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What changed in Yum! Brands's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Yum! Brands's 2024 and 2025 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 2025 report.

+377 added−372 removedSource: 10-K (2026-02-20) vs 10-K (2025-02-19)

Top changes in Yum! Brands's 2025 10-K

377 paragraphs added · 372 removed · 299 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe Company believes that many of these marks, including our Kentucky Fried Chicken®, KFC®, Taco Bell®, Pizza Hut® and The Habit® marks, have significant value and material importance to our business. The Company’s policy is to pursue registration of important marks whenever feasible and to challenge any infringement of our marks vigorously.
Biggest changeIn 2025, our system restaurants generated digital sales approaching both $40 billion and 60% of overall system sales. The Company and its Concepts own numerous registered trademarks. The Company believes that many of these marks, including our Kentucky Fried Chicken®, KFC®, Taco Bell®, Pizza Hut® and The Habit® marks, have significant value and material importance to our business.
The Company has franchise relationships that are particularly important to our business, such as our relationship with Yum China (defined below) and our relationships with certain other large franchisees. The Company currently has approximately 1,500 franchisees with whom we have franchise contracts. The Company utilizes both store-level franchise and master franchise programs to grow our businesses.
The Company has franchise relationships that are particularly important to our business, such as our relationship with Yum China (defined below) and our relationships with certain other large franchisees. 4 The Company currently has approximately 1,500 franchisees with whom we have franchise contracts. The Company utilizes both store-level franchise and master franchise programs to grow our businesses.
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.
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, 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.
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.
The Company also has certain patents on restaurant equipment and technology which, while valuable, are not currently considered material to our business. 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.
Today, Pizza Hut specializes in the sale of ready-to-eat pizza products and operates in the delivery, carryout and casual dining segments around the world. 3 Habit Burger & Grill The first Habit Burger & Grill restaurant opened in 1969 in Santa Barbara, California.
Today, Pizza Hut specializes in the sale of ready-to-eat pizza products and operates in the delivery, carryout and casual dining segments around the world. Habit Burger & Grill The first Habit Burger & Grill restaurant opened in 1969 in Santa Barbara, California.
Information 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.
Information about Operating Segments As of December 31, 2025, 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.
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.
In addition to the persons employed by the Company and its subsidiaries, our approximately 61,000 franchise restaurants around the world are responsible for the employment of over an estimated 1 million people who work in and support those restaurants.
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.
Each year YUM and our franchisees around the world create thousands of part-time, entry-level restaurant opportunities to grow careers at our KFC, Taco Bell, Pizza Hut and Habit Burger & Grill brands.
During 2024, there were no material capital expenditures for environmental control facilities and no such material expenditures are anticipated. Government Regulation U.S. Operations.
During 2025, there were no material capital expenditures for environmental control facilities and no such material expenditures are anticipated. Government Regulation U.S. Operations.
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.
Overview of Business YUM has over 63,000 restaurants in 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.
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.
Habit Burger & Grill is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. At December 31, 2025, 97% of our Concepts’ units are operated by independent franchisees or licensees under the terms of franchise or license agreements.
Our unrivaled culture and talent and leading with smart, heart and courage are key to our success, fueling brand performance and franchise success.
Key to our success fueling brand performance and franchise success is our unrivaled culture and talent and leading with smart, heart and courage.
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.
In recent years the Company has focused on building and acquiring a distinctive set of solutions with next-generation capabilities tailored for our brands, scaling these common digital and technology platforms across the globe and integrating our digital and technology teams into a unified global team.
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.
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 aligned and leveraged sourcing and distribution systems involving global, regional and local suppliers and distributors.
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.
Our commitments and progress towards these areas of focus 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 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.
The most recent survey conducted was in 2025 and reflected an above-average engagement level among our employees relative to 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.
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.
In 2025, we 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.
Non-traditional units include express units that have a more limited menu, usually generate lower sales volumes and operate in non-traditional locations like malls, airports, gasoline service stations, train stations, subways, convenience stores, stadiums, amusement parks and colleges, where a full-scale traditional outlet would not be practical or efficient.
Traditional units can feature dine-in, carryout, drive-thru and delivery services. Non-traditional units include express units that have a more limited menu, usually generate lower sales volumes and operate in non-traditional locations like malls, airports, gasoline service stations, train stations, subways, convenience stores, stadiums, amusement parks and colleges, where a full-scale traditional outlet would not be practical or efficient.
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.
In the U.S., approximately 90% of our Company-owned restaurant employees are part-time of which 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 multitude of countries in which the Company operates.
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.
The Company partners with our international franchisees to manage third-party suppliers and distributors, subject to our internal standards and approvals. 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.
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.
Of our over 61,000 franchised units at December 31, 2025, approximately 40% operate under our master franchise programs, including over 17,000 units in mainland China. The remainder of our franchise units operate under store-level franchise agreements.
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.
Human Capital Management As of December 31, 2025, the Company and its subsidiaries employed approximately 49,000 persons (collectively referred to throughout this filing as “our employees” or “YUM employees”), including approximately 28,000 employees in the U.S. and approximately 21,000 employees outside the U.S. Approximately 90% of our employees work in restaurants while the remainder work in our restaurant-support centers.
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.
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. 5 Digital sales include transactions where consumers at system restaurants utilize ordering interaction that is primarily facilitated by automated technology.
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’s policy is to pursue registration of important marks whenever feasible and to challenge any infringement of our marks vigorously. 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 terms franchise or franchisee within this Form 10-K are meant to describe third parties that operate units under either franchise or license agreements.
The terms franchise or franchisee within this Form 10-K are meant to describe third parties that operate units under either franchise or license agreements. In 2025, we began a review of strategic options for the Pizza Hut brand.
Taco Bell The first Taco Bell restaurant was opened in 1962 by Glen Bell in Downey, California, and in 1964, the first Taco Bell franchise was sold. Taco Bell specializes in Mexican-style food products, including various types of tacos, burritos, quesadillas, salads, nachos and other related items.
Taco Bell specializes in Mexican-style food products, including various types of tacos, burritos, quesadillas, salads, nachos and other related items. 3 Pizza Hut The first Pizza Hut restaurant was opened in 1958 in Wichita, Kansas, and within a year, the first franchise unit was opened.
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.
We are continuing to build a culture of opportunity and belonging among our employees, franchisees, suppliers and partners that makes room for all people and voices at our tables that reflects the customers and communities we serve, which we believe provides us with a competitive advantage with respect to the performance of our business.
Human capital management considerations are integral to our Recipe for Good Growth strategy, the drivers of which include leveraging our culture and people capability to fuel brand performance and franchise success, as well as recruiting and equipping the best restaurant operators in the world to deliver great customer experiences.
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. 7 Human capital management considerations are integral to our Recipe for Good Growth strategy, the drivers of which include leveraging our unrivaled culture and talent to fuel brand performance and franchise success, as well as recruiting and equipping the best restaurant operators in the world to deliver great customer experiences.
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 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 Company seeks to maintain strong and open relationships with our franchisees and their representatives. To this end, the Company invests a significant amount of time working with the franchisee community and their representative organizations on key aspects of the business, including products, technology, equipment, operational improvements and standards.
To this end, the Company invests a significant amount of time working with the franchisee community and their representative organizations on key aspects of the business, including products, technology, equipment, operational improvements and standards. Restaurant Operations Through its Concepts, YUM develops, operates and franchises a worldwide system of both traditional and non-traditional Quick Service Restaurants (“QSR”).
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.
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, 2025: Number of Units % of Units International Number of Countries and Territories % Franchised System Sales (a) (in Millions) KFC Division 33,897 90 % 149 99 % $ 36,434 Taco Bell Division 9,030 14 % 38 93 % 18,361 Pizza Hut Division 19,974 68 % 108 99 % 12,794 Habit Burger & Grill Division 384 — % 2 22 % 706 YUM 63,285 72 % 155 97 % $ 68,295 (a) Constitutes sales of all restaurants, both Company-owned and franchised.
The use by Yum China of certain of our material trademarks and service marks is governed by a master license agreement between Yum Restaurants Consulting (Shanghai) Company Limited, a wholly-owned indirect subsidiary of Yum China, and YUM, through YRI China Franchising LLC, a subsidiary of YUM.
The use by Yum China of certain of our material trademarks and service marks is governed by a master license agreement between subsidiaries of YUM and Yum China. The Company seeks to maintain strong and open relationships with our franchisees and their representatives.
Removed
Pizza Hut The first Pizza Hut restaurant was opened in 1958 in Wichita, Kansas, and within a year, the first franchise unit was opened.
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The objective of the review is to create value for YUM, Pizza Hut and its franchise partners by determining the optimal approach to best capitalize on Pizza Hut's structural advantages — strong brand equity, experienced franchise partners and meaningful scale — in the highly fragmented pizza market.
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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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We currently intend to complete this strategic options review in 2026, and there can be no assurance this review will result in any specific outcome or transaction.
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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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Taco Bell The first Taco Bell restaurant was opened in 1962 by Glen Bell in Downey, California, and in 1964, the first Taco Bell franchise was sold.
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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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Business Strategy Through our Recipe for Good Growth we strive to grow iconic restaurant brands around the world that are loved by our customers, trusted everywhere we operate and connected through teamwork, technology and our global scale.
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Restaurant Operations Through its Concepts, YUM develops, operates and franchises a worldwide system of both traditional and non-traditional Quick Service Restaurants (“QSR”). Traditional units can feature dine-in, carryout, drive-thru and delivery services.
Added
These three ideas - being loved, trusted and connected - guide how we operate across our global system and engage with our customers, teams and communities: Loved: We grow by delighting customers with craveable food and distinctive experiences. Trusted: We operate responsibly with consistency and efficiency in our restaurants, across our system and in our communities.
Removed
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.
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This includes a commitment to our priorities for social responsibility, risk management and sustainable stewardship of resources. Connected: We use our teamwork, technology and global scale to serve every customer, everywhere, anytime.
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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.
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As we enter into 2026, we intend to drive the next chapter of growth for YUM by Raising the B.A.R. through three clear priorities that reflect bold aspirations and a commitment to industry-leading performance: • B attle for the future consumer by staying relentlessly focused on their needs and wants. • A ccelerate restaurant unit economics for our franchisees and maximize performance of every restaurant, serving as a catalyst for new unit development and keeping our franchise system healthy. • R each the full potential of Byte by Yum! by effectively operating, innovating and expanding our connected platform built by restaurant operators for restaurant operators to unlock its full potential for our franchise partners and our business.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeHowever, if any governmental authority such as the NLRB were to adopt and implement a broader joint employer standard in the future under laws such as the NLRA in a manner that was determined to be applicable to franchise relationships, we or our Concepts could be liable or held responsible for unfair labor practices and other violations and could be required to engage in collective bargaining with representatives of the employees of our Concepts’ franchisees.
Biggest changeIn this regard, while the joint employer rule issued by the National Labor Relations Board (“NLRB”) under the prior administration, which would have provided for more expansive joint employer standards, is no longer in effect after having been vacated in federal court in 2024, in the event that the NLRB or other governmental authority were to implement a similar joint employer standard in the future that was determined to be applicable to franchise relationships, this could cause us or our Concepts to be held responsible for unfair labor practices and other violations and could require us to engage in collective bargaining with representatives of the employees of our Concepts’ franchisees.
Food or beverage-borne illnesses (that can be caused by food-borne pathogens such as E. coli, Listeria, Salmonella, Cyclospora and Trichinosis) and food safety issues (such as food tampering, contamination including with respect to allergens or adulteration) have occurred and may occur within our system from time to time.
Food or beverage-borne illnesses (that can be caused by food-borne pathogens such as E. coli, Listeria, Salmonella, Cyclospora and Trichinosis) and food safety issues (such as food tampering and contamination including with respect to allergens or adulteration) have occurred and may occur within our system from time to time.
The security and availability of our IT Systems and Confidential Information is critical to our business and regulated by evolving and increasingly demanding laws and regulations in various jurisdictions, certain third-party contracts and industry standards. The current cyber threat environment presents increased risk for all companies, including companies in our industry.
The security and availability of our IT Systems and Confidential Information is critical to our business and is regulated by evolving and increasingly demanding laws and regulations in various jurisdictions, certain third-party contracts and industry standards. The current cyber threat environment presents increased risk for all companies, including companies in our industry.
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.
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 the increased adoption of weight loss medications, our business and/or financial results may be adversely impacted.
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.
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 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.
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.
In this regard, we and our Concepts’ franchisees have been adversely impacted by, and may continue to be adversely impacted 22 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.
Any report linking our or our Concepts’ franchisees’ restaurants, our suppliers or distributors or otherwise involving the types of products used at our restaurants, or linking our competitors, suppliers, distributors or the retail food industry generally, to instances of food- or beverage-borne illness or food safety issues or substances having perceived health or environmental risks could result in adverse publicity and otherwise adversely affect us and possibly lead to consumer complaints, litigation and/or governmental investigations.
Any report linking our or our Concepts’ franchisees’ restaurants, our suppliers or distributors or otherwise involving the types of products used at our restaurants, or linking our competitors, suppliers, distributors or the retail food industry generally, to instances of food- or beverage-borne illness or food safety issues or substances having perceived health or environmental risks could result in adverse publicity and otherwise adversely affect us and lead to consumer complaints, litigation and/or governmental investigations.
Moreover, if negative macroeconomic conditions result in significant disruptions to capital and financial markets, or negatively impact our credit ratings, our cost of borrowing, our ability to access capital on favorable terms and our overall liquidity and capital structure could be adversely impacted. 22 Risks Related to Competition The retail food industry is highly competitive.
Moreover, if negative macroeconomic conditions result in significant disruptions to capital and financial markets, or negatively impact our credit ratings, our cost of borrowing, our ability to access capital on favorable terms and our overall liquidity and capital structure could be adversely impacted. Risks Related to Competition The retail food industry is highly competitive.
The rising popularity of social media and other consumer-oriented technologies has increased the speed and accessibility of information dissemination and given users the ability to more effectively organize collective actions such as boycotts and other brand-damaging behaviors. Many social media platforms immediately publish content, often without filters or checks on accuracy.
The rising popularity of social media and other consumer-oriented technologies has increased the speed and accessibility of information dissemination and given users the ability to more effectively organize collective actions such as boycotts and other brand-damaging behaviors. Many social media platforms immediately publish content, often without context, or filters or checks on accuracy.
Moreover, there may be a long-term trend toward higher wages in emerging markets as well as various other markets. In addition, increases in labor costs have also been driven by, and may continue to be driven by regulatory requirements to raise minimum wages, including in connection with the increases in minimum wages that have recently been enacted in various jurisdictions.
Moreover, there may be a long-term trend toward higher wages in emerging markets as well as various other markets. In addition, increases in labor costs have been driven by, and may continue to be driven by regulatory requirements to raise minimum wages, including in connection with the increases in minimum wages that have recently been enacted in various jurisdictions.
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.
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.
Any failure to realize the expected benefits of key franchise relationships, including with Yum China, may adversely impact our business and growth prospects. Our growth strategy depends upon our and our franchisees ’ ability to successfully open new restaurants and to operate these restaurants profitably.
Any failure to realize the expected benefits of key franchise relationships, including with Yum China, may adversely impact our business and growth prospects. Our growth strategy depends upon our and our Concepts’ franchisees ’ ability to successfully open new restaurants and to operate these restaurants profitably.
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.
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 14 employment practices and in digitally marketing our Concepts), data collected from minors, and biometric information.
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, 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.
In addition, our restaurant operations are highly service-oriented, and our success depends in part on our and our Concepts’ franchisees’ ability to attract, retain and motivate a sufficient number of qualified employees, including franchisee management, restaurant managers and other crew members.
Our restaurant operations are highly service-oriented, and our success depends in part on our and our Concepts’ franchisees’ ability to attract, retain and motivate a sufficient number of qualified employees, including franchisee management, restaurant managers and other crew members.
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.
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; limiting our ability to repay, refinance or satisfy our existing debt obligations, as well as 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 or 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.
Yum China’s business is exposed to risks in mainland China, which include, among others, potential political, financial and social instability, changes in economic conditions (including consumer spending, unemployment levels and ongoing wage and commodity inflation), consumer preferences, the regulatory environment (including uncertainties with respect to the interpretation and enforcement of Chinese laws, rules and regulations), heightened data and cybersecurity risks associated with the conduct of business in China, and food safety related matters (including compliance with food safety regulations and ability to ensure product quality and safety).
Yum China’s business is exposed to risks in mainland China, which include, among others, potential political, trade, financial and social instability, changes in economic conditions (including consumer spending, unemployment levels and ongoing wage and commodity inflation), consumer preferences, the regulatory environment (including uncertainties with respect to the interpretation and enforcement of Chinese laws, rules and regulations), heightened data and cybersecurity risks associated with the conduct of business in China, and food safety related matters (including compliance with food safety regulations and our ability to ensure product quality and safety).
In addition, various legislative and regulatory efforts to combat climate change may increase in the future, which could result in additional taxes, increased compliance costs, and otherwise disrupt and adversely impact us and our franchisees.
In addition, various legislative and regulatory efforts to combat climate change may increase in the future, which could result in additional taxes, increased compliance costs, and otherwise disrupt and adversely impact us and our Concepts’ franchisees.
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 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 restaurants and to operate these restaurants profitably.
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.
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 policy, the inability of suppliers 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.
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.
The inability to recruit and retain a sufficient number of qualified individuals at the store level, coupled with increased labor costs, 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.
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.
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.
The Federal Trade Commission (“FTC”) and many state attorneys general are also interpreting federal and state consumer protection laws to impose standards for the collection, use, dissemination and security of data.
The Federal Trade Commission (“FTC”) and many state attorneys general are also interpreting federal and state consumer protection laws to impose standards for the collection, use, dissemination and security of personal data.
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.
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 the country.
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.
The loss of key personnel, labor shortages and increased labor costs could adversely affect our business. 17 Much of our future success depends on the continued availability and service of senior management personnel.
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.
While 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.
For 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.
For 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 environment of opportunity and belonging 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.
Our marketing and advertising programs may not be as successful as intended, or may not be as successful as our competitors, which may adversely affect our reputation and business.
Our marketing and advertising programs may not be as successful, or may not be successful as our competitors, which may adversely affect our reputation and business.
We are regularly the target of cyber-attacks and other attempts to breach, or gain unauthorized access to, our systems and databases. Moreover, given the current cyber threat environment, we expect the volume and intensity of cyber-attacks and attempted intrusions to continue to increase.
We are regularly the target of cyber-attacks and other attempts to breach, or gain unauthorized access to, our systems and data. Moreover, given the current cyber threat environment, we expect the volume and intensity of cyber-attacks and attempted intrusions to continue to increase.
Additional risks include the impact of trade disputes, restrictive actions of foreign or U.S. governmental authorities affecting trade or foreign investment, potential increases in tariffs, import restrictions and controls, sanctions, foreign exchange control regimes (including restrictions on currency conversion), health guidelines and safety protocols, labor costs and conditions, compliance with the U.S. Foreign Corrupt Practices Act, the U.K.
Additional risks include the impact of trade disputes and tariffs, restrictive actions of foreign or U.S. governmental authorities affecting trade or foreign investment, import restrictions and controls, sanctions, foreign exchange control regimes (including restrictions on currency conversion), health guidelines and safety protocols, labor costs and conditions, compliance with the U.S. Foreign Corrupt Practices Act, the U.K.
An increase in food prices and other operating costs may have an adverse impact on our business and/or our growth prospects. Our and our Concepts’ franchisees’ businesses depend on reliable sources of large quantities of raw materials such as proteins (including poultry, pork, beef and seafood), cheese, oil, flour and vegetables (including potatoes and lettuce).
An increase in food prices and other operating costs may adversely impact our business and/or our growth prospects. Our and our Concepts’ franchisees’ businesses depend on reliable sources of large quantities of raw materials such as proteins (including poultry, pork, beef and seafood), cheese, oil, flour and vegetables (including potatoes and lettuce).
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.
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, respond to an extortion demand, recover lost data, prevent future compromises and adapt systems and practices in response to such events.
While we have established procedures to manage individual privacy requests from consumers and employees intended to ensure compliance with privacy laws, there remains potential residual risk of failure to comply with comprehensive privacy laws passed at the international, federal or state level and this may result in regulatory enforcement action, lawsuits, the imposition of monetary penalties, and damage our reputation.
While we have established procedures to manage individual privacy requests from consumers and employees intended to ensure compliance with privacy laws, there remains potential residual risk of failure to comply with comprehensive privacy laws passed at the international, federal or state level and this may result in regulatory enforcement action, lawsuits, the imposition of monetary penalties, and damage to our reputation, or require us to modify our operations.
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, third-party delivery aggregators typically charge restaurants a per order fee, and as such utilizing third-party delivery may not be as profitable as sales directly to our customers, and may also introduce food quality and customer satisfaction risks outside of our control.
Despite our security measures, we, and the third parties upon which we rely, have experienced security incidents from time to time and we and such third parties will continue to experience such incidents in the future.
Despite such security measures and processes, we, and the third parties upon which we rely, have experienced security incidents from time to time and we and such third parties will continue to experience such incidents in the future.
Certain IT Systems which are managed, hosted, provided and/or used by third parties may also be unreliable or inefficient, and technology vendors may limit or terminate product support and maintenance, which could impact the reliability of critical systems’ operations.
In addition, certain IT Systems that are managed, hosted, provided and/or used by third parties may also be unreliable or inefficient, and technology vendors may limit or terminate product support and maintenance, which could impact the reliability of critical systems’ operations.
Further, these goals may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, assumptions that are subject to change, and other risks and uncertainties, many of which are outside of our control.
Further, these goals may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and other risks and uncertainties, many of which are outside of our control.
In addition, we and other parties (such as vendors and franchisees), collect, transmit and/or maintain certain personal, financial and other information about our customers, employees, vendors and franchisees, as well as proprietary information pertaining to our business (collectively, “Confidential Information”).
In addition, we and other parties (such as vendors, food delivery aggregators and franchisees), collect, transmit and/or maintain certain personal, financial and other information about our customers, employees, vendors and franchisees, as well as proprietary information pertaining to our business (collectively, “Confidential Information”).
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.
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, particularly if located in regions where we have significant operations.
There is also a risk that we or our Concepts’ franchisees’ restaurants, suppliers or distributors under report food safety incidents or system failures, which could hinder response and tracking of such risks.
There is also a risk that we or our Concepts’ franchisees’ restaurants, suppliers or distributors underreport food safety incidents or system failures, which could hinder response and tracking of such risks.
In addition, business or other incidents, whether isolated or recurring, and whether originating from us, our Concepts’ restaurants, franchisees, competitors, governments, suppliers or distributors, can significantly reduce brand value and consumer perception, particularly if the incidents receive considerable publicity or result in litigation or investigations.
In addition, business or other incidents, whether isolated or recurring, and whether originating from us, our Concepts’ restaurants, franchisees, competitors, governments, third-party delivery providers, suppliers or distributors, can significantly reduce brand value and consumer perception, particularly if the incidents receive considerable publicity or result in litigation or investigations.
In addition to the foregoing, many states (including California) have enacted or are considering legislation regarding, or otherwise increased their focus on, the misclassification of independent contractors, which could have an adverse impact on and disrupt the operations of our Concepts' restaurants in other ways, such as costs relating to delivery aggregators or certain staff augmentation models.
In addition to the foregoing, many jurisdictions (including California) have enacted or have considered legislation regarding, or otherwise increased their focus on, the misclassification of independent contractors, which could have an adverse impact on and disrupt the operations of our Concepts' restaurants in other ways, such as costs relating to delivery aggregators or certain staff augmentation models.
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.
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 interest rate conditions, in markets in which we operate.
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.
If our or our Concepts’ franchisees’ data, processes and reporting with respect to ESG 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.
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.
Family and Medical Leave Act, laws related to workplace health and safety, meal and rest breaks, exempt classification, non-discrimination, non-harassment, and whistleblower protections, and laws related to union organizing rights and activities; 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 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 international trade and sanctions, tariffs, and currency conversion or exchange; anti-bribery and anti-corruption laws, including the U.S.
As disclosed under Part I, Item 1C of this Form10-K, we remain subject to risks and uncertainties as a result of the incident, including as a result of the data that was taken from the Company’s network and putative class actions filed against us in connection with this incident.
As disclosed under Part I, Item 1C of this Form 10-K, we remain subject to risks and uncertainties as a result of the incident, including as a result of the data that was taken from our network and putative class actions filed against us in connection with this incident.
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.
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, reputational damage, fines and assessments from the card brands, and significantly higher credit card and debit card related costs, any of which could adversely affect us.
Should customers become unable to access mobile payment apps in China, should the relationship between Yum China and one or more third-party mobile payment processors become interrupted, or should Yum China’s ability to use Alipay, WeChat Pay, Union Pay or other third-party mobile payment apps in its operations be restricted, its business could be adversely affected, which could have a negative impact on the license fee paid to us.
Should customers become unable to access mobile payment apps in China, should the relationship between Yum China and one or more third-party mobile payment processors become interrupted, or should Yum China’s ability to use such third-party mobile payment apps in its operations be restricted, its business could be adversely affected, which could have a negative impact on the license fee paid to us.
However, because we and our Concepts’ franchisees provide competitively priced food, we have not always been able to pass through to our customers the full amount of our cost increases or otherwise fully mitigate the cost increases experienced by us or our Concepts’ franchisees.
However, because we and our Concepts’ franchisees provide competitively priced food, we have not always been able to pass through to our customers the full amount of cost increases experienced by us and our Concepts’ franchisees.
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.
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, or subject us or our Concepts’ franchisees to penalties or litigation.
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.
These risks, which can vary substantially by country, include political, financial or social instability or conditions, corruption, 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 related to the enforceability of legal requirements and contract and intellectual property rights), and income and non-income based tax rates and laws.
Our trademarks, many of which are registered in various jurisdictions, create brand awareness and help build goodwill among our customers. We rely on a combination of legal protections provided by trademark registrations, contracts, copyrights, patents and common law rights, such as unfair competition, passing off and trade secret laws to protect our intellectual property from potential infringement.
Our 16 trademarks, many of which are registered in various jurisdictions, create brand awareness and help build goodwill among our customers. We rely on a combination of legal protections, including trademark registrations, contractual terms, copyrights, patents and common law rights, such as unfair competition, passing off and trade secret laws to protect our intellectual property from potential infringement.
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.
Other risks that could impact our ability to open new restaurants include: (i) economic conditions and trade policy 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) consumer sentiment related to our Concepts, and (vi) supply chain challenges, including our ability to secure sufficient supply to support new restaurants.
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.
Any failure or alleged failure to comply with applicable legal requirements 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.
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.
As of December 31, 2025, our total outstanding short-term borrowings and long-term debt was approximately $12.0 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.
The vast majority (98%) of our restaurants are operated by our Concepts’ franchisees. Our long-term growth depends on maintaining the pace of our new unit growth rate largely through our Concepts’ franchisees. We also rely on master franchisees, who have rights to license to sub-franchisees the right to develop and operate restaurants, to achieve our expectations for new unit development.
Our long-term growth depends on maintaining the pace of our new unit growth rate largely through our Concepts’ franchisees. We also rely on master franchisees, who have rights to license to sub-franchisees the right to develop and operate restaurants, to achieve our expectations for new unit development.
While we disagree with the position of the IRS and intend to contest it vigorously, an unfavorable resolution of this matter could have a material, adverse impact on our Consolidated Financial Statements in future periods.
While we disagree with the position of the IRS and are contesting it vigorously, an unfavorable resolution of this matter could have a material, adverse impact on our Consolidated Financial Statements in future periods.
In addition, the rapid evolution and increased adoption of AI and other emerging technologies also may heighten our cybersecurity risks by making cyber-attacks and social engineering more difficult to detect, contain and mitigate.
In addition, the rapid evolution and increased adoption of artificial intelligence (“AI”) and other emerging technologies may heighten our cybersecurity risks by making cyber-attacks and social engineering more difficult to detect, contain and mitigate.
For example, as disclosed in Note 20, as a result of an audit by the IRS for fiscal years 2013 through 2015, in August 2022, we received a Revenue Agent’s Report that includes a proposed adjustment for the 2014 fiscal year relating 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.
For example, as disclosed in Note 20, as a result of an audit by the IRS for fiscal years 2013 through 2015, the IRS has proposed an adjustment for the 2014 fiscal year relating 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.
Moreover, this scrutiny could lead to increased regulation of the content or marketing of our products, including legislation or regulation taxing and/or regulating food with high-fat, sugar and salt content, or foods otherwise deemed to be “unhealthy,” which may increase costs of compliance and remediation to us and our Concepts’ franchisees.
Moreover, this scrutiny could lead to increased regulation of the content or marketing of our products, including legislation or regulation taxing and/or regulating food with high-fat, sugar and salt content, or foods otherwise deemed to be “unhealthy”, such as ultra-processed foods, which may increase costs of compliance and remediation to us and our Concepts’ franchisees.
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.
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; and laws related to public company compliance, disclosure and governance matters.
We regard our registered trademarks (e.g., Yum®, KFC®, Taco Bell®, Pizza Hut® and The Habit®), unregistered trademarks, copyrightable works, inventions, software, domain names, and trade secrets related to our restaurant businesses as having significant value and being important to our marketing efforts.
We regard our registered trademarks (e.g., Yum! Brands®, KFC®, Taco Bell®, Pizza Hut® and Habit®), unregistered trademarks, copyrightable works, inventions, software, domain names, proprietary technologies (such as Byte by Yum!) and trade secrets related to our restaurant businesses as having significant value and being important to our marketing efforts.
There has been a marked increase in the use of social media platforms, including blogs, chat platforms, social media websites, and other forms of Internet-based communications which allow individuals access to a broad audience of consumers and other interested persons.
There has been a marked increase in the use of social media platforms and websites, including blogs, chat and messaging platforms, video-sharing platforms, and other forms of Internet-based communications which allow individuals access to a broad audience.
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.
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 adversely impact our reputation, growth prospects, and financial results.
The third-party delivery business is also the subject of increased scrutiny from regulators, which may result in additional costs and expenses that the third-party delivery businesses and aggregators may seek to pass through to participating restaurants or otherwise adversely impact such restaurants.
The third-party delivery business is also the subject of increased scrutiny from regulators, which may result in additional expenses that the third-party delivery businesses and aggregators may seek to pass through to participating restaurants.
Past and potential future strategic transactions may involve various inherent risks, including, without limitation: • expenses, delays or difficulties in integrating acquired companies, joint ventures, strategic partnerships or investments into our organization, including the failure to realize expected synergies and/or the inability to retain key personnel; • diversion of management’s attention from other initiatives and/or day-to-day operations to effectively execute our growth strategy; • inability to generate sufficient revenue, profit, and cash flow from acquired companies, joint ventures, strategic partnerships or investments; • the possibility that we have acquired substantial contingent or unanticipated liabilities in connection with acquisitions or other strategic transactions; and • the possibility that our interests and strategic direction do not align with those of acquired companies or other parties that maintain an interest in our investments.
Past and potential future strategic transactions may involve various inherent risks, including, without limitation: (i) expenses, delays or difficulties in integrating acquired companies, joint ventures, strategic partnerships or investments into our organization, including the failure to realize strategic alignment or expected synergies and/or the inability to retain key personnel; (ii) diversion of management’s attention from other initiatives and/or day-to-day operations to effectively execute our growth strategy; (iii) inability to generate sufficient revenue, profit, and cash flow from acquired companies, joint ventures, strategic partnerships or investments; and (iv) the possibility that we have acquired substantial contingent or unanticipated liabilities in connection with acquisitions or other strategic transactions.
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.
Our Concepts and their franchisees have experienced and may continue to experience labor shortages and employee turnover at many restaurants and increased competition for qualified employees.
These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, an increase in expenses and management focus associated with satisfying such regulations and expectations.
These rules, regulations and stakeholder expectations which may be conflicting, have resulted in, and are likely to continue to result in, an increase in expenses and management focus associated with satisfying such regulations and expectations.
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.
If our IT Systems or the information systems of any of our Concepts’ 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 fraud, 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 13 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, disrupt our supply chain, business and plans, result in the loss, misappropriation, corruption or unauthorized access, acquisition, use or disclosure of data or inability to access data, including the release of Confidential Information, and subject us to litigation and government enforcement actions.
There can be no assurance that the steps we have taken to protect our intellectual property or the legal protections that may be available will be adequate or that our Concepts’ franchisees will maintain the quality of the goods and services offered under our brands’ trademarks or always act in accordance with guidelines we set for maintaining our brands’ intellectual property rights and defending or enforcing our trademarks and other intellectual property could result in significant expenditures.
There can be no assurance that the steps we have taken to protect our intellectual property or the legal protections that may be available will be adequate or that our Concepts’ franchisees will maintain the quality of the goods and services offered under our brands’ trademarks or always act in accordance with guidelines we set for maintaining our brands’ intellectual property rights, including proprietary technology.
The rapid acceleration in growth of digital sales has placed additional stress on those platforms that are more reliant upon legacy technology, such as certain platforms used by Pizza Hut, which may result in more frequent and potentially more severe interruptions.
The rapid acceleration in growth of digital sales has placed additional stress on those platforms that are more reliant upon legacy technology, which may result in more frequent and potentially more severe interruptions.
These IT Systems are subject to damage, interruption or failure due to theft, fire, power outages, telecommunications failure, computer viruses, employee misuse, security breaches, malicious cyber-attacks including the introduction of malware or ransomware or other disruptive behavior by hackers, or other catastrophic events.
These IT Systems, including our proprietary Byte By Yum! platform and third-party technology systems, are subject to damage, interruption or failure due to theft, fire, power outages, telecommunications failure, computer viruses, employee misuse, security breaches, malicious cyber-attacks including the introduction of malware or ransomware or other disruptive behavior by hackers, or other catastrophic events.
Foreign currency risks and foreign exchange controls could adversely affect our financial results. Our results of operations, growth prospects and the value of our assets are affected by fluctuations in currency exchange rates, which have had, and may continue to have adverse effects on our reported earnings.
Our results of operations, growth prospects and the value of our assets are affected by fluctuations in currency exchange rates, which have had, and may continue to have adverse effects on our reported earnings.
Although our policy is to challenge infringements and other unauthorized uses of our intellectual property, certain or unknown unauthorized uses or other misappropriation of our trademarks and other intellectual property could diminish the value of our Concepts’ brands and adversely affect our business and goodwill.
Although our policy is to assess and, where appropriate, challenge infringements and other unauthorized uses of our intellectual property, certain known or unknown unauthorized uses or other misappropriation of our trademarks and other intellectual property may exist that could diminish the value of our Concepts’ brands and adversely affect our business and goodwill.
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.
These labor market conditions and the ongoing inflationary environment in markets where we operate have increased, 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 and due to increased overtime costs to meet demand.
Defending against such claims can be costly, and as a result of defending such claims, we may be prohibited from using such intellectual property or proprietary information in the future or forced to pay damages, royalties, or other fees for using such proprietary information, any of which could negatively affect our business, growth prospects, reputation and financial results.
Failure to adequately protect our intellectual property or defend against such claims could result in significant expenses or operational disruption, and as a result of such claims, we may be prohibited from using such intellectual property or proprietary information in the future or forced to pay damages, royalties, or other fees for using such proprietary information, any of which could negatively affect our business, growth prospects, reputation and financial results.
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.
Further, as a result of these expectations and requirements, as well as our commitment to ESG matters, we may continue to establish. expand or modify goals, commitments or targets, and take actions to meet such goals, commitments and targets.
Any failure to comply with such sanctions or other similar legal requirements could result in the imposition of damages or penalties, the suspension of business licenses, or a cessation of operations at our Concepts’ restaurants, as well as damage to our and our Concepts’ brand images and reputations.
Any failure to comply with such sanctions or other similar legal requirements could result in the imposition of damages or penalties, the suspension of business licenses, or a cessation of operations at our Concepts’ restaurants, as well as damage to our and our Concepts’ brand images and reputations. 12 Foreign currency risks and foreign exchange controls could adversely affect our financial results.
More specifically, an increase in the value of the U.S. dollar, relative to other currencies, such as the Chinese Renminbi (“RMB”), Australian Dollar, the British Pound and the Euro, as well as currencies in certain other markets have had and could continue to have an adverse effect on our reported earnings.
More specifically, an increase in the value of the U.S. dollar, relative to other currencies, such as the Chinese Renminbi (“RMB”), Australian Dollar, the British Pound and the Euro, as well as currencies in certain other markets have historically affected and may continue to affect our reported earnings.
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, some stakeholders and governmental authorities may object to the scope or nature of our ESG 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 authorities (such as retaliatory legislative actions or regulatory investigations or proceedings) or consumers (such as boycotts, lawsuits or negative publicity campaigns) that could adversely affect us or our brand value.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition, although data was taken from our network, the affected data was limited to certain personal information of former and current employees, and we have no evidence that customer databases were accessed. We have incurred, and may continue to incur, certain expenses related to this attack, including expenses to respond to, remediate and investigate this matter.
Biggest changeIn addition, although data was taken from our network, the affected data was limited to certain personal information of former and current employees, and we have no evidence that customer databases were accessed.
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.
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 (97%) of our restaurants are owned and operated by franchisees who themselves are at risk of cyber-attacks or security incidents.
As part of these processes, we conduct cybersecurity due diligence around significant third-party service providers who access our information technology systems before their engagement. We require third-party service providers to promptly notify us of any actual or suspected breach impacting our data or operations.
As part of these processes, we conduct cybersecurity due diligence around significant third-party service providers who access our information technology systems before and/or during their engagement. We require third-party service providers to promptly notify us of any actual breach impacting our data or operations.
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.
Additionally, we seek to obtain 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.
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.
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. There is limited direct connectivity between the networks that the Company manages and the networks which our franchisees manage.
In addition, several separate putative class actions have been filed in U.S. federal and state court by current and/or former employees alleging violations of privacy and other rights in connection with the ransomware incident.
Several separate putative class actions have been filed in U.S. federal and state court by current and/or former employees alleging violations of privacy and other rights in connection with the ransomware incident. As a result, we have incurred and may continue to incur expenses relating to this litigation.
The Audit Committee oversees the Company’s business and financial technology risk exposure, which includes data privacy and data protection, information security and cybersecurity, as well as the controls in place to monitor and mitigate these risks. At a management level, our Program is led by our CISO, who reports to the Company’s Chief Digital and Technology Officer.
The Audit Committee oversees the Company’s business and financial technology risk exposure, which includes data privacy and data protection, information security and cybersecurity, as well as the controls in place to monitor and mitigate these risks.
The Audit Committee provides a summary to the full Board at each regular Board meeting of the information security risk review together with any other risk related subjects discussed at the Audit Committee meeting.
The Audit Committee provides a summary to the full Board at each regular Board meeting of the information security risk review together with any other risk related subjects discussed at the Audit Committee meeting. At a management level, our Program is led by our CISO, who reports to the Company’s Chief Digital and Technology Officer.
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.
We have established minimum information security standards for our franchisees through our Franchise Agreement Policy Manuals and Brand Standards. Those minimum information security standards are reviewed and updated on a regular basis and franchisees are given time to adjust and comply with changes as they occur.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe YUM corporate headquarters and a KFC research facility in Louisville, Kentucky are owned by KFC. Additional information about the Company’s properties is included in the Consolidated Financial Statements in Part II, Item 8. 25 The Company believes that its properties are generally in good operating condition and are suitable for the purposes for which they are being used.
Biggest changeLeased buildings in Louisville, Kentucky contain the YUM corporate headquarters. Additional information about the Company’s properties is included in the Consolidated Financial Statements in Part II, Item 8. 25 The Company believes that its properties are generally in good operating condition and are suitable for the purposes for which they are being used.
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.
The Company currently also owns land, building or both related to approximately 400 franchise restaurants that it leases to franchisees and leases land, building or both related to approximately 225 franchise restaurants that it subleases to franchisees, principally in the U.S., United Kingdom, Germany and Australia.
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.
These restaurants are further detailed as follows: • The KFC Division owned land, building or both for 119 restaurants. • The Taco Bell Division owned land, building or both for 393 restaurants. • The Pizza Hut Division owned land, building or both for 2 restaurants.
Item 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.
Item 2. Properties. As of year end 2025, the Company’s Concepts owned land, building or both for 514 restaurants worldwide in connection with the operation of our 1,617 Company-owned restaurants.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeHe 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.
Biggest changeHe joined the Taco Bell brand in January 2022 as Chief Brand Officer. Previously he spent 15 years at Nike, most recently as Chief Marketing Officer of the Jordan Brand. Executive officers are elected by and serve at the discretion of the Board of Directors. 27 PART II
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.
Aaron Powell, 54, 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.
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.
She has served as Chief Operating Officer since January 2021 and Chief People & Culture Officer since January 2016. 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.
Before joining YUM, he served as Senior Vice President and General Manager in PepsiCo’s retail and e-commerce businesses with Walmart in the U.S. and more than 25 countries and across PepsiCo’s brands from December 2017 to July 2019.
Prior to that, he served as YUM's Chief Financial Officer since August 2019 and YUM's Chief Franchise Officer since November 2024. Before joining YUM, he served as Senior Vice President and General Manager in PepsiCo’s retail and e-commerce businesses with Walmart in the U.S. and more than 25 countries and across PepsiCo’s brands from December 2017 to July 2019.
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.
Item 4. Mine Safety Disclosures. Not applicable. Executive Officers of the Registrant. The executive officers of the Company as of February 20, 2026, and their ages and current positions as of that date are as follows: Christopher Turner , 51, is Chief Executive Officer of YUM, a position he has held since October 2025.
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.
Prior to his current role, he served as President of Taco Bell North America and International from December 2023 to February 2025, as President of Taco Bell North America from September 2023 to November 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.
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.
Prior to this role he spent 15 years with Goldman Sachs. 26 David Russell , 56, 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.
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
Since joining the Company in 2004, Mr. 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.
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.
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. Tracy Skeans, 53, is Chief Operating Officer and Chief People & Culture Officer of YUM.
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.
Finance team from September 2000 to June 2009. Sean Tresvant , 55, is Chief Executive Officer of Taco Bell Division and Chief Consumer Officer of YUM, positions he has held since January 2024 and September 2025, respectively. Prior to this he was the Global Chief Brand and Strategy Officer of Taco Bell from February 2023 to December 2023.
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.
Prior to joining PepsiCo, he was a partner in the Dallas office of McKinsey & Company, a strategic management consulting firm. Erika Burkhardt , 52, is Chief Legal Officer and Corporate Secretary of YUM. She has served in this position since November 2024.
Effective March 1, 2025, he will become the Chief Executive Officer of KFC Division.
Scott Mezvinsky , 50, is Chief Executive Officer of KFC Division, a position he has held since March 2025.
Removed
Prior to that, he served as President and Chief Operating Officer from August 2019 to December 2019, as President, Chief Financial Officer and Chief Operating Officer from January 2019 to August 2019 and as President and Chief Financial Officer from May 2016 to December 2018.
Added
Ranjith Roy , 45, is Chief Financial Officer of YUM, a position he has held since October 2025. Prior to that, he was YUM's Chief Strategy Officer and Treasurer. Before joining YUM in May 2024, he served as Chief Financial Officer of the e-commerce marketplace Goldbelly from May 2021 to May 2024.
Removed
Prior to these positions, he served as Chief Executive Officer of Pizza Hut Division from January 2015 to April 2016. From January 2014 to December 2014, Mr. Gibbs served as President of Pizza Hut U.S. Prior to this position, Mr. Gibbs served as President and Chief Financial Officer of Yum! Restaurants International, Inc. (“YRI”) from May 2012 through December 2013.
Removed
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.
Removed
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.
Removed
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.
Removed
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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) 10/1/25 - 10/31/25 — $ — — $ 1,238 11/1/25 - 11/30/25 528 $ 150.06 528 $ 1,159 12/1/25 - 12/31/25 671 $ 148.00 671 $ 1,059 Total 1,199 $ 148.91 1,199 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, 2020 to December 31, 2025.
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.
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, 2025, we have remaining capacity to repurchase up to $1.1 billion of Common Stock under this authorization.
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.
Issuer Purchases of Equity Securities The following table provides information as of December 31, 2025, with respect to shares of Common Stock repurchased by the Company during the quarter then ended.
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.
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, 2026, there were 30,435 registered holders of record of the Company’s Common Stock.
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.
In 2025, the Company declared and paid four cash dividends of $0.71 per share. In February 2026, the Company’s Board of Directors declared a dividend of $0.75 per share to be distributed March 6, 2026, to shareholders of record at the close of business on February 20, 2026.
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
The graph assumes that the value of the investment in our Common Stock and each index was $100 at December 31, 2020, and that all cash dividends were reinvested. 12/30/2020 12/31/2021 12/30/2022 12/29/2023 12/31/2024 12/31/2025 YUM $ 100 $ 130 $ 122 $ 127 $ 133 $ 153 S&P 500 $ 100 $ 129 $ 105 $ 133 $ 166 $ 196 S&P Consumer Discretionary $ 100 $ 124 $ 78 $ 112 $ 145 $ 154 Source of total return data: Bloomberg

Item 7. Management's Discussion & Analysis

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

97 edited+49 added−34 removed65 unchanged
Biggest changeThis 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.
Biggest changeFor discussion of our results of operations for 2024 compared to 2023, 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, 2024, filed with the SEC on February 19, 2025. 32 2025 financial highlights: % Change System Sales, ex FX Same-Store Sales Units GAAP Operating Profit Core Operating Profit KFC Division +5 +3 +6 +10 +9 Taco Bell Division +7 +7 +3 +8 +8 Pizza Hut Division (3) (1) (1) (9) (9) Worldwide +4 +3 +3 +7 +5 Results Excluding 53rd Week (% Change) System Sales, ex FX Core Operating Profit KFC Division +6 +10 Taco Bell Division +8 +10 Pizza Hut Division (2) (8) Worldwide +5 +7 Additionally: • Gross unit openings for the year were 4,567 units resulting in 1,939 net new units. • Foreign currency translation favorably impacted Divisional Operating Profit in our KFC Division by $12 million for the year ended December 31, 2025. 2025 2024 % Change GAAP EPS $5.55 $5.22 +6 Special Items EPS $(0.50) $(0.26) NM EPS Excluding Special Items $6.05 $5.48 +10 • In 2024, the 53rd week favorably impacted EPS by approximately $0.09 per share. 33 Worldwide GAAP Results Amount % B/(W) 2025 2024 2023 2025 2024 Company sales $ 2,945 $ 2,552 $ 2,142 15 19 Franchise and property revenues 3,473 3,295 3,247 5 1 Franchise contributions for advertising and other services 1,796 1,702 1,687 6 1 Total revenues 8,214 7,549 7,076 9 7 Company restaurant expenses $ 2,483 $ 2,120 $ 1,774 (17) (20) G&A expenses 1,262 1,181 1,193 (7) 1 Franchise and property expenses 140 134 123 (5) (8) Franchise advertising and other services expense 1,799 1,711 1,683 (5) (2) Refranchising (gain) loss (48) (34) (29) 42 16 Other (income) expense 2 34 14 NM NM Total costs and expenses, net 5,639 5,146 4,758 (10) (8) Operating Profit 2,574 2,403 2,318 7 4 Investment (income) expense, net (1) 21 (7) NM NM Other pension (income) expense (2) (7) (6) (71) 17 Interest expense, net 501 489 513 (2) 5 Income before income taxes 2,077 1,900 1,818 9 5 Income tax provision 518 414 221 (25) (88) Net Income $ 1,559 $ 1,486 $ 1,597 5 (7) Diluted EPS (a) $ 5.55 $ 5.22 $ 5.59 6 (7) Effective tax rate 24.9 % 21.8 % 12.1 % (3.1) ppts.
Further, while we generally include depreciation and amortization of restaurant-level assets within Divisional Company restaurant expenses used to derive Divisional Company restaurant profit, we record amortization of reacquired franchise rights arising from acquisition accounting within Corporate and unallocated Company restaurant expenses as such amortization is not believed to be indicative of ongoing Divisional results as well as to enhance comparability of acquired stores’ margins with those of existing restaurants within Divisional results.
Further, while we generally include depreciation and amortization of restaurant-level assets within Divisional Company restaurant expenses used to derive Divisional Company restaurant profit, we record amortization of reacquired franchise rights arising from acquisition accounting within Corporate and unallocated Company restaurant expenses as such amortization is not believed to be indicative of ongoing Divisional results as well as to enhance comparability of acquired stores’ margins with those of existing restaurants.
KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Total Revenues Company sales $ 16 $ 21 $ — $ 9 $ 46 Franchise and property revenues 8 16 6 — 30 Franchise contributions for advertising and other services 4 11 5 — 20 Total revenues $ 28 $ 48 $ 11 $ 9 $ 96 Operating Profit Franchise and property revenues $ 8 $ 16 $ 6 $ — $ 30 Franchise contributions for advertising and other services 4 11 5 — 20 Restaurant profit 3 7 — 1 11 Franchise for advertising and other services expenses (4) (11) (5) — (20) G&A expenses (2) (2) (1) — (5) Operating Profit $ 9 $ 21 $ 5 $ 1 $ 36 41 Middle East Conflict During the fourth quarter of 2023, certain of our markets, principally in our KFC and Pizza Hut Divisions, began being impacted by a military conflict in the Middle East region.
KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Total Revenues Company sales $ 16 $ 21 $ — $ 9 $ 46 Franchise and property revenues 8 16 6 — 30 Franchise contributions for advertising and other services 4 11 5 — 20 Total revenues $ 28 $ 48 $ 11 $ 9 $ 96 Operating Profit Franchise and property revenues $ 8 $ 16 $ 6 $ — $ 30 Franchise contributions for advertising and other services 4 11 5 — 20 Restaurant profit 3 7 — 1 11 Franchise for advertising and other services expenses (4) (11) (5) — (20) G&A expenses (2) (2) (1) — (5) Operating Profit $ 9 $ 21 $ 5 $ 1 $ 36 Middle East Conflict During the fourth quarter of 2023, certain of our markets, principally in our KFC and Pizza Hut Divisions, began being impacted by a military conflict in the Middle East region.
Investment in Devyani During the quarter ended March 31, 2024, we sold our approximate 5% minority investment in Devyani International Limited ("Devyani"), a franchise entity that operates KFC and Pizza Hut restaurants in India, for pre-tax proceeds of $104 million.
Investment in Devyani During the quarter ended March 31, 2024, we sold our approximate 5% minority investment in Devyani International Limited (“Devyani”), a franchise entity that operates KFC and Pizza Hut restaurants in India, for pre-tax proceeds of $104 million.
On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S. (IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S. (IS Holding), after failure by IS Gida to meet our standards.
(d) On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S. (IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S. (IS Holding), after failure by IS Gida to meet our standards.
As a result, the percentage of a reporting unit’s goodwill that will be written off in a refranchising transaction will be less than the percentage of the reporting unit’s Company-owned restaurants that are refranchised in that transaction and goodwill can be allocated to a reporting unit with only franchise restaurants.
As a result, the percentage of a reporting unit’s goodwill that will be written off in a refranchising transaction will be less than the percentage of the reporting unit’s Company-owned restaurants that are refranchised in that transaction and 51 goodwill can be allocated to a reporting unit with only franchise restaurants.
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.
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.
Further, we pledged to redirect any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts. During the second quarter of 2022, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator.
Further, we pledged to redirect any future net profits attributable to Russia subsequent to the date of invasion to 38 humanitarian efforts. During the second quarter of 2022, we completed the transfer of ownership of the Pizza Hut Russia business to a local operator.
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.
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, 2025.
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.
This authorization took effect on July 1, 2024 upon the exhaustion of a prior authorization approved in September 2022. As of December 31, 2025, we have remaining capacity to repurchase up to $1.1 billion of Common Stock under this authorization. This authorization does not obligate the Company to acquire any specific number of shares.
(b) In the first quarter of 2022, as a result of the Russian invasion of Ukraine, we suspended all investment and restaurant development in Russia. We also suspended all operations of our 70 company-owned KFC restaurants in Russia and began finalizing an agreement to suspend all Pizza Hut operations in Russia, in partnership with our master franchisee.
(f) In the first quarter of 2022, as a result of the Russian invasion of Ukraine, we suspended all investment and restaurant development in Russia. We also suspended all operations of our 70 company-owned KFC restaurants in Russia and began finalizing an agreement to suspend all Pizza Hut operations in Russia, in partnership with our master franchisee.
However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we reclassed such net operating profits or losses from the Division segment results in which they were earned to Unallocated Other income (expense).
However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we reclassed such net operating profits or losses from the KFC segment results in which they were earned to Unallocated Other income (expense).
Our unrivaled culture and talent and leading with smart, heart and courage are key to our success, fueling brand performance and franchise success. We intend to drive long-term growth and shareholder returns primarily through consistent same-store sales growth and new unit development across all of our Concepts.
Key to our success fueling brand performance and franchise success is our unrivaled culture and talent and leading with smart, heart and courage. We intend to drive long-term growth and shareholder returns primarily through consistent same-store sales growth and new unit development across all of our Concepts.
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.
The fair values of all our reporting units with goodwill balances were in excess of their respective carrying values as of our fourth quarter 2025 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.
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.
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 ( “ EP ” ) 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; 31 • Core Operating Profit and, in 2024, Core Operating Profit excluding the 53rd week.
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%.
Debt Obligations and Interest Payments As of December 31, 2025, approximately 96%, including the impact of interest rate swaps, of our $11.5 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 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.
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 63,000 restaurants, 97% are operated by franchisees.
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.
Additionally, during the years ended December 31, 2025, 2024 and 2023, we recorded net refranchising gains of $47 million, $35 million and $34 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.
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.
The net periodic benefit cost we record 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.
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”).
Brands, Inc. and its subsidiaries (collectively referred to herein as the “Company”, “YUM”, “we”, “us” or “our”) franchise or operate a system of over 63,000 restaurants in 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and Habit Burger & Grill (collectively, the “Concepts”).
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.
During the years ended December 31, 2025, 2024 and 2023, we recorded net a refranchising gain of $1 million and net refranchising losses of $1 million and $5 million, respectively, that have been reflected as Special Items.
As a result, we recorded charges of $37 million to Unallocated Other (income) expense, $18 million to Unallocated Franchise and property revenues and $6 million to Corporate and unallocated General and administrative expenses consisting primarily of transaction costs associated with the German acquisition and termination-related costs associated with the Turkey business in the year ended December 31, 2024, that have been reflected as Special Items.
As a result, we recorded charges of $37 million to Unallocated Other (income) expense, $18 million to Unallocated Franchise and property revenues and $6 million to Corporate and unallocated General and administrative expenses consisting primarily of transaction costs associated with the German acquisition and termination-related costs associated with the Turkey business in year ended December 31, 2024.
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.
Our purchase obligations relate primarily to marketing, information technology and supply agreements. We have purchase obligations of approximately $450 million at December 31, 2025, with approximately $300 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 2024.
Over 99% of the Pizza Hut Division units were operated by franchisees as of the end of 2025.
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.
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, 2025, we had $115 million of unrecognized tax benefits, $103 million of which would impact the effective income tax rate if recognized.
Changes in the fair value of our ownership interest in Devyani prior to the date of sale resulted in pre-tax investment losses of $20 million in the year ended December 31, 2024 and pre-tax investment income of $8 million and $11 million in the years ended December 31, 2023 and 2022, respectively.
Changes in the fair value of our ownership interest in Devyani prior to the date of sale resulted in pre-tax investment losses of 42 $20 million in the year ended December 31, 2024 and pre-tax investment income of $8 million in the year ended December 31, 2023.
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.
This quarterly dividend will be distributed March 6, 2026, to shareholders of record at the close of business on February 20, 2026, and will total approximately $210 million. 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.
Subject to market conditions, we expect to maintain our consolidated net leverage ratio at its current level of approximately 4.0x Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") over the medium term by issuing incremental debt as our business grows.
Subject to market conditions, we expect to maintain our consolidated net leverage ratio at approximately 4.0x Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) over the medium term by issuing incremental debt as our business grows.
Operating and Finance Leases Payments required under our operating and finance leases total $1,355 million, of which $148 million is payable within the next 12 months. These amounts are on a nominal basis and include payments related to lease renewal options we are reasonably certain to exercise.
Operating and Finance Leases Payments required under our operating and finance leases total $2.0 billion, of which $190 million is payable within the next 12 months. These amounts are on a nominal basis and include payments related to lease renewal options we are reasonably certain to exercise.
(1.4) ppts. (1.5) ppts. 0.5 ppts. 0.6 ppts.
(0.1) ppts. — (1.5) ppts. (1.4) ppts. (1.5) ppts.
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.
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.
All Note references herein refer to the Notes to the Financial Statements. Tabular amounts are displayed in millions of U.S. dollars except per share and unit count amounts, or as otherwise specifically identified. Percentages may not recompute due to rounding. Yum!
All Note references herein refer to the Notes to the Financial Statements. Tabular amounts are displayed in millions of U.S. dollars except per share and unit count amounts, or as otherwise specifically identified.
(a) See Note 4 for the number of shares used in this calculation.
(9.7) ppts. (a) See Note 4 for the number of shares used in this calculation.
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.
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) 2025 2024 2025 2024 2023 Reported Ex FX Ex FX and 53rd Week in 2024 Reported Ex FX Ex FX and 53rd Week in 2024 System Sales $ 12,794 $ 13,108 $ 13,315 (2) (3) (2) (2) (1) (1) Same-Store Sales Growth (Decline) % (1) % (4) % 2 % N/A N/A N/A N/A N/A N/A Company sales $ 51 $ 8 $ 14 584 573 599 (45) (45) (47) Franchise and property revenues 602 622 622 (3) (3) (2) Even 1 Even Franchise contributions for advertising and other services 360 378 383 (5) (5) (4) (1) (1) (3) Total revenues $ 1,013 $ 1,008 $ 1,019 Even Even 1 (1) (1) (2) Company restaurant profit (loss) $ (1) $ — $ — NM NM NM NM NM NM Company restaurant margin % (1.4) % (0.6) % 0.1 % (0.8) ppts.
The estimation of future taxable income in these jurisdictions and our resulting ability to utilize deferred tax assets can significantly change based on future events, including our determinations as to feasibility of certain tax planning strategies and refranchising plans. Thus, recorded valuation allowances may be subject to material future changes.
The estimation of future taxable income in these jurisdictions and our resulting ability to utilize deferred tax assets can significantly change based on future events, including our determinations as to feasibility of certain tax planning strategies and refranchising plans.
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.
The Company owned 8% of the Taco Bell units in the U.S. as of the end of 2025. % B/(W) % B/(W) 2025 2024 2025 2024 2023 Reported Ex FX Ex FX and 53rd Week in 2024 Reported Ex FX Ex FX and 53rd Week in 2024 System Sales $ 18,361 $ 17,193 $ 15,915 7 7 8 8 8 6 Same-Store Sales Growth % 7 % 4 % 5 % N/A N/A N/A N/A N/A N/A Company sales $ 1,281 $ 1,155 $ 1,069 11 11 13 8 8 6 Franchise and property revenues 1,060 997 918 6 6 8 9 9 7 Franchise contributions for advertising and other services 754 708 654 7 7 8 8 8 7 Total revenues $ 3,095 $ 2,860 $ 2,641 8 8 10 8 8 7 Company restaurant profit $ 310 $ 283 $ 252 10 10 12 12 12 9 Company restaurant margin % 24.2 % 24.4 % 23.7 % (0.2) ppts.
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.
We will recognize approximately $2 million of this loss in 2026 consistent with the $2 million of loss recognized in 2025. Income Taxes At December 31, 2025, we had valuation allowances of $284 million to reduce our $1,713 million of deferred tax assets to amounts that are more likely than not to be realized.
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.
We intend to support this growth and development through a capital and operating structure that: 30 • 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 cash flow through share repurchases.
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.
Restaurants India Private Limited (“YRIPL”) and certain former 49 directors of approximately Indian Rupee 11 billion, or approximately $125, primarily relating to alleged violations of operating conditions imposed in 1993 and 1994.
Non-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.
Non-GAAP Items Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, are presented below. 2025 2024 2023 Core Operating Profit Growth % 5 9 12 Core Operating Profit Growth %, excluding the 53rd week 7 8 N/A Diluted EPS Growth %, excluding Special Items 10 6 14 Diluted EPS Growth %, excluding Special Items and the 53rd week 12 4 N/A Effective Tax Rate excluding Special Items 22.7 % 23.6 % 20.6 % Effective Tax Rate excluding Special Items and the 53rd week N/A 23.5 % N/A 2025 2024 2023 Company restaurant profit $ 461 $ 432 $ 368 Company restaurant margin % 15.7 % 16.9 % 17.2 % Year 2025 2024 2023 Reconciliation of GAAP Operating Profit to Core Operating Profit and Core Operating Profit, excluding the 53rd Week Consolidated GAAP Operating Profit $ 2,574 $ 2,403 $ 2,318 Detail of Special Items: (Gain) loss associated with market-wide refranchisings (a) (1) 1 5 Charges associated with Pizza Hut Strategic Options Review (b) 41 — — Charges associated with Brand HQ Consolidation (c) 27 — — German acquisition and Turkey termination-related costs (d) 9 61 — Charges associated with Resource Optimization (e) 38 79 21 Operating (profit) loss impact from decision to exit Russia (f) — — 11 Charges associated with TB U.S. restaurant acquisition (g) 7 — — Other Special Items (Income) Expense — — 2 Special Items Expense - Operating Profit 122 141 39 Negative (Positive) Foreign Currency Impact on Operating Profit (12) 28 N/A Core Operating Profit 2,684 2,572 2,357 Impact of 53rd Week Operating Profit N/A (36) N/A Core Operating Profit, excluding the 53rd Week $ 2,684 $ 2,536 $ 2,357 Special Items as shown above were recorded to the financial statement line items identified below: Year 2025 2024 2023 Consolidated Statement of Income Line Item Franchise and property revenues $ 7 $ 18 $ — General and administrative expenses 111 84 28 Franchise and property expenses — — 1 Refranchising (gain) loss (1) 1 5 Other (income) expense 5 38 5 Special Items Expense - Operating Profit $ 122 $ 141 $ 39 36 Year 2025 2024 2023 KFC Division GAAP Operating Profit $ 1,503 $ 1,363 $ 1,304 Negative (Positive) Foreign Currency Impact (12) 22 N/A Core Operating Profit 1,491 1,385 1,304 Impact of 53rd Week N/A (9) N/A Core Operating Profit, excluding the 53rd Week $ 1,491 $ 1,376 $ 1,304 Taco Bell Division GAAP Operating Profit $ 1,129 $ 1,049 $ 944 Negative (Positive) Foreign Currency Impact — — N/A Core Operating Profit 1,129 1,049 944 Impact of 53rd Week N/A (21) N/A Core Operating Profit, excluding the 53rd Week $ 1,129 $ 1,028 $ 944 Pizza Hut Division GAAP Operating Profit $ 340 $ 373 $ 391 Negative (Positive) Foreign Currency Impact — 6 N/A Core Operating Profit 340 379 391 Impact of 53rd Week N/A (5) N/A Core Operating Profit, excluding the 53rd Week $ 340 $ 374 $ 391 Habit Burger & Grill Division GAAP Operating Profit (Loss) $ (13) $ — $ (14) Negative (Positive) Foreign Currency Impact — — N/A Core Operating Profit (Loss) (13) — (14) Impact of 53rd Week N/A (1) N/A Core Operating Profit (Loss), excluding the 53rd Week $ (13) $ (1) $ (14) Reconciliation of GAAP Net Income to Net Income excluding Special Items and Net Income excluding Special Items and the 53rd week GAAP Net Income $ 1,559 $ 1,486 $ 1,597 Special Items (Income) Expense - Operating Profit 122 141 39 Special Items Tax (Benefit) Expense (h) 18 (66) (161) Net Income excluding Special Items 1,700 1,561 1,475 Impact of 53rd Week N/A (25) — Net Income excluding Special Items and the 53rd Week $ 1,700 $ 1,536 $ 1,475 Reconciliation of Diluted EPS to Diluted EPS excluding Special Items and Diluted EPS excluding Special Items and the 53rd Week Diluted EPS $ 5.55 $ 5.22 $ 5.59 Less Special Items Diluted EPS (0.50) (0.26) 0.42 Diluted EPS excluding Special Items 6.05 5.48 5.17 Less Impact of 53rd Week N/A 0.09 N/A Diluted EPS excluding Special Items and the 53rd Week $ 6.05 $ 5.39 $ 5.17 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 24.9 % 21.8 % 12.1 % Impact on Tax Rate as a result of Special Items 2.2 % (1.8) % (8.5) % Effective Tax Rate excluding Special Items 22.7 % 23.6 % 20.6 % Impact on Tax Rate as a result of the 53rd Week N/A 0.1 % N/A Effective Tax Rate excluding Special Items and the 53rd Week 22.7 % 23.5 % 20.6 % 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.
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.
The Company owned 79% of the Habit Burger & Grill units in the U.S. as of the end of 2025. % B/(W) % B/(W) 2025 2024 2025 2024 2023 Reported Ex FX Ex FX and 53rd Week in 2024 Reported Ex FX Ex FX and 53rd Week in 2024 System Sales $ 706 $ 713 $ 696 (1) (1) 1 2 2 1 Same-Store Sales Growth (Decline) % (1) % (4) % (3) % N/A N/A N/A N/A N/A N/A Total revenues $ 570 $ 600 $ 586 (5) (5) (3) 2 2 1 Operating Profit (Loss) $ (13) $ — $ (14) NM NM NM 99 99 90 % Increase (Decrease) Unit Count 2025 2024 2023 2025 2024 Franchise 83 67 71 24 (6) Company-owned 301 316 307 (5) 3 Total 384 383 378 — 1 46 Corporate & Unallocated % B/(W) (Expense)/Income 2025 2024 2023 2025 2024 Corporate and unallocated G&A expense $ (402) $ (346) $ (326) (16) (6) Unallocated Company restaurant expenses (22) (8) — (176) NM Unallocated Franchise and property revenues (7) (18) — 63 NM Unallocated Franchise and property expenses — — (1) NM NM Unallocated Refranchising gain (loss) (See Note 19) 48 34 29 42 16 Unallocated Other income (expense) (3) (44) (9) NM NM Investment income (expense), net (See Note 5) 1 (21) 7 NM NM Other pension income (expense) (See Note 15) 2 7 6 (71) 17 Interest expense, net (501) (489) (513) (2) 5 Income tax provision (See Note 18) (518) (414) (221) (25) (88) Effective tax rate (See Note 18) 24.9 % 21.8 % 12.1 % (3.1) 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.
Additionally, 99% of the KFC Division units were operated by franchisees as of the end of 2025. % B/(W) % B/(W) 2025 2024 2025 2024 2023 Reported Ex FX Ex FX and 53rd Week in 2024 Reported Ex FX Ex FX and 53 rd Week in 2024 System Sales $ 36,434 $ 34,452 $ 33,863 6 5 6 2 3 3 Same-Store Sales Growth (Decline) % 3 % (2) % 7 % N/A N/A N/A N/A N/A N/A Company sales $ 1,057 $ 801 $ 484 32 30 32 66 64 60 Franchise and property revenues 1,807 1,685 1,698 7 6 7 (1) 1 Even Franchise contributions for advertising and other services 679 613 648 11 9 10 (5) (6) (6) Total revenues $ 3,542 $ 3,099 $ 2,830 14 13 14 10 10 9 Company restaurant profit $ 128 $ 98 $ 67 31 28 32 48 47 43 Company restaurant margin % 12.1 % 12.2 % 13.7 % (0.1) ppts.
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%.
G&A expenses $ 372 $ 363 $ 383 (3) (2) (2) 5 5 6 Franchise and property expenses 66 63 72 (6) (4) (4) 13 12 12 Franchise advertising and other services expense 670 610 648 (10) (8) (9) 6 6 7 Operating Profit $ 1,503 $ 1,363 $ 1,304 10 9 10 4 6 5 % Increase (Decrease) Unit Count 2025 2024 2023 2025 2024 Franchise 33,393 31,513 29,680 6 6 Company-owned 504 468 220 8 113 Total 33,897 31,981 29,900 6 7 Company sales and Company restaurant margin % In 2025, the increase in Company sales, excluding the impacts of foreign currency translation and lapping the 53rd week in 2024, was driven by the KFC U.K. and Ireland restaurant acquisition (see Note 3) in the second quarter of 2024 and Company same-store sales growth of 5%.
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.
Operating Profit In 2025, the increase in Operating Profit, excluding the impacts of lapping the 53 rd week, was driven by same-store sales growth, unit growth and acquisitions, partially offset by higher restaurant operating costs and higher G&A. Pizza Hut Division The Pizza Hut Division has 19,974 units, 68% of which are located outside the U.S.
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.
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 $300 million outstanding as of December 31, 2025. Borrowings under our Revolving Facility in 2025 had original maturities of three months or less.
As a matter of course, we are regularly audited by federal, state and foreign tax authorities. We recognize the benefit of positions taken or expected to be taken in our tax returns in our Income tax provision when it is more likely than not that the position would be sustained upon examination by these tax authorities.
We recognize the benefit of positions taken or expected to be taken in our tax returns in our income tax provision when it is more likely than not that the position would be sustained upon examination by these tax authorities.
In 2025, we expect gross capital expenditures of approximately $350 million driven by technology initiatives and continued investments in Taco Bell, Habit Burger & Grill and KFC company restaurants. Additionally, we expect approximately $55 million of refranchising proceeds, resulting in net capital expenditures of approximately $295 million.
In 2026, we expect gross capital expenditures of approximately $400 million driven by technology initiatives and continued investments in Taco Bell, KFC and Habit Burger & Grill company restaurants, including regular maintenance of recently acquired restaurants. Additionally, we expect approximately $50 million of refranchising proceeds, resulting in net capital expenditures of approximately $350 million.
The discount rate used in the fair value calculations is our estimate of the required rate of return that a franchisee would expect to receive when purchasing a similar restaurant or groups of restaurants and the related long-lived assets.
The after-tax cash flows used in determining the anticipated bids incorporate similar assumptions to those of a restaurant level assessment. 50 The discount rate used in the fair value calculations is our estimate of the required rate of return that a franchisee would expect to receive when purchasing a similar restaurant or groups of restaurants and the related long-lived assets.
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.
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, 2025. 2026 2027 2028 2029 2030 2031 2032 2037 2043 Total Securitization Notes $ 884 $ 595 $ 590 $ 1,000 $ 737 $ 500 $ 4,306 Credit Agreement $ 28 34 1,424 438 1,923 Revolving Facility 300 300 Subsidiary Senior Unsecured Notes 750 750 YUM Senior Unsecured Notes 800 1,050 2,100 $ 325 $ 275 4,550 Total $ 28 $ 1,668 $ 2,019 $ 1,327 $ 1,800 $ 1,787 $ 2,600 $ 325 $ 275 $ 11,828 Interest payments on the outstanding long-term debt in the table above total approximately $2.5 billion, with approximately $500 million due within the next twelve months on the outstanding amounts on a nominal basis.
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.
Performance Metrics % Increase (Decrease) Unit Count 2025 2024 2023 2025 2024 Franchise 61,668 60,035 57,691 3 4 Company-owned 1,617 1,311 1,017 23 29 Total 63,285 61,346 58,708 3 4 2025 2024 2023 Same-Store Sales Growth (Decline) % 3 (1) 6 System Sales Growth %, reported 4 3 8 System Sales Growth %, excluding FX 4 4 10 System Sales Growth %, excluding FX and 53rd week 5 3 N/A 34 Our system sales breakdown by Company and franchise sales was as follows: Year 2025 2024 2023 Consolidated Company sales (a) $ 2,945 $ 2,552 $ 2,142 Franchise sales 65,350 62,914 61,647 System sales 68,295 65,466 63,789 Negative (Positive) Foreign Currency Impact (b) (290) 638 N/A System sales, excluding FX 68,005 66,104 63,789 Impact of 53rd week N/A (568) N/A System sales, excluding FX and the 53rd Week $ 68,005 $ 65,536 $ 63,789 KFC Division Company sales (a) $ 1,057 $ 801 $ 484 Franchise sales 35,377 33,651 33,379 System sales 36,434 34,452 33,863 Negative (Positive) Foreign Currency Impact (b) (249) 515 N/A System sales, excluding FX 36,185 34,967 33,863 Impact of 53rd week N/A (171) N/A System sales, excluding FX and the 53rd Week $ 36,185 $ 34,796 $ 33,863 Taco Bell Division Company sales (a) $ 1,281 $ 1,155 $ 1,069 Franchise sales 17,080 16,038 14,846 System sales 18,361 17,193 15,915 Negative (Positive) Foreign Currency Impact (b) (12) (1) N/A System sales, excluding FX 18,348 17,192 15,915 Impact of 53rd week N/A (279) N/A System sales, excluding FX and the 53rd Week $ 18,348 $ 16,913 $ 15,915 Pizza Hut Division Company sales (a) $ 51 $ 8 $ 14 Franchise sales 12,743 13,100 13,301 System sales 12,794 13,108 13,315 Negative (Positive) Foreign Currency Impact (b) (29) 124 N/A System sales, excluding FX 12,765 13,232 13,315 Impact of 53rd week N/A (107) N/A System sales, excluding FX and the 53rd Week $ 12,765 $ 13,125 $ 13,315 Habit Burger & Grill Division Company sales (a) $ 555 $ 588 $ 575 Franchise sales 151 125 121 System sales 706 713 696 Negative (Positive) Foreign Currency Impact (b) — — N/A System sales, excluding FX 706 713 696 Impact of 53rd Week N/A (11) N/A System sales, excluding FX and the 53rd Week $ 706 $ 702 $ 696 (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.
(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.
OBBBA 76 — — Tax (Benefit) - Tax audit (47) — — Tax (Benefit) - Intra-entity transfers and valuations of intellectual property (89) (32) (183) Tax (Benefit) - Other Income tax impacts from decision to exit Russia — — (7) Tax (Benefit) - Other Income tax impacts recorded as Special (2) (6) 37 Special Items Tax (Benefit) Expense $ 18 $ (66) $ (161) Tax (Benefit) on Special Items Expense - Operating Profit 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.
These leases relate primarily to approximately 950 Company-owned restaurants and approximately 200 leased restaurants for which we sublease land, building or both to our franchisees. See Note 12. Investing Activities We remain committed to maintaining our asset light, franchisor model that includes at least a 98% franchise mix.
These leases relate primarily to approximately 1,100 Company-owned restaurants and approximately 225 leased restaurants for which we sublease land, building or both to our franchisees. See Note 12. 48 Investing Activities We remain committed to maintaining our asset light, franchisor model.
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.
G&A expenses $ 215 $ 199 $ 204 (8) (8) (9) 3 3 4 Franchise and property expenses 29 33 32 12 12 12 (3) (3) (2) Franchise advertising and other services expense 750 708 644 (6) (6) (8) (10) (10) (8) Operating Profit $ 1,129 $ 1,049 $ 944 8 8 10 11 11 9 % Increase (Decrease) Unit Count 2025 2024 2023 2025 2024 Franchise 8,357 8,253 8,081 1 2 Company-owned 673 504 483 34 4 Total 9,030 8,757 8,564 3 2 Company sales and Company restaurant margin % In 2025, the increase in Company sales, excluding the impacts of lapping the 53 rd week, was driven by acquisitions, company same-store sales growth of 5%, and unit growth.
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. Our annual operating cash flows were in excess of $2 billion in 2025 and we expect continued strong operating cash flows in 2026.
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.
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).
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.
As part of this reorganization, certain Pizza Hut intellectual property (“IP”) rights from subsidiaries in the U.S. were transferred to international subsidiaries resulting in a step-up in amortizable tax basis of those IP rights. • The tax benefit recorded in the year ended December 31, 2024, resulting 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 tax benefit recorded in the year ended December 31, 2023, resulting 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.
KFC Division The KFC Division has 31,981 units, 89% of which are located outside the U.S.
KFC Division The KFC Division has 33,897 units, 90% of which are located outside the U.S.
The change was primarily driven by outflows in the current year related to the KFC U.K. and Ireland restaurant acquisition, lapping proceeds from the prior year sale of KFC Russia and current year purchases of short-term investments, partially offset by current year proceeds arising from the sale of our approximate 5% minority investment in Devyani.
The change was primarily driven by higher current year spending on restaurant acquisitions, higher current year capital spending and lapping prior year proceeds arising from the sale of our approximate 5% minority investment in Devyani, partially offset by maturities of short-term investments in the current year compared to net purchases of short-term investments in the prior year.
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!
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!
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.
As it relates to our Habit Burger & Grill reporting unit, which includes a goodwill balance of $64 million, the assumptions that were most impactful to our reporting unit fair value estimate in the fourth quarter of 2025 were future same-store sales growth and company restaurant margin improvement.
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 believe that our ongoing cash from operations, cash on hand, which was approximately $700 million at December 31, 2025, 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.
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.
Reconciliation of GAAP Operating Profit to Company Restaurant Profit 2025 KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division Corporate and Unallocated Consolidated GAAP Operating Profit (Loss) $ 1,503 $ 1,129 $ 340 $ (13) $ (384) $ 2,574 Less: Franchise and property revenues 1,807 1,060 602 12 (7) 3,473 Franchise contributions for advertising and other services 679 754 360 3 — 1,796 Add: General and administrative expenses 372 215 219 54 402 1,262 Franchise and property expenses 66 29 41 4 — 140 Franchise advertising and other services expense 670 750 376 3 — 1,799 Refranchising (gain) loss — — — — (48) (48) Other (income) expense 1 — (14) 12 3 2 Company restaurant profit (loss) $ 128 $ 310 $ (1) $ 46 (22) $ 461 Company sales $ 1,057 $ 1,281 $ 51 $ 555 — $ 2,945 Company restaurant margin % 12.1 % 24.2 % (1.4) % 8.3 % N/A 15.7 % 40 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 % Items Impacting Reported Results and/or Reasonably Likely to Impact Future Results The following items impacted reported results in 2025 and/or 2024 and/or are reasonably likely to impact future results.
The termination affects 284 KFC restaurants and 254 Pizza Hut restaurants in Turkey, which will be reflected as a reduction in the Company’s reported unit counts at the end of the first quarter of 2025. We also re-acquired the master franchise rights in Germany for KFC and Pizza Hut from the owner of IS Holding in December 2024.
As a result, 283 KFC restaurants and 254 Pizza Hut restaurants in Turkey were closed during the first quarter of 2025. We also re-acquired the master franchise rights in Germany for KFC and Pizza Hut from the owner of IS Holding in December 2024.
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.
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 2025, refranchising activity completed by the Company was limited and the write-off of goodwill associated with these transactions was approximately $3 million.
Franchise and property revenues In 2024, Franchise and property revenues, excluding the impacts of foreign currency translation and the 53rd week, were flat as unit growth was offset by a franchise same-store sales decline of 2% and a 1% negative impact from the KFC U.K. and Ireland restaurant acquisition.
Franchise and property revenues In 2025, the increase in Franchise and property revenues, excluding the impacts of foreign currency translation and lapping the 53rd week in 2024, was driven by unit growth and franchise same-store sales growth of 2%, partially offset by a 1% negative impact from the KFC U.K. and Ireland restaurant acquisition. 43 G&A In 2025, the increase in G&A, excluding the impacts of foreign currency translation and lapping the 53rd week in 2024, was driven by higher expenses related to our annual incentive compensation programs, partially offset by lower headcount and salaries.
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.
G&A expenses $ 219 $ 219 $ 221 Even 1 Even 1 1 2 Franchise and property expenses 41 34 15 (18) (19) (21) (122) (121) (118) Franchise advertising and other services expense 376 390 389 4 4 2 Even Even 1 Operating Profit $ 340 $ 373 $ 391 (9) (9) (8) (5) (3) (4) % Increase (Decrease) Unit Count 2025 2024 2023 2025 2024 Franchise 19,835 20,202 19,859 (2) 2 Company-owned 139 23 7 504 NM Total 19,974 20,225 19,866 (1) 2 45 Franchise and property revenues In 2025, the decrease in Franchise and property revenues, excluding the impact of foreign currency translation and lapping the 53 rd week in 2024, was driven by franchise same-store sales declines of (1%) and a unit decline.
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.
In April 2023, we completed our exit from the Russia market by selling the KFC business in Russia to Smart Service Ltd. Our GAAP operating results presented herein reflect revenues from and expenses to support the Russian operations for KFC prior to the date of sale, within their historical financial statement line items and operating segments.
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.
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.
Franchise and property revenues In 2024, the increase in Franchise and property revenues, excluding the impacts of the 53rd week, was driven by franchise same-store sales growth of 4% and unit growth. 44 G&A In 2024, the decrease in G&A, excluding the impacts of the 53rd week, was driven by lower share-based compensation and lower expenses related to our annual incentive compensation programs partially offset by higher digital and technology expenses.
G&A In 2025, the increase in G&A, excluding the impacts of lapping the 53 rd week, was driven by higher digital and technology expenses, higher expenses related to our annual incentive compensation programs and increased share-based compensation, partially offset by lower professional and legal fees.
The increase was primarily driven by an increase in Operating Profit before Special Items, partially offset by higher income tax payments and an increase in payments related to our resource optimization program. Net cash used in investing activities was $422 million in 2024 versus $107 million in 2023.
The increase was primarily driven by an increase in Operating Profit before Special Items, and lower current year incentive compensation and income tax payments. Net cash used in investing activities was $1,003 million in 2025 versus $422 million in 2024.
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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.
Costs incurred to date related to the program primarily include severance associated with positions that have been eliminated or relocated and consultant fees. Due to their scope and size, these charges have been reflected as Special Items.
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.
Operating Profit In 2025, the increase in Operating Profit, excluding the impacts of foreign currency translation and lapping the 53rd week in 2024, was driven by same-store sales growth and unit growth. Taco Bell Division The Taco Bell Division has 9,030 units, 86% of which are in the U.S.
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.
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.
See also the Detail of Special Items section of this MD&A for other items similarly impacting results. Extra Week in 2024 Fiscal 2024 included a 53rd week for all of our U.S. and certain international subsidiaries that operate on a period calendar. See Note 2 for additional details related to our fiscal calendar.
We do not currently expect our ongoing effective tax rate to be significantly impacted by the legislation. Extra Week in 2024 Fiscal 2024 included a 53rd week for all of our U.S. and certain international subsidiaries that operate on a period calendar. See Note 2 for additional details related to our fiscal calendar.
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.
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.
Rather, the Company believes that the presentation of these non-GAAP measurements provide additional information to investors to facilitate the comparison of past and present operations. Special Items are not included in any of our Division segment results as the Company does not believe they are indicative of our ongoing operations due to their size and/or nature.
These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measurements provide additional information to investors to facilitate the comparison of past and present operations.
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 2025, the decrease in Company restaurant margin percentage, excluding the impacts of lapping the 53 rd week, was driven by commodity inflation (primarily beef), higher labor and other restaurant operating costs, partially offset by higher margin percentages of the units included in the Southeast U.S. restaurant acquisition and same store sales growth. 44 Franchise and property revenues In 2025, the increase in Franchise and property revenues, excluding the impacts of lapping the 53 rd week, was driven by franchise same-store sales growth of 7% and unit growth.
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.
Corporate and unallocated G&A expense In 2025, the increase in Corporate and Unallocated G&A expense was driven by costs associated with the current year Pizza Hut Strategic Options Review, costs associated with our current year Brand Headquarters Consolidation, higher salaries and benefits, higher professional and legal fees and higher current year expenses related to our annual incentive compensation programs, partially offset by lower costs associated with our Resource Optimization Program.
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.
As of December 31, 2025, 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 strive to grow iconic restaurant brands around the world that are loved by our customers, trusted everywhere we operate and connected through teamwork, technology and our global scale.

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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 changeThese 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.
Biggest changeSee Note 11 for details on our outstanding debt and Note 13 for details related to interest rate swaps.
Historically, we have chosen not to hedge foreign currency risks related to our foreign currency denominated earnings and cash flows through the use of financial instruments. In addition, we attempt to minimize the exposure related to foreign currency denominated financial instruments by purchasing goods and services from third parties in local currencies when practical.
Historically, we have chosen not to hedge foreign currency risks related to our foreign currency denominated earnings and cash flows through the use of financial instruments. We attempt to minimize the exposure related to foreign currency denominated financial instruments by purchasing goods and services from third parties in local currencies when practical.
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.
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, 2025, Operating Profit would have decreased approximately $150 million if all foreign currencies had uniformly weakened 10% relative to the U.S. dollar.
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.
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, 2025, result in a fixed interest rate on $1.5 billion of our variable-rate debt. As a result, approximately 96% of this $11.5 billion of outstanding debt at December 31, 2025, is effectively fixed-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 $1.1 billion as of December 31, 2024.
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. 53 The Company’s foreign currency net asset exposure (defined as foreign currency assets less foreign currency liabilities) totaled approximately $1.0 billion as of December 31, 2025.
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.
At December 31, 2025, 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 $4 million in Interest expense, net within our Consolidated Statement of Income.
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, 2025, a hypothetical 100 basis-point decrease in short-term interest rates would decrease the net liability associated with the fair value of our interest rate swaps by approximately $31 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.
Interest 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.
Interest 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 $11.5 billion includes 83% fixed-rate debt and 17% variable-rate debt.
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.
The fair value of our cumulative fixed-rate debt of $9.5 billion as of December 31, 2025, would decrease approximately $375 million as a result of the same hypothetical 100 basis-point increase.

Other YUM 10-K year-over-year comparisons