Yum’s Global Reach and Ongoing Brand Investment Buoy Long-Term Growth Runway

We think Yum Brands is prudent to step up investment to support franchisee profits and secure global white space across its portfolio, even as the industry faces traffic pressure and international competition intensifies. As a result, Yum has grown system sales by 4.7% over the last five years, outpacing foodservice’s 2% rate. We don’t expect Yum to ease off its push to integrate technology across its footprint while leveraging its scale and insights to serve up consistent menu innovation and operational improvements. We model capital expenditures averaging 3.9% of revenue ($1.9 billion in aggregate) over the next five years, up from 3.6% ($1.2 billion) in the prior five-year period. We expect this should position Yum to drive 6.1% system sales growth over the comparable period, ahead of our 4.7% global foodservice estimate.