Yum! Brands - Earnings Call - Q4 2020
February 4, 2021
Transcript
Speaker 0
Good day, and welcome to the Fourth Quarter twenty twenty Yum! Brands Incorporated Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.
Would now like to turn the conference over to Keith Signer. Please go ahead, sir.
Speaker 1
Thanks, operator. Good morning, everyone, and thank you for joining us. On our call today are David Gibbs, our CEO Chris Turner, our Chief Financial Officer and Dave Russell, our Senior Vice President and Corporate Controller. Following remarks from David and Chris, we'll open the call to questions. Before we get started, I'd like to remind you that this conference call includes forward looking statements.
Forward looking statements are subject to future events and uncertainties that could cause our actual results to differ materially from those statements. We're going to do our best to provide our current thinking about the impact of the COVID-nineteen pandemic on our business, but obviously this situation is completely unprecedented and evolving. So any forward looking remarks should be considered in light of the uncertainty regarding the severity and duration of the pandemic and the variables that will be impacted as a result. All forward looking statements are made only as of the date of this announcement and should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the SEC. In addition, please refer to our earnings releases and relevant sections of our filings with the SEC to find disclosures and reconciliations of non GAAP financial measures that may be used on today's call.
Please note the following regarding our basis of presentation. First, all system sales results exclude the impact of foreign currency. Second, core operating profit growth figures exclude the impact of foreign currency and special items. Third, please note that fourth quarter twenty twenty results include the impact of lapping a fifty third week in 2019. However, figures stated on this call will exclude the fifty third week.
For more information on our reporting calendar for each market, please visit the Financial Reports section of our website. We are broadcasting this conference call via our website. This call is also being recorded and will be available for playback. Please be advised that if you ask a question, it will be included in both our live conference and in any future use of the recording. We'd like to make you aware of upcoming Yum!
Investor events and the following. First, disclosures pertaining to outstanding debt in our restricted group capital structure will be provided at the time of the Form 10 ks filing. Second, first quarter earnings will be released on 04/28/2021 with the conference call on the same day. And finally, we will be hosting a virtual KFC Global Brand Day on Tuesday, May 25 available via webcast on our website. Stay tuned for more details.
Now I'd like to turn the call over to Mr. David Gibbs.
Speaker 2
Thank you, Keith, and good morning, everyone. We entered 2021 a stronger company, primed to grow, made better and more resilient by the challenges of 2020. I'm incredibly proud of our people and the way our global system came together to navigate these challenges and offer new ways to safely and affordably serve customers. We galvanized our global systems commitment to our growth and good strategy, underpinned by a culture of collaboration across our brands, people and franchisees that we believe is unmatched and has put us on solid footing to move forward. In fact, to ensure this momentum on collaboration and execution continues, we recently elevated our Chief Transformation and People Officer, Tracy Schemes, to Yum!
Chief Operating Officer. This promotion formalizes the role she has already been playing to drive cross brand collaboration on people capability and customer experience imperatives that fuel same store sales and net new unit growth. This underlying alignment of vision and action is an often underappreciated competitive advantage for us and it's fundamentally central to our current and future growth. Across Yum! We intensified our focus on leveraging our scale.
As you're well aware, having more restaurants than any other company enhances our opportunity to create sustainable competitive advantages to fuel growth for our franchisees. This includes accelerating our deployment of digital and technology initiatives to enhance the customer experience, off premise capabilities and unit economics across the globe. We now have over 35,000 restaurants offering delivery, representing a 16% increase year over year, in part driven by expanded aggregator partnerships. We ended 2020 on a digital sales high note, hitting a record of $17,000,000,000 about a 45% increase over the prior year. As I enter my second year leading Yum!
I'm more confident than ever that our customer focused digitally enabled brands will grow same store sales, unit economics profitable development and Yum! Is well positioned to maximize value creation for years to come. Our recipe for growth using our four key growth drivers continues to guide our long term strategy. So I'll start with an overall review of 2020 results and use a few examples to demonstrate our relevant, easy and distinctive brands or RED for short, unmatched operating capability and unrivaled culture drivers. Then Chris will share more details of our Q4 results, our bold restaurant development growth driver and our strong liquidity and balance sheet position.
First, 2020 results. Overall Yum! System sales declined 4%, including a 1% headwind of the lap of the fifty third week in 2019 with slightly positive net units year over year and a 6% same store sales decline. COVID continued to impact the business through the end of the year, both in terms of temporary closures of restaurants and limitations on the use of dining rooms, upon which some of our markets heavily rely. This adversely impacted our core operating profit, which declined 8%, including a 1% headwind from the lap of the '50 third week in 2019.
Now I'd like to provide some details regarding COVID related temporary closures and the progress that we've seen. As of the end of the third quarter, we had about 1,100 temporarily closed units. This improved to about 1,000 as of the third quarter earnings conference call we hosted on October 29. We continued to see reopening through the balance of the fourth quarter, but due to second wave COVID impacts, including increased government restrictions, temporary closures climbed back to about 1,000 in January, which is where we remain today. This means roughly 98% of our system is currently open in a full or limited capacity.
Not surprisingly, the geographies experiencing temporary closures have evolved, and we are now seeing more closures in Europe, Canada and The Middle East, offset by some reopenings in Latin America and India. By asset format, restaurants located in malls, transportation centers, airports and the like continue to be pressured, making up many of the temporary closures. All in, the situation remains dynamic and largely dependent on local government response to COVID. We've also continued to have a significant number of our open restaurants subject to dining room closures or other limitations on access. Pre COVID-nineteen, about one third of our system sales came from the dining room.
Despite the drag from these limitations, our off premise channels aided by digital offset most of those lost sales and enabled our open store base to deliver same store sales that were about flat for the fourth quarter in aggregate. Now let's talk about our four RED brands. Starting with the KFC division, which now accounts for approximately 48% of our divisional operating profit, Q4 system sales declined 1% driven by a two percentage point negative impact from the lap of the fifty third week in 2019 and a 2% same store sales decline, partially offset by 4% net new unit growth. KFC continued to reopen temporarily closed stores, though different geographies suffered from the second wave impacts of COVID and ended Q4 with about 98% open in a full or limited capacity. At KFC International, same store sales declined 4% during the quarter, an an improvement from Q3.
The U. K, SOPAK and Canada continued to show strong customer resonance and operational execution, leveraging drive thru and other off premise channels to grow sales. Importantly, the most impacted geographies from Q3 such as India, Latin America and The Caribbean and The Middle East started to show recovery. Across the globe, KFC continues to invest in innovation by filling gaps on their core menus or through rebundling, repackaging and reconceptualizing the core menu items. KFC U.
S. Continued to see positive same store sales growth, delivering 8% growth in Q4, owing to continued strength in group occasions and digital. To kick off our launch with DoorDash, we had a free tenders promotion, which performed particularly well and helped digital grow to a high single digit sales mix for the quarter. Moving on to Pizza Hut, which now accounts for approximately 17% of our divisional operating profit, the division reported a Q4 system sales decline of 6%, driven by a three percentage point negative impact from the lap of the fifty third week in 2019, a 6% net new unit decline and a 1% same store sales decline. During the quarter, Pizza Hut continued to reopen temporarily closed stores and ended Q4 with about 98% at least partially opened in a full or limited capacity.
Express units continued to be pressured, making up many of the remaining closures. Pizza Hut International same store sales declined 7%. Our off premise focused markets continue to excel, while our dine in footprint continued to be a headwind. Our off premise channel generated a positive 9% same store sales growth, and we are continuing to emphasize and support the shift to off premise, both through our operations and brand strategies. Further, markets that offered abundant value to customers helped drive strong performance in markets such as Canada and Asia.
Pizza Hut U. S. Had another stellar quarter delivering 18% same store sales growth in the off premise channel with 8% overall same store sales growth. Our $10 Tastemaker value offer continued to perform well, mixing over 20%. Just in time for the holidays, we introduced our Triple Treat Box, a premium product with abundant value.
We also partnered with Beyond to be the first major pizza chain to successfully introduce a plant based alternative product to the market. A few weeks ago, Flynn Restaurant Group announced its intention to acquire approximately nine fifty Pizza Hut U. S. Restaurants. Flynn is an existing Yum!
Brands franchisee for Taco Bell that is well capitalized and brings a strong track record of operational excellence. We expect Flynn's ownership of these restaurants will make the entire Pizza Hut U. S. System stronger and welcome Greg Flynn and his team to the Pizza Hut family. The near term plans include modernization of a significant portion of the restaurants acquired while improving operations.
As for Taco Bell, which now accounts for approximately 36% of our divisional operating profit, Q4 system sales declined 3%, driven by a five percentage point negative impact from the lap of the fifty third week. This was partially offset by 1% same store sales growth and 1% net new unit growth. Taco Bell continued to reopen temporarily closed stores and ended Q4 with less than 50 temporary closures. Before delving into results, I'd like to congratulate the entire Taco Bell system for ranking number one in the Franchise 500, beating out peers as well as impressive concepts in other industries. In the words of Entrepreneur Magazine, which produces this list, Taco Bell was recognized for a well seasoned blend of innovative products at value prices, customers who are willing to follow the brand on wild marketing adventures and some of the most satisfied franchisees in the business.
During the quarter, Taco Bell U. S. Stayed focused on simultaneously building the brand over time and building sales overnight. First, we improved ease by expanding to additional aggregator marketplaces. Bolstered by dedicated media, these marketplaces helped delivery grow to a high single digit sales mix for the quarter.
Second, we launched a loyalty program with promotions geared towards customer acquisition and adoption. All in digital sales mix reached 12% for the quarter and about $1,000,000,000 for the full year 2020. We are very pleased with this progress on such essential components of building the brand over time. Third, we offered compelling and craveable products to drive sales overnight. The quarter began with the return of a fan favorite, the $5 Grande Stacker box, which had a strong performance mixing at 9%.
Next, we brought back the toasted Cheddar Chalupa and saw a sales mix of 10%. We then rounded out the year with the Grilled Cheese Burrito and Nachos Party Pack, both having a positive sales impact. Now on to The Habit. Despite ending Q4 with 7% of Habit restaurants temporarily closed as well as COVID related on premise restrictions in California, same store sales declined only 5%, a slight step back from the pace in late Q3. I'm pleased to say that we were able to fill much of this void through our digital ordering platform, which continued to perform well, constituting over 40% sales mix.
Two permanent new menu items were added during the quarter to keep customer engagement high, including the Habit's Own Amazing Crispy Chicken Sandwich as well as Chicken Bites. Now on to our unmatched operating capability. First, at KFC U. S, with most of the sales occurring in the drive thru, our teams have successfully adapted to better support the drive thru lanes. As a result, transaction time during the quarter improved sixteen seconds from Q4 twenty nineteen.
At Pizza Hut International, we're modernizing the team member experience through the launch of Phase one of our in house intelligent coaching app called HutBot to improve ship level store performance. After launching HutBot and other process improvements in The U. K, delivery times improved over six minutes and drove a 20 improvement in customer satisfaction scores. There's lots of franchise excitement around HubSpot and nine other markets have already rolled out this store management and coaching aid. Similar to KFC, Taco Bell U.
S. Saw record breaking drive thru performance and with consumer demand in our drive thru at an all time high, achieved its goal of completing a full year with transaction times below four minutes, with the fastest quarterly average achieved in Q4. Next, our newest brand, the Habit Burger Grill, aggressively rolled out off premise solutions this year such as pop up drive thrus and curbside pickup. Curbside, in particular, has continued to be well received by customers, accounting for over 10% of total sales and about 50% of mobile orders. Now to our unrivaled culture and talent growth driver.
With the restaurant team member in mind, we held our first ever virtual global ops summit. What stood out the most to me was how the summit integrated key talent from our digital and technology teams directly into the unmatched ops agenda more than ever before. Our Yum! Digital and technology team is not solely focused on the customer experience, but the team member experience as well through a focus on building systems at scale, harmonizing platforms and leveraging an agile mindset. The goal is to unlock our pace of innovation and adoption for front and back of house platforms, which will be launched in a major market first, iterated until mature and then scaled globally.
There's a lot of excitement across the globe for our newly developed technology solutions, and Chris will provide a few examples of specific platforms launching in The U. S. With that, Chris, over to
Speaker 3
you. Thank you, David, and good morning, everyone. Today, I'll discuss our fourth quarter results, our progress on our digital and tech journey, our bold restaurant development growth driver and our strong liquidity and balance sheet position. To begin, let's discuss Q4. Overall Yum!
System sales declined 2%, including a 3% headwind of lapping the fifty third week in 2019. This was driven by slightly positive net units year over year, partly offset by a 1% same store sales decline. Core operating profit declined 9% in the quarter or a decline of 5% when excluding the lap of the fifty third week in 2019. EPS, excluding special items, was $1.15 This represented a 15% increase compared to ex special EPS of $1 in Q4 twenty nineteen. I'll now provide some additional color on several items.
General and administrative expenses, excluding the impact of special items, were $3.00 $6,000,000 for the fourth quarter twenty twenty, roughly consistent with the estimate I shared on our third quarter conference call. For the full year 2020, G and A, excluding the impact of special items, represented 1.9% of consolidated system sales. We saw an opportunity to enhance our systems competitive advantage by accelerating digital and technology spending during a period when many others could not. We offset this through proactive austerity measures. However, because of 2020 sales pressures, we were temporarily above our historical framework for G and A spend as a percentage of system sales.
2020 was not representative of a fundamental change in approach or in our commitment to be an efficient growth model that leverages fixed costs. Our business model is positioned for rapid recovery once we emerge from the pandemic, and we expect our G and A ratio to move back toward our historical target as sustained growth resumes. In the fourth quarter, interest expense was approximately $132,000,000 flat compared to Q4 twenty nineteen, driven by higher outstanding borrowings offset by a decrease in rate on our floating rate debt. Our fourth quarter and 2020 ex special effective tax rates were lower than the prior year, primarily due to the release of a valuation allowance against net operating losses we now expect to utilize in a foreign jurisdiction. We are currently evaluating potential changes in taxes under the new administration in The U.
S, though it's too early to provide an assessment. At this time, we believe the 21 to 23% range we provided last year remains appropriate for an effective tax rate for 2021, excluding any potential impact of special items. Capital expenditures net of refranchising proceeds of $19,000,000 were $141,000,000 for the full year 2020, including $16,000,000 at The Habit. While our 2020 capital spending plans remain fluid given the macro environment, I'd like to discuss our general approach. We believe roughly $250,000,000 in annual gross CapEx appropriately balances the inherent needs of the business as well as occasional opportunities to invest in technology initiatives and strategic development of equity stores.
We also anticipate at least $50,000,000 in annual proceeds from refranchising, which will fund the strategic equity store investments. For 2021, we may be slightly higher than the gross CapEx amount I just mentioned. This upside relates to catch up spend on repair, maintenance and remodels delayed owing to COVID as well as select strategic development in The U. S, primarily for The Habit, for which refranchising proceeds may not be fully realized this year. As you're all aware, the global macro environment remains quite fluid owing to the impact of COVID-nineteen, governmental actions including stimulus packages and more.
We have the utmost confidence in our teams and their ability to pivot to whatever challenges and opportunities arise. However, the environment is still unpredictable, and therefore, we will not guide to specific financial results. Before moving on to bold restaurant development, I wanted to share some of the work we've been doing around restaurant technology to transform the customer and team member experience. As David mentioned, we are launching our new solutions in major markets before we scale globally. First, KFC U.
S. Began the national rollout of our new e commerce platform in early twenty twenty one. This will allow KFC to take orders from our own digital platform for both pickup and third party delivery. Second, Pizza Hut U. S.
Launched our omni channel menu management system where there is one source for menu customization and pricing that can be synced across multiple digital channels. This is particularly important as we grow our delivery capability across multiple aggregator partners. And lastly, Taco Bell U. S. Is the first to test a new advanced point of sale system, a modern tablet based application that is completely customizable.
This technology should increase accuracy, speed and reliability as well as allow for a more intuitive team member experience optimized for each brand's specific needs. Now moving on to bold restaurant development. During the fourth quarter, we opened ten twenty four restaurants and closed seven ninety seven, including five forty closures at Pizza Hut, which placed our year end unit count slightly ahead of the estimate I shared on our third quarter conference call. For the full year 2020, we delivered slightly positive unit growth. This includes the addition of two seventy six Habit restaurants in Q1 of this year, offset by COVID related dislocations and Pizza Hut closures.
I am pleased to say that despite COVID headwinds, three of our four brands achieved positive net unit growth for the year, an encouraging sign for the future. Most notably, KFC delivered 4% net unit growth with strength in China, Russia and Central And Eastern Europe and Thailand. Importantly,
Speaker 2
10 out of
Speaker 3
13 KFC markets were net unit positive in 2020, ending the year with 25,000 restaurants, an incredibly impressive milestone. This momentum gives us confidence that there is capital available when we provide strong economic models. In regards to Pizza Hut, units declined six percent for the year as we continue the previously announced transition of the asset base to a healthier and more modern estate. Closures that occurred this year were largely underperforming units or units with lower AUVs. COVID has hastened the transition and the closure of casual dining based restaurants.
We have more work to do and we expect this to weigh on unit growth into this year. As it relates to franchisee health and appetite for development, as David alluded to earlier, we are entering 2021 from a position of strength. Unit economics are improving in many markets and many franchisees are primed to grow. During the quarter, we saw recoveries of amounts past due at KFC International, Pizza Hut U. S.
And Taco Bell. These recoveries resulted in an $8,000,000 net benefit to operating profit related to bad debt during the quarter, an improvement of $14,000,000 compared to $6,000,000 of expense in the 2019. Importantly, deferred royalties outstanding from grace periods provided during the year were less than $1,000,000 as of the 2020, down from $60,000,000 as of 06/30/2020 and our allowance for doubtful accounts is below where it was in Q4 twenty nineteen before the pandemic. Now for an update on our balance sheet and liquidity position as well as our latest thoughts on capital structure and priorities for capital allocation. First, we ended Q4 with cash and cash equivalents of $730,000,000 excluding restricted cash.
Consolidated net leverage was 5.2 times, which is marginally above our historical target of approximately five times. Second, we resumed share repurchases and repurchased 2,400,000.0 shares totaling $250,000,000 at an average price per share of $103 Third, our capital priorities remain unchanged: invest in the business, maintain a healthy balance sheet, pay a competitive dividend and return the remaining excess cash flows to shareholders via repurchases. To that end, we are pleased to have recently increased our quarterly cash dividend by over 6% to $0.50 per share. After maintaining our dividend in 2020, despite the impact of COVID-nineteen, we believe this increase conveys our confidence in the cash flow generation and growth potential of Yum! Business model.
With iconic category leading brands and a uniquely diversified global business of over 50,000 restaurants, Yum! Is well positioned to accelerate growth and drive healthy franchise unit economics by leveraging our massive scale and by expanding digital technology and delivery. We look forward to updating you on our progress throughout 2021. Now the team and I are happy to take your questions.
Speaker 0
We will now begin the question and answer session. And the first question will come from David Tarantino with Baird. Please go ahead.
Speaker 4
Hi, good morning. My question is about the unit growth and I appreciate the comments that the many franchisees are kind of primed for growth. But I was wondering if you could perhaps comment on your previous long term target to get to 4% annual growth and if there's any framework you can share on how long you think it might take to get to that level given what you know today?
Speaker 3
We're having some technical difficulties. One second please.
Speaker 1
Hold on a second folks. One of the lines dropped. We appreciate your patience.
Speaker 3
Can you repeat the question please? So the team that didn't hear can hear it again please.
Speaker 4
Yes. So my question is about the unit development and I appreciate your comments about kind of many of the franchisees being primed for unit growth. But I guess the main question is about your prior target of 4% annual growth. And given what you know today, I was asking about how long do you think is reasonable for us to expect for you to get back to that type of growth rate on a system wide basis? Thank you.
Speaker 2
Thanks for the question, David, and apologies to everybody for our phone dropping out. That's a first for us on an earnings call, but I guess everything's happened in the last twelve months, so why not that. As far as unit development, I know that's on everybody's mind, so just a couple of thoughts there. To the question of can we regain that 4% pace and is that in our crosshairs and our goal certainly to get to 4% and beyond, and the answer is certainly yes. There's a lot of reasons why we're confident that we will get there over time.
Our business model really has gotten stronger over the last twelve months. The shift to off premise suits us well and improves our franchisees economics. And obviously in our open stores, we're seeing that show up as sales. Most of our franchisees are in good shape. They're coming out of this situation in good financial shape and they're ready to grow.
Certainly, it's a more favorable real estate climate. And I will point out that in 2020, we actually opened over 2,400 gross units. So it's not as if the development pace at Yum! Just disappeared. The challenge obviously was a lot of the closures which we had for good reasons, things we've talked about over the years wanting to close particularly Pizza Hut restaurants to strengthen our asset base.
So we've got a lot of that behind us in 2020. And then certainly three out of our four brands grew last year and we had 3% growth in the global business when you exclude the Pizza Hut business. So all of those good proof points for why we can get back to 4%. As far as the timing though, I know the question is when and there's still some uncertainty on that, which is why we're not providing guidance on that number. We certainly can't be certain of the pandemic course.
Since our last call, we've obviously seen flare ups that have impacted our business. Yum China talked about that as well last night. It's a challenging environment just to build stores and there are markets that we want to get stores open and we're having trouble permits and getting the right people to construct the stores. And certainly, as we've changed our asset models, that has got our franchisees looking at making changes to the kinds of sites they pursue in some cases, the type of stores they build on those locations, all of that leads to some delays. And then certainly, we all know in the development game in retail, it takes time to build the pipeline and the fact that our pipeline was disrupted last year, we have to rebuild it.
So confident that we can get back to 4% and beyond, still not at a point where we're going to commit to a certain timeframe on that, but the mood is definitely one of confidence.
Speaker 1
Next question, please.
Speaker 0
Our next question will come from John Glass with Morgan Stanley. Please go ahead.
Speaker 5
Thanks very much. Good morning. Can I just ask about digital? You've talked a lot about the success you've had in the digital penetration. Underneath of that, can you just talk about at the enterprise level, what you're doing to support franchisees?
Specifically, I guess, I mean, there a common platform by brand, for example, now globally that allows all franchisees to access that and integrating mobile order and pay, integrating delivery, integrating loyalty or is it even bigger than that, like across the enterprise you've got one? Just maybe just understanding where you are and where your investments in digital specifically are going to be in 2021? Thanks.
Speaker 3
Thanks, John. This is Chris. Really good question. Digital has been such an important part of our resilience during the pandemic. We're proud to say that we had the $17,000,000,000 in digital sales for the year, very significant increase over the previous year.
And we're just very pleased with how digital is supporting the business. And we are, as we said, investing ahead in digital. We're finding other places manage costs to help us to continue to fund those investments. And to your point, what we really care about in the long term is that we earn a return on those investments. And so that gets at how we're thinking about the digital strategy.
We want to continue to have the consumer facing and team member facing technologies be curated by the brands and be right for each individual market. The needs of a customer expectations for e commerce in one market may be very different from another. So those front ends are tailored. But to your point, we are building common platforms underneath that. We don't need to replicate those common platforms multiple times.
And so we gave a couple of examples earlier around how we're doing that. We mentioned that in KFC U. S, we've now introduced an internally built e commerce platform. We'll test that in a major market like KFC U. S, and then we'll take it to other brands and other markets over time.
Similarly, the POS example that we used on Taco Bell. Taco Bell is the first place where we'll implement that. And then we will customize and tailor that as a platform for other markets. Both of those allow the front ends to be customized. So it's a blend of customer focus and platform underneath.
Speaker 0
The next question will come from John Iankov with JPMorgan.
Speaker 5
There's obviously a lot of discussion both in The U. S. And Europe, I think specifically on The U. S. Of kind of this major wave of restaurant consumption that will happen post vaccine.
And I wonder just kind of what your thoughts were on that? I mean, you are prepared for significant shifts back to dine in and obviously you have a lot of off premise assets. I mean if there are any examples around the world, maybe even cities within countries that are more or less kind of post pandemic that you have a significant amount of stores that maybe you could talk about some experience of sales and the brands where you have some scale? Thanks for that color.
Speaker 2
Yes. Thanks, John. Look, obviously, environment has changed over the last twelve months that we're operating in, and we're pleased at how the business has pivoted to off premise, but that doesn't at all mean we're giving up on dine in and we know that dine in can play a role in our business as we go forward. I think Yum China talked about it yesterday on their call that they've seen sequential improvement in their dine in business and while it hasn't gotten back to where it was that they've done some innovation around technology to help and dine in and have been able to regain some of it. So we have 300 different combinations of brands and countries.
Every one of them is a different story. As we've gone through this, what you're seeing is the markets that have a more that were built for off premise are the ones that are doing better. And the ones that had more of a dine in SKU are developing better off premise solutions and improving their situation. But we are preparing for people reengaging with dine in and we have the assets that can serve it and we still think it will be part of the business, but lesser going forward than it has been.
Speaker 0
The next question will come from Greg Frankfort with Bank of America. Please go ahead.
Speaker 5
Hey, thanks for the question. My question is more of
Speaker 3
a high level one. Can you talk a little bit it seems like a lot of the big franchisors are making a decision right now on what portions of the tech stack to bring in house and what portion to kind of buy from third parties. Can you talk just a little bit about how you're thinking about that dynamic and what's proprietary advantage to Yum! On the technology front going forward? Thanks.
Yes. So good question and it's one that we think about on each element of the tech stack. And in general, we focus on ones where we think that element could provide a competitive advantage are the ones that we want to build and have control of internally. Others that are more of a support or enabler role are ones that we would work with third party vendors through hopefully advantaged commercial relationships where we bring our scale to bear. So it's always a blend and we're always constantly reevaluating each of those aspects.
But I gave a couple of examples a moment ago of ones where we've clearly said we need to have a differentiated proprietary platform on e commerce and POS as a couple of examples that are so strategically important to the business.
Speaker 0
The next question will come from Dennis Geiger with UBS. Please go ahead.
Speaker 6
Good morning. Thanks. Hope you're doing well and congratulations to Tracy. Just wondering if you could talk more about the brands in The U. S.
Broadly. I guess specifically given the momentum that you saw through 2020 and really to end 2020, given some new menu items this year across brands, already this year and guess a good pipeline for the remainder of the year thinking about stimulus benefits, etcetera. Just curious if you kind of care to highlight any of the momentum that may have been continued into this new year and just how you're thinking about the brands as the broader industry opens as we go throughout the year? Thank you.
Speaker 2
Yes, obviously The U. S. Was a bright spot for us in Q4 and during the course of the year collectively positive in both despite all of the impact from closures on same store sales growth. So I think in each case, we're really excited about where the brands are. Pizza Hut is the one that we've talked about a lot because of the remaking their asset base, moving to more off premise, the progress they've made on digital.
One of the things that we mentioned in our comments, but bears repeating is 20% of the Pizza Hut stores were in the hands of a poorly capitalized operator previously. Now with Greg Flynn entering the system of proven commodity in the Taco Bell world, we know that that's going to provide a boost to Pizza Hut. So there's lots of reasons to be enthusiastic about Pizza Hut with their off premise SKU and the move they've made. The numbers are pretty staggering. When you exclude the Express units, it's a 21% increase in Pizza Hut's off premise consumption for the quarter in The U.
S. So lots of excitement there. The Taco Bell, again getting through this with less of a family meal SKU, they had to pivot more and embrace the new needs of the consumer and I think they've done an amazing job of that. They just put up a decent quarter and on top of that spent a lot of time in the quarter building up their loyalty base through programs to acquire new loyalty customers. So we think that bodes really well for the future as they as we in our language, we talk about they really focused on building the brand over time and entering 2021 with a lot of reasons to be excited The loyalty program, some of the product launches that we've had, you've heard the news about bringing back potatoes, but there's a lot more to come in the world at Taco Bell.
And then KFC, one of the exciting things about KFC in this environment is obviously it's built for this environment, off premise has been good to them. We've seen a massive increase in their bucket sales in the quarter. And as we go into the year, we've talked about their new chicken sandwich coming and the rollout of that in 20% of the stores now, but we'll we're pleased with how that increases our mix of sandwiches and how that will play out as we get it in all of our stores. So across every brand, there is a reason to be excited about the future, but there's also a very uncertain environment in The U. S.
As we all know, and we're remaining cautious as we move forward. Chris, a couple
Speaker 3
of things to add. Yes. I'll just add a little bit of color on sales trends to start the year. We've been pleased with how the brands have started the year given all of the elements that David mentioned, but I will try to provide a little more context for trends that we've seen. So first, if we take The U.
S. Specifically, in the first few weeks of the quarter across all four brands, our same store sales growth in aggregate was in the mid teens. Of course, that strength was partly bolstered by The U. S. Stimulus, which appears to be waning.
Internationally, the sales trends have been softer. We've seen a slight deceleration from Q4 trends owing to the impact of regional COVID resurgences, plus the temporary closures due to COVID and local restrictions, plus restrictions on operating hours in some of the restaurants. If you step back and you think about this quarter in total, there's a fair bit of uncertainty that makes it a bit unpredictable. We've got many different laps, the Lunar New Year moving, plus all of the COVID impacts in various markets around the globe. But hopefully that gives you a little more context for how the quarter has started.
Speaker 2
Yes. And one last comment on The U. S, the Habit Burger Grill. I know it's of such a scale that it can have a meaningful impact on our numbers in the short term, but we are excited about the long term potential of the brand. The way it's gotten through this environment pivoted to off premise, the technology that they've deployed, the quality of their operations, there's a lot of reasons why you would be excited going forward with Habit.
We've seen a lot of interest from the franchise community in becoming Habit franchisees. We're going slow in that regard to make sure we do it exactly right. But that's a brand that I think is also poised for a lot of exciting things in 2021.
Speaker 0
The next question will come from Jon Tower with Wells Fargo. Please go ahead.
Speaker 3
Great. Thanks. Just kind of a few into one hopefully. I think the gross CapEx number moved up a bit higher than in the past or at least what you're talking about in the past, roughly say $25,000,000 or so. Is this step up mostly attributed to tech spend?
And then on the internally built e commerce platform in The U. S. And some of the other solutions you're coming up with over time that are internally built, are these solutions going to allow for a payback to the franchisor by the franchisees? And then just lastly, in terms of thinking about the tech initiatives, where does modernization of the global drive thru experience? I'm thinking digital menu boards fall in the priority stack.
Thank you. Great. So I've got three questions there. I'll take through those. So first on gross CapEx.
Yes, prior to the pandemic, we had gross CapEx around $225,000,000 in a normal year. And so yes, but the $250,000,000 there is a tick up there. It's really driven by two factors. One, we've now got The Habit as a part of the business and we still have a large equity store base there. And so we will be investing in development in The Habit.
And second, smaller pieces driven by the digital investments. And of course, as we mentioned, we want to have at least $50,000,000 in refranchising proceeds, could be north of that. We obviously have more stores in the portfolio now with the acquisition of Habit. So hopefully that explains that slight tick up in the gross number. Second, in terms of payback on technology investments, yes, our focus is earning a return on those investments over time.
However, the primary way in which we earn those returns is by those investments leading to higher sales growth and higher strengths in the business, which also aids net new unit growth. And that supports our franchisees, it supports us. That's the primary way in which we earn return on those investments. And then your third question around drive thru, obviously off premise has been such an important shift as we've gone through the pandemic. And yes, we continue to invest in the right drive thru technology and experience in each of our markets.
In some cases, that does include digital menu boards. In other markets, we might say that's not the needed investment. But in virtually all cases, we want it to be an easy, for our customers, and we continue to focus in each brand on making sure that experience is terrific and enabling it through the right technologies for the particular market.
Speaker 1
We have time for one more question, please.
Speaker 0
The next question will come from David Palmer with Evercore ISI. Please go ahead.
Speaker 7
Thanks. Maybe I can squeeze in two here. With regard to Pizza Hut, you mentioned how the franchisee base, the financial health has been improved and you'd shifted certain units into sure hands there. But I'm wondering about the insights of the company from a brand perspective, the pause of COVID in terms of giving you a sales lift may have also given you an opportunity internally under Kevin Hockman to rebuild the innovation pipeline into a position that you think might position that brand for longer term growth beyond the 2020? If that's could you perhaps comment on what that might be?
And then with regards to international, clearly, there's going to be less of that on that part of the business in terms of going through COVID. How fast are you thinking you can rebuild that walk in business overseas versus perhaps versus 2019 levels? How do you think you'll get back to par in those markets so much?
Speaker 2
As far as Pizza Hut goes, David, there was you broke out broke up a couple of times. I think I got the gist of your question. On The U. S. Business and the brand, we're really pleased with the progress that Kevin under his leadership, but also the team that we brought in from a brand and a marketing standpoint, David Graves and George Felix have done an amazing job of reinvigorating the innovation pipeline and bringing the brand forward to consumers in a way that's really resonating.
And that's why you're seeing the great results there. We do think, as you've seen with the launch with the Detroit style pizza more recently, we do think that there's an important role for innovation to play in that brand. And I think those guys are spot on in the way to bringing it to life. So we're confident in the brand coming to life. As we've always talked about, the challenges are more around the asset base than it is about consumers' loves for the brands or the products that we serve.
On the international side, it's obviously a different story. The assets are in better shape, but they skew more towards dine in. And you're seeing that shift in the asset based off premise. Even the dine in stores themselves are now, in many cases, offering delivery, coming up with innovative solutions to leverage technology on the dine in experience. So I think that will continue.
And yes, we will be helped on the international side when we get past the pandemic and people return to the stores. But the base model that we have at Pizza Hut, both internationally and domestically, of building a delivery carryout unit is a low cost asset to build that usually gets very high returns, is attractive to our franchisees and that base model and the unit economics of it bodes very well for the future of the brand internationally and domestically.
Speaker 0
This concludes our question and answer session. I would like to turn the conference back over to Mr. David Gibbs for any closing remarks. Please go ahead.
Speaker 2
Well, thanks everybody for your time today. Obviously, in summary, 2020 was a challenging year across almost every dimension, but we feel really good about the massive progress we've made in so many ways, progress we wouldn't have made without the challenges of 2020. I'll just end on a high note, if you didn't pick it up in the release, we opened our twenty fifth thousand KFC in Q4, ended the year with 25,000 restaurants. If you look back just five years ago at the 2015, we had less than 20,000 restaurants. KFC in 2020 opened had 4% net new unit growth.
Even in the toughest of times, this brand is growing. It's our biggest brand. And that kind of 5,000 unit growth over a five year period bodes well for the future. We still only scratched the surface of penetrating the world with KFC. Probably most importantly though, 2020 was a year in which our culture and talent was a differentiating factor in getting through it as successfully as we have.
And I was so proud of the way our franchisees and our employees and took care of our customers and our communities, partnered together to pivot the business, and we clearly have emerged stronger, and there's a lot of enthusiasm and excitement around the world about the growth ahead of us. Thank you for your time.
Speaker 0
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.