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

Good morning, and welcome to day 2 of the Morgan Stanley Global Consumer Conference. My name is John Glass. I'm the restaurant analyst at Morgan Stanley. And it's my great pleasure to welcome Chris Turner, the CFO of Yum! Brands, back to the conference this year. Spanning the globe with over 52,000 restaurants under 4 banners, Yum! is a dominant QSR in multiple categories from chicken to pizza to Mexican and burgers. Post the spinoff with Yum China a few years ago, Yum! is now a 98% franchise business with a clear strategy of operating Relevant, Easy and Distinctive Brands across its core strategies of strong restaurant development, industry-leading franchising capabilities and its unique culture and talent. Before jumping in here with Chris, I do have one quick disclaimer to make, which is for important disclosures, see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. And if you have questions, please reach out to your Morgan Stanley sales representative. With that out of the way, good morning, Chris, and welcome.

Good morning, John. Thanks so much for having us, and thanks to everyone who's made time to join the discussion this morning.

It is our pleasure. Chris, I want to jump into unit development. We're going to talk about unit development. We're going to talk about the brands, specifically some technology in other aspects. But I do want to lead off with unit development since that is, I think, a leading characteristic of the business. It's a key contributor to your long-term growth algorithm and the investment thesis. The reinstatement of your long-term growth targets in the second quarter and accelerating actually from 4% to 4% to 5% was, I think, a thesis changer for many. And in fact, the second -- third quarter that you hit record development. So I think that sort of reinforced investors that you are, in fact, achieving that inside of 2021. I guess, just starting, Chris, if you think about even just this year, given the strong performance development in the third quarter, is it likely that we're likely to see a similarly strong development growth in the fourth quarter, that is to say, getting it close to 5%? Or maybe were there some unique characteristics in the third quarter of catching up on delayed development from 2020?

Yes. Thanks a bunch, John. And just to step back from an overall growth standpoint, you're exactly right. We have dual growth drivers. Obviously, same-store sales growth is important. But to your point, unit growth has been the bigger part of the algorithm historically pre COVID. And we were excited in Q2 to reinstate the algorithm and to actually take up that unit development number given the confidence that we had in the pipeline. Of course, that's driven by things like unit economics, our strong franchisees and the strength of our brands. But very proud of the unit development that we've and our franchisees have accomplished this year. In Q3, from a growth standpoint, we opened nearly 1,000 restaurants. That's really a restaurant every 2.5 hours around the globe. It's really an amazing accomplishment for our teams and our franchisees. As David mentioned, we're -- we think we're headed toward what could be a restaurant industry record in terms of a development year. Across the industry, Q4 tends to be the strongest quarter. And to your question, I don't think there was anything unique or special about Q3 other than we're really seeing our franchisees put their capital to work, building our restaurants across all brands in a number of markets around the globe.

And Chris, can you discuss sort of China versus non-China development within that? You're still heavily dependent on China. It's one of your largest markets in the world, incredibly successful. Could you provide some detail to give investors confidence this isn't just a China-led development story, but it is, at this point, maybe broader than that?

Yes. China is the world's development leader in restaurants. What Joey and her team do is really impressive. They opened 381 restaurants of Yum! Brands in Q3, which was a record for them. But outside of China, we opened 379 restaurants, which was a Q3 record ex China. And we saw really broad-based strength. If you go into KFC, for example, we opened restaurants in more than 60 countries during Q3. We've got some really strong other markets. India was at plus 100 across our brands. Russia was plus 50. In the U.S., we opened nearly 40 restaurants. And I could keep going down the list. It has been really broad-based strength, which we think is very encouraging and a great sign of the strength of our brands around the globe, even in some markets that are still feeling the effects of COVID and government restrictions, those sorts of things. I think it points to we have, on average, larger franchisees than many other restaurant systems. Those franchisees are well capitalized. And they can see through near-term choppiness and are putting their capital to work and building new stores.

And you cited improving unit economics versus pre COVID is one of those reasons, right? And obviously, strong unit economics drives the business. If I were just to pick KFC as an example, right, it's a lead development brand though, if you looked at your sales on a compounded basis versus '19 on a global basis, they're up about 1% on a 2-year stack. So that's good. But that doesn't suggest the AUVs are significantly higher than pre COVID. So what is it that has strengthened the unit economics? Is the development costs lower? Or is it just inside of that 1% I'm looking at, there are many markets which are substantially higher and the volumes are higher and therefore the economics are higher? What's improved unit economics?

Yes. So on average, our unit economics, as I talk to our brands, as I talk to our franchisees, on average, our unit economics are stronger now than they were 2 years ago around the globe. Now obviously, the story can vary from market-to-market. We operate in 150 countries. And the situation is a little different from market-to-market. In some cases, it is very strong sales. As we've talked about in many of our developed markets, we're running significantly ahead of 2019 from a sales standpoint. We do have some other markets that are still behind. We've talked about how in emerging markets, they run a little bit slower than developed markets, although we're starting to see -- in Q3, we talked about how ex Asia, our emerging markets were starting to rebound. But across all those markets, there are a set of factors that do support unit economics. Think about our digital sales. We've achieved $20 billion in digital sales on a 12-month basis. We like everything about those digital sales. If you think about the nondelivery digital sales, and we've seen significant growth there, those lead to improved unit economics because you've got less labor component in the sale. We've seen a change in consumer behavior toward larger check sizes and more group dining. That supports improved unit economics, and there will be some permanence in that shift. You also think about people dining off-premise. Coming into the pandemic, $17 billion of our sales were in the dining room. That virtually all went away. It's starting to come back a little bit. But as you shift to off-premise, those tend to be improved economics as well because you're not managing and cleaning the dining room. So there are a number of factors that have helped. Obviously, there are some offsets in markets, things like inflation. I think we're the best equipped to deal with those types of challenges. But that gives you a feel for some of the factors that are supporting unit economics, even in markets where sales have been more challenged. And of course, anytime profits are challenged, our franchisees are fantastic operators. They dig in, and they find efficiencies in their businesses with those pressures. So I think all of those factors have contributed to what, on average, are improved unit economics.

That's super helpful. I appreciate that. And we're going to come back maybe in a moment to some digital and some of those other drivers, but that's a great overview. Investors, I think, will finally ask that if you've raised your -- you've talked about a high single-digit sort of a, I'll call it -- I don't know if it's still 7%, but a high single-digit system sales growth goal. Is there any reason to think that accelerating your unit growth target to 5% versus 4%, that, that wouldn't incrementally flow through ultimately to growth? And is there any offset there? Or is this just we're still in a high single digits, but we're in better high single digits now than we were before?

Yes. When we reinstated the algorithm, obviously, the reason we have taken it down was because of the high uncertainty during the early parts of COVID. We reinstated it when we had confidence and had seen enough evidence that our brands can really operate in just about any kind of environment that we have around the globe. We obviously still have some markets that are significantly impacted by COVID. But in general, we're able to serve customers because of our off-premise capabilities. That gave us the confidence to reinstate. And we talked about why we actually took the development number up a bit. Look, my job in the long run is to take every element of the algorithm up. That's what my aspiration is. And we're going to certainly work towards that. From a profit standpoint, high single digits is what we've reinstated in the algorithm right now. There is leverage in the business model. And we're going to be trying to take advantage of that leverage. Of course, we're also going to be continuing to invest ahead in things that will set us up for long-term growth, and digital being the most important area there. So we're balancing the needs to drive performance in the business with the investments that will set us up for the long term. But yes, over the long haul, my aspiration and our aspiration is to continue to take all elements of the algorithm.

And considering that on that topic of the core operating profit growth, Chris, '21 had a lot of puts and takes, right? So it wasn't a particularly even year, beginning of the year much faster as you sort of lap some of COVID and then back half of the year, you had some puts and takes around the debt recoveries. It's early stages, and I know you're probably not willing to talk about guidance for '22 yet. But just as we think about '22, one, is it a year that one would expect that the core operating profit should continue that high single-digit growth rate? And is there anything early days an investor should know about the cadence of '22 that may be different or unusual than a typical year?

Well, we reinstated the algorithm. So the algorithm is our view on long-term guidance. And in my mind, that applies in 2022 and beyond. So that's what we're driving towards. This year, you're right, we did have some quarterly lumpiness, given those COVID-driven swings. We've talked about those and tried to help people understand those as we've gone through the year. You hit on the bad debt overlaps. Another one is we own a number of Taco Bell stores in the U.S. and at least in our company stores. We'll see some normalization of the store margins there from -- some of the more temporary drivers of expanded margins in that business normalize over time. So there'll be a few of those swings. I'm sure that as we go into future earnings calls, we'll give more direction around the shape of things to keep in mind as you're modeling quarter-by-quarter next year, just as we did this year. But there's nothing new or dramatically different beyond the factors that have been driving those swings this year.

Okay. And another just on that topic, Chris, you commented on the role of inflation in your last call. It was supply chain challenges. They're everywhere. But you also commented that Yum! is navigating well. Just remind us why you have the confidence that you don't get stuck in some of the issues that have either led to supply chain challenges around food, around labor shortages. What are the things that make Yum! unique in this environment that you think you've got better visibility on some of those than other -- maybe some other brands do?

Yes. It's a great question. It's certainly -- in certain markets, these are certainly important challenges that our teams and our franchisees are dealing with right now. A few things to think about. One, while we see some of these in other markets outside of the U.S., these are most acute -- the labor challenges and the inflationary challenges are most acute in the U.S., which I think points to the resiliency of our portfolio. Remember, the U.S. business is only 40% of our global business. So there's natural resiliency just in the shape and design of our portfolio. In the U.S., I think we're advantaged in dealing with those challenges. First and foremost, our scale, if you think about inflation, the scale player has advantage. And our first line of defense on that is to leverage our scale to find cost offsets that help us to deal with it. So if I take the U.S., our purchasing is done through restaurant supply chain solutions, the co-op that our franchisees and Yum! own, professional team of strategic sourcing experts. And they have been rolling up their sleeves for months now because they saw that inflation coming. They've set aggressive targets for how to go deal with it. So they're leveraging our scale to do that. We also have other levers that we can pull to deal with inflation. There's nonpricing commercial levers that each of our brands are working with the franchisees on: tweaking, adjusting promotional calendars; tweaking, adjusting menu mix. And then you've got the pricing lever. And our brands have pricing power. We're confident that our franchisees, they ultimately make the decisions on that. We help with analytical tools. We help with frameworks. But we do have that power. But of course, we'd like to pull the other levers first because we always want to provide strong value to our customers. And so we're balancing the near-term needs of the economics of the business with long-term consumer relationships. And so that's always front and center as our marketers and our franchisees think about how to make those pricing decisions.

And then just before moving on, Chris, the next topic around technology, the new variant has obviously caught the attention of the world. It's caught the attention of the market. No one knows yet what the impact could be to the economy or to sales. What do you do as a management team, right? When you hear that news, what are the action steps Yum! has been taking? Or as you sort of huddle as a management team, what do you do now to prepare for what may end up being somewhat new disruptions?

It's a great question. And I think it points to one of the important adjustments to our operating model that we've made as we've gone through the pandemic. Yum! historically has been a very decentralized company, which has served us well and continues to serve us well. We're able to get our brands and our operations right for each of the 150 markets in which we operate around the globe or the 290 brand-country combinations. But coming into the pandemic, certainly for things like understanding COVID, understanding its impact on our restaurants and making decisions around keeping team members safe and keeping customers safe, we had to centralize a number of those types of discussions and get all of our brand leaders in the same room to talk through those. So this is no different. We built those muscles. We're obviously trying to work with our experts, both internally and the external experts that we work with, to understand everything we can about the nature of the new variant. When you think about COVID, mission number one is keeping team members and customers safe. And our franchisees and our brands are doing a great job of that. But again, from a sales standpoint, we've shown that we've been able to safely serve customers in just about any kind of environment around the globe, largely supported by those digital capabilities and off-premise capabilities. So I'm confident that whatever the nature of this is, we will be able to navigate it well with our teams and with our customers.

Yes, well-said. I want to -- that's a great jumping-off point for talking about technology. So obviously, technology is a big -- technology, digital sales, a big driver in this industry. Yum!, I think, illustrated that. On a trailing 12-month basis, you did about $20 billion in digital sales. So that's an enormous number. I guess, what I'm trying to understand is how Yum! -- where are you in your progression from a digital standpoint? How -- are you at this point, in your view, a best-in-class digital QSR? Are you -- the capabilities you've built recently just getting you back to par and you -- there's opportunity -- future opportunities? I think from the outside looking in, it's often hard to distinguish whose strategies -- what's the differentiation? Which is better? So maybe where are you on that journey at a high level, right? And what have you changed? And then I want to talk about some of the specific investments that you've made recently.

Yes. So if I step back and think about where we are -- this is a race that will never be over. And so it's one where you always have to think about, "How do I run faster? How do I run faster?" Coming into the pandemic, we had shifted our digital strategy. We brought in Clay Johnson, Walmart CIO, and we had -- our strategy was driven by a set of customer changes and behavioral changes we thought would occur over the next 5 to 10 years. All those changes accelerated in the pandemic. They basically all came through, but they happened in an 18-month period in terms of the customer behavioral change. Thank goodness, we have the strategy in place and our core technologies in place leading into that, that allowed us to dramatically grow our digital business to offset the loss of business in the dining room, and to your point now, $20 billion, sustained nearly 40% of our global sales. So that was great. If I'm assessing where are we, I think for technology, the front end has to be right for every brand-market combination. What a KFC customer in Thailand expects from their digital experience may be very different from what a Taco Bell customer in the U.S. expects. So we still want to get it right for every market. I think in terms of 290 brand-country combinations doing technology at scale, I don't know if there's anybody better at doing that in a retail business than Yum!, so I'm very proud of where we are there. Now if I go into any individual market, hey, I feel like we're doing great. But you always see opportunities to run faster, to serve customers better or to be more efficient in how we do that. And so in my mind, we've still got a long way to go. The aspiration is high on where we want to head. The way we think about the digital strategy, we break it up into three buckets. We think about providing easy experiences for our customer. We want to have the easiest, most frictionless experience for customers in each of our markets, easy operations for our team members and our franchisees and then easy insights. So we should be -- with 51,000-plus restaurants, we should be generating more data than anyone. We want to make the best use of that data in terms of generating insights to make better decisions. And we should do all of that while leveraging our scale. Technology costs tend to be more fixed cost investments. If we can apply those across the brands and get scale and platforms underneath those tailored front ends, that should allow us to have leading-edge capabilities at advantaged economics for our franchisees and for Yum!.

And you've made -- last question on technology. You made a number of investments in some smaller companies that have unique technologies. If you had to pick one, and I know there's a few but not a long list, is there one that you think is most transformational to your business?

Well, we've done three acquisitions this year. They tie to those three areas. We acquired a company called Tictuk, which is conversational commerce. It allows you to order very quickly and in a frictionless way through text messaging or social media. That supports easy experiences. We acquired Dragontail, which was already up and running in more than 1,000 of our Pizza Hut restaurants around the globe. And it is the next-gen back-of-house optimization. So it's really about easy operations. And we acquired Kvantum, which was an AI-driven marketing analytics company, that helps us get the mix of digital and traditional marketing right in each of those 290 brand-country combinations. All of them are distinctive. All of them add to our competitive advantage in those areas. So it's hard to pick one that I think will be most transformational. But maybe one to dig into would be Dragontail because it was the largest of those acquisitions. And if you think about going into the back of house in a restaurant, if you picked a random one around the globe, some of that technology that you would see, and this is across all restaurant brands, is fairly basic. You have an order that comes in at the front of house. It comes up on a screen in the back of house. And you see people with bump bars moving it through. Dragontail is really the next-generation, AI-driven version of all that, that helps the team members in an easy way to optimize how they manage the kitchen in a multichannel world. So just to take one example, if you think about delivery, Dragontail knows where the delivery drivers are. It knows what the traffic is between those drivers and the restaurant. It knows when they'll get back. It's able to then optimize the sequence of those orders to tell the team in the kitchen when to put this particular order into the oven, when to run it through the cooking process so that it's prepared and is at its freshest point coming right out of the oven when the delivery driver arrives. That's just one example of how it takes the back of house to the next level.

That's really interesting. I appreciate that detail because I didn't really understand how that works. Let me -- Chris, let me just turn to the brands, and I'm going to start with KFC since that's half of your global profits. And given its large footprint around the world and expressed differently across the world, I do want to ask if there's any high-level specific opportunities for sales growth you are most excited about in the brand? Again, understanding that there's a lot of places that it resides. I just want to give you some four examples. The role of the sandwich business in the U.S., where are you on that? Is there a breakfast opportunity that's been untapped in certain markets? Is there a more untapped digital opportunity in that brand versus others? Where -- if you just look globally at KFC, where would you say there's the most excitement from a sales-driving opportunity?

Yes. So KFC, our largest brand, has an incredible brand presence in each of its markets around the globe and an outstanding leadership team and business model for operating a global business. As a consultant, who's seen a lot of global retail businesses over to your former consultant, the framework that the KFC team uses to manage is -- manage 150 roughly countries is really outstanding. So it's just a very strong business. If you think about opportunities, I'll just build on a few that you mentioned. So one, from a sandwich business standpoint, obviously, KFC has very strong chicken-on-the-bone business. But we have very strong chicken-off-the-bone businesses in many of our markets around the globe. The Zinger sandwich has a tremendous sales record and represents a big portion of our sales in a number of markets around the globe we have large sandwich businesses. In the U.S., we've struggled to get a sandwich that really resonates with customers in the past. I'll tell you the new chicken sandwich that Kevin Hochman and team have developed that they rolled out over the past year is doing tremendously. It's doing 4x better than any chicken sandwich we've ever had in the U.S. before. It's a great product. It comes right out of the fryer whenever the customer orders it. You've got a spicy version that's tremendous. The other insight that they had in the U.S., and it seems like one that makes sense, is that customers want fries with their sandwiches. We've always had potato wedges in the U.S. We've now taken those off the menu. We brought in fries, one of our recipes from around the globe that are tremendous, fantastic fries. And that's really working. So in the U.S., we're now building a sandwich platform that is really showing legs. And that gives us excitement about the future of the KFC business in the U.S. If I go globally and think about COVID impacts, I talked about earlier how developed markets have been running ahead: higher vaccination rates, maybe government stimulus, more of a drive-through-centric footprint. Markets like the U.S., the U.K., Australia, those have been running strong throughout the pandemic. Emerging markets have been running significantly behind that. But we started to see an uptick in Q3 in non-Asia emerging markets. We really started to see markets like India really start to grow and rebound. And that gives us a lot of confidence in terms of -- that's a big part of the KFC business, gives us confidence in the momentum in those parts. So those are a couple of factors that point to future growth in KFC. It also hit digital. Nitin Chaturvedi, the KFC global digital team, they're obviously, as part of the global strategy, doing lots of great work in a number of markets around the globe. And I think digital will be another supporter of KFC momentum.

Got you. And then just back on the U.S., Chris, you mentioned a very successful chicken sandwich launch. You've also got a big bump in the U.S. from just family meal occasions, right, the bucket business, for example. How do you -- what's the risk that you don't hold on to that in 2022 just as we go back to normal? Or what do you do to alleviate or minimize that risk as people sort of rebalance their lifestyles, if you will, post COVID?

Yes, a great question. We obviously had a number of customers who reintroduced themselves to the brand during the pandemic. And it was a brand that they love, they trusted. And that's why they came to the brand, in addition to factors like families dining at home. And what we find is that those customers loved their experiences whenever they came back to the brand. But then they discovered that, hey, wow, there's these chicken-off-the-bone offerings like the sandwich, like our strips that maybe they weren't as familiar with. And again, I think that will give them a reason to continue to come back for this broader product set that we have here in the U.S. I think they also found that, hey, now there's a digital component of the experience that allows me to have my KFC experience a little faster and more frictionless than it was in the past. We launched the KFC app, which was built in-house with our digital team, and it's doing very well. We've added the delivery layer. So it's a much easier to access brand. And I think we've been working on refreshing the KFC store estate. And so they likely were going into a store that's under the American Showman model, and they've had a good experience. So all of those things help. Plus in general, you've obviously seen a shift toward chicken as a protein of choice in consumers in the U.S. And that's lifting a lot of boats. But we think it's great. We think no one stands for chicken more than KFC. And so we love that there's this focus on chicken broadly in the consumer set in the U.S.

Great. I want to move on to Taco Bell. This past summer, I think breakfast was relaunched. And I wonder if you can talk about where the incremental opportunities for Taco Bell, right? It's a different dynamic. It maybe didn't play into the group dining occasion the way Pizza Hut and KFC did. So where are the incremental opportunities now for Taco Bell as it continues to recover? And in particular, I'm just interested in breakfast since I think that continues to get airplay across the industry, where breakfast was launched several years ago with a lot of fanfare. Where is it today? Is that a big opportunity? For example, as we get back to normal, where are the additional levers for Taco Bell sales growth in '22?

Yes. The Taco Bell brand is strong. Mark King and team, along with our franchisees, are doing a great job navigating the pandemic. As you mentioned, it was a category that didn't see quite as much tailwind from COVID as some other categories, but the business has performed very well. We did reduce the operating hours when there was less traffic in early morning and late night as the franchisees navigated those challenges. We've now reintroduced breakfast. I've had it a couple of times in the last couple of weeks, great products at breakfast. And so we're seeing that business come back. And then of course, as you see more and more traffic in late night in the U.S., the late-night business continues to get stronger as well. And we're trying to hold on to the increased business we saw in the middle of the day dayparts that didn't come from group dining, again to your point, maybe not as much as in some other categories. But we did see higher check sizes, more group dining at dinner time, for example, in Taco Bell. We want to hold on to those customers as much as we can in those occasions as much as we can while we bring back these other dayparts. The other big piece in Taco Bell has been the growth of digital. So coming into the pandemic, we had a large digital business through our kiosks. But the thing that has grown is our delivery and our app business in Taco Bell. And of course, we'll start to see people come back into the dining rooms. And every time we have customers who do business with us digitally through any of those channels, we find the frequency and the check sizes all benefit from that digital business. So I think that will be another driver and sustainer of Taco Bell momentum.

And Chris, how big is that digital business at Taco Bell now? Do you think it would be probably your most -- the brand that has most resonance in digital, right, young customer base, et cetera, late-night business for delivery? How big is that like relative to KFC's U.S. digital business? And what's the opportunity there?

Yes. It's not as big as our Pizza Hut business, which is a digital category. But prior to the pandemic, the kiosk was probably in the high single digits mix. When the pandemic hit, the kiosk, obviously, went down to near 0 because the dining rooms were closed. But then we saw the app and delivery grow. It's probably right around 10% now. And then as the dining rooms reopen, I think you'll see kiosks start to support acceleration and growth there. And if you go talk to Mark and the Taco Bell team, the sky is the limit in terms of where they're setting the goal on where the digital business should be. Now there's a little bit of a natural headwind because of how easy it is to access Taco Bell through the drive-through without digital, which is great. I mean, we have one of the fastest drive-through experiences in the industry in Taco Bell. But I think as customers join the loyalty program, as they see that even through the drive-through, they can pick up a couple of extra seconds by having payment happen through the app, we'll be able to convert that as well. So the momentum is strong there.

And in the last couple of minutes, Chris, I just wanted to touch on Pizza Hut. It's the smallest of your three brands but obviously very important on a global basis. And there's just two questions I have from that perspective. One is it's been a global repositioning of the asset-based story, right? And I think we talked about this last time we were together. But can you just remind us of where we are in this transformation from a dine-in asset, particularly in the international markets, to a more of a, I'll call it, a delivery or delco, delivery and carryout business? And when do we sort of get to a more steady state of that journey of that brand asset transformation?

Yes. So you're exactly right. I think the Pizza Hut business has performed very, very well during the pandemic. But you have to kind of dig into what's driven that. The off-premise business -- and we've been saying for a number of years that we want the Pizza Hut business to shift from what was really the first large-scale casual dining brand decades ago to fully shift toward modern off-premise-based business in general. We'll still have pockets around the globe where the dine-in business is very important and very strong. But in general, we were driving that shift. We saw those trends accelerate during the pandemic. And we've been running 15% to 20% same-store sales growth in that off-premise business throughout. I think that's a reflection of how strong our delivery capability is and how strong that off-premise business is. And it's only going to get stronger with investments like the one that I mentioned earlier in Dragontail. You didn't have a headwind, where you lost in the U.S. the 10% or so of sales that were in dine-in or in other markets around the globe, you've had a headwind in those dine-in sales. Some of those will start to come back. But you saw what we did last year with our franchisees to take advantage of that situation to accelerate the transition. We closed a number of restaurants that needed to be closed. A large percentage of those were those dine-in assets. And so that actually helps us on the transformation. And we're seeing an increased level of even offsets now, which is where you close dine-in and you immediately open a delco in its place. And you're starting to see that momentum now build on unit development. In fact, Pizza Hut International has seen a trajectory change in terms of unit development. They had a very strong Q3, which offset last year closing stores as part of that transformation. And then you've seen the unit count in Pizza Hut U.S. stabilize. And our expectation in the long run is that all parts of our business will be growing units. And so I think it's a very positive development. Underpinning all of that is strong unit economics, unit economics in Pizza Hut U.S., much stronger than where they were a couple of years ago. And our franchisees are strong as well. So I think there's a lot of momentum there, competitive category but a lot of momentum.

Chris, thank you so much for this quick tour around the world, tour around your brands. We are unfortunately out of time. But I want to thank you very much and your team for joining us this morning. I want to thank all of you for joining us on the webcast. And stay tuned, there's more to come. So for that, I'll sign off from here. And again, thank the Yum! team. Take care.

Thanks so much, John.