Yum! Brands · 10-Q · Item 2 MD&A

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction and Overview

The following Management's Discussion and Analysis (“MD&A”), should be read in conjunction with the unaudited Condensed Consolidated Financial Statements (“Financial Statements”), the Forward-Looking Statements and our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, (“2025 Form 10-K”). All Note references herein refer to the Notes to the Financial Statements. Tabular amounts are displayed in millions of U.S. dollars except per share and unit count amounts, or as otherwise specifically identified.

Yum! Brands, Inc. and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 64,000 restaurants in 157 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger & Grill (collectively, the “Concepts”). The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-inspired and pizza categories, respectively. The Habit Burger & Grill, is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Of the over 64,000 restaurants, 97% are operated by franchisees.

YUM currently consists of four operating segments:

•The KFC Division which includes our worldwide operations of the KFC concept

•The Taco Bell Division which includes our worldwide operations of the Taco Bell concept

•The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept

•The Habit Burger & Grill Division which includes our worldwide operations of the Habit Burger & Grill concept

In 2025, we began a review of strategic options for the Pizza Hut brand. The objective of the review was to create value for YUM, Pizza Hut and its franchise partners by determining the optimal approach to best capitalize on Pizza Hut's structural advantages — strong brand equity, experienced franchise partners and meaningful scale — in the highly fragmented pizza market. In June 2026, we entered into two definitive agreements to sell the Pizza Hut brand thereby completing this review (see Note 3 for discussion regarding the agreements).

Through our Recipe for Good Growth, our mission is to grow iconic restaurant brands globally that are loved, trusted and connected:

Loved: We grow by delighting customers with craveable food and a distinctive experience.

Trusted: We operate responsibly with consistency and efficiency in our restaurants, across our system and in our communities. This includes a commitment to our priorities for social responsibility, risk management and sustainable stewardship of resources.

Connected: We use our teamwork, technology and global scale to serve every customer, everywhere, anytime.

In 2026 and beyond, we intend to drive the next chapter of growth for YUM by Raising the B.A.R. through three clear priorities that reflect bold aspirations and a commitment to industry-leading performance:

•Battle for the future consumer by staying relentlessly focused on their needs and wants.

•Accelerate restaurant unit economics for our franchisees and maximize performance of every restaurant, serving as a catalyst for new unit development and keeping our franchise system healthy.

•Reach the full potential of Byte by Yum! by effectively operating, innovating and expanding our connected platform built by restaurant operators for restaurant operators to unlock its full potential for our franchise partners and our business.

Key to our success fueling brand performance and franchise success is our unrivaled culture and talent and leading with smart, heart and courage.

We intend to drive long-term growth and shareholder returns primarily through consistent same-store sales growth and new unit development across all of our Concepts. We intend to support this growth and development through a capital and operating structure that:

•Invests capital in a manner consistent with an asset light, franchisor model;

•Allocates G&A in an efficient manner that provides leverage to operating profit growth while at the same time opportunistically investing in strategic growth initiatives;

•Targets a consolidated net leverage ratio that balances shareholder returns, cost of capital and flexibility against various risk factors; and

•Maximizes shareholder return through a combination of paying a competitive dividend and returning excess cash flow through share repurchases.

We intend for this MD&A to provide the reader with information that will assist in understanding our results of operations, including performance metrics that management uses to assess the Company's performance. Throughout this MD&A, we commonly discuss the following performance metrics:

•Same-store sales growth is the estimated percentage change in system sales of all restaurants that have been open and in the YUM system for one year or more, including those temporarily closed. From time-to-time restaurants may be temporarily closed due to remodeling or image enhancement, rebuilding, natural disasters, health epidemic or pandemic, landlord disputes, boycotts, social or civil unrest or other issues. The system sales of restaurants we deem temporarily closed remain in our base for purposes of determining same-store sales growth and the restaurants remain in our unit count (see below). We believe same-store sales growth is useful to investors because our results are heavily dependent on the results of our Concepts' existing store base. Additionally, same-store sales growth is reflective of the strength of our Brands, the effectiveness of our operational and advertising initiatives and local economic and consumer trends.

•Gross unit openings reflects new openings by us and our franchisees. Net new unit growth reflects gross unit openings offset by permanent store closures, by us and our franchisees. To determine whether a restaurant meets the definition of a unit we consider whether the restaurant has operations that are ongoing and independent from another YUM unit, serves the primary product of one of our Concepts, operates under a separate franchise agreement (if operated by a franchisee) and has substantial and sustainable sales. We believe gross unit openings and net new unit growth are useful to investors because we depend on new units for a significant portion of our growth. Additionally, gross unit openings and net new unit growth are generally reflective of the economic returns to us and our franchisees from opening and operating our Concept restaurants.

•System sales and System sales excluding the impacts of foreign currency translation (“FX”) reflect the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants. Sales at franchise restaurants typically generate ongoing franchise and license fees for the Company at a rate of 3% to 6% of sales. Increasingly, customers are paying a fee to a third party to deliver or facilitate the ordering of our Concepts' products. We also include in System sales any portion of the amount customers pay these third parties for which the third party is obligated to pay us a license fee as a percentage of such amount. Franchise restaurant sales and fees paid by customers to third parties to deliver or facilitate the ordering of our Concepts' products are not included in Company sales on the Condensed Consolidated Statements of Income; however, any resulting franchise and license fees we receive are included in the Company's revenues.

We believe System sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates our primary revenue drivers, Company and franchise same-store sales as well as net new unit growth.

In addition to the results provided in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”), the Company provides the following non-GAAP measurements:

•Diluted Earnings Per Share excluding Special Items (as defined below);

•Effective Tax Rate excluding Special Items;

•Core Operating Profit. Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance internally;

•Net Income excluding Special Items;

•Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below).

These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measurements provide additional information to investors to facilitate the comparison of past and present operations.

Special Items are not included in any of our Division segment results as the Company does not believe they are indicative of our ongoing operations due to their size and/or nature. Our chief operating decision maker does not consider the impact of Special Items when assessing segment performance.

Company restaurant profit is defined as Company sales less Company restaurant expenses, both of which appear on the face of our Condensed Consolidated Statements of Income. Company restaurant expenses include those expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, cost of restaurant-level labor, rent, depreciation and amortization of restaurant-level assets and advertising expenses incurred by and on behalf of that Company restaurant. Company restaurant margin as a percentage of sales (“Company restaurant margin %”) is defined as Company restaurant profit divided by Company sales. We use Company restaurant profit for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe Company restaurant profit provides useful information to investors as to the profitability of our Company-owned restaurants.

In calculating Company restaurant profit, the Company excludes revenues and expenses directly associated with our franchise operations as well as non-restaurant-level costs included in General and administrative expenses, some of which may support Company-owned restaurant operations. The Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations. Further, while we generally include depreciation and amortization of restaurant-level assets within Divisional Company restaurant expenses used to derive Divisional Company restaurant profit, we record amortization of reacquired franchise rights arising from acquisition accounting within Corporate and unallocated Company restaurant expenses as such amortization is not believed to be indicative of ongoing Divisional results as well as to enhance comparability of acquired stores' margins with those of existing restaurants. Company restaurant profit and Company restaurant margin % as presented may not be comparable to other similarly titled measures of other companies in the industry.

Certain performance metrics and non-GAAP measurements are presented excluding the impact of FX. These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the FX impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

Certain General and administrative expenses allocations between KFC Division and Corporate and Unallocated for the prior periods have been restated to be comparable with the allocations for the quarter and year to date ended June 30, 2026.

Results of Operations

Summary

All comparisons within this summary are versus the same period a year ago.

Quarterly Financial Highlights:

% Change

System Sales, ex FX

Same-Store Sales

Units

GAAP Operating Profit

Core Operating Profit

KFC Division

+6

+2

+7

+9

Taco Bell Division

+9

+7

+3

Pizza Hut Division

(2)

(1)

+1

Worldwide

+5

+3

+5

+5

+5

Year to date Financial Highlights:

% Change

System Sales, ex FX

Same-Store Sales

Units

GAAP Operating Profit

Core Operating Profit

KFC Division

+6

+2

+7

+9

Taco Bell Division

+8

+3

Pizza Hut Division

(1)

(1)

+1

Worldwide

+6

+3

+5

+6

Additionally:

•T1Foreign currency translation favorably impacted Divisional Operating Profit by $16 million and $41 million for the quarter and year to date ended June 30, 2026, respectively.

•T2Gross unit openings for the quarter were 1,053 units resulting in 481 net new units.

◦Gross unit openings for the year to date were 2,083 units resulting in 881 net new units.

Second Quarter

Year to date

% Change

% Change

GAAP EPS

Less Special Items EPS

NM

NM

EPS Excluding Special Items

Worldwide

GAAP Results

Quarter ended

Year to date

% B/(W)

% B/(W)

Company sales

$

$

$

$

Franchise and property revenues

7

8

Franchise contributions for advertising and other services

2

4

Total revenues

Company restaurant expenses

G&A expenses

(7)

(7)

Franchise and property expenses

(6)

Franchise advertising and other services expense

(4)

(5)

Refranchising (gain) loss

(1)

(2)

Other (income) expense

6

(7)

NM

NM

Total costs and expenses, net

Operating Profit

5

Investment (income) expense, net

(6)

—

NM

(6)

(1)

NM

Other pension (income) expense

—

(1)

—

(1)

Interest expense, net

(4)

(6)

Income before income taxes

7

Income tax (benefit) provision

Net Income

$

$

$

$

Diluted EPS(a)

$

$

$

$

Effective tax rate

%

%

ppts.

%

%

ppts.

(a)See Note 4 for the number of shares used in this calculation.

Performance Metrics

Unit Count

% Increase (Decrease)

Franchise

4

Company-owned

Total

5

Quarter ended

Year to date

Same-store Sales Growth %

3

2

3

2

System Sales Growth %, reported

8

5

9

4

System Sales Growth %, excluding FX

5

4

6

4

Our system sales breakdown by Company and franchise sales was as follows:

Quarter ended

Year to date

Consolidated

Company sales(a)

$

$

$

$

Franchise sales

System sales

Negative (Positive) Foreign Currency Impact(b)

N/A

N/A

System sales, excluding FX

$

$

$

$

KFC Division

Company sales(a)

$

$

$

$

Franchise sales

System sales

Negative (Positive) Foreign Currency Impact(b)

N/A

N/A

System sales, excluding FX

$

$

$

$

Taco Bell Division

Company sales(a)

$

$

$

$

Franchise sales

System sales

Negative (Positive) Foreign Currency Impact(b)

(5)

N/A

N/A

System sales, excluding FX

$

$

$

$

Pizza Hut Division

Company sales(a)

$

$

7

$

$

Franchise sales

System sales

Negative (Positive) Foreign Currency Impact(b)

N/A

N/A

System sales, excluding FX

$

$

$

$

Habit Burger & Grill Division

Company sales(a)

$

$

$

$

Franchise sales

System sales

Negative (Positive) Foreign Currency Impact(b)

—

N/A

—

N/A

System sales, excluding FX

$

$

$

$

(a)Company sales represents sales from our Company-operated stores as presented on our Condensed Consolidated Statements of Income.

(b) The foreign currency impact on System sales is presented in relation only to the immediately preceding year presented. When determining applicable System sales growth percentages, the System sales excluding FX for the current year should be compared to the prior year System sales.

Non-GAAP Items

Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, as presented below.

Quarter ended

Year to date

Core Operating Profit Growth %

5

2

6

5

Diluted EPS Growth %, excluding Special Items

7

Effective Tax Rate excluding Special Items

%

%

%

%

Company restaurant profit

$

$

$

$

Company restaurant margin %

%

%

%

%

Reconciliation of GAAP Operating Profit to Core Operating Profit

Quarter ended

Year to date

Consolidated

GAAP Operating Profit

$

$

$

$

Detail of Special Items:

Charges associated with Pizza Hut Strategic Options Review(a)

—

—

Charges associated with Brand HQ Consolidation(b)

—

1

Charges associated with Resource Optimization

—

—

Income from Litigation Settlement(c)

—

—

—

German acquisition and Turkey termination-related costs(d)

—

5

—

7

Special Items Expense - Operating Profit

Positive Foreign Currency Impact on Division Operating Profit

N/A

N/A

Core Operating Profit

$

$

$

$

Special Items as shown above were recorded to the financial statement line items identified below.

Condensed Consolidated Statements of Income Line Item

Decrease in Franchise and property revenues

$

—

$

—

$

—

$

1

Increase in General and administrative expenses

Increase in Other (income) expense

—

—

(2)

Special Items Expense - Operating Profit

$

$

$

$

KFC Division

GAAP Operating Profit

$

$

$

$

Negative (Positive) Foreign Currency Impact

N/A

N/A

Core Operating Profit

$

$

$

$

Taco Bell Division

GAAP Operating Profit

$

$

$

$

Negative (Positive) Foreign Currency Impact

—

N/A

(1)

N/A

Core Operating Profit

$

$

$

$

Pizza Hut Division

GAAP Operating Profit

$

$

$

$

Negative (Positive) Foreign Currency Impact

(2)

N/A

(4)

N/A

Core Operating Profit

$

$

$

$

Habit Burger & Grill Division

GAAP Operating Profit (Loss)

$

(4)

$

3

$

$

2

Negative (Positive) Foreign Currency Impact

—

N/A

—

N/A

Core Operating Profit (Loss)

$

(4)

$

3

$

$

2

Reconciliation of GAAP Net Income to Net Income excluding Special Items

GAAP Net Income

$

$

$

$

Special Items Expense - Operating Profit

Special Items Tax (Benefit) Expense(e)

3

Net Income excluding Special Items

$

$

$

$

Quarter ended

Year to date

Reconciliation of Diluted EPS to Diluted EPS excluding Special Items

Diluted EPS

$

$

$

$

Less Special Items Diluted EPS

Diluted EPS excluding Special Items

$

$

$

$

Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items

GAAP Effective Tax Rate

%

%

%

%

Impact on Tax Rate as a result of Special Items

%

%

%

%

Effective Tax Rate excluding Special Items

%

%

%

%

(a) In 2025, we began a review of strategic options for the Pizza Hut brand. During the quarter and year to date ended June 30, 2026, we recorded charges of $44 million and $81 million, respectively, to Corporate and unallocated General and administrative expenses, which primarily included third-party advising costs associated with this strategic options review. Given the significance of the costs expected to be incurred through the course of this strategic options review, we have reflected such amounts as Special Items.

(b)In 2025, we decided to designate two brand headquarters in the U.S., located in Plano, Texas and Irvine, California, to foster greater collaboration among brands and employees. This involved relocating the KFC U.S. corporate office to the KFC Global headquarters and requiring the majority of our U.S.-based remote employees to relocate to an appropriate headquarter office. We also decided to relocate our YUM Corporate headquarters to a new space in Louisville, Kentucky and accordingly, donated our existing space. T3Costs incurred to date primarily include severance for the employees who chose not to relocate and consultant fees. As a result of these decisions, we recorded charges of approximately $10 million during the quarter ended June 30, 2025, and approximately $1 million and $17 million for the years to date ended June 30, 2026 and 2025, respectively to Corporate and unallocated General and administrative expenses. Due to their scope and size, these charges have been reflected as Special Items.

(c)During the quarter ended March 31, 2026, we received approximately $44 million, net of legal expenses, related to a credit card interchange fee litigation settlement in which we were a plaintiff. This settlement was recorded to Unallocated Other (income) expense. Due to the nature and size of the settlement, including the years to which the litigation related, it has been reflected as a Special Item within Other income.

(d)On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S. (IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S. (IS Holding), after failure by IS Gida to meet our standards. As a result, 283 KFC restaurants and 254 Pizza Hut restaurants in Turkey were closed during the first quarter of 2025. We also re-acquired the master franchise rights in Germany for KFC and Pizza Hut from the owner of IS Holding in December 2024. We recorded charges of $5 million and $7 million during the quarter and year to date ended June 30, 2025, respectively, to Corporate and unallocated General and administrative expenses consisting primarily of severance costs associated with re-acquiring the master franchise rights in Germany. Consistent with prior charges related to the matter, these charges have been reflected as Special Items.

(e)The below table includes the detail of Special Items Tax (Benefit) Expense:

Quarter ended

Year to date

Tax (Benefit) on Special Items Expense - Operating Profit

$

$

(7)

$

(9)

$

Tax (Benefit) - Income tax impacts from planned sale of Pizza Hut

—

—

Tax (Benefit) - Intra-entity transfers and valuations of intellectual property

—

—

Tax Expense - Other Income tax impacts recorded as Special

—

—

—

Tax Expense - Foreign tax reserve

—

—

Special Items Tax (Benefit) Expense

$

$

3

$

$

Tax (Benefit) on Special Items Expense - Operating Profit was determined by assessing the tax impact of each individual component within Special Items based upon the nature of the item and jurisdictional tax law.

Tax (Benefit) - Income tax impacts from the planned sale of Pizza Hut in the quarter and year to date ended June 30, 2026, reflects a $359 million net deferred tax benefit recorded upon the recognition of certain tax basis in entities expected to be sold. Such recognition was triggered upon entering into definitive agreements during the quarter ended June 30, 2026 to sell Pizza Hut. The Pizza Hut sales are expected to close at significant book gains in the quarter ended September 30, 2026 resulting in the utilization of these deferred tax benefits.

Tax (Benefit) - Intra-entity transfers and valuations of intellectual property in the quarter and year to date ended June 30, 2026, reflects tax benefits of $91 million and $113 million, respectively, resulting from an internal reorganization to consolidate our Pizza Hut legal entities and assets into two isolated ownership structures by aligning the legal ownership, simplifying the organizational footprint and consolidating the Pizza Hut domestic and international businesses. As part of this reorganization, certain Pizza Hut intellectual property ("IP") rights from subsidiaries in the U.S. were transferred to international subsidiaries resulting in a step-up in amortizable tax basis of those IP rights. This reorganization began in the fourth quarter of 2025 in connection with our Pizza Hut strategic options review.

Additionally, Tax (Benefit) - Intra-entity transfers and valuations of intellectual property in the quarter and year to date ended June 30, 2026, includes $12 million of tax expense representing an adjustment to the valuation allowance on tax credits previously granted by local Swiss tax authorities in connection with transferred IP rights in Switzerland. Previously recorded impacts associated with this IP transfer were recorded as Special Items.

Tax Expense - Other Income tax impacts recorded as Special in the year to date ended June 30, 2026, includes a $13 million adjustment to tax expense associated with our decision to exit Russia. Consistent with previously recorded impacts associated with our decision to exit Russia, this adjustment was recorded as a Special Item.

Tax Expense - Foreign tax reserve in the quarter and year to date ended June 30, 2025, is associated with a reserve, and the related ongoing foreign exchange and inflationary adjustments, associated with a change in management's judgment around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico. This expense was reflected as a Special Item due to its size and the time elapsed since the years to which the reserve relates.

Reconciliation of GAAP Operating Profit to Company Restaurant Profit

KFC Division

Taco Bell Division

Pizza Hut Division

Habit Burger & Grill Division

Corporate and Unallocated

Consolidated

GAAP Operating Profit (Loss)

$

$

$

$

(4)

$

$

Less:

Franchise and property revenues

3

—

Franchise contributions for advertising and other services

1

—

Add:

General and administrative expenses

Franchise and property expenses

9

1

—

Franchise advertising and other services expense

1

—

Refranchising (gain) loss

—

—

—

—

(1)

(1)

Other (income) expense

(2)

(1)

(3)

6

6

6

Company restaurant profit (loss)

$

$

$

1

$

$

$

Company sales

$

$

$

$

$

—

$

Company restaurant margin %

%

%

%

%

N/A

%

KFC Division

Taco Bell Division

Pizza Hut Division

Habit Burger & Grill Division

Corporate and Unallocated

Consolidated

GAAP Operating Profit (Loss)

$

$

$

$

3

$

$

Less:

Franchise and property revenues

3

—

Franchise contributions for advertising and other services

1

—

Add:

General and administrative expenses

Franchise and property expenses

7

1

—

Franchise advertising and other services expense

1

—

Refranchising (gain) loss

—

—

—

—

Other (income) expense

—

—

(3)

—

(4)

(7)

Company restaurant profit (loss)

$

$

$

—

$

$

(4)

$

Company sales

$

$

$

7

$

$

—

$

Company restaurant margin %

%

%

%

%

N/A

%

KFC Division

Taco Bell Division

Pizza Hut Division

Habit Burger & Grill Division

Corporate and Unallocated

Consolidated

GAAP Operating Profit (Loss)

$

$

$

$

$

$

Less:

Franchise and property revenues

6

—

Franchise contributions for advertising and other services

2

—

Add:

General and administrative expenses

Franchise and property expenses

2

—

Franchise advertising and other services expense

2

—

Refranchising (gain) loss

—

—

—

—

(2)

(2)

Other (income) expense

(2)

—

(6)

8

Company restaurant profit (loss)

$

$

$

1

$

$

$

Company sales

$

$

$

$

$

—

$

Company restaurant margin %

%

%

%

%

N/A

%

KFC Division

Taco Bell Division

Pizza Hut Division

Habit Burger & Grill Division

Corporate and Unallocated

Consolidated

GAAP Operating Profit (Loss)

$

$

$

$

2

$

$

Less:

Franchise and property revenues

5

(1)

Franchise contributions for advertising and other services

1

—

Add:

General and administrative expenses

Franchise and property expenses

2

—

Franchise advertising and other services expense

1

—

Refranchising (gain) loss

—

—

—

—

Other (income) expense

—

—

(5)

—

Company restaurant profit (loss)

$

$

$

(1)

$

$

(7)

$

Company sales

$

$

$

$

$

—

$

Company restaurant margin %

%

%

%

%

N/A

%

Items Impacting Reported Results and Reasonably Likely to Impact Future Results

The following items impacted reported results in 2026 and/or 2025 and/or are reasonably likely to impact future results. See also the Detail of Special Items in this MD&A for other items impacting results in 2026 or 2025.

Public Health Issue

On July 17, 2026, after communication with state and federal health officials, Taco Bell U.S. announced that it had preemptively and voluntarily removed certain lettuce provided by its vendor, Taylor Farms, which Taylor Farms subsequently recalled. We removed the lettuce from our nationwide supply chain quickly and transparently, and before the recall, because the safety and well-being of our consumers is always our top priority.

T4Taco Bell U.S. saw a meaningful near-term impact on sales as a result of the issue. Sales are improving from their low-point and we believe that they will continue to improve through the quarter ended September 30, 2026, due to the underlying strength of the brand and recovery plan being implemented by the Taco Bell team. While it is difficult to forecast with certainty the impacts of this issue, we believe Taco Bell Company restaurant margin percentage in the U.S. will range between 19% to 21% in the quarter ended September 30, 2026.

Pizza Hut Strategic Options Review

In 2025, we began a review of strategic options for the Pizza Hut brand. The objective of the review was to create value for YUM, Pizza Hut and its franchise partners by determining the optimal approach to best capitalize on Pizza Hut's structural advantages — strong brand equity, experienced franchise partners and meaningful scale — in the highly fragmented pizza market.

In January 2026, we launched the Hut Forward program that represents a bridge to a longer-term acceleration of the Pizza Hut brand. This program includes alignment on a vibrant marketing plan, modernization of certain technology and franchise agreements and a YUM contribution to marketing support, along with the approval of some targeted closures of underperforming units. The YUM contribution for incremental marketing in the quarter ended March 31, 2026, is being recognized as advertising expense throughout 2026.

T5On June 16, 2026, we entered into definitive agreements to sell Pizza Hut in two separate transactions completing our strategic options review. Pizza Hut excluding Mainland China (“Pizza Hut Ex-China”) will be acquired by LongRange Capital, a private equity firm, and Pizza Hut in Mainland China will be acquired by Yum China Holdings, Inc., which will remain YUM’s master franchisee for KFC and Taco Bell in Mainland China.

We anticipate both transactions will close in August 2026, subject to customary closing conditions, including receipt of required regulatory approvals. Across the two transactions, we expect to receive approximately $2.3 billion of net proceeds after taxes, closing adjustments and transaction-contingent fees. Additionally, YUM has the opportunity to receive an earn-out from LongRange Capital of $75 million by 2030. We will continue to provide Byte by Yum!, our proprietary technology, to Pizza Hut Ex-China subsequent to the sale. Additionally, following the closing of the transaction, we will provide certain enterprise technology and finance services to Pizza Hut Ex-China under a transition services agreement.

We incurred certain other costs during the quarter and year to date ended June 30, 2026 associated with this strategic review (see Detail of Special Items section of this MD&A) and we expect to incur further expenses of approximately $40 million during the remainder of 2026.

KFC Division

The KFC Division has 34,747 units, 90% of which are located outside the U.S. Additionally, 99% of the KFC Division units were operated by franchisees as of June 30, 2026.

Quarter ended

Year to date

% B/(W)

% B/(W)

Reported

Ex FX

Reported

Ex FX

System Sales

$

$

6

$

$

6

Same-Store Sales Growth (Decline) %

2

2

N/A

N/A

2

2

N/A

N/A

Company sales

$

$

8

$

$

9

Franchise and property revenues

9

6

7

Franchise contributions for advertising and other services

3

(1)

6

—

Total revenues

$

$

9

5

$

$

6

Company restaurant profit

$

$

5

$

$

Company restaurant margin %

%

%

ppts.

ppts.

%

%

ppts.

ppts.

G&A expenses

$

$

1

3

$

$

(3)

—

Franchise and property expenses

(1)

2

Franchise advertising and other services expense

(4)

—

(6)

—

Operating Profit

$

$

9

$

$

9

% Increase (Decrease)

Unit Count

Franchise

7

Company-owned

8

Total

7

Company sales and Company restaurant margin %

The quarterly increase in Company sales, excluding the impacts of foreign currency translation, was driven by Company same-store sales growth of 5%, unit growth and acquisitions of restaurants from franchisees.

The year to date increase in Company sales, excluding the impacts of foreign currency translation, was driven by Company same-store sales growth of 5%, acquisitions of restaurants from franchisees and unit growth.

The quarterly decrease in Company restaurant margin percentage was driven by lower margins associated with new builds inside the U.S., partially offset by Company same-store sales growth.

The year to date increase in Company restaurant margin percentage was driven by Company same-store sales growth, partially offset by higher restaurant operating costs and lower margins associated with new builds inside the U.S.

Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues, excluding the impacts of foreign currency translation, were driven by unit growth and franchise same-store sales growth of 2%.

G&A

The quarterly decrease in G&A, excluding the impacts of foreign currency translation, was driven by lower professional fees.

G&A, excluding the impacts of foreign currency translation, was flat year to date.

Operating Profit

The quarterly and year to date increases in Operating Profit, excluding the impacts of foreign currency translation, were driven by same-store sales growth and unit growth.

Taco Bell Division

The Taco Bell Division has 9,046 units, 86% of which are in the U.S. The Company owned 8% of the Taco Bell Division units in the U.S. as of June 30, 2026.

Quarter ended

Year to date

% B/(W)

% B/(W)

Reported

Ex FX

Reported

Ex FX

System Sales

$

$

9

9

$

$

Same-Store Sales Growth %

7

4

N/A

N/A

8

6

N/A

N/A

Company sales

$

$

$

$

Franchise and property revenues

9

9

8

8

Franchise contributions for advertising and other services

5

5

7

7

Total revenues

$

$

$

$

Company restaurant profit

$

$

$

$

Company restaurant margin %

%

%

ppts.

ppts.

%

%

ppts.

ppts.

G&A expenses

$

$

(8)

(8)

$

$

(8)

(8)

Franchise and property expenses

9

7

Franchise advertising and other services expense

(7)

(7)

(8)

(8)

Operating Profit

$

$

$

$

% Increase (Decrease)

Unit Count

Franchise

2

Company-owned

Total

3

Company sales and Company restaurant margin %

The quarterly and year to date increases in Company sales were driven by acquisitions of restaurants from franchisees and company same-store sales growth of 6%.

The quarterly and year to date restaurant margin percentage increase was driven by same store sales growth and the margin percentages of restaurants acquired from franchisees, partially offset by other restaurant operating costs, higher labor costs, and commodity inflation (primarily beef).

Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues were driven by franchise same-store sales growth of 7% and 8% for the quarter and year to date, respectively, and unit growth partially offset by the impact of our acquisition of restaurants from franchisees.

G&A

The quarterly and year to date increases in G&A were driven by higher headcounts including headcount associated with operating restaurants acquired from franchisees, higher digital and technology expenses, and higher legal and professional fees.

Operating Profit

The quarterly and year to date increases in Operating Profit were driven by same store sales growth, the impact of restaurants acquired from franchisees and unit growth, partially offset by higher restaurant operating costs and higher G&A.

Pizza Hut Division

The Pizza Hut Division has 19,985 units, 70% of which are located outside the U.S. The Pizza Hut Division uses multiple distribution channels including delivery, dine-in and express (e.g. airports) and includes units operating under both the Pizza Hut and Telepizza brands. Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of June 30, 2026.

Quarter ended

Year to date

% B/(W)

% B/(W)

Reported

Ex FX

Reported

Ex FX

System Sales

$

$

Even

(2)

$

$

1

(1)

Same-Store Sales Growth (Decline) %

(1)

(1)

N/A

N/A

(1)

(1)

N/A

N/A

Company sales

$

$

7

$

$

Franchise and property revenues

(3)

(4)

(2)

(3)

Franchise contributions for advertising and other services

(6)

(6)

(6)

(6)

Total revenues

$

$

6

6

$

$

8

7

Company restaurant profit (loss)

$

1

$

—

$

1

$

(1)

Company restaurant margin %

%

%

ppts.

ppts.

%

%

ppts.

ppts.

G&A expenses

$

$

(5)

(5)

$

$

(6)

(5)

Franchise and property expenses

Franchise advertising and other services expense

3

3

5

5

Operating Profit

$

$

$

$

% Increase (Decrease)

Unit Count

Franchise

1

Company-owned

Total

1

Franchise and property revenues

The quarterly and year to date decreases in Franchise and property revenues, excluding the impact of foreign currency translation, were primarily driven by franchise same-store sales declines of 1% and the impact of our acquisition of restaurants from franchisees.

G&A

The quarterly and year to date increases in G&A, excluding the impact of foreign currency translation, were driven by the impact of G&A associated with operating restaurants acquired from franchisees and higher expense associated with annual

incentive compensation plans, partially offset by lower professional and legal expenses and lapping expenses associated with the bi-annual Global Franchise Convention held in the prior year.

Operating Profit

The quarterly and year to date decreases in Operating Profit, excluding the impact of foreign currency translation, were driven by higher advertising costs associated with the Pizza Hut U.S. Hut Forward program, the impact of operating restaurants acquired from franchisees and same-store sales declines.

Habit Burger & Grill Division

The Habit Burger & Grill Division has 388 units, all of which are in the U.S. The Company owned 78% of the Habit Burger & Grill Division units as of June 30, 2026.

Quarter ended

Year to date

% B/(W)

% B/(W)

Reported

Reported

System Sales

$

$

7

$

$

7

Same-Store Sales Growth (Decline) %

3

(4)

N/A

4

(3)

N/A

Total revenues

$

$

4

$

$

3

Operating Profit (Loss)

$

(4)

$

3

NM

$

$

2

NM

Unit Count

% Increase (Decrease)

Franchise

Company-owned

—

Total

2

Corporate & Unallocated

Quarter ended

Year to date

(Expense) / Income

% B/(W)

% B/(W)

Corporate and unallocated G&A

$

$

$

$