company and franchise sales was as follows: Year 2024 2023 2022 Consolidated Company sales (a) $ 2,552 $ 2,142 $ 2,072 Franchise sales 62,914 61,647 57,211 System sales 65,466 63,789 59,283 Negative (Positive) Foreign Currency Impact (b) 638 1,169 N/A System sales, excluding FX 66,104 64,958 59,283 Impact of 53rd week (568) N/A N/A System sales, excluding FX and the 53rd Week $ 65,536 $ 64,958 $ 59,283 KFC Division Company sales (a) $ 801 $ 484 $ 491 Franchise sales 33,651 33,379 30,625 System sales 34,452 33,863 31,116 Negative (Positive) Foreign Currency Impact (b) 515 965 N/A System sales, excluding FX 34,967 34,828 31,116 Impact of 53rd week (171) N/A N/A System sales, excluding FX and the 53rd Week $ 34,796 $ 34,828 $ 31,116 Taco Bell Division Company sales (a) $ 1,155 $ 1,069 $ 1,002 Franchise sales 16,038 14,846 13,651 System sales 17,193 15,915 14,653 Negative (Positive) Foreign Currency Impact (b) (1) (3) N/A System sales, excluding FX 17,192 15,912 14,653 Impact of 53rd week (279) N/A N/A System sales, excluding FX and the 53rd Week $ 16,913 $ 15,912 $ 14,653 Pizza Hut Division Company sales (a) $ 8 $ 14 $ 21 Franchise sales 13,100 13,301 12,832 System sales 13,108 13,315 12,853 Negative (Positive) Foreign Currency Impact (b) 124 207 N/A System sales, excluding FX 13,232 13,522 12,853 Impact of 53rd week (107) N/A N/A System sales, excluding FX and the 53rd Week $ 13,125 $ 13,522 $ 12,853 Habit Burger & Grill Division Company sales (a) $ 588 $ 575 $ 558 Franchise sales 125 121 103 System sales 713 696 661 Negative (Positive) Foreign Currency Impact (b) — — N/A System sales, excluding FX 713 696 661 Impact of 53rd Week (11) N/A N/A System sales, excluding FX and the 53rd Week $ 702 $ 696 $ 661 (a) Company sales represents sales from our Company-operated stores as presented on our Consolidated Statements of Income. 35 (b) The foreign currency impact on System sales is presented in relation only to the immediately preceding year presented.
Reconciliation of GAAP Operating Profit to Company Restaurant Profit 2023 KFC Division Taco Bell Division Pizza Hut Division Habit Burger Grill Division Corporate and Unallocated Consolidated GAAP Operating Profit (Loss) $ 1,304 $ 944 $ 391 $ (14) $ (307) $ 2,318 Less: Franchise and property revenues 1,698 918 622 9 — 3,247 Franchise contributions for advertising and other services 648 654 383 2 — 1,687 Add: General and administrative expenses 383 204 221 59 326 1,193 Franchise and property expenses 72 32 15 3 1 123 Franchise advertising and other services expense 648 644 389 2 — 1,683 Refranchising (gain) loss — — — — (29) (29) Other (income) expense 6 — (11) 10 9 14 Company restaurant profit $ 67 $ 252 $ — $ 49 — $ 368 Company sales $ 484 $ 1,069 $ 14 $ 575 — $ 2,142 Company restaurant margin % 13.7 % 23.7 % 0.1 % 8.5 % N/A 17.2 % 38 2022 KFC Division Taco Bell Division Pizza Hut Division Habit Burger Grill Division Corporate and Unallocated Consolidated GAAP Operating Profit (Loss) $ 1,198 $ 850 $ 387 $ (24) $ (224) $ 2,187 Less: Franchise and property revenues 1,645 837 607 7 — 3,096 Franchise contributions for advertising and other services 698 598 376 2 — 1,674 Add: General and administrative expenses 390 191 211 51 297 1,140 Franchise and property expenses 69 33 13 2 6 123 Franchise advertising and other services expense 684 599 382 2 — 1,667 Refranchising (gain) loss — — — — (27) (27) Other (income) expense 67 (2) (10) 4 (52) 7 Company restaurant profit $ 65 $ 236 $ — $ 26 $ — $ 327 Company sales $ 491 $ 1,002 $ 21 $ 558 $ — $ 2,072 Company restaurant margin % 13.2 % 23.6 % (2.2) % 4.7 % N/A 15.8 % 2021 KFC Division Taco Bell Division Pizza Hut Division Habit Burger Grill Division Corporate and Unallocated Consolidated GAAP Operating Profit (Loss) $ 1,230 $ 758 $ 387 $ 2 $ (238) $ 2,139 Less: Franchise and property revenues 1,557 742 597 4 — 2,900 Franchise contributions for advertising and other services 640 552 385 1 — 1,578 Add: General and administrative expenses 377 174 201 48 260 1,060 Franchise and property expenses 74 33 11 — (1) 117 Franchise advertising and other services expense 627 553 395 1 — 1,576 Refranchising (gain) loss — — — — (35) (35) Other (income) expense (5) 1 (9) 1 14 2 Company restaurant profit $ 106 $ 225 $ 3 $ 47 $ — $ 381 Company sales $ 596 $ 944 $ 46 $ 520 $ — $ 2,106 Company restaurant margin % 17.7 % 23.9 % 6.8 % 9.0 % N/A 18.1 % Items Impacting Reported Results and/or Reasonably Likely to Impact Future Results The following items impacted reported results in 2023 and/or 2022 and/or are reasonably likely to impact future results.
Other Income Tax impacts recorded as Special in the year ended December 31, 2023 included $41 million of expense associated with a correction in the timing of capital loss utilization related to refranchising gains previously recorded as Special Items to tax years with a lower statutory tax rate. 39 Reconciliation of GAAP Operating Profit to Company Restaurant Profit 2024 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Corporate and Unallocated Consolidated GAAP Operating Profit (Loss) $ 1,363 $ 1,049 $ 373 $ — $ (382) $ 2,403 Less: Franchise and property revenues 1,685 997 622 9 (18) 3,295 Franchise contributions for advertising and other services 613 708 378 3 — 1,702 Add: General and administrative expenses 363 199 219 54 346 1,181 Franchise and property expenses 63 33 34 4 — 134 Franchise advertising and other services expense 610 708 390 3 — 1,711 Refranchising (gain) loss — — — — (34) (34) Other (income) expense (3) (1) (16) 10 44 34 Company restaurant profit (loss) $ 98 $ 283 $ — $ 59 (8) $ 432 Company sales $ 801 $ 1,155 $ 8 $ 588 — $ 2,552 Company restaurant margin % 12.2 % 24.4 % (0.6) % 10.1 % N/A 16.9 % 2023 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Corporate and Unallocated Consolidated GAAP Operating Profit (Loss) $ 1,304 $ 944 $ 391 $ (14) $ (307) $ 2,318 Less: Franchise and property revenues 1,698 918 622 9 — 3,247 Franchise contributions for advertising and other services 648 654 383 2 — 1,687 Add: General and administrative expenses 383 204 221 59 326 1,193 Franchise and property expenses 72 32 15 3 1 123 Franchise advertising and other services expense 648 644 389 2 — 1,683 Refranchising (gain) loss — — — — (29) (29) Other (income) expense 6 — (11) 10 9 14 Company restaurant profit $ 67 $ 252 $ — $ 49 $ — $ 368 Company sales $ 484 $ 1,069 $ 14 $ 575 $ — $ 2,142 Company restaurant margin % 13.7 % 23.7 % 0.1 % 8.5 % N/A 17.2 % 40 2022 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Corporate and Unallocated Consolidated GAAP Operating Profit (Loss) $ 1,198 $ 850 $ 387 $ (24) $ (224) $ 2,187 Less: Franchise and property revenues 1,645 837 607 7 — 3,096 Franchise contributions for advertising and other services 698 598 376 2 — 1,674 Add: General and administrative expenses 390 191 211 51 297 1,140 Franchise and property expenses 69 33 13 2 6 123 Franchise advertising and other services expense 684 599 382 2 — 1,667 Refranchising (gain) loss — — — — (27) (27) Other (income) expense 67 (2) (10) 4 (52) 7 Company restaurant profit $ 65 $ 236 $ — $ 26 $ — $ 327 Company sales $ 491 $ 1,002 $ 21 $ 558 $ — $ 2,072 Company restaurant margin % 13.2 % 23.6 % (2.2) % 4.7 % N/A 15.8 % Items Impacting Reported Results and/or Reasonably Likely to Impact Future Results The following items impacted reported results in 2024 and/or 2023 and/or are reasonably likely to impact future results.
G&A expenses $ 383 $ 390 $ 377 2 2 (3) (6) Franchise and property expenses 72 69 74 (5) (6) 7 (3) Franchise advertising and other services expense 648 684 627 5 4 (9) (15) Operating Profit $ 1,304 $ 1,198 $ 1,230 9 12 (3) 5 40 % Increase (Decrease) Unit Count 2023 2022 2021 2023 2022 Franchise 29,680 27,541 26,643 8 3 Company-owned 220 219 291 — (25) Total 29,900 27,760 26,934 8 3 Company sales and Company restaurant margin % In 2023, the increase in Company sales, excluding the impact of foreign currency translation, was driven by Company same-store sales growth of 5%, partially offset by the suspension of operations of our 70 company owned KFC restaurants in Russia.
G&A expenses $ 363 $ 383 $ 390 5 5 6 2 2 Franchise and property expenses 63 72 69 13 12 12 (5) (6) Franchise advertising and other services expense 610 648 684 6 6 7 5 4 Operating Profit $ 1,363 $ 1,304 $ 1,198 4 6 5 9 12 % Increase (Decrease) Unit Count 2024 2023 2022 2024 2023 Franchise 31,513 29,680 27,541 6 8 Company-owned 468 220 219 113 — Total 31,981 29,900 27,760 7 8 Company sales and Company restaurant margin % In 2024, the increase in Company sales, excluding the impacts of foreign currency translation and the 53rd week, was driven by the KFC U.K. and Ireland restaurant acquisition (see Note 3) in the second quarter of 2024, partially offset by a Company same-store sales decline of 3%.
The annual valuation supported an increase to tax basis of Swiss IP rights associated with parts of our business that continue to use these IP rights due to expected royalty growth assumptions in those parts of the business that largely offset the loss of Russia royalty income associated with such IP rights as a result of our decision to exit the Russia market. • The benefit recorded in the year ended December 31, 2021, resulted primarily from $187 million of tax benefit as a result of concentration of management responsibility for European (excluding the UK) KFC franchise development, support operations and management oversight in Switzerland.
The annual valuation supported an increase to tax basis of Swiss IP rights associated with parts of our business that continue to use these IP rights due to expected royalty growth assumptions in those parts of the business that largely offset the loss of Russia royalty income associated with such IP rights as a result of our decision to exit the Russia market.
This authorization took effect during the fourth quarter of 2022 upon the exhaustion of a prior authorization approved in May 2021. As of December 31, 2023, we have remaining capacity to repurchase up to $1.7 billion of Common Stock under the September 2022 authorization.
This authorization took effect on July 1, 2024 upon the exhaustion of a prior authorization approved in September 2022. As of December 31, 2024, we have remaining capacity to repurchase up to $1.6 billion of Common Stock under this authorization. This authorization does not obligate the Company to acquire any specific number of shares.
Others may consider the fair value of these future royalties as fair value disposed of and thus would conclude that a larger percentage of a reporting unit’s fair value is disposed of in a refranchising transaction. During 2023, refranchising activity completed by the Company was limited and the write-off of goodwill associated with these transactions was less than $1 million.
Others may consider the fair value of these future royalties as fair value disposed of and thus would conclude that a larger percentage of a reporting unit’s fair value is disposed of in a refranchising transaction.
(14.4) ppts. Corporate and unallocated G&A In 2023, the increase in Corporate and Unallocated G&A expenses was driven by higher costs associated with our resource optimization program, higher current year expenses related to our annual incentive compensation programs and costs associated with the previously disclosed January 2023 ransomware attack.
Corporate and unallocated G&A In 2024, the year to date increase in Corporate and unallocated G&A expense was driven by higher costs associated with our resource optimization program (see Note 5), partially offset by lower current year expenses related to our annual incentive 46 compensation programs, lower share based compensation expense and lapping net costs related to the prior year ransomware attack.
G&A expenses $ 221 $ 211 $ 201 (5) (5) (5) (7) Franchise and property expenses 15 13 11 (16) (15) (23) (25) Franchise advertising and other services expense 389 382 395 (2) (2) 3 2 Operating Profit $ 391 $ 387 $ 387 1 3 Even 4 % Increase (Decrease) Unit Count 2023 2022 2021 2023 2022 Franchise 19,859 19,013 18,359 4 4 Company-owned 7 21 22 (67) (5) Total 19,866 19,034 18,381 4 4 Franchise and property revenues In 2023, the increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by unit growth and franchise same-store sales growth of 2%, partially offset by lapping the prior year recognition of franchise fees related to unexercised development rights arising from a master franchise agreement.
G&A expenses $ 219 $ 221 $ 211 1 1 2 (5) (5) Franchise and property expenses 34 15 13 (122) (121) (118) (16) (15) Franchise advertising and other services expense 390 389 382 Even Even 1 (2) (2) Operating Profit $ 373 $ 391 $ 387 (5) (3) (4) 1 3 % Increase (Decrease) Unit Count 2024 2023 2022 2024 2023 Franchise 20,202 19,859 19,013 2 4 Company-owned 23 7 21 NM (67) Total 20,225 19,866 19,034 2 4 Franchise and property revenues In 2024, Franchise and property revenues, excluding the impacts of foreign currency translation and the 53rd week, were flat, as a franchise same-store sales decline of 4% was offset by unit growth. 45 G&A In 2024, the decrease in G&A, excluding the impacts of foreign currency translation and the 53rd week, was driven by lower expenses related to our annual incentive compensation programs, partially offset by higher salaries and benefits.
Our reporting units are our business units (which are aligned based on geography) in our KFC, Taco Bell, Pizza Hut and Habit Burger Grill Divisions. Fair value is the price a willing buyer would pay for the reporting unit, and is generally estimated using discounted expected future after-tax cash flows from franchise royalties and Company-owned restaurant operations, if any.
Fair value is the price a willing buyer would pay for the reporting unit, and is generally estimated using discounted expected future after-tax cash flows from franchise royalties and Company-owned restaurant operations, if any. Future cash flow estimates and the discount rate are the key assumptions when estimating the fair value of a reporting unit.
Impairment of Goodwill We evaluate goodwill for impairment on an annual basis as of the beginning of our fourth quarter or more often if an event occurs or circumstances change that indicates impairment might exist. Goodwill is evaluated for impairment by determining whether the fair value of our reporting units exceed their carrying values.
As of our fourth quarter 2024 annual impairment testing date, the fair values of all of our indefinite-lived intangible assets were in excess of their respective carrying values and no impairment was recorded. 50 Impairment of Goodwill We evaluate goodwill for impairment on an annual basis as of the beginning of our fourth quarter or more often if an event occurs or circumstances change that indicates impairment might exist.
Operating Profit In 2023, the increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by unit growth and same-store sales growth, partially offset by higher G&A and lapping the prior year recognition of franchise fees related to unexercised development rights arising from a master franchise agreement. 43 Habit Burger Grill Division The Habit Burger Grill Division has 378 units, the vast majority of which are in the U.S.
Operating Profit In 2024, the decrease in Operating Profit, excluding the impacts of foreign currency translation and the 53rd week, was driven by higher bad debt expense and a same-store sales decline, partially offset by unit growth. Habit Burger & Grill Division The Habit Burger & Grill Division has 383 units, the vast majority of which are in the U.S.
G&A In 2023, the decrease in G&A, excluding the impact of foreign currency translation, was driven by the impact of the sale of our KFC Russia business, partially offset by higher headcount and salaries, and higher expenses related to our annual incentive compensation programs.
G&A In 2024, the decrease in G&A, excluding the impacts of foreign currency translation and the 53rd week, was driven by lower expenses related to our annual incentive compensation programs, lower travel related costs, refranchising and the impact of the sale of our KFC Russia business in 2023, partially offset by higher expenses related to the operation of acquired KFC U.K. and Ireland restaurants. 43 Operating Profit In 2024, the increase in Operating Profit, excluding the impacts of foreign currency translation and the 53rd week, was driven by unit growth and lower G&A, partially offset by a same-store sales decline.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur outstanding total debt, excluding finance leases and debt issuance costs and discounts, of $11.2 billion includes 81% fixed-rate debt and 19% variable-rate debt.
Biggest changeInterest Rate Risk We have a market risk exposure to changes in interest rates, principally in the U.S. Our outstanding total debt, excluding the Revolving Facility balance, finance leases and debt issuance costs and discounts, of $11.0 billion includes 82% fixed-rate debt and 18% variable-rate debt.
The notional amount and maturity dates of these contracts match those of the underlying receivables or payables such that our foreign currency exchange risk related to these instruments is minimized. The Company’s foreign currency net asset exposure (defined as foreign currency assets less foreign currency liabilities) totaled approximately $1 billion as of December 31, 2023.
The notional amount and maturity dates of these contracts match those of the underlying receivables or payables such that our foreign currency exchange risk related to these instruments is minimized. The Company’s foreign currency net asset exposure (defined as foreign currency assets less foreign currency liabilities) totaled approximately $1.1 billion as of December 31, 2024.
Operating in international markets exposes the Company to movements in foreign currency exchange rates. The Company’s primary exposures result from our operations in Asia-Pacific, Europe and the Americas. For the fiscal year ended December 31, 2023, Operating Profit would have decreased approximately $150 million if all foreign currencies had uniformly weakened 10% relative to the U.S. dollar.
Operating in international markets exposes the Company to movements in foreign currency exchange rates. The Company’s primary exposures result from our operations in Asia-Pacific, Europe and the 53 Americas. For the fiscal year ended December 31, 2024, Operating Profit would have decreased approximately $150 million if all foreign currencies had uniformly weakened 10% relative to the U.S. dollar.
At December 31, 2023, a hypothetical 100 basis-point decrease in short-term interest rates would decrease the asset associated with the fair value of our interest rate swaps by approximately $17 million. Fair value was determined based on the present value of expected future cash flows considering the risks involved and using discount rates appropriate for the durations.
At December 31, 2024, a hypothetical 100 basis-point decrease in short-term interest rates would decrease the asset associated with the fair value of our interest rate swaps by approximately $3 million. Fair value was determined based on the present value of expected future cash flows considering the risks involved and using discount rates appropriate for the durations.
At December 31, 2023, a hypothetical 100 basis-point increase in short-term interest rates would result, over the following twelve-month period after consideration of the aforementioned interest rate swaps, in an increase of approximately $7 million in Interest expense, net within our Consolidated Statement of Income.
At December 31, 2024, a hypothetical 100 basis-point increase in short-term interest rates would result, over the following twelve-month period after consideration of the aforementioned interest rate swaps through maturity, in an increase of approximately $16 million in Interest expense, net within our Consolidated Statement of Income.
We have attempted to minimize the interest rate risk from variable-rate debt through the use of interest rate swaps that, as of December 31, 2023, result in a fixed interest rate on $1.5 billion of our variable-rate debt. As a result, approximately 94% of this $11.2 billion of outstanding debt at December 31, 2023, is effectively fixed-rate debt.
We have attempted to minimize the interest rate risk from variable-rate debt through the use of interest rate swaps that, as of December 31, 2024, result in a fixed interest rate on $1.5 billion of our variable-rate debt. As a result, approximately 96% of this $11.0 billion of outstanding debt at December 31, 2024, is effectively fixed-rate debt.
These estimated amounts are based upon the current level of variable-rate debt that has not been swapped to fixed and assume no changes in the volume or composition of that debt and exclude any impact from interest income related to cash and cash equivalents.
These estimated amounts are based upon the current level of variable-rate debt that has not been swapped, both through and after maturity of our existing interest rate swaps, to fixed and assume no changes in the volume or composition of that debt and exclude any impact from interest income related to cash and cash equivalents.
The fair value of our cumulative fixed-rate debt of $8.6 billion as of December 31, 2023, would decrease approximately $430 million as a result of the same hypothetical 100 basis-point increase.
The fair value of our cumulative fixed-rate debt of $8.7 billion as of December 31, 2024, would decrease approximately $375 million as a result of the same hypothetical 100 basis-point increase.
See Note 11 for details on our outstanding debt and Note 13 for details related to interest rate swaps.
These interest rate swaps mature in March 2025. See Note 11 for details on our outstanding debt and Note 13 for details related to interest rate swaps.
In the normal course of business and in accordance with our policies, we manage these risks through a variety of strategies, which may include the use of financial and commodity derivative instruments to hedge our underlying exposures.
In the normal course of business and in accordance with our policies, we manage these risks through a variety of strategies, which may include the use of financial and commodity derivative instruments to hedge our underlying exposures. Our policies prohibit the use of derivative instruments for trading purposes, and we have processes in place to monitor and control their use.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The Company is exposed to financial market risks associated with interest rates, foreign currency exchange rates, commodity prices and the value of our equity investment in Devyani International Limited.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The Company is exposed to financial market risks associated with interest rates, foreign currency exchange rates and commodity prices.
Our ability to recover increased costs through higher pricing is, at times, limited by the competitive environment in which we operate. We manage our exposure to this risk primarily through pricing agreements with our vendors. Equity Investment Risk YUM holds approximately 53 million shares of Devyani International Limited (“Devyani”) common stock (See Note 5).
Our ability to recover increased costs through higher pricing is, at times, limited by the competitive environment in which we operate. We manage our exposure to this risk primarily through pricing agreements with our vendors. 54
Removed
Our policies prohibit the use of derivative instruments for trading purposes, and we have processes in place to monitor and control their use. 50 Interest Rate Risk We have a market risk exposure to changes in interest rates, principally in the U.S.
Removed
As of December 31, 2023, the National Stock Exchange of India Limited composite closing sales price of Devyani was Indian Rupee 193.75.
Removed
A hypothetical 10% decline in the price of these shares would result in a $12 million decrease in the fair value of this investment, which would be reflected as a charge in Investment (income) expense, net within our Consolidated Statements of Income.
Removed
The effects of changes in market prices for equity securities are unpredictable, which could cause significant fluctuations in our quarterly and annual results. 51

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