Summary of YUM Brands 10k 2023

These are some of the basic notes after reading YUM Brand's 10k 2023. This is not detailed analysis but basic info based on the public filing. This focused more on fundamental analysis. 

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• HQ: 1441 Gardiner Lane, Louisville KY 40213
• Total of 58k locations in 155 countries with KFC, Taco Bell, Pizza Hut and The Habit Burger Grill brands. 
• Total number of location by brands and countries below on table. 

• KFC: Started in 1939, first franchise 1952.
  • Company profit margin %= 2023: 13.7%, 2022: 13.2%, 2021: 17.7%. 
  • Has 29,900 units, 87% are in US. 99% are operated by franchisees. As of 2023 company owns 220 units. 
• Taco Bell: Started in 1962, first franchise 1964
  • Company profit margin: 2023: 23.7%, 2022: 23.6%, 2021: 23.9%
  • Has 8,564 units, 86% are in US. Company owns 7% of Taco Bell in US. As of 2023 company owns 483 units.
• Pizza Hut: Started in 1958, opened first franchise same year. Has more limited drive-tru option compared to other brands. 
  • Has 19,866 units. 67% are outside US. 99% are operated by franchisees. As of 2023 company owns 7 units. 
  • Company profit margin: 2023: 0.1%, 2022: -2.2%,  2021: 6.8%. 
• Habit Burger Grill: Started in 1969
  • Company profit/loss: 2023: -14mil loss, 2022: -24 mil loss, 2021: 2 mil profit. 
  • Has 378 units. 84% are in US. As of 2023 company owns 307 units.  

• Has ~1,500 franchisees, over 57,000 franchised units. 35% operate under master franchise programs. Other operate under store level franchise agreements. 
• Store level agreements: typically require payment to company of certain upfront cost like initial fees opening stores, renew term, fees for transfer of franchise to new owner. 4% to 6% of sales

• Master level agreements: Franchisee are responsible for overseeing development within territories. In return they retain certain percentage of fees payable by sub-franchisees under their franchisees agreement. Often pay lower fees for the restaurants they operate. 
• YUM China pays YUM 3% of system sales in locations in China. 
• Generally each location has restaurant one general manager, one or more assistant manager. 
• In 2023, digital sales were $29 billion, 45% of overall sales system. 
• In US: Company along with rep of KFC, Taco Bell and Pizza Hut franchisee groups are members of Restaurant Supply Chain Solutions. That is third party responsible for purchase restaurant product and equipment. 
  • In US: McLane FoodService is exclusive distributor of majority of items used by company owned restaurants and substantial franchisee location. 
  • Outside US, it is decentralized. International franchisees generally select their own third-party suppliers and distributor. 
• Advertising:
  • If multiple franchisees operate in same country/region. National and regional ads spending is typically conducted by cooperative to which franchisees and company owned restaurant contribute to percentage of sales. 
• Human Capital:
  • Of Dec 31 2023, ~35,000 employees. ~25,000 were in US and ~10,000 were outside US. 
  • ~85% worked in local locations. 90% of company owned location are part time, ~50% employed by company for less than year. 
  • Other 57,000 location franchisees are responsible over ~1 million people . 
• Properties:
  • Owned land/building or both for 326 locations worldwide. In total there are 1,017 company owned restaurant. Land/building or both owned by division:
    • KFC Division: 66 location
    • Taco Bell:       258 locations
    • Pizza Hut:      2 locations
  • Company-owned, land/building or both in ~450 locations that it leases to franchisees and leases land, building or both related to ~250 location that it subleases to franchisee, mainly in US, UK, Australia and Germany.  Leases are generally 10-20 yrs and generally have renewal option. 
  • KFC Division and Pizza Hut Division is HQ in Plano, TX are owned by Pizza Hut. Leased building in Irvine, CA has Taco Bell and Habit Grill’s HQ. 
  • YUM Corporate HQ is in Louisville, KY is owned by KFC. 
• Execs:   
  • One thing i did notice is that they do promote decent number of their internal employees. Like their current CEO has been there since 2005. 
  • Another thing is that all the younger executives are not from the internal hire. They are from external hire. Older ones are internal hire. 
• Devyani Investment:
  • In 2020 invested 5% minority interest in Devyani International (is public company, check my foreign company list). It has master franchise rights for KFC India and Pizza Hut India. This was for re-franchising ~60 KFC locations in India. In Aug, 21 2021 Devyani went public. Currently they are valuing 5%  at ~11 mil.   
• Liquidity/Capital Resources: 
  • Generally over ~1.3 bil in cash flow each year. 
  • Maintains 1.25 bil revolving facility.  Is undrawn as of Dec 31, 2023. Currently ~500 mil cash in hand. 
  • Total of ~$11.4 bil debt outstanding at about 4.6% annually. That interest/cost excludes finance leases and debt issuance cost and discounts. 81% of it is fixed rate and 19% is variable-rate debt. 
  • Net leverage of 4.2x EBIDTA. 
  • $500 mil interest due within next 12 months. Total interest payment in long term debt is 1.3 bil. 
  • Operating/Finance Lease: 1,163 million of within $128 mil due with next 12 months. 
  • In Dec 6 2023, company announced will acquire 218 KFC from UK and Ireland franchisee. Funded by cash on hand.

• Important/Interesting: Each one of their division acts like their own company like KFC Division has its own leadership, HQ, liquidity resources like loans, notes and so on,  and research facility.