Yum!(YUM) - 2023 Q4 - Annual Report

Business Operations - YUM operates over 58,000 restaurants across more than 155 countries, with system sales totaling $63.789 billion in 2023[16]. - Approximately 98% of YUM's units are franchised, with 1,500 franchisees contributing to the company's growth strategy[25]. - The company does not consider its operations to be materially seasonal, indicating stable performance throughout the year[38]. - As of December 31, 2023, the company employed approximately 35,000 persons, with 25,000 in the U.S. and 10,000 internationally, where 85% work in restaurants[44]. - Approximately 90% of U.S. company-owned restaurant employees are part-time, and about 50% have been employed for less than a year[44]. - The company and its franchisees globally create thousands of part-time, entry-level restaurant jobs, with 80% of U.S. Restaurant General Managers promoted from within[45]. - The company has divested its Pizza Hut and KFC businesses in Russia during the second quarters of 2022 and 2023 due to geopolitical instability[73]. - The company removed 1,112 KFC units and 53 Pizza Hut units from its global unit counts due to the exit from Russia, treating these as permanent closures for same-store sales calculations[175]. Financial Performance - System sales growth for 2023 was reported at +10%, with same-store sales growth at +6%[183]. - Company sales reached$ 2,142 million, a 3% increase from $2,072 million in 2022[185]. - Franchise sales grew to$ 61,647 million, up 8% from $57,211 million in 2022[187]. - GAAP EPS increased by 23% to$ 5.59, while EPS excluding special items rose by 14% to $5.17[184]. - Core Operating Profit increased to$ 2,406 million in 2023, up from $2,155 million in 2022, reflecting a growth of 11.6%[190]. - The effective tax rate decreased to 12.1% from 20.3% in the previous year[185]. - The company incurred a net operating loss of$ 11 million related to its exit from the Russian market in 2023[192]. - The company recorded a foreign currency impact of $49 million on Operating Profit in 2023, compared to$ 118 million in 2021[190]. - Franchise and property revenues for 2023 were $3,247 million, an increase of 5% from$ 3,096 million in 2022[197]. Growth Strategy - The company focuses on four key growth drivers: culture and talent, operating capability, brand relevance, and restaurant development[24]. - The company aims to enhance customer experiences and operational efficiency through digital and technology initiatives[22]. - The company aims to drive long-term growth through consistent same-store sales growth and new unit development across all concepts[173]. - The company intends to maximize shareholder return through a combination of paying competitive dividends and returning excess free cash flow through debt paydowns and share repurchases[174]. - The company plans to continue refranchising activities, with net refranchising gains of $34 million recorded in 2023[192]. Digital and Technology - Digital sales reached$ 29 billion in 2023, accounting for over 45% of overall system sales[31]. - The company is increasingly dependent on digital commerce platforms, and any disruptions in these services could adversely impact sales and customer satisfaction[91]. - The company’s growth strategy includes leveraging digital technology and systemwide scale to improve customer experiences and operational efficiency[171]. Risks and Challenges - YUM faces intense competition in the retail food industry, influenced by consumer preferences and economic conditions[39]. - The company faces risks related to food safety and public health conditions, which could disrupt operations and affect growth prospects[52][54]. - Expansion efforts may be hindered by economic conditions, financing challenges, and supply chain issues affecting franchisees[63][65]. - The company faces significant costs and operational changes due to evolving international and federal data privacy regulations, which could affect personalized customer experiences[85]. - Labor shortages and increased labor costs are challenges that could adversely affect the company's operations and growth potential[103]. - The company faces risks related to consumer discretionary spending, which may be adversely impacted by inflationary pressures and elevated interest rates[127]. - Climate change poses risks to the company's operations, potentially leading to increased costs and disruptions due to severe weather events[114]. Corporate Governance and Compliance - The company aims for gender parity in senior leadership roles by 2030, with 43% of global corporate leadership roles held by women as of 2022[50]. - The company has established minimum information security standards for its franchisees, who operate over 98% of its restaurants[135]. - Compliance with evolving data privacy laws, such as the EU's GDPR and California's privacy laws, is critical, with potential penalties for noncompliance[83]. - The Federal Trade Commission (FTC) is actively enforcing privacy laws, which may lead to increased compliance costs and impact data transfer processes[84]. Shareholder Returns - The company declared and paid four cash dividends of $0.605 per share in 2023, with a new dividend of$ 0.67 per share declared for distribution on March 8, 2024[163]. - The company has remaining capacity to repurchase up to $1.7 billion of common stock under the share repurchase authorization of up to$ 2.0 billion[164].