Yum! Brands, Inc. (YUM) Earnings Call Transcript & Summary

How are you?

Hi, John.

So this is a first for me. So we are in a room full of people. You are on a screen behind me. You're also on a small -- the audience can see you're also on a small screen in front of me. I can't see myself, so excuse me if I move out of the screen. So this is what was meant to be one of the -- one of, if not, the first in-person conferences on Wall Street, has evolved into a hybrid conference. And certainly, we're very gracious for your time. And for my session, you're leading us off today. I think an introduction probably isn't necessary, but this is David Gibbs, who is the CEO of Yum! Brands. I'm John Ivankoe, the restaurant analyst at JPMorgan. Welcome, everybody. And certainly, we're happy to be here in a just barely getting back to normal way. Certainly, I would say that we're in first gear, possibly even half a gear. But the important thing is that we're rolling.

So okay, let me just start with the first question. Many companies have talked about not letting a crisis go to waste and have really rethought how their businesses -- their business organization should be structured and even various opportunities in store-level operations. Could you talk about how and if Yum! is a stronger business as we stand in September of '21 versus, for example, March of '20?

Sure. And obviously, John, it's great to be with you, even if it is virtually and with a few of you in person there, I'm jealous. But I'm excited to spend some time today talking about Yum! because there's a lot of exciting stuff to talk about. When we started in -- when I started as CEO in 2020 coming off of what we had called the transformation of Yum!, there was a lot of confidence in the business as we were growing faster than we ever had. New unit development and just come off of a record year and we were putting in place strategies to accelerate that growth, principally around digital and off-premise. So you ask, never let a good crisis go to waste, all we've really seen happen over the last 18 months is our business gets stronger. And a lot of those strategies that we were putting in place have been accelerated. You can see it in the numbers, over $20 billion on the trailing 12 months of digital sales. I don't think we ever imagined we would be there this quickly. But that's what this environment has done as customers have embraced our brands and new ways to access it. And all of the technology that we've been investing in prior to the pandemic is all paying great dividends for us. I think we've never been more aligned with our franchisees on the future of the business, and certainly very excited about the growth that we're seeing right now.

And certainly, a lot to cover there. So I mean, it's very easy to focus on positives like the U.S., many U.S. quick service brands have actually had record store-level cash flow in the past 12 months. Are there still opportunities in any of your larger international markets, markets that have not yet turned, that you think could be a driver of future profits and future growth?

Look, the great thing about our business is there's opportunities everywhere. As strong as we're performing, we know we have lots of things that are sort of the unfinished business. In general, as you look around the world, I think the developed markets have gotten through this environment better than the emerging markets. You see a pretty significant gap in sales. There's lots of reasons for that, the way the developed markets have obviously been able to get the vaccine out quicker. Some of the stimulus programs and things that governments are doing in development markets were probably a little more sophisticated than emerging markets. So yes, there's plenty of opportunity, particularly in emerging markets to get them more back on track. But obviously, what's exciting to us is you're seeing us put up good 2-year same-store sales growth, even though as the leader in developed markets in the restaurant industry, we have more of a drag from that than most.

Okay. So there's a lot of focus on labor shortages in the U.S. and all the different implications that, that's having across the supply chain, real estate, construction, cost of distribution, but specifically, and maybe what you can control and your franchisees can control the most, just overall staffing at the store level. Could you talk about if those are challenges that are presenting themselves in the U.S. and actually may be constraining sales from rebounding even further? And do such labor shortages, have you heard us such labor shortages existing outside of the U.S.?

Generally, this tends to be more of an issue in the U.S. and certainly it's been well documented and it's not just an issue in the restaurant industry, it's an issue across industries. I like our position when it comes to attracting the best talent in the industry and staffing our stores. We've talked about this for years, but Yum! has been built on a people-first culture. We invest in the people in our restaurants. We have Chief Operating Officers of our business units that came out of the restaurants. It's not just about the paychecks, it's really about paychecks and pathways, the opportunities that you can provide an entry-level employee to grow and advance in our system, whether it be becoming a franchisee or going into a Chief Operating Officer job. So that culture and the talent, the environment we have in our restaurants is an advantage right now. We're also doing a lot of hard tangible things, like retention bonuses, referral bonuses, providing family meals for employees, you name it. We're pulling out all stops to make sure that we have the right staff in the restaurant. And I think we're getting through this better than most as a result, but certainly a challenge for the industry right now.

And obviously, being largely a franchise system in the U.S., I mean, you cannot and do not directly control labor practices at the franchise level. Are you seeing some performing particularly better than others? And again, I'm focused on maybe bringing up the lower performance more to a system average to help the overall results.

Yes, look, it can't be overstated. The culture that you create in the restaurant is first and foremost, what's going to help you get through a tight labor environment. So our franchisees that have better cultures and better environments in their restaurants are the ones that are doing better. A couple of weeks ago, I was on a market tour, where I visited a restaurant where we had a 22-year-old restaurant manager, Jessica, who had been there for 3 or 4 years and made it all the way to restaurant manager, one of our top restaurant managers in the Taco Bell system. She had an amazing culture in the restaurant. I walked in, everybody was smiling. While we were there, some former teammates had come by just to visit and say hi. That is a restaurant that's not having any staffing challenges because people want to work there. It's a great environment. And that's what I think we're seeing across industries right now, employees are more choosy. So those are the kinds of things. Certainly, the dollars matter, but everybody is paying more now, and there's a better environment in terms of getting a better wage. It's those kinds of environments, where friends refer friends, that's where we're most successful. So the franchisees that create those environments are the ones that are really winning right now.

Understood. And one of the ways that Yum! -- gosh, a number of different points here, that Yum! has helped its franchisees, operational and menu simplicity clearly has been a driver. The average ticket across the entire sector has gone up materially like once in a lifetime. You've gone up a number of different reasons for that, it has gone material. How much of that do you think needs to be unwound? I mean, do you see a fallback to normal of, "Hey, we need to add complexity back, we need to add value back, maybe we do give up some of the average ticket to focus on traffic"? I mean, how -- I mean, as we're still in this gray period as we clearly are still hybrid, how much of some of the changes over the last 18 months at the store level do you think will be permanent? And how much do you think would revert back to 2019?

Yes. I'll go back to what I was saying originally when we kicked off. What we've seen is an acceleration of trends that already existed. It's not new news that off-premise was climbing prior to the pandemic. It's not new news if people like to interact with digital and have an easier experience in the restaurant. All of that's been accelerated. I don't see any of those things unwinding. Maybe they might moderate a little bit, maybe the growth in those areas might moderate a little bit. The menu simplicity has clearly been an enabler to get through this with better speed. You've seen great speed scores at Taco Bell, for example. So I don't think we're looking to unwind anything. I don't think the consumers are unhappy with what we're providing. We will see some return to dine-in. We will see more individual meals. You've got to remember those increased checks aren't just price increases, those are more eaters per check. So as we go back to more individual meals, perhaps you'll see the average check start to moderate just a little bit. But I think most of these changes have been good for the industry, good for our brands. And the vast majority of what's happened will stay in the business as we move forward.

And we have seen the American consume larger sizes, more premium and most people perceive actually more items per person, I mean, which is very American, that probably the way to approach the crisis is to eat one's way through it. So can you comment on that? How important do you think that is versus just on a single person basis? And again, do you think value -- the specific value that drove QSR for decades, do you think that has a place in the future?

Yes. I think you said it well that premiumization has really been one of the driving factors. People are willing to pay more for a little bit more premium experience right now. Obviously, we're talking a lot about the U.S. and because this trend doesn't exist all around the world. As we've seen more money put in consumers' pockets through stimulus programs, unemployment benefits and the like, that has helped to contribute to people being a little bit less price-sensitive. Do I think that there will be a little bit more focus on value as we gradually come out of this? Yes, I do. And certainly, around the world right now, we have some markets that are still very dependent on value. So that is one -- we're at a point in time right now where value has probably been less important than in most of our recent history.

And you, I think, more than many companies at least, explicitly has focused more on the services model for franchisees. You've acquired a number of different technology-oriented companies. Can you talk about the benefit that the system has already seen from that? How much more value-added services can you provide to the franchisees? And if you can separate what you've done in the U.S. versus what you've done internationally through those technology initiatives?

Yes. Look, you're hitting on a great point. It really gets to the heart of what I think is one of Yum!'s biggest competitive advantages. We have the largest footprint in the restaurant industry with over 50,000 restaurants, a very widespread store base. We're in almost every market in the world. And we have more know-how, more scale than just about anybody else. We're using that when it comes to technology with the explicit stated goal of we want to provide our customers, our employees and our franchisees with the best technology solutions. If you're interacting with Yum!, you should have the best-in-class restaurant experience with our technology. We can do that because we can afford to buy up some of these smaller companies that have great technology, competitive-advantaged technology and then we can scale them on our system. So we can make the economics work in a way that the franchisees get the best solutions at the lowest cost. We've done a number of these acquisitions. I would say every single one of them has worked out the way we've hoped. And I imagine we'll continue to do more because of the economics of it, and the battle that's going to be more and more thought over who has the best technology solutions in the restaurant space.

And so has -- so I always -- it's easy to think about them as currently U.S. solutions. Have they been applied globally? What big pockets do you think Yum! still can improve to make themselves best-in-class? I mean, where do you see -- and I know you're a very rational data-driven person. Where do you see the biggest opportunities to improve to achieve that goal?

Well, the reality is we don't need to buy technology that's commoditized. So we don't need to own the cloud data storage. That's something that we can buy from anybody and doesn't give us competitive advantage. Where the advantage has come for us is when we can buy things that drive sales, please our customers and give our franchisees a competitive advantage. And I know you mentioned the U.S. But you look at the acquisitions that we've done, they've all been -- QuikOrder was a U.S. bank -- QuikOrder was a U.S.-based transaction that we did several years ago, but all the recent ones have been international-based companies, the most recent one being Dragontail, which is technology that's been deployed in a whole bunch of our restaurants outside the U.S. and just starting to come into the U.S. as we closed on that transaction last week. So I think one of the other advantages we have at Yum! is we see these companies, we get to interact with some of these smaller companies in some of the countries that we operate in, see how well that might work in one country internationally and then start to apply it to other countries. We get a lens into these businesses that most people don't have. So we can pick and choose the right technology to buy and know that we're getting the best in the industry.

And how do you view these technology and services? I mean, is it a profit-driving vehicle for Yum! in and of itself? Or does Yum! get paid on the back end, if you will, as franchisees have better sales, better profitability and therefore open more stores?

Yes, it's really much more about the latter. Obviously, we're in the -- we have to remember our mission. Our mission is to please customers, create unit economics that please our franchisees and grow as fast as we can. We're not in the business of making a ton of money off of technology. The technology fuels those things that we want to do, please customers and improve unit economics. And that leads to higher sales, higher royalties for Yum!. Of course, we've got to recoup the investments that we make. But a lot of times, as we scale these things, we anticipate being able to provide our franchisees with great pricing on stuff that they couldn't get anywhere else if we were dealing with a third party.

And certainly, I mean, you talked about what COVID did is accelerate trends that were already in place. I mean, automation and robotics could be those trends. The industry, as of the date, it's hardly even in its infancy. It's not even being incubated maybe. What does Yum! think about that in terms of the system? How big of an idea, is that something that, again proprietary versus commoditized for lack of a better word, in terms of the future opportunity, especially as it may be safer, faster and obviously use less labor hours?

Certainly, there's a bright future in terms of the impact that automation and robotics can have on our business. It's already having an impact to some degree. A lot of this is proprietary. And again, we want to be the winner in the industry. I can tell you just as one small example, we've been doing virtual restaurant visits since we can't travel around the world. So I was virtually in the U.K. last week and virtually watching a franchisee in the U.K. take us through his store, bragging about the technology that he has deployed in the store via Dragontail to use artificial intelligence, artificial vision to inspect pizzas to make sure they're all made right before they get put in the oven. The technology can tell you if a pizza is made wrong and caught it -- and catch it before it's actually put in the oven. Just as a small example, but you can imagine how gratifying it is to hear our franchisees so excited about the technology and the impact that it's having on its business, which is obviously a good proof point for why we ended up buying Dragontail.

So obviously, I mean, you have three brands at mega scale. Talk about what type of shared services or shared learnings were -- what Yum! can provide corporate to all three brands that can be leveraged at the franchisee level, many of which are -- don't have commonality with one another. I mean, can you talk about more of the how Yum! can leverage the strength of these three brands and add value through a virtuous cycle, leveraging the experience that each three brands have independently?

Yes. And I think our challenge at Yum! is we have actually four brands when you include The Habit.

Not at mega scale, but yes, thank you. You're right.

Not mega scale, they're going to be there someday. But all of our brands bring something to the table that they all have something to share. If you want delivery expertise, obviously Pizza Hut has a drive-thru expertise, Taco Bell has it. Habit has taught us a whole bunch of things actually about back-of-house restaurant systems, believe it or not. So everybody has something unique that they can share. And then there are also a lot of commonalities that maybe aren't that obvious to the layman, but the engines for our e-commerce business are all -- can all be very similar and we can all leverage the scale across that. In fact, some of these acquisitions that we've done when we -- in the tech world for one part of the business, it turns out that the IP we acquire can have a great impact or positive impact on other brands that we have. But then there's always the obvious stuff when it comes to Yum!, like our purchasing scale. We have a purchasing co-op in the U.S., for example, that purchases for all of our brands. All of our brands use cheese, for example, and we get amazing scale out of that. So when we buy somebody like The Habit, we can immediately leverage that purchasing scale to reduce their cost of sales. And then there's the sharing of talent across brands and the sharing of know-how. Let's take loyalty programs. If you're looking at loyalty programs, we've learned all around the world what works in loyalty programs and what doesn't. Our brands share those things. When the pandemic hit and we realized we had to serve customers in a different way, our China business, which got hit first, shared all of their learnings about how to do contactless delivery and carryout, which was an amazing lesson for the rest of our businesses and quickly spread around the world. So I'd go on a long time about the things that we can share and benefit from and within our system. And it's all part of what fuels Yum!'s growth.

I mean, you led with two provocative examples. I mean, delivery expertise at Pizza Hut, how can that be leveraged since that's an in-house system largely? How can that be leveraged to the other brands? How can Taco Bell's drive-thru expertise be leveraged to other brands? So talk about having a completely different operating platform than either Pizza Hut or KFC. Could you elaborate on those, too?

Yes. Look, obviously, the world is embracing delivery right now. And what we know is that our Pizza Hut business, particularly in the U.S. where we're at huge scale, we're world's experts on delivery. We can do it cheaper than any aggregator can. We have all sorts of systemic advantages in self-delivery and we're sharing that around the world. We have self-delivery occurring at KFC. And I think it's also helped us in terms of working with aggregators because we also recognize that they're part of our system and there's a place for aggregators in our model. Early on, we actually got involved in a financial deal with aggregators and took a board seat and we -- and I think they've got as much out of that relationship as we did because we know a lot about delivery probably more than just about any other company in the world. And in this environment, that's a huge competitive advantage. It's the same thing with drive-thru. And the drive-thru in the U.S. is fairly common, but it's not as well-accepted in a lot of international markets. So as we build out international markets and you see our drive-thru percentage increase, that's an advantage. Habit, for example, only has 20% drive-thru restaurants today. But they are going to a much heavier drive-thru model as they see much higher volumes in their drive-thru assets. They're going to leverage the knowledge obviously that we have from Taco Bell and KFC on drive-thru.

And so this would be my fun fact. My teammates went to a Habit drive-thru in Las Vegas yesterday. So it was -- and they had a great experience. They talked about how much busier it was than other nearby popular restaurants, which I won't mention. Okay. So delivery again, I've always asked the question is that can you leverage the in-house Pizza Hut network, keeping them busier by delivering Taco Bell products or KFC products? I mean, is that too far of a leap of we have the network, maybe you're not as busy in the afternoon or certain dayparts, people order Taco Bell perhaps at different times than they order Pizza Hut? Is that an opportunity that exists? Or is the practicality of combining those different franchise systems too challenging?

Look, it's certainly an opportunity, and somebody like Dragontail would enable that with their order management software. And we do have pockets of tests and have played around with that. But I think for us, it's always good to come back to what's our purpose for being, it's to build our individual brands to be the best that they can be. So anything that we do that might sacrifice the success of Pizza Hut, while a Pizza Hut driver is trying to deliver Taco Bell, we're not going to do. I think we have scale at Pizza Hut. We keep our drivers incredibly busy, particularly in this environment. You saw just in our last quarter, on a 2-year basis, our off-premise business at Pizza Hut around the world is up around 20% between international and the U.S. So it's not as if we're looking for something for our drivers to do right now. But certainly, as the world evolves, as different means of delivery evolve, as software gets more sophisticated, there's probably an opportunity there.

And many have launched loyalty as a way to collect customer data, especially because that they come on your app and not a third-party app and you can promote to them in a number of successful ways, in a number of very low-cost ways. I mean, can you talk about integrating loyalty of the different systems? Actually, in reviewing my notes, I forgot that KFC didn't have a loyalty program in the U.S. Taco Bell is new, Pizza Hut obviously is several years ago. So it's interesting to see them in very different parts of their life cycle or at least different parts of launch in the U.S. Talk about the ability to integrate kind of across Yum! or just whether it's on the front end that the customer sees it or at the back end that the customer doesn't in terms of really flexing your data advantage that you may be able to garner.

Yes. Look, as far as loyalty goes, obviously it's quickly becoming table stakes in the industry. The majority of our stores around the world have a loyalty program of some type. But loyalty is just one step on the tech journey, right? And it has to be done at the right time. I'm really proud, for example, you mentioned KFC U.S. that we don't have a loyalty program yet. But I'm really proud that earlier this year, they launched an app and a new website developed in-house, using the capabilities of some of the companies that we have acquired, and it's been incredibly well received. So on that journey, obviously the next step for KFC U.S., one of the next steps would be loyalty. And that's what you're seeing us do all around the world. Just sticking with the U.S., obviously, Pizza Hut launched loyalty first because it was a more digital business and it had a greater payoff. Taco Bell followed, and we're having success with both of those brands. We are sharing a lot of knowledge across brands, across countries on what works in loyalty and what doesn't work. It's a little bit harder to share data and customer data, specifically on loyalty, just because of the privacy laws as you can imagine. But I think the big [ get ] for us is just the know-how of how to administer whatever it is in tech, loyalty or something else in the way that's most effective. Just think about how users interact with e-commerce sites. We're experts across all of our brands on how to design websites to be the most efficient for a consumer. And our brands are constantly sharing ideas in that space, for example.

With Yum!, and this is previous generation, I think you were at the company in 1999. I saw all three brands on one advertisement. And certainly, co-branding -- multi-branding was basically the part of the company's strategy in refranchising before China really took off. So I guess, go back and reference that example. I mean, is it -- does it make sense to think about various combinations in leveraging the three brands or as your point earlier, just focusing on maximizing the value of each individual one? Because that strategy has shifted over time.

Yes. I think that strategy has shifted, and I think for good reason. We have four -- or three of the world's greatest brands and a fourth that's about to become one that are incredibly strong, have loyal followings, have different consumer bases and on their -- standing on their own, have great unit economics and a huge growth potential ahead of them. That is what our focus is, is continuing to realize that potential. That's why, for example, with the stronger unit economics in this environment and a strong pipeline of development, you saw us on our last earnings call take our guidance for development up to 4% to 5% for net new unit growth. There's no better indicator of the strength of a business than being able to grow at that rate with a big -- the starting footprint that we have because that growth is all done, for the most part, with franchisee capital. So they're putting their money behind these brands because they believe in the unit economics and they see the potential to grow the business. And we'd be crazy to get far off of that path, given the bright future we have.

So KFC has been an absolute development machine. I mean, obviously, it's been driving the overall business. So can you talk about what you think the ultimate TAM is of KFC, I mean, if you kind of have this idea? And then of course, I want to talk about Taco Bell International and then we'll talk about the Pizza Hut system after that. So let's hit each one separately if we can.

So KFC, with 25,000 units or so, is obviously one of the world's great brands, highly successful just about everywhere we've launched it. But as we've said in past venues like this is we think 2/3 of the world's KFCs are yet to be built. And I know sometimes when I talk to folks based in the U.S., they find that to be a little curious because the brand has been here so long and they don't think of it as the growth brand it is. But number one, you just travel around the world and see how fast we're growing in so many markets as evidenced by the numbers and visit some of those markets and you realize how real that is. And then even in the U.S., we've only got about 4,000 KFCs in the U.S. We're now switching into growth mode at KFC U.S. after a number of years of same-store sales growth, has strengthened our unit economics there, made the business stronger. So we really have growth potential everywhere. People are always looking at me, asking me to try to categorize where we're done growing and where we are going to keep growing. And I don't have any done-growing markets. All I've got is keep-growing markets. And in fact, in the keep-growing, we want to grow fast.

Well, that would -- I mean, obviously, you know this. I mean, that would make KFC larger than Yum! is today. So I mean, those are -- I mean, that's obviously -- we used to talk about bold goals. That's a bold goal, certainly. And Pizza Hut, we don't need to spend time talking about the casual dining market in the U.S. But can you talk about the percentage of the Pizza Hit global portfolio that you think has the right asset optimization? How much of that still needs to be cleaned up, if you will, or converted, to a lack of a better word, and what you think the growth opportunity is for Pizza Hut to be a net contributor versus what has actually been a modest drag?

Yes. Well, obviously, Pizza Hut has done incredibly well over the last few quarters, and you're seeing it in the numbers. I talked about the 20% off-premise same-store sales growth on a 2-year basis. It's a pretty astonishing number. What we report overall for the brand is a little bit lower because we do still have a drag from dine-in. As far as the asset base that we have, it's -- the majority of our asset base is now a delivery/carryout asset base. But even if you have a dine-in asset, it doesn't mean that you can't be a good delivery asset. And we also, in many markets, embrace our dine-in heritage. It gives us a credibility and a quality queue for our customers that nobody else has. So we think we're in a really good spot with Pizza Hut. We closed a lot of the dine-in stores that didn't belong in the portfolio over the last 18 months in the United States. But for the most part, the stores that we have in the portfolio now are good long-term stores. The brand has got an incredibly bright future. And it's probably the biggest beneficiary of that acceleration of trends that I was talking about earlier. Getting out of some of the dine-in stores that we didn't want was a great opportunity for us, our franchisees embraced and we're glad they did. But we're moving forward with a lot of growth and a lot of white space for the Pizza Hut brand.

And this is the one case I'll ask about a competitor that actually is past due in terms of both global and U.S. system sales and communicates an everyday value at a price point that you guys have not been able to sustain. So how do we think about the brand positioning of Pizza Hut? How does Pizza Hut retake the lead if that's what your intention is?

Look, I think in so many ways, Pizza Hut is a leading brand in the pizza category. If you ask consumers which brands they love in the category, Pizza Hut pops up as #1. If you ask consumers about fond memories of brands and -- but a brand that is made for today with a modern delivery experience, Pizza Hut is right there. So we're proud of Pizza Hut. We're proud of the assets that we have to deploy at Pizza Hut that are incredibly unique with restaurant-quality pizzas but in a modern, convenient way. And that's why I'm so excited about the future for Pizza Hut. Of course, having started as a fast casual brand, that has been a challenge over the last few years to overcome as consumers move to more off-premise. But the acceleration of our -- in our asset base in that direction, the franchisees' mindset around embracing the off-premise opportunity, I think we're lined up for a very bright future.

And do you have a sense of when does Pizza Hut get back to 4% to 5% unit development? Are you thinking about the different brands in terms of contribution to that admittedly very high growth rate?

Yes. Well, the U.S. business is now going through a turning point after having closed some stores and getting back into growth and take them a little time to get to that 4% to 5% rate. But we know that, that's there. And then International is really there and then -- or close to it and growing -- and easily can get to that number and higher. If you look at the unit economics for building a Pizza Hut, they're incredibly favorable. With most parts of the world, we have 3- to 4-year cash paybacks from building a new Pizza Hut. We've got to get out -- there's some more dine-in stores we may want to transition into new delivery/carryout stores. So that's -- so we may build some gross units and have a few more closures to get there. But the net new unit number at 4% to 5% is easily within sight of Pizza Hut International, and we're getting there in the U.S. as we return to growth this year.

And let's shift to Taco Bell. I mean, Taco Bell has -- apparently doesn't have a limit in the United States, been at very extremely high margins, very good sales -- excellent sales-to-investment ratio. It's actually one of the higher returning businesses in QSR. Congratulations on that. So how has that opened the U.S. market? And talk about the transportability of that very strong U.S. experience, which obviously is very drive-thru-driven, to various international markets.

Yes. As you know, we often talk about Taco Bell as being in a category of one. There really -- nobody else can do what Taco Bell does. And you're seeing that in the results and the success and the love that consumers have for the brand. But still, we've got a long runway for growth at Taco Bell in the U.S. and internationally. As the brand has grown in the U.S., that's opened up a lot more opportunities to build new assets as the unit economics have gotten stronger, as you mentioned. I think Franchise Times had them as the #1 franchise concept in the franchise industry, which makes sense to me because our franchisees have done incredibly well with the brand, and they know they've got a bright future ahead. Internationally, obviously, markets are at an earlier stage of growth. But the thing that we've been highlighting on our earnings calls, which encourages me, is a couple of markets are now starting to get to the tipping point, like the U.K. and Spain, where you've seen a rapid increase in their average unit volumes and a rapid increase in the pace of units that our franchisees in those markets are building. And we know once we get to 100-plus units, that's when markets have typically taken off based on our experience with KFC and Pizza Hut. So when you get a few markets and get to that tipping point and then really start to go, that fuels the rest of the country as other franchisees gain confidence in their ability to grow in their own countries. All of that is taking place right now at Taco Bell under the leadership of Mark King and Julie Masino. And it's a very exciting and important part of Yum!'s story.

I've seen or saw Taco Bell in Shanghai. It barely bore resemblance to the U.S. brand. So can this be -- you talk about the frequency, talk about the importance of drive-thru. I mean, it's almost like we should talk about Taco Bell with a different name internationally versus the U.S. because it is -- it doesn't have the great value, the throughput, the brand -- the extremely high frequency. Can you elaborate on how -- on why -- and what can be done with the brand to make it work a lot like the U.S.?

One of the strengths of Yum! is our brand-building talent, right? When you think of Yum!, you think of an organization that has built these amazing brands over the years because of the kind of talent we have on that side of the business. Same thing applies to Taco Bell. One of the reasons we -- our talent is so successful is we give them the freedom to build the brands the right way in-market. We're not as rigid probably as a lot of our competitors in terms of what the product offerings are. We give you a little flexibility to make the menu make sense in that market. That's probably why you've noticed that there's slight differences in the Taco Bell menu around the world. That's all by design. We figured out ways to connect with consumers locally. For KFC, some markets, that's more of a chicken on the bone market. Some markets are more sandwich markets. So Taco Bell may have its own differences. And that excites me because I know, like I said, we're seeing success in the U.K., where, for example, Taco Bell, more of a delivery brand than I would have imagined, much higher delivery percentage than most other markets. U.K. consumer in a lockdown type of environment has really embraced getting Taco Bell delivered. And we think that's a strength that we can build on in the U.K. that we didn't necessarily know we would have.

30 seconds left. So can you talk about your attitude on CapEx? I mean, clearly you've gotten payback on the money that you spent. And do you anticipate a brand number four, five, six? I mean, is that -- how far does the leverage of the Yum! franchise network go?

Yes. I think The Habit, in many ways, was dipping our toe in the water and a test without making a massive investment, investing and betting the company. We've been pleased with what we've seen from Habit. We know we're going to ramp up the pace of development. We've got a lot of franchisee interest in it as it starts to move out of California and move into international markets. So everything there, despite the crazy environment we're in, has worked well. And I imagine that there will be other Habit-like deals down the road. But we're in no rush. We have so much growth ahead of us with the brands that we have today that if we don't do any other acquisitions, I know we're still going to be a much bigger company in the future than we are today, just with the growth we have in our existing four brands.

David, excellent. Thank you so much. Thank you for your time.

Thanks, John.