Taco Bell is on a completely different level than its Yum! Brands counterparts.

The Mexican concept saw Q2 same-store sales and system sales grow 5 and 7 percent, respectively, far outpacing KFC, Pizza Hut, and The Habit Burger Grill. Taco Bell went from consumers managing check earlier this year to check growth in Q2, led by items per transaction.

The chain’s comps increased mid-single digits across all income cohorts, which to CEO David Gibbs proved that “craveable innovation” can still win at a higher price point with today’s consumers. He’s referring to the Cantina Chicken platform, which features The Cantina Chicken Soft Taco, Cantina Chicken Crispy Taco, Cantina Chicken Burrito, Cantina Chicken Quesadilla, and Cantina Chicken Bowl. Since the platform launch, the brand’s chicken sales mix has increased 10 points. Nearly 25 percent of orders include an item from the Chicken Cantina platform. In Q3, the brand rolled out the Cantina Chicken Cheesy Street Taco Chalupas, which are off to a good start.

Taco Bell also intrigued customers with the Cheez-It Crunchwrap and Secret Aardvark fries.

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Gibbs doesn’t anticipate the brand’s momentum slipping in the latter half of 2024. He pointed to Taco Bell’s always-on value messaging, more specifically the Cravings Value menu that offers 10 choices.

“They’re unique items that nobody else in the industry has. And they’re not like junior-sized versions of a core item,” Gibbs said. “They’re unique. They stand in their own right. They’re incredibly craveable. That has served us well, and it really put a moat around when it comes to value.”

The CEO also mentioned the $7 Luxe Box, featuring a Seasoned Beef Chalupa Supreme, a Beefy 5-Layer Burrito, a Double Stacked Taco, chips & Nacho Cheese sauce, and a medium fountain drink. He said Taco Bell is “outperforming the QSR industry by a wide margin.”

“We have a great way to play value that makes it hard for others to compete. And then when you couple that with things like the Cantina Chicken launch in Q2, which is really a platform that we’ll continue to innovate off of as we move forward. … We’ll probably re-hit Cantina Chicken in Q4. And then you’ve got all sorts of other great things going on at Taco Bell like speed of service, improving loyalty program launches.”

Digital business, which mixed 35 percent in Q2, is also fueling Taco Bell’s growth. Loyalty sales grew more than 30 percent in the quarter as well. These expanding channels are improving labor productivity and driving industry-leading margins. At Yum!’s 488 company-owned Taco Bell restaurants in the U.S., store-level margins were 25.6 percent in Q2, with mature locations achieving more than 27 percent.

“I think the Taco Bell margin story is very impressive in the context of a value-oriented environment,” CFO Chris Turner said. “The Taco Bell business is serving consumers, creating buzz in the market, bringing great innovation to bear and delivering value when consumers need it. And yet you’re seeing us maintain these industry-leading margins. That comes from leveraging our scale on our food purchases and our franchisees take advantage of that scale. And I think in the long run, you’ll see us continue to be more and more productive in terms of how we operate the restaurants.”

Digital rapidly evolving has pushed Taco Bell to accelerate voice AI at the drive-thru at a faster pace than it expected three months ago. The technology is currently in more than 100 Taco Bell restaurants and will expand to several hundred locations by the end of 2024. Another pilot is underway in KFC Australia. The chain has consistently seen better consumer experiences and employee productivity. The AI uses digital menu boards, which will become a brand standard in 2025, and Yum!’s proprietary POS system Poseidon.

Taco Bell opened 56 restaurants in Q2, including 17 stores across international markets. The brand ended the quarter with 7,458 U.S. stores and 1,107 international outlets.

Elsewhere in the Yum! portfolio, KFC saw global same-store sales drop 3 percent. International comps lowered 3 percent in several markets because of the ongoing Middle East conflict. Markets excluding China, which were not impacted materially by the Middle East conflict, reported a mid-single-digit increase in same-store sales. U.S. comps slipped 5 percent.

KFC worldwide opened 598 units across 57 countries. This brings the chain’s year-to-date gross openings to 1,107 units, a new record for the brand for the first half of the year. China, India, Thailand, and Japan led development. Over the last year, KFC has seen positive development trends in South Africa, the Philippines, and Brazil. In the second quarter, the company closed on the transaction to purchase 216 stores in the U.K. and Ireland, one of its highest AUV markets. Yum! now owns 434 KFC restaurants, most of which are in the U.K. market.

The chicken giant finished Q2 with 3,771 U.S. units and 26,918 international stores.

Gibbs said Yum!’s year-end gross openings total will look similar to 2022 and 2023. He’d like for that number to increase every year, but he understands there’s an impact from the Middle East. There’s potential for some additional closures in the second half of the year, maybe more than normal. However, he emphasized that any stores that would close, especially in the Middle East markets, would be lower-volume locations.

“The development picture is really one that is strongly encouraging,” Gibbs said. “When you think about the impact of the conflict on sales in particular markets, we are still seeing quite widespread growth all around the world. … The development story is good. Why is that? Because I think the franchisees have a lot of long-term confidence in the strength of our brands and their businesses around the world and they’re getting good paybacks. We meticulously track the paybacks in every market around the country to make sure that our franchisees are getting good returns on their investments.”

Pizza Hut’s same-store sales dropped 1 percent in the U.S. and 4 percent internationally. Comps outside the U.S. were negative because of a stalled recovery in Malaysia and Indonesia. Despite the negativity, the brand is seeing progressing trends domestically and encouraging recoveries in international markets like Thailand and Hong Kong.  In the U.S., the chain increased its average transactions per week per restaurant by focusing on value-based promotions, like the My Hut Box. Pizza Hut has 19,864 restaurants worldwide, comprising 6,573 in the U.S. and 13,291 internationally.

At The Habit Burger, same-store sales dropped 6 percent. With California’s new fast-food wage law pressuring margins, The Habit Burger’s leadership team has worked to safeguard profitability to stay competitive. These efforts have culminated in a store-level labor optimization initiative, resulting in a 520-basis-point increase in restaurant-level margins from the first quarter. This achievement comes despite a double-digit rise in labor rates at California locations. The Habit has 380 units globally; that consists of 372 in the U.S. and eight internationally.