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Greg Creed, CEO Yum! Brands

Greg Creed,
Chief Executive Officer,
Yum! Brands, Inc.

Celebrating Milestones
and Progressing on Our Transformation Journey

Dear Fellow Stakeholders:

was a year of celebrating and achieving milestones while making solid progress in the first full year of our transformation journey.

First, we celebrated our 20th anniversary as an independent company following our spin-off from Pepsico in October 1997. Since the spin, Yum! has more than doubled its system sales, grown operating profit more than six times over and developed into a global powerhouse, going from 30% of restaurants outside the U.S. to nearly 60% of restaurants outside the U.S. Our exceptional results over the last 20 years are a testament to the unmatched power of our brands and the extraordinary talent which is the backbone of our organization.

Next, October 31 marked the one-year anniversary of our spin-off of the China business into an independent company. China’s success over the past year reaffirmed our decision to separate this powerful business. Our collaboration with Yum! China is as strong as ever and we continue to be impressed with their ability to make Yum!’s brands distinctive, relevant, and easy. Our future together is bright and by working together we can fully exploit the power of our brands.

Finally, 2017 represented the first full year of our transformation journey. We made significant progress on our path to becoming a company that is more focused, more franchised, and more efficient. In fact, we ended 2017 with 97% of our restaurants being franchised and are well on our way towards being at least 98% franchised by the end of 2018.

Our four key growth capabilities are the foundation upon which our sustainable, long-term results are being built. These growth capabilities, outlined below, are the key drivers of same-store sales and net-new unit growth and serve as our guiding principles in all business decisions.

  • Distinctive, Relevant and Easy Brands. We will innovate and elevate iconic restaurant brands people trust and champion.
  • Unmatched Franchise Operating Capability. We will recruit and equip the best restaurant operators in the world to deliver great customer experiences.
  • Bold Restaurant Development. We will drive market and franchise unit expansion with strong economics and attractive returns.
  • Unrivaled Culture & Talent. We will leverage culture and people capability to fuel brand performance and franchisee success.

I firmly believe our culture is a competitive advantage for Yum! and am committed to ensuring this is the case not only today, but in the future. Leading and investing in our culture is the best way to fuel better business results and I’m excited to see our people and our franchisees energized as they grow our iconic brands. With culture as the driving force behind our results, I’m pleased to share the following highlights from 2017:

  • Worldwide system sales growth of 5%, excluding the impact of the 53rd week and foreign currency translation. This was led by 7% growth at Taco Bell, followed by 6% at KFC and 2% at Pizza Hut.
  • Same-store sales growth of 2%, led by 4% growth at Taco Bell and followed by 3% at KFC with Pizza Hut even for the year.
  • Net-new unit growth of 3%, including 2,632 gross unit openings, which is more than 300 gross unit openings than in 2016.
  • Reached a significant milestone in 2017 as we ended the year with over 45,000 global restaurants in 139 countries and territories.
  • Increased core operating profit 9%, excluding the impact of the 53rd week.
  • Returned $2.4 billion of capital to shareholders through share repurchases and dividends and remain committed to returning between $6.5 and $7.0 billion from 2017 to 2019 through both share repurchases and dividends.

Our three iconic brands continue to focus on our four key growth capabilities which are the catalysts behind our successful results.

  • KFC is “Southern Inspired”. With innovative new products such as the Dirty Louisiana burger and the Chizza, a unique marriage of chicken and pizza, KFC continues to demonstrate success with our “Always Original” brand positioning. The team remains dedicated to addressing unmet consumer occasions through enhanced asset formats and elevated consumer experiences by leveraging the brand’s strengths and delivering sustained momentum globally.
  • Pizza Hut is committed to ensuring every customer has a Hot, Fast and Reliable experience around the world. In the U.S. we are aligning the system through the Transformation Agreement and building momentum in the business by enhancing our digital and delivery experiences, investing in loyalty through our Hut Rewards program and optimizing our asset base. Internationally, we continue to align our delivery-centric asset strategy to meet the growing global demand for fast casual pizza.
  • Taco Bell truly is a Category of One. The team delivered another solid year of operating results driven by innovative new products and unparalleled value. I am particularly excited about the new products and unique and compelling marketing calendar the team has planned for 2018. Internationally, Taco Bell continues to build momentum as we entered five new countries and ended the year with over 400 Taco Bell restaurants outside the U.S.

In closing, we are confident we are making the right changes to our business to build an enduring foundation for long-term growth that results in increased returns for our stakeholders. In 2018 and beyond, I look forward to updating you on our brands’ bold moves in delivery, digital and new restaurant development as they make our brands ‘Easy’ to order, ‘Easy’ to afford and ‘Easy’ to access. Most importantly, our three global iconic brands, bold growth agenda and world-class culture will continue to serve as our guiding light in our journey towards sustained momentum in our business now and in the future. Together we are building a world with more Yum!

Greg Creed Signature

Greg Creed, CEO

Financial Highlights

Download Financials
(In millions, except for per share amounts)
(As Restated)
Company Sales $3,572 $4,189 (15)
Francise and license fees and income 2,306 2,167 6
Total Revenues $5,878 $6,356 (8)
Operating Profit $2,761 $1,682 64
Income from Continuing Operations $1,340 $1,018 32
Reported Diluted Earnings Per Common Share from Continuing Operations $3.77 $2.54 48
Special Items Earnings Per Common Share (a) 0.81 0.08 NM
Diluted Earnings Per Common Share from Continuing Operations before Special Items (a) $2.96 $2.46 20
Cash Flows Provided by Operating Activities from Continuing Operations $1,030 $1,248 (17)

(a) See our 2017 Form 10-K for further discussion of Special Items.