As Yum! Brands CEO David Gibbs pointed out Tuesday, the U.S. quick-service industry has slogged through negative traffic for months now. By Revenue Management Solutions’ data, the figure was down 1.2 percent in Q3, year-over-year, sector-wide, which was actually slightly better than the 3.5 percent decline from the prior quarter.
And then, there’s Taco Bell. The brand outperformed Yum!’s other chains—Pizza Hut, KFC, and Habit Burger—this past quarter just as it did the larger industry. Taco Bell’s U.S. same-store sales climbed 4 percent in Q3 versus the prior-year period, when it gained 8 percent, giving the chain a two-year top-line stack of 12 percent. KFC and Pizza Hut’s same-store sales each declined 4 percent, while Habit slid 5 percent.
Yum! as a whole expanded worldwide system sales 1 percent (1 percent at KFC, 5 percent at Taco Bell, and negative 1 percent at Pizza Hut) as it lifted unit count 5 percent, including 1,029 gross new units in the quarter to surpass 60,000 globally. Overall, Yum! expanded by 547 stores, reflecting the gross openings alongside 482 closures. The company is opening roughly a restaurant every two hours. Digital sales eclipsed $8 billion as mix lifted north of 60 percent.
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Returning to Taco Bell, Gibbs said the brand led the industry on value perception among all quick-service users. It gained market share thanks to a formula that isn’t exactly an enigma, but remains a blueprint only Taco Bell has proven capable of delivering this effectively at scale—brand buzz, value, category entry points, and digital engagement.
“Taco Bell’s competitive advantages in innovation, value leadership at compelling price points, and strong consumer connection are clear reasons why the brand remains a category of one when it comes to winning with consumers in any economic environment,” Gibbs says.
Taco Bell represents 75 percent of Yum!’s U.S. profit and 37 percent of its divisional operating profit. So the outlier performance shouldered a massive lift.
Taco Bell in Q3 launched Cheesy Street Chalupas, which marked its first innovation on the Cantina Chicken Platform. Last quarter, Taco Bell said the setup—inclusive of The Cantina Chicken Soft Taco, Cantina Chicken Crispy Taco, Cantina Chicken Burrito, Cantina Chicken Quesadilla, and Cantina Chicken Bowl—increased its chicken mix 10 points. Nearly 25 percent of all orders featured an item from the lineup.
Taco Bell began by offering the Cheesy Street Chalupa exclusively to aggregator premium members to bump delivery. It led to seven daily sales records for the provider in Q3. Taco Bell then followed with the reintroduction of its Cheez-It collab and invested behind its $7 Lux Cravings Box.
Toward the end of Q3, Taco Bell also made the call for breakfast to be an optional daypart for franchisees in an effort to provide flexibility. Gibbs said Yum! put marketing dollars into more present growth drivers, such as the Cantina Chicken offering and Taco Bell’s Cravings Value Menu, which touts 10 items priced $3 or less. He said Taco Bell expects net impact from the change to be less than a point headwind to same-store sales growth. “These are platforms where our marketing spend has had significant success building new and very profitable sales layers,” he said.
And notably, Taco Bell doesn’t plan to give up on the daypart. Gibbs said the brand will ultimately reintroduce breakfast with a “bolder, more distinctive Taco Bell approach.”
From a wider view, Gibbs said the value proposition at Taco Bell has simply broken through the noise during a testy time for transactions. It’s something rooted in data and innovation, and marketing efforts filtered through culturally relevant and distinct campaigns (R.E.D, as Yum! calls it).
“It has to do with the unique way that Taco Bell can provide value with products that nobody else has,” Gibbs continued. “Really, if you think about it, Taco Bell can provide a product that is a value product, that’s an innovative product, and that can help our franchisees margins [Q4 company-operated store margins are expected to range between 23–24 percent]. That’s an incredibly powerful set of tools that we have in our toolbox that our competitors don’t.”
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In late October, Taco Bell revived five nostalgic items from its first five decades, like the 90s Gordita Supreme, at under $3 apiece. “I think we’re very confident in Taco Bell’s ability to win in this environment relative to our peers,” Gibbs said.
When it comes to engaging diners, much of the work is happening through platform outreach. Taco Bell’s 90-day active loyalty users increased 50 percent, year-over-year, in Q3. Digital sales expanded 30 percent.
The brand continues to work on two significant initiatives in the drive-thru, where it was just clocked the fastest in the country for the fourth consecutive year. One is Drive-Thru Voice AI. The other, loyalty program enhancements.
On the former, supported by digital menuboards and Yum!’s proprietary Poseidon POS system, Taco Bell first shared the rollout publicly in July. At the time, Taco Bell offered the tech in more than 100 stores across 13 states, tasking it with enhancing back-of-house operations for employees and improving the ordering experience for guests.
Yum! CFO Chris Turner said Tuesday Voice AI, to date, has processed more than two million successful orders and is now live through 300-plus Taco Bell U.S. locations, making the chain the largest quick-service voice AI brand in the world.
As for loyalty, Taco Bell began to use its connected ecosystem to allow users to identify themselves at the drive-thru and kiosk. That powered personalization through ordering and enabled guests to earn and redeem rewards. It spread to 160 stores in Q3, “and we’re encouraged with early results,” Turner said, “which clearly show an increase in sign-ups and in daily loyalty transactions, all without an impact to speed of service.”
Given the connection with digital menuboards (they’re required enablers of each tech piece), Taco Bell accelerated deployment to more than 6,000 restaurants. Digital menuboards will be a “Taco Bell brand standard” in 2025, Turner said, along with Yum!’s aforementioned proprietary POS.
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Turner added results thus far accomplished what Taco Bell took sight of—better guest and employee experience. “The customer response has been very positive,” he said. “And our team members really enjoy having what they call an extra pair of hands in the restaurant to help them operate the store. Our rollout pace this year has been much faster than we originally envisioned going into the year, and I think that speaks to how our operators are seeing the capability and how our franchisees are seeing the capability.”
Additionally, Yum!’s AI-powered labor scheduler—perhaps less buzzy but highly vital nonetheless—scaled up and is being used in more than 5,000 Taco Bells. It’s driving improvements in labor planning and efficiency, Turner said. Taco Bell today boasts AI-powered forecasts to further its labor scaling and inventory management processes. Yum! expects to grow the solution to other brands throughout 2025.
“Our goal with technology is to give our franchisees the absolute best technology in the industry, better than any of our peers at the lowest possible cost, better than they can get anywhere else,” Gibbs said. “That is our North Star when it comes to tech. We know that if they get that tech in their restaurants and it drives sales and drives improvement in their business models, like voice AI is doing improving their margins by cutting labor, they’ll build more stores, top line will grow more. And that’s the best way for us to leverage technology to drive profitability in the business.”
AI was a pulsing theme throughout Tuesday’s earnings call. Yum! in Q3 launched personalized AI-driven marketing campaigns that, relative to traditional digital marketing, generated “significant increases” in consumer engagement, leading to increased purchases, and a reduction in consumer churn, Turner explained.
Going forward, Yum! believes it can improve ROI and allow the company to extract benefits from its proprietary “global data hub.”
“And we expect it to be broadly and easily scalable across brands,” he said.
Yum! ran pilots of AI-driven marketing in each of its concepts. While the company wouldn’t divulge specific numbers, Turner said what enables the tech is Yum!’s digital ecosystem. “It’s really what we call the ‘AI factory’ within that ecosystem that leverages our massive data assets that we’ve built,” he said, “which enable us to know our customers.”
Consider Taco Bell. It leverages Yum!’s in-store POS, digital menuboards, and the ability to bring those to life at restaurants and through its loyalty programs and via connections with customers across the app.
“So we’ve got many ways to bring it to life,” Turner said. “But it essentially allows us to do more personalized tailoring of offers and to learn and refine much more rapidly than we could before.”
Much of the digital growth is being steered by Joe Park, who was named president of Yum!’s digital and restaurant technology ecosystem in addition to his overall chief digital and technology officer role.
Yum!’s foundational platforms include Poseidon, the cloud-first point-of-sale system, its e-commerce engine, delivery optimization platform, Dragontail, SuperApp, an integrated restaurant management platform for team members, restaurant general managers and area coaches, and a scalable global data platform that houses more than 80 percent of the company’s transaction data.
“We believe we are still only scratching the surface of the full value creation potential of our capabilities with exciting innovations, including One Touch labor scheduling and inventory management, consumer feedback dashboards, quality control monitoring, and personalized AI-driven marketing, to name a few,” Turner said.
Some other trends at Yum!
The company’s other “twin growth engine” (Taco Bell U.S. being the first), KFC International, continued to drop lofty growth figures. It delivered 9 percent year-over-year unit growth in Q3. The development spanned 65 countries as gross unit openings year-to-date are up nearly 150 units over last year. KFC opened 685 gross new restaurants to exit at 31,143 stores compared to 29,051 in Q3 2023.
That remains a split picture. KFC U.S. had 23 new builds in the quarter and 106 closures (for a total of 3,708). There were 1,769 new builds outside the U.S. alongside 536 shutterings.
Gibbs noted KFC LTOs stateside in Q3 underperformed expectations “due to a more intense competitive environment, particularly within the chicken QSR category.”
In Q4, KFC U.S. will work to strengthen value, he added. It recently introduced boneless innovation (Original Recipe Chicken Tenders) and will continue to build on rewards growth, which contributed to digital sales expansion north of 20 percent from last year.
Gibbs said KFC brand-wide wants to establish seven centers of excellence focused on restaurant design, customer insights, market planning, food innovation, and more. “These centers will drive operational and marketing excellence while leveraging the brand’s scale, strengthening a competitive moat that has helped KFC grow successfully around the globe in 150 countries, an achievement that few global brands have ever accomplished,” he said.
KFC faced volatility in the Middle East, Indonesia, and Malaysia, stemming from conflict in the region. Its same-store sales have generally declined between 15–45 percent throughout the year, including Q3.
Digital mix at the brand overall represents more than 55 percent of sales—growth of 3 percentage points, quarter-over-quarter, thanks to expanded kiosk and click-and-collect channels.
With Pizza Hut, Gibbs said Q3 began strong in the U.S. with the $6.99 My Hut Box and a robust marketing agenda for the Chicago Tavern Style Pizza. These translated to positive traffic growth for the quarter and ahead of peers.
However, product news and bounce-back offers, Gibbs said, were not sufficient to compete against deep value offers in the market. Throughout the three-month stretch, several markets became more intentional in pursuing value, including China, India, and countries within the Middle East. Pizza Hut, in response, shifted toward a lower price point over abundance in some of those areas.
The chain is also in the process of repositioning long-term under new chief brand officer Kalen Thornton, who arrived in May from PepsiCo. Melissa Friebe became CMO, moving over from Taco Bell.
Pizza Hut added 63 units in Q3 on 292 gross openings and 229 closures. Taco Bell in Q3 had 103 new builds and 32 closures in the U.S. to reach 7,476 locations. Internationally, it touted 58 new builds and 99 closures for 1,118 locations. In total, Taco Bell finished Q3 with 8,594 restaurants (491 company and 8,103 franchised/licensed).
