The Yum! Brands story

What drives the business

• Yum!'s franchise model puts restaurant investment largely in franchisees' hands, with 97% of units franchised at December 2025 and continuing fees under store-level agreements typically between 4% to 6% of restaurant sales.
• The completed Pizza Hut exit leaves KFC, Taco Bell and Habit Burger & Grill across more than 44,000 restaurants in 151 countries and territories, concentrating the business around chicken and Mexican-style food.
• Yum China remains the master franchisee for KFC and Taco Bell in Mainland China, with the master license agreement establishing a continuing fee of 3% on system sales.
• KFC unit growth of 7% and Taco Bell same-store sales growth of 7% supported performance in the quarter to June 2026, when the brands generated operating profit of $410 million and $311 million, respectively.
• Byte by Yum! brings ordering, restaurant operations and management tools onto a common technology platform, while digital system sales excluding Pizza Hut approached $9 billion and exceeded 60% of system sales in the quarter to June 2026.

What the price assumes

At $138.28, the reverse DCF implies free cash flow after stock pay grows 10.0% a year for ten years, using a 10.2% discount rate.

That compares with delivered growth of 2.9% a year over the last 10 years and the TenQ check's 3.5% bar, leaving the implied pace above both.

Revenue grew 10.3% over the last twelve months, but that is a different measure from the cash flow growth embedded in the price, and the historical record includes Pizza Hut.

Value YUM on your own assumptions

What could change the story

• The July 2026 multistate Cyclospora outbreak prompted Taco Bell U.S. to remove certain lettuce following a vendor recall, exposing the brand to lost sales, litigation and supply disruptions.
• Increased regulatory scrutiny and lawsuits concerning PFAS in packaging could add costs or operating requirements.
• At June 2026, before the Pizza Hut transactions closed, total debt of $12.3 billion compared with cash and short-term investments of $674 million, while negative equity and a liquidity ratio of 0.59 failed TenQ financial health checks.
• Shareholder distributions represented 101.0% of free cash flow in the TenQ check, making the allocation of disposal proceeds relevant to the balance sheet.
• Revenue growth of 6.3% a year over the last three years trailed the sector check's 12.0% bar, despite the faster pace over the last twelve months.

What to watch next

• The next releases will show how the remaining business compares with Yum!'s reiterated long-term objectives of 5% unit growth, 7% system sales growth excluding foreign currency translation and at least 8% core operating profit growth.
• Taco Bell same-store sales and restaurant margins will help show whether demand held up after the July 2026 lettuce recall.
• KFC menu changes, digital sales mix and Byte adoption will show progress toward the planned rollout of KFC's refreshed strategy across its Top 20 markets by the end of 2027.
• Post-transaction debt, cash flow and shareholder distributions will show how Yum! deploys the Pizza Hut proceeds and how much cash the remaining brands generate.

Sources

• Yum! Brands's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The YUM stock report, for every figure and check