Operating Profit Growth Target
Q: What's needed to hit 8% operating profit growth despite weak comps?
A: Management reaffirmed their 2024 target of at least 8% core operating profit growth [1]. They plan to rely on new unit development as a strong lever to achieve this goal [1]. The development pipeline is robust, and they are confident in their global partners [1]. Same-store sales growth is hard to predict in the current environment, so they're counting more on development to reach their targets [1].

KFC International Performance
Q: How are KFC International sales and outlook amid global challenges?
A: KFC International remains a key growth driver, contributing 85% of international profit [2]. System sales grew 6%, and adjusting for Middle East impact, growth is 8–9% [2]. Regions like Latin America and Africa saw sales up 22% and 11%, respectively [2]. Net new unit growth was up 10%, showcasing a strong development pipeline [2].

U.S. Brand Performance
Q: How are U.S. brands positioned in a tough environment?
A: Taco Bell, representing 75% of U.S. operating profit, improved throughout Q1 and is seeing accelerated same-store sales growth into Q2 [5]. The Cantina Chicken menu launch has been well received [5]. Taco Bell is well-positioned as a value leader, not seeing a fall-off in low-income consumers [5]. Pizza Hut U.S. showed positive two-year trends and expects a strong calendar ahead [5]. While KFC U.S. is struggling, management is working to reset the brand domestically [5].

G&A Expense Outlook
Q: What's driving the decrease in G&A expenses?
A: G&A expenses are expected to be flat to slightly down on a 52-week basis, excluding special items [0]. Factors include lapping last year's cyber event and Russia-related costs, as well as resource optimization efforts [0]. Investments in digital and technology are becoming more efficient as franchise adoption increases, bending the cost curve [0]. The acquisition of U.K. stores will add just under $10 million to G&A [0].

Digital Impact on Franchisees
Q: How are digital initiatives affecting franchisee economics?
A: Digital deployments lead to increased check sizes and frequency [4]. At Taco Bell U.S., digital sales mix grew from essentially zero in 2018 to over 30% now [4]. Technologies like Dragontail for Pizza Hut reduce delivery times by 4 minutes and increase driver efficiency [4]. Strong development momentum reflects improved franchisee economics due to digital investments [4].

Long-Term G&A Trajectory
Q: Will digital investments lower G&A dollars in future years?
A: Management anticipates increased leverage on G&A over the long run, expecting G&A as a percentage of system sales to decrease [3]. Early investments in digital and technology created pressure on G&A, but as platforms are deployed and adoption increases, the net P&L impact will reduce [3]. While investments will continue in areas like AI and data analytics, overall efficiency is expected to improve [3].

Unit Growth and AUVs
Q: How does unit growth translate into system sales amid lower AUVs?
A: New units in emerging markets often have lower average unit volumes (AUVs), but they tend to grow faster over time [6]. The strategy has successfully built markets like China and India [6]. Yum! is also expanding in higher-volume markets like Western Europe [6]. The mix will always include varying AUVs, but overall growth is expected to align with long-term objectives [6].

Sales Performance vs. Expectations
Q: Are sales progressing as expected, and when will comps turn positive?
A: Q1 sales were generally in line with expectations, slightly weaker due to unanticipated weather impacts in the U.S. [7]. Taco Bell is strengthening into Q2, and management remains confident in meeting yearly projections [7]. Despite a challenging year, they expect to deliver the 8% core operating profit growth [7].