Yum's Digital Prowess and Prudent Menu Innovation Should Fuel Global Restaurant Market Share Gains

We believe Yum Brands should 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 4.9% over the last seven years, outpacing foodservice’s 2.2% rate. We don’t expect Yum to ease up on its push to integrate technology across its footprint while leveraging its scale and insights to deliver consistent menu innovation and operational improvements. We model capital expenditures averaging 4.1% of revenue ($1.9 billion in aggregate) over the next five years, up from 3.9% ($1.4 billion) in the prior five-year period. We expect this should position Yum to drive 6.6% system sales growth over the comparable period, excluding Pizza Hut, ahead of our 4.5% global foodservice estimate.