In a time when many quick-service chains are feeling the strain of a punishing consumer environment, Taco Bell is seemingly stronger than ever. U.S. same-store sales rose 9 percent in the latest quarter, the chain’s best performance in two years. International comps were up 3 percent.
“I know this is a tough operating environment for everybody else in the industry. It’s just probably an environment that favors Taco Bell,” CEO David Gibbs said on Wednesday’s earnings call.
He added that the brand saw a “significant expansion in consumer penetration” thanks to efforts to elevate its positioning and broaden its relevance. Visits rose 3.7 percent in the U.S., versus a 1.6 percent drop in the overall category, according to data from Placer.ai.
“We’re bringing more customers into the brand,” Gibbs said, highlighting that traffic was up across all income levels, driven by a consistent pipeline of menu innovation. Recent launches like the Steak and Queso Crunchwrap Slider, Crispy Chicken Nuggets, Milk Bar Churros, and Cheesy Dipping Burritos played a key role. Other Q1 introductions—such as Caliente Cantina Chicken and Steak Nacho Fries—further helped widen the brand’s entry points.
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Digital sales also accelerated in the quarter, increasing 37 percent year over year. Taco Bell now gets 42 percent of its sales through digital channels.
The digital momentum is driven in part by Byte by Yum, a proprietary suite of AI-powered SaaS tools that Gibbs said is allowing the advertising team to push creative boundaries. The brand is testing personalized, one-to-one consumer communications through these tools, which he said could unlock significant revenue growth.
By 2030, expanded digital channels and loyalty membership are projected to drive an additional $225,000 in per-store sales—roughly a 10 percent lift in AUVs.
Ultimately, CFO Chris Turner credited the brand’s strength to a ”magic formula” that allows it to make compelling value plays that resonate in the current environment while also maintaining strong margins. Company-operated restaurant margins hit 22.4 percent in Q1, with full-year U.S. margins expected to be in the 24–25 percent range.
The expansion of the Luxe Craving Box lineup at $5, $7, and $9 price points earlier this year delivered “exceptional value across income levels,” Turner said, with the $5 Luxe Box in particular representing a “massive win” with low-income guests.
The combination of strong value and improved store-level profitability helped fuel a 16 percent increase in operating profit for the quarter. Turner called it a “complex year to navigate,” noting that consumer spending slowed in February and March due to ongoing inflation concerns and uncertainty tied to the Trump administration’s tariff policies. Still, he emphasized that Taco Bell is well-positioned to gain share from higher-priced competitors in this environment.
The brand is also benefiting from its unique menu offerings and lack of direct competitors.
“We do not have to worry about anybody copying it, because nobody sells anything close to what we sell,” Gibbs said. “That is a very enviable position in the industry. It’s why we call Taco Bell a category-of-one brand.”
In December, the chain opened its in-store beverage concept, Live Mas Café. The restaurant offers specialty drinks like Chillers, Agua Frescas, and Specialty Coffees, alongside other items like tacos, burritos, quesadillas, nachos, and a value menu. The store’s inside features self-ordering kiosks, digital menu boards, and some indoor seating.
The concept has quickly driven 40 percent sales growth in that restaurant, which is now selling an average of 300 specialty beverages per day. Gibbs said Yum! is planning “rapid expansion” of Live Mas Café this year and told analysts to expect an update on the concept in the coming weeks.
Yum! also has begun piloting its new KWENCH by KFC concept in 38 restaurants in the U.K., making it the first market to experience the brand’s entry into the fast-growing specialty beverage segment. Similar to Live Mas Café, KWENCH features 10 handcrafted drinks across a couple of different categories, including lemonades, refreshers, shakes, and iced coffees.
Executives told analysts that early results are promising. Participating restaurants are seeing growth in both transactions and beverage sales and the concept is outperforming previous specialty drink offers. Building on that momentum, the company recently expanded the pilot to Australia, where Gibbs said results are already exceeding forecast and driving incremental traffic. Plans are now in motion to scale to additional markets in the coming months.
Meanwhile, in the U.S., KFC’s new Saucy concept is blowing past predictions. The spinoff launched in December in Orlando and focuses on chicken tenders and creative beverages. It features 11 sauces—paying homage to KFC’s “11 herbs and spices”—available individually or as a flight of four, paired with hand-breaded, made-to-order chicken tenders. The location includes kiosk ordering, a mobile order pickup station, and a drive-thru lane.
Sales are at more than double the U.S. system average, giving the store a spot among the top 15 locations in KFC’s domestic system. Now, the company is planning a phased expansion to at least 20 more stores, with a focus on targeting sites that create marketing synergies through geographic proximity.
“In the long term, you could expect franchise stores and company stores, but we’re being very methodical and making sure we pick the very best partners to work with,” Turner said. “We want to scale it while preserving the unique identity that comes to life when you’re there in that restaurant, plus we’ve got to scale the supply chain and real estate that goes along with it.”
Saucy’s strong results come at a time when KFC is working to stabilize U.S. performance. Same-store sales declined 1 percent in Q1, an improvement from the 5 percent dip recorded in fiscal 2024.
The brand is still looking for ways to boost traffic amid intensifying competition in the chicken category. In February, it appointed Catherine Tan-Gillespie as its new president. Q1 performance was supported by value promotions, including $5 bowls and the $10 Tuesday bucket deal, which helped deliver low single-digit transaction growth.
Internationally, KFC posted same-store sales growth of 3 percent. Executives credited the results to ongoing investments in brand modernization and value. These efforts lifted KFC’s net value score by seven points versus its largest competitor and boosted brand perception among younger consumers globally by two points. The brand saw low-single-digit traffic gains across international markets, including China, which marked its ninth consecutive quarter of traffic growth.
Pizza Hut faced a more difficult quarter. System sales declined 3 percent, largely due to what the company called “disappointing same-store sales performance” in the U.S. Domestic sales were soft in January but improved in February and March, with the final weeks of the quarter showing steady gains in both revenue and transactions.
Facing what Gibbs called an “intense competitive environment” in the U.S., the brand leaned into value and group occasion offerings such as Stuffed Crust and Wings promotions and the Ultimate Hut Bundle, which helped lift check averages and bring in new customers. The Ultimate Hut Bundle also powered Pizza Hut’s highest digital sales per restaurant during the Super Bowl. Going forward, the chain will prioritize its “3D” strategy: distinctive offerings for group occasions, dependable value platforms like the $7 Deal Lover’s Menu, and disruptive innovation to gain share.
Outside the U.S., Pizza Hut delivered positive same-store sales, with broad-based strength across Asia, Europe, and the Middle East.
At Habit Burger & Grill, system sales were flat, and same-store sales dipped 3 percent. However, the chain saw success with its Tempura Avocado Wedges LTO, which became one of its top-performing sides in recent memory. Habit also shifted toward a “brand fame” strategy in Q1, increasing its social media presence and securing a Super Bowl ad that generated 10 million impressions. Looking ahead, the brand plans to ramp up local restaurant marketing efforts, with Gibbs highlighting strong comps in key states as validation of the market-by-market approach.
Yum!’s broader digital and tech strategy continued to gain momentum. The company’s proprietary Byte by Yum! platform is beginning to show tangible returns. Digital sales were up 12 percent year-over-year, and during the Super Bowl, Pizza Hut U.S. processed all digital orders through Byte Commerce, marking a milestone in Yum!’s tech transformation.
Consumer engagement is also rising: KFC saw a $4.5 million quarter-over-quarter increase in loyalty members, while Taco Bell’s active loyalty base jumped 45 percent year-over-year, fueled by personalized offers like the build-your-own Luxe Box and seasonal activations.
Yum! also is now partnering with NVIDIA to accelerate AI development across three focus areas: voice automation for drive-thru and call centers, computer vision tools to improve operations, and advanced restaurant intelligence to support general managers with real-time insights.
Executives framed AI as a foundational shift in restaurant operations, with Turner calling it “the new operating system” for the industry. That mindset is already being put into action. In the U.K., Pizza Hut saw a 67 percent year-over-year increase in mobile app transactions after launching Byte Commerce. In 2025, Yum! plans to roll out the platform to four more international Pizza Hut markets and layer in AI-powered personalization to boost order values and transaction growth.
KFC is also leaning into digital, with kiosks now accounting for nearly half of digital sales globally, excluding China. On the operations side, Yum! scaled its Byte Restaurant Coach tools to an additional 5,000 locations in Q1, helping standardize performance and streamline restaurant routines. At Taco Bell U.S., the Byte Back of House platform was deployed in another 1,500 stores, bringing the total to 3,000 and marking continued progress toward a connected kitchen system.
Yum! is also making strides in AI-driven marketing. Its cross-brand consumer data platform powered a pilot campaign that doubled engagement rates compared to traditional email efforts. Those capabilities are now being extended across brands to sharpen targeting, improve marketing efficiency, and increase ROI.
On the development front, Yum! opened 751 new restaurants across 68 countries in Q1. KFC led the way with 528 openings—its second-highest Q1 total ever—bringing its global footprint to nearly 32,000 units. Pizza Hut added 198 new restaurants across 34 markets, reaching 19,786 units worldwide. Taco Bell opened 24 new stores in eight countries and now operates 8,723 restaurants globally.
