The cost of dining out is rising faster than eating at home, and consumers are feeling the pinch. They’re stretching every dollar, pulling back on discretionary spending, and leaving quick-service chains to compete for a shrinking customer base. Brands are pulling more levers to attract guests—especially those with lower incomes that have been dropping off lately.

That dynamic is unfolding in a few ways for Yum! Brands. Taco Bell is flexing its strong value proposition to attract and retain wallet-conscious guests. Pizza Hut and KFC, like many of their quick-service peers, are searching for answers around traffic as same-store sales slide amid a tough consumer environment. 

Pizza Hut’s U.S. comps dipped 6 percent in Q1. The softness was largely expected after the brand saw same-store sales increase 8 percent a year ago on the heels of the successful launch of Menu Melts and the Big New Yorker Pizza. 

“Obviously, the laps in the quarter were unusually large … But we are positive on a two-year basis,” CEO David Gibbs said during the company’s Q1 earnings call last week, adding that he’s optimistic about Pizza Hut’s calendar in the U.S. for the remainder of the year. “For KFC, it’s a different story.”


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KFC’s domestic comps were down 7 percent in Q1. It’s the first negative result since mid-2022, when it lapped the launch of its chicken sandwich, though comps were flat in the last two quarters of fiscal 2023. 

Gibbs attributed Q1’s softness to winter weather in the first part of the quarter and “chicken value promotions” from competitors. KFC has had its fair share of value promotions lately, too. It rolled out a series of $5 deals last year—two wraps, 10 chicken nuggets, eight spicy wings—and launched a $20 Fill Up Box. More recently, it looked to bring in guests with a new Smashed Potato Bowl, its first bowl innovation since 2019. February saw the launch of the chain’s first rewards program in the U.S. 

But traffic remains a challenge. Monthly visits at KFC’s domestic stores were trending negative in the low-single-digits heading toward 2024, and the declines accelerated in the first few months of the year, according to data from Year-over-year traffic fell 7.5 percent in January and 6.2 percent in February before plummeting 12.2 percent in March. 

“The KFC brand in the U.S. has been struggling,” Gibbs said, hinting at work that’s going on behind the scenes to “boldly reset the brand.” He didn’t offer details on what that work looks like but said the playbook takes a cue from the brand’s international division, which accounts for a much larger portion of Yum’s overall business. 

“We know how to bring that brand to life to connect with consumers around the world,” Gibbs said. “We have to do a better job of that in the U.S.”

KFC International is one of Yum’s “twin growth engines” alongside Taco Bell U.S. Together, they account for 80 percent of the company’s operating profit. 

Broadly, Yum’s overseas business struggled in the quarter, with each brand’s international division posting negative comps. That was partially due to choppy demand from consumers and partly due to ongoing impacts from the Israel-Palestine conflict, which Gibbs said were “scattered and difficult to measure” but collectively created a low-single-digit headwind on overall same-store sales. 

Taco Bell U.S. was a bright spot in an otherwise challenging quarter. Comps were up 2 percent, a strong outcome on top of 9 percent comp growth in the same period a year ago. The brand launched a new value menu with 10 items priced under $3 early in the quarter. A third of all transactions now contain one of those items, translating to a roughly 10 percent check uplift versus non-value menu checks. 

“We know from the industry data that value is more important and that others are struggling with value,” Gibbs said. “You are seeing some low-income consumers fall off in the industry. We’re not seeing that at Taco Bell. So, a really favorable setup … which you could probably say that about any environment that they operate in, given the strength of the brand.”

Digital sales at Taco Bell are now well into the 30 percent mix, thanks to in-store kiosks that finished rolling out across the entire U.S. footprint last year. The brand also fully onboarded the Yum! Commerce Platform, an omnichannel engine that increased its digital order capacity tenfold. The new system is playing into the value proposition by accelerating viral promotions, too.

Across all brands and all geographies, more than half of Yum’s sales are flowing through digital channels. Gibbs said that’s the result of a years-long digital transformation that kicked off in 2019 when the company started deploying a suite of new tools across all of its brands—everything from enhanced loyalty programs, digital menu boards, in-store kiosks, and a fresh POS system to back-of-house upgrades like automated inventory management and the Dragontail production and delivery sequencing platform. 

“There are use cases all over the place for how these improve unit economics for franchisees, which ultimately is the heart of our business,” Gibbs said. “The better their unit economics are, the more they build, the more they can afford to offer the right prices and value to customers, and so on.”

Yum! still has a ways to go in deploying those platforms but has “achieved critical mass” on several fronts thanks to bundled technology upgrades rolling out to more restaurants, he added. Now, it is embarking on a second, parallel phase in its technology journey as it continues bringing all of those elements together in common stores. 

This second phase focuses on accelerating AI capabilities and fully leveraging the immense data assets generated from digital tools. There are more than 40 AI initiatives in progress spanning marketing, operations, insights, engineering and internal back-office functions. 

Many of those are still confidential, but one example it already shared publicly is voice AI in the drive-thru. It is testing that capability at five Taco Bell locations in California. The pilot will expand to 30 stores in Q2 based on positive feedback from customers. Another example is the AI-powered SuperApp, a support tool for general managers, which makes it “easier and faster for managers to access critical operational information to make better decisions.” 

On the data front, Yum! has started activating a U.S. cross-brand customer data platform that provides more visibility into ordering behavior and paves the way for personalization opportunities on digital and social channels. Both Taco Bell and Pizza Hut have integrated into the system, with KFC set to follow in Q2. Similarly, the company is expanding the Yum! Global Data Hub, which captures a majority of global transaction-level sales data plus other operational and guest metrics. 

All the while, the company’s development engine continues firing away. KFC’s domestic store count shrank by 6 in Q1, but the international division netted 351 new stores, pushing the total footprint past the 30,000-unit threshold. It ended the quarter with 3,785 U.S. locations and 26,466 international locations. 

Pizza Hut is fast approaching 20,000 units around the world. It added 15 stores in the U.S. and 61 stores in international markets. That brought the total footprint to 19,942 units, including 6,608 in the U.S. and 13,334 in international markets. Taco Bell posted a net gain of 18 units in the U.S. and a net loss of 27 units in international markets. It ended the quarter with 7,423 domestic units and 1,132 international units. 

Fast Food, Finance, Franchising, Growth, Story, Kentucky Fried Chicken, Pizza Hut