Industry News | August 3, 2017 | By Alex Dixon | QSR Exclusive Brief

Yum! Not Seeing Results from Pizza Hut's Fix Just Yet

Sales at Taco Bell rose by 4 percent in the second quarter. Taco Bell
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Another quarter of declining same-store sales at Pizza Hut offset strong sales growth at KFC and Taco Bell as parent company Yum! Brands awaits a turnaround with its $130 million transformation plan.

While Yum! beat analyst expectations with nearly $1.45 billion in revenue and a 2 percent comparable sales increase in the U.S., its profit dropped 39 percent over the year. Pizza Hut’s same-store sales fell 1 percent in the second quarter, while KFC increased by 3 percent and Taco Bell rose by 4 percent. Worldwide, Yum! system sales increased 6 percent while the company opened 174 new restaurants.

Yum! CEO Greg Creed said in a conference call that while the company doesn’t expect to see immediate results with Pizza Hut’s transformation plan, it does expect results over time with 2019 being the first post-plan year.

Pizza Hut is turning toward a more digital, delivery-centric model, with increased funds going toward national advertising campaigns to build awareness. While digital orders comprise about 50 percent of sales, 10—15 percent of sales still come from customers dining in.

Pizza Hut recently rolled out its new Hut Rewards program, and plans to hire 14,000 delivery drivers through the end of this year. Creed said Pizza Hut is focusing on making its pizzas easier to access for customers, and “working on making sure we have the best pizza in the marketplace.”

While other brands have turned to value campaigns or discounting to draw in customers, Creed says this isn’t part of Pizza Hut’s plan. “Value is always going to be important so I don’t see any renewed focus,” he said. “I think we have good everyday value and that really does resonate ... and we don’t have to get into deep discounting.”

At Taco Bell, the announcement that customers could get married at its Las Vegas flagship restaurant earned 1.7 billion impressions, and a new partnership with ridesharing app Lyft will allow riders a stop at a Taco Bell drive thru on the way to their final destination.

Creed said KFC is also “back on top of the cultural conversation” with the launch of its online store, where many items have sold out—including a $20,000 meteorite that has been molded into the shape of a Zinger chicken sandwich.

“These are truly remarkable events that no one would have believed possible three years ago,” Creed said.

During the quarter, Yum! refranchised 244 restaurants and repurchased 5.6 million shares totaling $384 million.