Yum! Brands (YUM) Digital Initiatives Aid Amid High Costs
Yum! Brands, Inc. YUM is witnessing growth trends courtesy of various approaches like robust digital initiatives, strategic unit expansion efforts, strong brand recognition and same-store sales growth. However, business withdrawal from Russia, inflationary pressures and supply chain risks hurt.
Yum! Brands is witnessing top-line growth from implementing various digital features in mobile and online platforms across all brand segments that enhance the guest experience. The company’s digital initiatives like Dragontail Systems and Tictuk enhance customer ordering and food delivery, thus driving up sales.
The company has been leveraging the power of its three most important brands — KFC, Pizza Hut and Taco Bell — to drive long-term growth. It focuses on relentless unit growth of restaurants to drive incremental sales. The company is intensifying its focus on leveraging its scale and reinforcing the growth model by accelerating investments in digital technology to enhance customer experience and unit economics.
The company is witnessing robust same-store sales growth. In 2022, worldwide systemwide same-store sales witnessed robust growth of 4%, subject to consumer value proposition, expanded digital access and franchise partners. The company has been benefiting from a recovery in emerging markets. Given the emphasis on consumer value proposition, expanded digital access and franchise partners, the company anticipates the momentum to continue in the upcoming periods.
The company, which shares space with Yum China Holdings, Inc. YUMC, Jack in the Box Inc. JACK and BJ's Restaurants, Inc. BJRI is also focusing on expanding its footprint to drive growth. Despite unfavorable economic conditions, the company opened 571 gross new units at Pizza Hut, 997 gross new units at KFC and 496 gross new openings at Taco Bell during 2022. As of 2022-end, the company's total restaurant count was 55,361.
The company’s growth has been adversely impacted by Russia’s invasion of Ukraine. In 2022, the company ceased business at 1,112 units of KFC and 53 units of Pizza Hut in Russia. The business withdrawal from Russia incurred certain additional costs, which hurt the margins of the company.
Also, certain additional costs due to inflationary pressures and supply chain disruptions, like an increase in the cost of employee wages, benefits and insurance, and other operating costs such as rent and energy costs put significant pressure on the company’s margins.
A Brief Review of the Other Stocks
Yum China: The company has been benefiting from menu innovation, unit expansion and digitalization efforts. The company is gradually shifting toward digital and content marketing to expand its customer base. Its focus on logistics center openings and supply chain security bodes well. With a focus on improving customer experience and operating efficiency, the company started continued investments in this direction. Restaurant margin in fourth-quarter 2022 was 10.4%, up 290 basis points from the year-ago quarter’s levels. The growth was primarily the result of labor productivity, operational efficiency, temporary relief as well as initiatives to create a new base level for costs.
Jack in the Box: The company is benefiting from its focus on menu innovation, delivery channels and marketing strategies. The company is investing aggressively in store improvements and new store build, innovating via digital operations. Moreover, it is using its digital platforms for enhancing overall guest experiences and customer satisfaction. In fourth-quarter 2022, comps at Jack in the Box’s stores increased 11.4% year over year against a decline of 4.4% reported in the prior-year quarter. The upside in comps was primarily due to an increase in average checks, partially offset by a decline in traffic (for franchise).
BJ's Restaurants: The company is benefiting from initiatives like menu innovations, an off-premise business model and unit expansion. Also, focus on Brewhouse Beer Club bodes well. The company is focused on creating more iconic brewhouse signature food and drink menu items to drive incremental visits and spending in its restaurants. Also, it emphasizes on refreshing its e-commerce platform with a modern user experience and advanced functionality.
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