What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-06 compared with 2025-11-07 · 148 added, 260 removed, 307 unchanged (57% of the section changed)

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dollars except per share and unit count amounts, or as otherwise specifically identified.

In the first quarter of 2025, the Company prospectively changed its basis of presentation to round financial figures in the Financial Statements and as presented in the tabular presentations in this MD&A to the nearest whole number in millions in all instances.

As a result, some totals and percentages may not recompute based on rounded figures as presented within this MD&A.

Previously, amounts were presented to ensure that all numbers herein recomputed, resulting in the presentation of certain figures inconsistent with their underlying rounding.

and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 62,000 restaurants in more than 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger & Grill (collectively, the “Concepts”).

and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 63,000 restaurants in 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger & Grill (collectively, the “Concepts”).

The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-inspired and pizza categories, respectively.

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• The Habit Burger & Grill Division which includes our worldwide operations of the Habit Burger & Grill concept

Through our Recipe for Good Growth we intend to deliver iconic restaurant brands and consistently drive better customer experiences, improved unit economics and higher rates of growth.

Key enablers include accelerated use of digital and technology, increased collaboration and better leverage of our systemwide scale.

This is done through a framework of three pillars:

being Loved, Trusted and Connected.

Through our Recipe for Good Growth, our mission is to grow iconic restaurant brands globally that are loved, trusted and connected:

We grow by delighting customers with craveable food and a distinctive experience.

We innovate and elevate our iconic restaurant brands that people trust and champion, resulting in relevant, easy and distinctive brands.

We operate responsibly with consistency and efficiency in our restaurants, across our system and in our communities.

This includes a commitment to our priorities for social responsibility, risk management and sustainable stewardship of our people, food and planet.

This includes a commitment to our priorities for social responsibility, risk management and sustainable stewardship of resources.

We use our teamwork, technology and global scale to serve every customer, everywhere, anytime.

Our unmatched operating capability allows us to recruit and equip the best restaurant operators in the world to deliver great customer experiences.

And our commitment to bold restaurant development drives market and franchise unit expansion with strong economics.

Our unrivaled culture and talent and leading with smart, heart and courage are key to our success, fueling brand performance and franchise success.

In 2026 and beyond, we intend to drive the next chapter of growth for YUM by Raising the B.A.R.

through three clear priorities that reflect bold aspirations and a commitment to industry-leading performance:

• B attle for the future consumer by staying relentlessly focused on their needs and wants.

• A ccelerate restaurant unit economics for our franchisees and maximize performance of every restaurant, serving as a catalyst for new unit development and keeping our franchise system healthy.

• R each the full potential of Byte by Yum!

by effectively operating, innovating and expanding our connected platform built by restaurant operators for restaurant operators to unlock its full potential for our franchise partners and our business.

Key to our success fueling brand performance and franchise success is our unrivaled culture and talent and leading with smart, heart and courage.

We intend to drive long-term growth and shareholder returns primarily through consistent same-store sales growth and new unit development across all of our Concepts.

We intend to support this growth and development through a capital and operating structure that:

• Invests capital in a manner consistent with an asset light, franchisor model;

• Allocates G&A in an efficient manner that provides leverage to operating profit growth while at the same time opportunistically investing in strategic growth initiatives;

• Targets a consolidated net leverage ratio that balances shareholder returns, cost of capital and flexibility against various risk factors;

• Maximizes shareholder return through a combination of paying a competitive dividend and returning excess cash flow through share repurchases.

We intend for this MD&A to provide the reader with information that will assist in understanding our results of operations, including performance metrics that management uses to assess the Company's performance.

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The system sales of restaurants we deem temporarily closed remain in our base for purposes of determining same-store sales growth and the restaurants remain in our unit count (see below).

Same-store sales growth excludes, for subsidiaries operating on a monthly calendar, the extra day resulting from a leap year and excludes, for subsidiaries operating on a weekly periodic calendar, the last week of the year in fiscal years with 53rd weeks.

We believe same-store sales growth is useful to investors because our results are heavily dependent on the results of our Concepts' existing store base.

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In calculating Company restaurant profit, the Company excludes revenues and expenses directly associated with our franchise operations as well as non-restaurant-level costs included in General and administrative expenses, some of which may support Company-owned restaurant operations.

Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations.

Further, while we generally include depreciation and amortization of restaurant-level assets within Divisional Company restaurant expenses used to derive Divisional Company restaurant profit, we record amortization of reacquired franchise rights arising from acquisition accounting within Corporate and unallocated Company restaurant expenses as such amortization is not believed to be indicative of ongoing Divisional results as well as to enhance comparability of acquired stores' margins with those of existing restaurants for which reacquired franchise rights are not applicable.

The Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations.

Company restaurant profit and Company restaurant margin % as presented may not be comparable to other similarly titled measures of other companies in the industry.

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Taco Bell Division +10 +8 +3 +16 +16

Pizza Hut Division (1) (1) Even (8) (8)

YUM +5 +3 +3 +8 +7

Year to date Financial Highlights:

System Sales, ex FX Same-Store Sales Units GAAP Operating Profit Core Operating Profit

KFC Division +5 +2 +6 +10 +10

Taco Bell Division +9 +7 +3 +9 +9

Pizza Hut Division (2) (1) Even (14) (14)

YUM +5 +3 +3 +5 +6

Pizza Hut Division Even Even +1 (14) (16)

+6 +3 +5 +17 +6

Additionally:

• Foreign currency translation favorably impacted Divisional Operating Profit by $7 million and $1 million for the quarter and year to date ended September 30, 2025, respectively.

Third Quarter

2025 2024 % Change 2025 2024 % Change

• Foreign currency translation positively impacted Divisional Operating Profit by $25 million for the quarter ended March 31, 2026.

• Gross unit openings for the quarter were 1,030 units resulting in 400 net new units.

First Quarter

2026 2025 % Change

GAAP EPS $1.55 $0.90 +72

Less Special Items EPS

$(0.16) $(0.02) NM $(0.67) $(0.14) NM

$0.05 $(0.40) NM

EPS Excluding Special Items $1.50 $1.30 +15

• Our diluted EPS, excluding Special Items, for the year to date ended September 30, 2024, was unfavorably impacted by $0.08 from after-tax investment losses.

• Gross unit openings for the quarter were 1,131 units resulting in 744 net new units.

Gross unit openings for the year to date were 2,753 units resulting in 670 net new units.

◦ Net new unit growth for the year to date was impacted by unit closures in Turkey.

On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S.

(IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S., after failure by IS Gida to meet our standards.

As a result, 283 KFC and 254 Pizza Hut restaurants in Turkey were closed in January.

Quarter ended Year to date

2025 2024 % B/(W) 2025 2024 % B/(W)

Quarter ended

2026 2025 % B/(W)

Company sales $ 785 $ 607 29

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Refranchising (gain) loss (1) (5) (79)

Other (income) expense (1) (4) NM (15) (10) NM

Other (income) expense (45) (8) NM

Total costs and expenses, net 1,415 1,239 (14)

Operating Profit 644 548 17

Investment (income) expense, net — (1) NM (1) 21 NM

Investment (income) expense, net — (1) (94)

Other pension (income) expense — — (7)

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Income before income taxes 516 429 20

Income tax provision (benefit) 144 120 (21) 446 309 (44)

Income tax provision

Net Income $ 432 $ 253 71

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Effective tax rate 16.2 % 41.0 % 24.8 ppts.

30.3 % 22.5 % (7.8) ppts.

(a) See Note 3 for the number of shares used in this calculation.

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Total 63,685 60,886 5

Quarter ended Year to date

2025 2024 2025 2024

Quarter ended

Same-store Sales Growth (Decline) % 3 3

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Our system sales breakdown by Company and franchise sales was as follows:

Quarter ended Year to date

2025 2024 2025 2024

Quarter ended

Company sales (a)

$ 697 $ 621 $ 1,974 $ 1,667

Franchise sales 16,218 14,896

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Negative (Positive) Foreign Currency Impact (b)

(167) N/A (26) N/A

System sales, excluding FX $ 16,417 $ 15,503

Company sales (a)

$ 259 $ 220 $ 721 $ 488

Franchise sales 9,073 8,124

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Negative (Positive) Foreign Currency Impact (b)

(134) N/A (31) N/A

System sales, excluding FX $ 8,852 $ 8,340

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Company sales (a)

$ 298 $ 267 $ 848 $ 775

Franchise sales 4,022 3,717

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Negative (Positive) Foreign Currency Impact (b)

(7) N/A (5) N/A

System sales, excluding FX $ 4,378 $ 3,980

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Company sales (a)

$ 9 $ 1 $ 20 $ 5

Franchise sales 3,083 3,025

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Negative (Positive) Foreign Currency Impact (b)

(26) N/A 10 N/A

System sales, excluding FX $ 3,020 $ 3,028

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Company sales (a)

$ 130 $ 133 $ 385 $ 399

Franchise sales 40 30

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Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, as presented below.

Quarter ended Year to date

2025 2024 2025 2024

Quarter ended

Core Operating Profit Growth %

Diluted EPS Growth %, excluding Special Items

15 (5) 11 (1)

Effective Tax Rate excluding Special Items 18.0 % 19.8 %

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Company restaurant margin % 13.7 % 14.3 %

Reconciliation of GAAP Operating Profit to Core Operating Profit Quarter ended Year to date

2025 2024 2025 2024

Reconciliation of GAAP Operating Profit to Core Operating Profit Quarter ended

GAAP Operating Profit $ 644 $ 548

Detail of Special Items:

(Gain) Loss associated with market-wide refranchisings (a)

Charges associated with Resource Optimization (b)

Charges associated with Brand HQ Consolidation (c)

German acquisition and Turkey termination-related costs (d)

Pizza Hut Strategic Options Review (e)

Special Items Expense - Operating Profit

Charges associated with Pizza Hut Strategic Options Review (a)

Charges associated with Brand HQ Consolidation (b)

Charges associated with Resource Optimization

Income from Litigation Settlement (c)

Other Special Items (Income) Expense

Special Items (Benefit) Expense - Operating Profit

Positive Foreign Currency Impact on Division Operating Profit

(7) N/A (1) N/A

Core Operating Profit $ 612 $ 575

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Decrease in Franchise and property revenues

$ 4 $ — $ 5 $ —

Increase in General and administrative expenses

Increase in Refranchising (gain) loss

Increase in Other (income) expense

Special Items Expense - Operating Profit

$ 18 $ 11 $ 73 $ 61

Special Items (Benefit) Expense - Operating Profit

GAAP Operating Profit $ 383 $ 331

Negative (Positive) Foreign Currency Impact

(7) N/A (2) N/A

Core Operating Profit $ 361 $ 331

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GAAP Operating Profit (Loss)

$ (2) $ 1 $ — $ (2)

Negative (Positive) Foreign Currency Impact

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GAAP Net Income $ 432 $ 253

Special Items Expense - Operating Profit

Special Items Tax Expense (Benefit) (f)

28 (2) 116 (19)

Special Items (Benefit) Expense - Operating Profit

Special Items Tax (Benefit) Expense (d)

Net Income excluding Special Items $ 418 $ 366

Quarter ended Year to date

2025 2024 2025 2024

Quarter ended

Reconciliation of Diluted EPS to Diluted EPS excluding Special Items

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Effective Tax Rate excluding Special Items 18.0 % 19.8 %

(a) Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with market-wide refranchisings.

During the quarter and year to date ended September 30, 2024, we recorded net refranchising gains of $1 million and net refranchising losses of $3 million, respectively, that have been reflected as Special Items.

Additionally, we recorded net refranchising gains of $17 million and $11 million during the quarters ended September 30, 2025 and 2024, respectively, that have not been reflected as Special Items.

During the years to date ended September 30, 2025 and 2024, we recorded net refranchising gains of $33 million and $34 million, respectively, that have not been reflected as Special Items.

These net refranchising gains relate to refranchising of restaurants unrelated to market-wide refranchisings that we believe are indicative of our expected ongoing refranchising activity.

(b) We recorded charges of $5 million and $37 million during the quarter and year to date ended September 30, 2025, respectively, and $12 million and $58 million during the quarter and year to date ended September 30, 2024, respectively, primarily to Corporate and unallocated General and administrative expenses related to a resource optimization program.

Over the past several years, this program has allowed us to reallocate significant resources to accelerate our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics.

We expanded the program in 2024 to identify further opportunities to optimize the Company’s spending and identify additional, critical areas in which to potentially reallocate resources, both with a goal to enable the acceleration of the Company’s growth rate.

Costs incurred to date related to the program primarily include severance associated with positions that have been eliminated or relocated and consultant fees.

Due to their scope and size, these charges have been reflected as Special Items.

(c) During the quarter and year to date ended September 30, 2025, we recorded charges of approximately $3 million and $20 million, respectively, to Corporate and unallocated General and administrative expenses associated with our decision to designate two brand headquarters in the U.S., located in Plano, Texas and Irvine, California, to foster greater collaboration among brands and employees.

(a) In 2025, we began a review of strategic options for the Pizza Hut brand.

During the quarter ended March 31, 2026, we incurred charges of $37 million to Corporate and unallocated General and administrative expenses, which primarily included third-party advising costs associated with this strategic options review.

Given the significance of the costs expected to be incurred through the course of this strategic options review, we have reflected such amounts as Special Items.

(b) In 2025, we decided to designate two brand headquarters in the U.S., located in Plano, Texas and Irvine, California, to foster greater collaboration among brands and employees.

This involved relocating the KFC U.S.

corporate office to a KFC Global headquarters and requiring the majority of our U.S.-based remote employees to relocate to an appropriate headquarter office.

Costs incurred to date primarily include severance for the employees who have chosen not to relocate and consultant fees.

corporate office to the KFC Global headquarters and requiring the majority of our U.S.-based remote employees to relocate to an appropriate headquarter office.

We also decided to relocate our YUM Corporate headquarters to a new space in Louisville, Kentucky and accordingly, donated our existing space.

Costs incurred to date primarily include severance for the employees who chose not to relocate and consultant fees.

As a result of these decisions, we recorded charges of approximately $1 million and $7 million during the quarters ended March 31, 2026 and 2025, respectively, to Corporate and unallocated General and administrative expenses.

Due to their scope and size, these charges have been reflected as Special Items.

(d) On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S.

(IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S.

(IS Holding), after failure by IS Gida to meet our standards.

As a result, 283 KFC restaurants and 254 Pizza Hut restaurants in Turkey were closed during the first quarter of 2025.

We also re-acquired the master franchise rights in Germany for KFC and Pizza Hut from the owner of IS Holding in December 2024.

We recorded charges of $1 million and $8 million during the quarter and year to date ended September 30, 2025, respectively, to Corporate and unallocated General and administrative expenses consisting primarily of severance costs associated with re-acquiring the master franchise rights in Germany.

Consistent with prior charges related to the matter, these charges have been reflected as Special Items.

(e) We have begun a review of strategic options for the Pizza Hut brand.

During the quarter ended September 30, 2025, we incurred approximately $4 million in third-party advising costs associated with this strategic options review and wrote-off approximately $4 million of franchise incentive assets associated with rationalizing the Pizza Hut estate in preparation for a potential transaction.

These charges were recorded to Corporate and unallocated General and administrative expenses and Corporate and unallocated franchise and property revenues, respectively.

significance of the costs expected to be incurred through the course of this strategic options review, we have reflected such amounts as Special Items.

(f) The below table includes the detail of Special Items Tax Expense (Benefit):

Quarter ended Year to date

9/30/2025 9/30/2024 9/30/2025 9/30/2024

Tax (Benefit) on Special Items Expense

(c) During the quarter ended March 31, 2026, we received approximately $44 million, net of legal expenses, related to a credit card interchange fee litigation settlement in which we were a plaintiff.

This settlement was recorded to Unallocated Other (income) expense.

Due to the nature and size of the settlement, including the years to which the litigation related, it has been reflected as a Special Item within Other income.

(d) The below table includes the detail of Special Items Tax (Benefit) Expense:

Quarter ended

3/31/2026 3/31/2025

Tax Expense (Benefit) on Special Items (Benefit) Expense - Operating Profit

Tax Expense - Foreign tax reserve

Tax Expense - U.S.

OBBBA 76 — 76 —

Tax (Benefit) - Tax audit

(47) — (47) —

Tax (Benefit) - Other Income tax impacts recorded as Special

Special Items Tax Expense (Benefit)

$ 28 $ (2) $ 116 $ (19)

Tax Benefit on Special Items Expense was determined by assessing the tax impact of each individual component within Special Items based upon the nature of the item and jurisdictional tax law.

Tax Expense - Foreign tax reserve in the year to date ended September 30, 2025, is associated with a reserve, and the ongoing foreign exchange and inflationary adjustments, associated with a change in management's judgment around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico (see Note 7).

This tax expense was reflected as a Special Item due to its size and the time elapsed since the years to which the reserve relates.

Tax Expense - U.S.

OBBBA in the quarter and year to date ended September 30, 2025, reflects the tax expense recorded upon the July 4, 2025, enactment of H.R.1, commonly known as the One Big Beautiful Bill Act (“OBBBA”) in the United States.

The tax expense was primarily associated with a change in management's judgment regarding our ability to utilize U.S.

foreign tax credit related deferred tax assets that existed at the date of enactment and has been reflected as a Special Item due to the size of the non-recurring adjustment necessary upon enactment of the legislation.

Tax (Benefit) - Tax audit in the quarter and year to date ended September 30, 2025, reflects the benefit associated with the reversal of a reserve due to a favorable audit resolution.

Such reserve was established in prior years and was originally recorded as a Special Item.

Other Income tax impacts recorded as Special in the year to date ended September 30, 2024, include benefits related to the reversal of a reserve due to the favorable resolution of a tax audit in a foreign jurisdiction.

Such reserve was established in prior years related to income tax liabilities originally recorded as a Special Item as part of an intercompany restructuring of intellectual property.

Tax (Benefit) - Intra-entity transfers and valuations of intellectual property

Tax Expense - Other Income tax impacts recorded as Special

Special Items Tax (Benefit) Expense

Tax Expense (Benefit) on Special Items (Benefit) Expense - Operating Profit was determined by assessing the tax impact of each individual component within Special Items based upon the nature of the item and jurisdictional tax law.

Tax (Benefit) - Intra-entity transfers and valuations of intellectual property in the quarter ended March 31, 2026, reflects the tax benefit resulting from an internal reorganization to consolidate our Pizza Hut legal entities and assets into two isolated ownership structures by aligning the legal ownership, simplifying the organizational footprint and consolidating the Pizza Hut domestic and international business.

As part of this reorganization, certain Pizza Hut intellectual property ("IP") rights from subsidiaries in the U.S.

were transferred to international subsidiaries resulting in a step-up in amortizable tax basis of those IP rights.

This reorganization began in the fourth quarter of 2025 in connection with our Pizza Hut strategic options review.

Tax Expense - Other Income tax impacts recorded as Special in the quarter ended March 31, 2026, includes a $13 million adjustment to tax expense associated with our decision to exit Russia.

Consistent with previously recorded impacts associated with our decision to exit Russia, this adjustment was recorded as a Special Item.

Tax Expense - Foreign tax reserve in the quarter ended March 31, 2025, is associated with a reserve, and the related ongoing foreign exchange and inflationary adjustments, associated with a change in management's judgment around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico.

This expense was reflected as a Special Item due to its size and the time elapsed since the years to which the reserve relates.

Reconciliation of GAAP Operating Profit to Company Restaurant Profit

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Company restaurant margin % 9.3 % 22.4 % (6.1) % 8.6 % N/A 14.3 %

Year to date 9/30/2025

KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division

Corporate and Unallocated Consolidated

GAAP Operating Profit (Loss) $ 1,088 $ 770 $ 239 $ — $ (260) $ 1,836

Franchise and property revenues 1,303 735 436 8 (5) 2,476

Franchise contributions for advertising and other services 478 514 255 2 — 1,249

General and administrative expenses 255 148 159 39 285 885

Franchise and property expenses 51 22 32 3 — 107

Franchise advertising and other services expense 472 510 268 2 — 1,251

Refranchising (gain) loss — — — — (33) (33)

Other (income) expense 1 — (9) 1 (8) (15)

Company restaurant profit (loss)

$ 85 $ 199 $ (2) $ 34 $ (11) $ 306

Company sales $ 721 $ 848 $ 20 $ 385 $ — $ 1,974

Company restaurant margin % 11.9 % 23.5 % (9.2) % 8.7 % N/A 15.5 %

Year to date 9/30/2024

KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division

Corporate and Unallocated Consolidated

GAAP Operating Profit (Loss) $ 986 $ 709 $ 278 $ (2) $ (225) $ 1,746

Franchise and property revenues 1,219 678 446 7 — 2,350

Franchise contributions for advertising and other services 427 477 264 2 — 1,170

General and administrative expenses 253 137 153 38 249 830

Franchise and property expenses 46 22 19 3 — 90

Franchise advertising and other services expense 424 473 270 2 — 1,169

Refranchising (gain) loss — — — — (31) (31)

Other (income) expense (3) (1) (10) 1 3 (10)

Company restaurant profit (loss)

$ 60 $ 185 $ — $ 33 $ (4) $ 274

Company sales $ 488 $ 775 $ 5 $ 399 $ — $ 1,667

Company restaurant margin % 12.2 % 23.9 % (1.9) % 8.2 % N/A 16.4 %

Items Impacting Reported Results and Reasonably Likely to Impact Future Results

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See also the Detail of Special Items in this MD&A for other items impacting results in 2026 or 2025.

Investment in Devyani

During the quarter ended March 31, 2024, we sold our approximate 5% minority investment in Devyani International Limited ("Devyani"), a franchise entity that operates KFC and Pizza Hut restaurants in India, for pre-tax proceeds of $104 million.

Changes in the fair value of our ownership interest in Devyani prior to the date of sale resulted in pre-tax investment losses of $20 million in the year to date ended September 30, 2024.

Impact of Tax Law Changes

On July 4, 2025, H.R.1, commonly known as the One Big Beautiful Bill Act ("OBBBA") was enacted into law in the U.S.

The OBBBA includes a broad range of domestic and international tax reform provisions, including extending and modifying certain key provisions from the Tax Cuts and Jobs Act, as well as provisions allowing accelerated tax deductions for qualified depreciable property and research expenditures.

The OBBBA has multiple effective dates, with certain provisions becoming effective in 2025 and others effective through 2027.

We currently anticipate the OBBBA will have a favorable impact on our ongoing effective tax rate beginning in 2026.

Pizza Hut Strategic Options Review

We have begun a review of strategic options for the Pizza Hut brand.

We have not set a deadline or definitive timetable for the completion of the strategic options review, and there can be no assurance this review will result in any specific outcome or transaction.

We incurred certain costs during the quarter ended September 30, 2025 associated with this strategic options review (see Detail of Special Items section of this MD&A) and expect to incur further costs of a currently indeterminate amount as this strategic options review progresses.

In 2025, we began a review of strategic options for the Pizza Hut brand.

The objective of the review is to create value for YUM, Pizza Hut and its franchise partners by determining the optimal approach to best capitalize on Pizza Hut's structural advantages — strong brand equity, experienced franchise partners and meaningful scale — in the highly fragmented pizza market.

We currently intend to complete this strategic options review in 2026, and there can be no assurance this review will result in any specific outcome or transaction.

In January 2026, we launched the Hut Forward program that represents a bridge to a longer-term acceleration of the Pizza Hut brand.

This program includes alignment on a vibrant marketing plan, modernization of certain technology and franchise agreements and a YUM contribution to marketing support, along with the approval of some targeted closures of underperforming units.

The YUM contribution for incremental marketing in the quarter ended March 31, 2026, is being recognized as advertising expense throughout 2026.

Additionally, we incurred certain other costs during the quarter ended March 31, 2026 associated with this strategic review (see Detail of Special Items section of this MD&A) and expect to incur further costs of a currently indeterminate amount as this strategic options review progresses.

The KFC Division has 34,332 units, 90% of which are located outside the U.S.

Additionally, 99% of the KFC Division units were operated by franchisees as of September 30, 2025.

Quarter ended Year to date

% B/(W) % B/(W)

2025 2024 Reported Ex FX 2025 2024 Reported Ex FX

Additionally, 98% of the KFC Division units were operated by franchisees as of March 31, 2026.

Quarter ended

2026 2025 Reported Ex FX

System Sales $ 9,328 $ 8,340 12 6

Same-Store Sales Growth (Decline) % 3 (4) N/A N/A 2 (3) N/A N/A

Same-Store Sales Growth (Decline) % 2 2 N/A N/A

Company sales $ 255 $ 216 18 10

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Company restaurant margin % 10.3 % 9.3 % 1.0 ppts.

11.9 % 12.2 % (0.3) ppts.

G&A expenses $ 88 $ 86 (2) Even $ 255 $ 253 (1) Even

G&A expenses $ 87 $ 80 (8) (4)

Franchise and property expenses 19 16 (19) (12)

7 unchanged sentences

Company sales and Company restaurant margin %

The quarterly increase in Company sales, excluding the impacts of foreign currency translation, was driven by restaurant acquisitions and Company same-store sales growth of 6%.

The year to date increase in Company sales, excluding the impacts of foreign currency translation, was driven by the KFC U.K.

and Ireland restaurant acquisition (see Note 2) in the second quarter of 2024 and Company same-store sales growth of 4%.

The quarterly increase in Company restaurant margin percentage was driven by Company same-store sales growth.

The year to date decrease in Company restaurant margin percentage was driven by the margin percentages of the units included in the KFC U.K.

and Ireland restaurant acquisition, partially offset by Company same-store sales growth.

The quarterly increase in Company sales, excluding the impacts of foreign currency translation, was driven by Company same-store sales growth of 5%, acquisitions of restaurants from franchisees and unit growth.

The quarterly increase in Company restaurant margin percentage was driven by Company same-store sales growth, partially offset by higher labor and other restaurant operating costs.

Franchise and property revenues

The quarterly increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by franchise same-store sales growth of 3% and unit growth.

The year to date increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by franchise same-store sales growth of 2% and unit growth, partially offset by a 1% negative impact from the KFC U.K.

and Ireland restaurant acquisition.

G&A, excluding the impacts of foreign currency translation, was flat during the quarter as higher expenses related to our annual incentive compensation programs were offset by lower headcount and salaries.

G&A, excluding the impacts of foreign currency translation, was flat year to date as higher expenses related to our annual incentive compensation programs and the operation of acquired KFC U.K.

and Ireland restaurants were offset by lower headcount and salaries.

The quarterly increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by unit growth and franchise same-store sales growth of 2%.

The quarterly increase in G&A, excluding the impacts of foreign currency translation, was driven by higher headcount.

Operating Profit

The quarterly and year to date increases in Operating Profit, excluding the impacts of foreign currency translation, were driven by same-store sales growth and unit growth.

The quarterly increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by same-store sales growth and unit growth.

Taco Bell Division

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The Company owned 9% of the Taco Bell Division units in the U.S.

as of September 30, 2025.

Quarter ended Year to date

% B/(W) % B/(W)

2025 2024 Reported Ex FX 2025 2024 Reported Ex FX

as of March 31, 2026.

Quarter ended

2026 2025 Reported Ex FX

System Sales $ 4,394 $ 3,980 10 10

Same-Store Sales Growth % 7 4 N/A N/A 7 3 N/A N/A

Same-Store Sales Growth % 8 9 N/A N/A

Company sales $ 372 $ 263 41 41

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Company restaurant margin % 23.6 % 22.4 % 1.2 ppts.

23.5 % 23.9 % (0.4) ppts.

G&A expenses $ 53 $ 49 (8) (8)

Franchise and property expenses 8 6 (33) (33) 22 22 3 3

Franchise and property expenses 6 6 Even 1

Franchise advertising and other services expense 173 157 (10) (10)

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Company sales and Company restaurant margin %

The quarterly and year to date increases in Company sales were driven by company same-store sales growth of 6% and 5% for the quarter and year to date, respectively, and unit growth.

The quarterly restaurant margin percentage increase was driven by same store sales growth partially offset by commodity inflation (primarily beef), higher labor and other restaurant operating costs.

The year-to-date restaurant margin percentage decrease was driven by commodity inflation (primarily beef), higher labor and other restaurant operating costs partially offset by same store sales growth.

The quarterly increase in Company sales was driven by acquisitions of restaurants from franchisees, company same-store sales growth of 6%, and unit growth.

The quarterly increase in Company restaurant margin percentage was driven by same store sales growth and the margin percentages of restaurants acquired from franchisees, partially offset by higher labor and other restaurant operating costs and commodity inflation (primarily beef).

Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues were driven by franchise same-store sales growth of 7% for both the quarter and year to date and unit growth.

The quarterly increase in G&A was driven by higher expenses related to our annual incentive compensation programs, higher digital and technology expenses and increased professional and legal fees.

The year-to-date increase in G&A was driven by higher digital and technology expenses, higher expenses related to our annual incentive compensation programs and increased share-based compensation partially offset by lower professional and legal fees.

The quarterly increase in Franchise and property revenues was driven by franchise same-store sales growth of 8% and unit growth partially offset by acquisitions.

The quarterly increase in G&A was driven by higher professional and legal fees and higher headcount.

Operating Profit

The quarterly increase in Operating Profit was driven by same-store sales growth and unit growth partially offset by higher G&A and higher restaurant operating costs.

The year to date increase in Operating Profit was driven by same-store sales growth and unit growth partially offset by higher restaurant operating costs.

The quarterly increase in Operating Profit was driven by same-store sales growth, the impact of restaurants acquired from franchisees and unit growth, partially offset by higher restaurant operating costs and higher G&A.

Pizza Hut Division

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airports) and includes units operating under both the Pizza Hut and Telepizza brands.

Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of September 30, 2025.

Quarter ended Year to date

% B/(W) % B/(W)

2025 2024 Reported Ex FX 2025 2024 Reported Ex FX

Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of March 31, 2026.

Quarter ended

2026 2025 Reported Ex FX

System Sales $ 3,114 $ 3,028 3 Even

Same-Store Sales Growth (Decline) % (1) (4) N/A N/A (1) (5) N/A N/A

Same-Store Sales Growth (Decline) % Even (2) N/A N/A

Company sales $ 32 $ 3 825 789

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Franchise contributions for advertising and other services 80 85 (6) (6)

Total revenues $ 240 $ 238 1 Even $ 710 $ 715 (1) (1)

Total revenues $ 253 $ 231 10 7

Company restaurant profit (loss)

$ (1) $ — NM NM $ (2) $ — NM NM

$ 1 $ — 370 350

Company restaurant margin % 1.8 % (6.1) % 7.9 ppts.

(9.2) % (1.9) % (7.3) ppts.

G&A expenses $ 50 $ 51 Even Even $ 159 $ 153 (4) (4)

G&A expenses $ 59 $ 55 (8) (6)

Franchise and property expenses 17 11 (59) (56)

Franchise advertising and other services expense 89 89 Even Even 268 270 1 1

Franchise advertising and other services expense 84 89 6 6

Operating Profit $ 64 $ 74 (14) (16)

3 unchanged sentences

Company-owned 135 23 487

Total 19,872 19,927 Even

Total 19,944 19,786 1

Franchise and property revenues

The quarterly and year to date decreases in Franchise and property revenues, excluding the impact of foreign currency translation, were driven by franchise same-store sales declines of (1%).

G&A, excluding the impact of foreign currency translation, was flat during the quarter.

The year to date increase in G&A, excluding the impact of foreign currency translation, was driven by higher professional and legal fees, including expenses associated with franchise entities that have or are transitioning to new ownership.

The quarterly decrease in Franchise and property revenues, excluding the impact of foreign currency translation, was primarily driven by the impact of our acquisitions of restaurants from franchisees.

Franchise same-store sales were flat in the quarter.

The quarterly increase in G&A, excluding the impact of foreign currency translation, was driven by the impact of G&A associated with operating restaurants acquired from franchisees.

Operating Profit

The quarterly decrease in Operating Profit, excluding the impact of foreign currency translation, was driven by a same store sales decline and higher current year bad debt expense (including bad debt expense associated with franchise entities that have or are transitioning to new ownership).

The year to date decrease in Operating Profit, excluding the impacts of foreign currency translation, was driven by higher current year bad debt expense (including bad debt expense associated with franchise entities that have or are transitioning to new ownership), higher G&A, a same store sales decline and timing of digital and technology related spending within Franchise advertising and other services expense.

The quarterly decrease in Operating Profit, excluding the impact of foreign currency translation, was driven by higher advertising costs associated with the Pizza Hut U.S.

Hut Forward program and the impact of operating restaurants acquired from franchisees.

Habit Burger & Grill Division

The Habit Burger & Grill Division has 377 units, the vast majority of which are in the U.S.

The Company owned 80% of the Habit Burger & Grill Division units in the U.S.

as of September 30, 2025.

Quarter ended Year to date

% B/(W) % B/(W)

2025 2024 Reported Ex FX 2025 2024 Reported Ex FX

The Habit Burger & Grill Division has 388 units, all of which are in the U.S.

The Company owned 79% of the Habit Burger & Grill Division units as of March 31, 2026.

Quarter ended

2026 2025 Reported

System Sales $ 166 $ 155 7

Same-Store Sales Growth (Decline) %

1 (5) N/A N/A (2) (6) N/A N/A

Total revenues $ 130 $ 128 1

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Corporate & Unallocated

Quarter ended Year to date

(Expense) / Income 2025 2024 % B/(W) 2025 2024 % B/(W)

Quarter ended

(Expense) / Income 2026 2025 % B/(W)

Corporate and unallocated G&A $ ( 111 ) $ ( 105 ) (5)

Unallocated Company restaurant expenses (See Note 9)

Unallocated Company restaurant expenses

( 12 ) ( 3 ) (330)

Unallocated Franchise and property revenues

( 4 ) — NM ( 5 ) — NM

Unallocated Refranchising gain (loss) 1 5 (79)

Unallocated Other income (expense) ( 3 ) 2 NM 8 ( 3 ) NM

Investment income (expense), net (see Note 9)

— 1 NM 1 ( 21 ) NM

Other pension income (expense) (see Note 10)

( 1 ) 2 (154) — 5 (93)

Unallocated Other income (expense) (See Note 5)

Investment income (expense), net

Other pension income (expense)

Interest expense, net ( 128 ) ( 120 ) (7)

1 unchanged sentence

Effective tax rate (See Note 7) 16.2 % 41.0 % 24.8 ppts.

30.3 % 22.5 % (7.8) ppts.

Corporate and unallocated G&A

The quarterly increase in Corporate and Unallocated G&A expense was driven by higher professional and legal fees and higher current year expenses related to our annual incentive compensation programs, partially offset by lower costs associated with our resource optimization program.

The year to date increase in Corporate and Unallocated G&A expense was driven by higher professional and legal fees, costs associated with our current year brand headquarters consolidation and higher current year expenses related to our annual incentive compensation programs, partially offset by lower costs associated with our resource optimization program.

The quarterly increase in Corporate and Unallocated G&A expense was driven by costs associated with the Pizza Hut Strategic Options Review, partially offset by lapping costs associated with our Resource Optimization Program and Brand Headquarters Consolidation.

Unallocated Company restaurant expenses

Unallocated Company restaurant expenses include amortization of reacquired franchise rights.

The quarterly increase was driven by the acquisitions of restaurants from franchisees in 2025.

Interest expense, net

The quarterly increase in Interest expense, net was driven by higher outstanding borrowings.

Consolidated Cash Flows

Net cash provided by operating activities was $416 million in 2026 versus $404 million in 2025.

The increase was primarily driven by lower income tax payments in the current year, an increase in Operating Profit before Special Items and lower incentive compensation payments.

Net cash used in investing activities was $208 million in 2025 versus $292 million in 2024.

The change was primarily driven by maturities of short-term investments in the current year compared to net purchases of short-term investments in the prior year and lower current year spending on restaurant acquisitions, partially offset by lapping prior year proceeds arising from the sale of our approximate 5% minority investment in Devyani and higher current year capital spending.

The increase was primarily driven by an increase in Operating Profit, partially offset by higher incentive compensation payments, the timing of spending on advertising and higher income tax payments.

Net cash used in investing activities was $80 million in 2026 versus net cash provided by investing activities of $2 million in 2025.

The change was primarily driven by lapping maturities of short-term investments in the prior year.

Net cash used in financing activities was $375 million in 2026 versus $443 million in 2025.

The change was primarily driven by net borrowings in the current year compared to net repayments in the prior year.

The change was primarily driven by lower current year share repurchases and higher current year net borrowings.

Liquidity and Capital Resources

We have historically generated substantial cash flows from our extensive franchise operations, which require a limited YUM investment, and from the operations of our Company-owned stores.

Our annual operating cash flows have been in excess of $1.4 billion in each of the past four years and we expect that to continue to be the case in 2025.

Our annual operating cash flows were in excess of $2.0 billion in 2025 and we expect continued strong operating cash flows in 2026.

It is our intent to use these operating cash flows to continue to invest in growing our business and pay a competitive dividend, with any remaining excess then returned to shareholders through share repurchases.

Subject to market conditions, we expect to maintain our consolidated net leverage ratio at approximately 4.0x Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") over the medium term by issuing incremental debt as our business grows.

To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.5 billion Revolving Facility under our Credit Agreement that was undrawn as of September 30, 2025.

Borrowings under our Revolving Facility have original maturities of three months or less.

We believe that our ongoing cash from operations, cash on hand, which was approximately $1,050 million at September 30, 2025, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

There have been no material changes to the disclosures made in Item 7 of the Company's 2024 Form 10-K regarding our material cash requirements, except that we executed purchase agreements with a franchisee to acquire 128 Taco Bell restaurants across the Southeast U.S.

during the quarter ended September 30, 2025.

These acquisitions are expected to close in the quarter ended December 31, 2025, with a total cash outlay of approximately $670 million, largely financed with cash on hand.

To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.5 billion Revolving Facility under our Credit Agreement which had $350 million outstanding as of March 31, 2026.

Borrowings under our Revolving Facility in 2026 had original maturities of three months or less.

We believe that our ongoing cash from operations, cash on hand, which was approximately $700 million at March 31, 2026, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

There have been no material changes to the disclosures made in Item 7 of the Company's 2025 Form 10-K regarding our material cash requirements.

Due to the ongoing significance of our debt obligations, we are providing the update below.

Debt Instruments

As of September 30, 2025, approximately 96%, including the impact of interest rate swaps, of our $11.5 billion of total debt outstanding, excluding finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.5%.

We ended the quarter with a consolidated net leverage ratio of 3.7x EBITDA.

We continually reassess our optimal leverage ratio to maximize shareholder returns.

Debt Obligations and Interest Payments

As of March 31, 2026, approximately 96%, including the impact of interest rate swaps, of our $11.5 billion of total debt outstanding, excluding the Revolving Facility balance, finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.5%.

We target a capital structure which we believe provides an attractive balance between optimized interest rates, duration and flexibility with diversified sources of liquidity and maturities spread over multiple years and as mentioned above, we expect to maintain our net leverage ratio at approximately 4.0x EBITDA over the medium term by issuing incremental debt as our business grows.

We have credit ratings of BB+ (Standard & Poor's)/Ba2 (Moody's).

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of September 30, 2025.

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of March 31, 2026.

2026 2027 2028 2029 2030 2031 2032 2037 2043 Total

1 unchanged sentence

Credit Agreement $ 21 34 1,424 438 1,916

Revolving Facility 350 350

Subsidiary Senior Unsecured Notes 750 750

1 unchanged sentence

Total $ 21 $ 1,668 $ 2,019 $ 1,377 $ 1,800 $ 1,787 $ 2,600 $ 325 $ 275 $ 11,872

See Note 11 for details on the Securitization Notes, the Credit Agreement, Subsidiary Senior Unsecured Notes and YUM Senior Unsecured Notes, including a refinancing of certain Securitization Notes that took place in September 2025.

A Term Loan A Facility that is part of the Credit Agreement and the Revolving Facility will mature on the earliest of (i) April 26, 2029, (ii) the date that is 91 days prior to the March 15, 2028 maturity of the existing Term Loan B Facility if more than $250 million of such Term Loan B Facility remains outstanding as of such date or (iii) the date that is 91 days prior to the June 1, 2027 maturity of the existing Subsidiary Senior Unsecured Notes if more than $250 million of such Subsidiary Senior Unsecured Notes remain outstanding as of such date.

Given the $750 million in Subsidiary Senior Unsecured Notes oustanding as of March 31, 2026, the maturity date of the Term Loan A Facility and the Revolving Facility will occur less than 12 months from the balance sheet date of these Condensed Consolidated Financial Statements if the Company has not paid nor refinanced at least $500 million of the Subsidiary Senior Unsecured Notes 91 days prior to June 1, 2027.

As such, the outstanding borrowings of the Term Loan A Facility and the Revolving Facility as of March 31, 2026 have been classified as Short-term borrowings in the Condensed Consolidated Balance Sheets as of March 31, 2026.

We expect to refinance the $750 million of the existing Subsidiary Senior Unsecured Notes before 91 days prior to June 1, 2027, and as such, the table above reflects the April 26, 2029 anticipated repayment date for the Term Loan A Facility and the Revolving Facility.

See Note 11 for details on the Securitization Notes, the Credit Agreement, Revolving Facility, Subsidiary Senior Unsecured Notes and YUM Senior Unsecured Notes.

New Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which updates income tax disclosure requirements related to the income tax rate reconciliation and requires disclosure of income taxes paid by jurisdiction.

The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2025 with early adoption permitted.

The amendments should be applied prospectively;

however, retrospective application is permitted.

We are currently evaluating the impact of the standard on our disclosures.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40), which requires new financial statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions.

In November 2024, the Financial Accounting Standards Board ("FASB") issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40), which requires new financial statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions.

The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2027, and subsequent interim periods, with early adoption permitted.

7 unchanged sentences

Quantitative and Qualitative Disclosures About Market Risk

There were no material changes during the quarter ended September 30, 2025, to the disclosures made in Item 7A of the Company’s 2024 Form 10-K.

There were no material changes during the quarter ended March 31, 2026, to the disclosures made in Item 7A of the Company’s 2025 Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis