Yum! Brands (YUM) 10-K risk factor changes: FY2021 vs FY2020

Risks Related to COVID-19, [removed: Health Epidemics and] Food Safety [added: and Catastrophic Events]

*The novel coronavirus (COVID-19) global pandemic has had, and [removed: is expected to] [added: may] continue to have, an adverse effect on our business and results of operations.*

The impacts of COVID-19 have included the [removed: ongoing] loss of revenues due to [added: store closures,] reduced [removed: and limited] store-level operations, [removed: continued or increased] full or partial dining room [removed: closures,] [added: closures and] other restrictions on our business and [removed: operations, continued delays in reopening, and an increase in the number of permanent restaurant closures during the year ended December 31, 2020.][added: operations.]

[removed: Additionally, we] [added: We] and our franchisees have made operational changes intended to safeguard employees and customers in response to COVID-19, [removed: including] [added: which have included] increased cleaning and sanitization, installation of counter [added: screens and the purchase of personal protective equipment.]

[removed: screens and purchasing personal protective equipment, which] [added: These operational changes] have increased and may continue to increase restaurant operating costs and impact restaurant-level margins and return on invested capital.

Our and our [removed: franchisees] [added: franchisees’] restaurants [added: have also experienced, and] may [removed: experience] [added: continue to experience,] interruptions of food and other supplies as well as labor [removed: shortages as a result of COVID-19, thereby disrupting our and our franchisees operations and impacting same-store sales negatively.][added: shortages.]

As a result of this distress, [added: certain of] our franchisees [added: have been unable to, or in the future] may [removed: not] be [removed: able to] [added: unable to,] meet their financial obligations to us as they come due, including the payment of royalties, rent, or other amounts due to the Company.

Additionally, [added: certain of] our franchisees [added: have been unable to, or in the future] may [removed: not] be [removed: able] [added: unable] to make payments to landlords, distributors and key suppliers, as well as payments to service any debt they may have outstanding.

[removed: We are unable to fully predict the impact that COVID-19 will have on our and our franchisees’ operations going forward due to various uncertainties, including the severity and duration] of [removed: the outbreak, the timing and availability of effective] medical treatments and vaccines, the [removed: timing and effectiveness] [added: spread] of [removed: the ongoing rollout] [added: potentially more contagious and/or virulent forms] of [removed: vaccines,] [added: COVID-19, including variants that may be more resistant to currently available vaccines and treatments,] the extent to which COVID-19 may cause customers to continue to be reluctant to return to in-restaurant dining or otherwise change their consumption patterns (including after the COVID-19 pandemic has ended), [removed: additional] actions that may be taken by governmental authorities, and the [removed: length] [added: extent to which ongoing governmental restrictions in certain regions will be lifted,] and [removed: severity of] [added: the] ongoing [removed: negative] [added: impact of the pandemic on] economic conditions in the U.S. and [removed: globally arising from the COVID-19 pandemic.][added: globally.]

[removed: Finally, the] [added: In addition,] negative [removed: economic] [added: macroeconomic] conditions [removed: arising from the COVID-19 pandemic have resulted] [added: or other adverse developments with respect to our businesses may result] in [removed: the] [added: future asset] impairment [removed: of the value of certain of our restaurant assets as well] [added: charges, such] as the goodwill impairment charge we incurred with respect to [removed: our] [added: The] Habit Burger Grill reporting unit in the first quarter of 2020.

Conversely, for our restaurants that prominently feature drive-thru, carryout and delivery options, [removed: COVID-19] [added: the pandemic] has in many cases contributed to an increase in sales [removed: during 2020.][added: since the onset of the pandemic.]

If the impact of [removed: COVID-19 recedes, in-person dining restrictions are lifted or lessened] [added: the pandemic continues to recede] and the restaurant industry in general returns to more normal operations, the benefits to sales experienced by certain of our restaurants, including our Pizza Hut delivery restaurants, could wane and our results could be negatively impacted.

*Food safety and [removed: food-borne] [added: food- or beverage-borne] illness concerns may have an adverse effect on our business.*

Food-borne illnesses, such as E. coli, Listeria, [removed: Salmonella] [added: Salmonella, Cyclospora] and Trichinosis, [added: and food safety issues, such as food tampering, contamination (including with respect to allergens) and adulteration or food- or beverage-borne illness,] occur or may occur within our system from time to time.

Any report or publicity linking us or one of our Concepts’ restaurants, [removed: including restaurants operated by us] or [removed: our Concepts’ franchisees, or] linking our competitors or the retail food industry generally, to instances of [removed: food-borne] [added: food- or beverage-borne] illness or food safety [removed: issues] [added: issues,] could adversely affect [removed: our Concepts’ brands and reputations as well as our revenues and profits,] [added: us] and possibly lead to product liability claims, litigation, governmental investigations or actions, and damages.

If a customer of one of our Concepts’ restaurants becomes ill from food [removed: borne] [added: or beverage-borne] illnesses or as a result of food safety issues, restaurants in our system may be temporarily closed, which could disrupt our operations and [removed: have a material adverse effect on our business, financial condition] [added: materially] and [removed: results of operations.][added: adversely affect our business.]

In addition, instances or allegations of [removed: food-borne] [added: food or beverage-borne] illness or food safety issues, real or perceived, involving our restaurants, restaurants of competitors, or our suppliers or distributors (regardless of whether we use or have used those suppliers or distributors), or otherwise involving the types of food served at our restaurants, could result in negative publicity that could adversely affect either our or our Concepts’ franchisees’ revenues and profits.

The occurrence of [removed: food-borne] [added: food or beverage-borne] illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, which could result in disruptions in our supply chain and/or lower margins for us and our Concepts’ franchisees.

[removed: Our business could be materially and adversely affected by] [added: For example,] the outbreak of a widespread [added: future] health epidemic or [removed: pandemic (in addition to the current COVID-19] pandemic, [removed: as discussed above),] including [added: an outbreak] arising from various strains of avian flu or swine flu, such as H1N1, particularly if located in regions from which we derive a significant amount of revenue or [removed: profit.][added: profit could materially and adversely affect our business.]

[removed: It] [added: Prior outbreaks of avian flu have resulted in confirmed human cases and it] is possible that outbreaks could reach pandemic levels.

Public concern over avian flu generally may cause fear about the consumption of chicken, eggs and other products derived from poultry, which could cause customers to consume less poultry and related [removed: products.][added: products, which would adversely affect us as the result of the fact that poultry is a menu offering for our Concepts’ restaurants.]

*Our operating results and growth strategies are closely [removed: and increasingly] tied to the success of our Concepts’ franchisees.*

The vast majority (98%) of our restaurants are operated by our Concepts’ [removed: franchisees, and our percentage of franchise-owned restaurants has increased in recent years.][added: franchisees.]

In addition, our long-term growth depends on maintaining the pace of our net system unit growth [removed: rate.][added: rate through our Concepts’ franchisees.]

We have limited control over how our Concepts’ franchisees’ businesses are run, and their inability to operate successfully could adversely affect our operating results through decreased fees paid to us for royalties, advertising funds contributions, and other discrete services we may provide to our Concept’s franchisees [removed: (e.g.] [added: (*e.g.*] management of e-commerce platforms).

If a significant franchisee of one of our Concepts becomes, or a significant number of our Concepts’ franchisees in the aggregate become, financially [removed: distressed,] [added: distressed (which has occurred with certain of] our [added: franchisees as the result of the COVID-19 pandemic), our] operating results could be impacted through reduced or delayed fee payments that cause us to record bad debt expense, reduced advertising fund contributions, and reduced new unit development.

Our success also depends on the willingness and ability of our Concepts’ franchisees to implement marketing programs and major initiatives such as restaurant remodels or equipment or technology upgrades, which may require financial [removed: investment.][added: investment by such franchisees.]

Additionally, the failure of our Concepts’ franchisees to focus on key elements of restaurant operations, such as [added: compliance with our operating standards addressing] quality, service and cleanliness (even if such failures do not rise to the level of breaching the related franchise [removed: documents)] [added: documents),] may be attributed by guests to our Concepts’ entire brand and could have a negative impact on our business.

In connection with the spin-off of our China business in 2016 into an independent publicly-traded company (the “Separation” or “Yum China spin-off”), we entered into a Master License Agreement pursuant to which Yum China is the exclusive licensee of the KFC, [removed: Pizza Hut and] Taco Bell [added: and Pizza Hut] Concepts and their related marks and other intellectual property rights for restaurant services in mainland China.

Our financial results are significantly affected by Yum China’s results as we are entitled to receive a 3% sales-based royalty on all Yum China system sales related to [removed: our] [added: these] Concepts.

In addition to Yum China, we have other significant [added: franchise] relationships on which our success is dependent, including our strategic alliance with [added: Food Delivery Brands Group, S.A. (previously named] Telepizza Group [removed: S.A.,] [added: S.A. (“Telepizza”)),] which is the master franchisee of Pizza Hut in Latin America (excluding Brazil) and portions of Europe, and our relationship with certain [added: other] large [removed: franchisees, such as Flynn Restaurant Group, an existing YUM franchisee which recently announced its intention to acquire approximately 950 Pizza Hut U.S. restaurants which would make it the largest operator of Pizza Hut restaurants in the U.S. Any failure to realize the expected benefits of such franchise relationships may adversely impact our business and operating results.][added: franchisees.]

Effectively managing growth can be challenging, particularly as we expand into new markets internationally, and we cannot guarantee that we, or our Concepts’ franchisees, including Yum China, will be able to achieve our expansion goals or that new restaurants will be operated [removed: profitably.][added: profitably, consistent with results of existing restaurants or consistent with our or our franchisees’ expectations.]

Other risks that could impact our ability to increase the number of our restaurants include prevailing economic conditions and trade or economic policies or sanctions, our ability to attract new franchisees, construction and development costs of new restaurants, and our, or our Concepts’ franchisees’, ability to obtain suitable restaurant locations, negotiate acceptable lease or purchase terms for the locations, [added: access capital on favorable terms,] obtain required permits and approvals in a timely manner, hire and train qualified management teams and restaurant crews, and meet construction schedules.

From time to time we evaluate and may complete mergers, acquisitions, divestitures, joint ventures, strategic partnerships, minority investments (which may include minority investments in third parties, such as franchisees or master franchisees) and other strategic transactions, including our acquisition of [added: Dragontail Systems Limited completed in September 2021, and our acquisition of] The Habit Restaurants, Inc. completed in March [removed: 2020, our strategic][added: 2020.]

A significant portion of our total [removed: business is conducted in mainland China,] [added: business,] particularly with respect to our KFC [removed: Concept.][added: Concept, is conducted in mainland China through our largest franchisee, Yum China.]

Yum China’s business is exposed to risks in mainland China, which include, among others, potential political, financial [removed: or] [added: and] social instability, changes in economic conditions (including consumer spending, unemployment levels and wage and commodity inflation), consumer preferences, the regulatory environment (including uncertainties with respect to the interpretation and enforcement of Chinese laws, rules and regulations), [added: food safety related matters (including compliance with food safety regulations and ability to ensure product quality and safety), and] the effect of the COVID-19 pandemic and related [removed: Chinese governmental restrictions.][added: restrictions in China.]

[removed: Further, any] [added: Any] significant or prolonged deterioration in U.S.–China relations, including as the result of current U.S.–China tensions, could adversely affect our Concepts in mainland China.

Our royalty income from the Yum China business is therefore subject to numerous uncertainties based on [removed: the policies of the] Chinese [removed: government,] [added: laws, regulations and policies,] as they may change from time to time.

These risks, which can vary substantially by country, include political, financial or social instability or conditions, geopolitical events, corruption, anti-American sentiment, social and ethnic unrest, [added: military conflicts] and terrorism, as well as changes in economic conditions (including consumer spending, unemployment levels and wage and commodity inflation), the regulatory environment (including the risks of operating in developing or emerging markets in which there are [removed: significant] uncertainties regarding the interpretation and enforceability of legal requirements and the enforceability of contract rights and intellectual property rights), income and non-income based tax rates and [removed: laws, the impact of import restrictions or controls, sanctions, foreign exchange control regimes (including restrictions on currency conversion), natural disasters, the impact of labor costs and conditions, consumer preferences and the laws and policies that govern foreign investment in countries where our Concepts’ restaurants are operated.][added: laws.]

For example, we have been subject to a regulatory enforcement action in India alleging violation of foreign exchange laws for failure to satisfy conditions of certain operating approvals, such as minimum investment and store build requirements [added: as well as limitations on the remittance of fees outside of the country (see Note 20).]

Developments related to COVID-19, which was declared a global pandemic by the World Health Organization in March 2020, have adversely impacted, and may continue to adversely impact our business and results of operations.

During 2021, the overall adverse impact of COVID-19 on our operations was less significant than in 2020, but we continued to see negative impacts as of the end of 2021 due to COVID-19 outbreaks and resulting government restrictions limiting mobility in certain parts of the world, primarily in Asia.

In addition, the COVID-19 pandemic has required and may continue to require us to implement certain precautionary measures, such as in relation to vaccinations, testing and face coverings, which could adversely impact our operations, employee retention and satisfaction, and the willingness of customers to visit our restaurants.

We are unable to fully predict the impact that COVID-19 will have on our and our franchisees’ operations going forward due to various uncertainties, including the severity and duration of the pandemic, the timing, availability acceptance and effectiveness

Moreover, the reliance of our Concepts’ restaurants on third-party food suppliers and distributors and increasing reliance on food delivery aggregators increases the risk that food- or beverage-borne illness incidents and food safety issues could be caused by factors outside of our direct control.

*Our business may be adversely affected by catastrophic or unforeseen events, such as future health epidemics or pandemics, natural disasters, and events that lead to avoidance of public places or restrictions on public gatherings.*

Our control is further limited in markets where we utilize master franchise arrangements, which require us to rely on our master franchisees to monitor and enforce sub-franchisee compliance with our operating standards.

Any failure to realize the expected benefits of such franchise relationships may adversely impact our business and operating results.

In addition, we account for certain investments, including our investment in Devyani International Limited (“Devyani”), on a mark-to-market basis and, as a result, changes in the fair value of these investments impact our reported results.

Changes in market prices for equity securities are unpredictable, and our investment in Devyani has caused, and could continue to cause, fluctuations in our results of operations.

Additional risks include the impact of import restrictions or controls, sanctions, foreign exchange control regimes (including restrictions on currency conversion), health guidelines and safety protocols related to the COVID-19 pandemic, labor costs and conditions, compliance with the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and other similar applicable laws prohibiting bribery of government officials and other corrupt practices, consumer preferences and the laws and policies that govern foreign investment in countries where our Concepts’ restaurants are operated.

In addition, escalating tensions between Russia and Ukraine and any potential military incursion of Russia into Ukraine could adversely impact macroeconomic conditions, give rise to regional instability and result in heightened economic sanctions from the U.S. and the international community in a manner that adversely affects us and our Concepts’ restaurants located in Russia and Eastern Europe, including to the extent that any such sanctions restrict our ability in this region to conduct business with certain suppliers or vendors, and/or to utilize the banking system and repatriate cash.

other markets, such as the Malaysian Ringgit and Russian Ruble, could have an adverse effect on our reported earnings.

In addition, fluctuations in the value of currencies in which we or our franchisees operate could lead to increased costs and lower profitability to us or our franchisees and/or cause us or our franchisees to increase prices to customers, which could negatively impact sales in these markets and harm our financial condition and operating results.

Furthermore, the significant increase in remote working as the result of the COVID-19 pandemic, which may continue following the pandemic, could increase the risks of cyber incidents and the improper dissemination of personal or confidential information.

Additionally, such events could result in the release to the public of confidential information about our operations and could subject us to litigation and government enforcement actions, the losses associated with which may not be covered by insurance.

Moreover, any significant cybersecurity events could require us to devote significant management resources to address the problems created by such events, interfere with the pursuit of other important business strategies and initiatives, and cause us to incur additional expenditures, which could be material, including to investigate such events, remedy cybersecurity problems, recover lost data, prevent future compromises and adapt systems and practices in response to such events.

There is no assurance that any remedial actions will meaningfully limit the success of future attempts to breach our information technology systems.

Further, the standards for systems currently used for transmission and approval of electronic payment transactions, and the technology utilized in electronic payment transactions, all of which can put electronic payment data at risk, are determined and controlled by the payment card industry, not by us.

If we or our franchisees fail to adequately control fraudulent credit card and debit card transactions or to comply with the Payment Card Industry Data Security Standards, we or our franchisees may face civil liability, diminished public perception of our security measures, fines and assessments from the card brands, and significantly higher credit card and debit card related costs, any of which could adversely affect our business, financial condition and results of operations.

*The failure to maintain satisfactory compliance with data privacy and data protection legal requirements may adversely affect our business and subject us to penalties.*

In addition, the State of California enacted the California Consumer

The Federal Trade Commission will also pursue privacy as a dedicated enforcement priority, with specialized attorneys seeking violation of US privacy laws including unfair or deceptive practices relating to privacy policies, consumer data collection and processing consent, and digital advertising practices.

New cross-border data transfer requirements will require us to incur costs and expenses in order to comply and may impact the transfer of personal data throughout our organization and to third parties.

The increasingly restrictive and evolving regulatory environment at the international, federal and state level related to data privacy and data protection may require significant effort and cost, require changes to our business practices and impact our ability to obtain and use data used to provide a personalized experience for customers of our Concepts’ restaurants.

In addition, failure to comply with applicable requirements may subject us and our franchisees to fines, sanctions, governmental investigation, lawsuits and other potential liability, as well as reputational harm.

We cannot predict the impact that alternative methods of delivery, including autonomous vehicle delivery, or changes in consumer behavior facilitated by these alternative methods of delivery will have on our business.

Advances in alternative methods of delivery, including advances in digital ordering technology, or certain changes in consumer behavior driven by these or other technologies and methods of delivery could have a negative effect on our business and market position.

Moreover, technology and consumer offerings continue to develop, and we expect that new or enhanced technologies and consumer offerings will be available in the future.

We may pursue certain of those technologies and consumer offerings if we believe they offer a sustainable customer proposition and can be successfully integrated into our business model.

However, we cannot predict consumer acceptance of these delivery channels or their impact on our business.

Moreover, the COVID-19 pandemic has resulted in an increase in the use of store-level or third-party delivery services by our Concepts.

As a result, our Concepts and our Concepts’ franchisees are increasingly reliant on digital ordering and payment as a sales channel and our business could be negatively impacted if we are unable to successfully implement, execute or maintain our consumer-facing digital initiatives, such as curbside pick-up and mobile carryout.

If the third-party aggregators that we utilize for delivery, including marketplace and delivery as a service, cease or curtail their operations, fail to maintain sufficient labor force to satisfy demand, materially change fees, access or visibility to our products or give greater priority or promotions on their platforms to our competitors, our business may be negatively impacted.

Social media is also increasingly used to compel companies to express public positions on issues and topics not directly related to their core business, which could prove controversial or divisive to consumers and result in lost sales or a misallocation of resources.

The inappropriate use of social media by our

Shortages or interruptions in the supply of food items, equipment and other supplies to our Concepts’ restaurants have happened from time to time and could reduce sales, harm our Concepts’ reputations and delay the planned openings of new restaurants by us and our Concepts’ franchisees.

We are experiencing and have experienced certain supply chain disruptions resulting from, among other things, capacity, transportation, staffing, operational and COVID-19 related challenges, which have and may continue to adversely affect our business and results of operations.

McLane Foodservice, Inc. (“McLane”) serves as the largest distributor for the Company’s KFC, Taco Bell and Pizza Hut Concepts in the U.S. Any

Our and our Concepts’ franchisees are experiencing and may continue to experience a shortage of labor for positions in our restaurants, including due to the current competitive labor market and concerns around COVID-19.

In late 2019, COVID-19 was first detected and in March 2020, the World Health Organization declared COVID-19 a global pandemic.

During 2020, COVID-19 spread throughout the U.S. and the rest of the world, and governmental authorities implemented measures to reduce the spread of COVID-19.

These measures include restrictions on travel outside the home or other limitations on business and other activities, as well as encouraging social distancing.

Moreover, COVID-19 cases increased in late 2020 and early 2021 in the U.S. and various other regions of the world in which we have operations, which resulted in some governmental authorities re-imposing restrictions on business and other activities that were previously lifted or reduced.

Developments related to COVID-19 have had and are expected to continue to have an adverse effect on our business and results of operations.

The impact on our sales in each of our markets has been dependent on, among other factors, the timing, severity and duration of the outbreak, measures implemented by government authorities to reduce the spread of COVID-19, and our reliance on dine-in sales in the market.

This has led to, and may continue to lead to, write-offs of amounts we have currently due from our franchisees beyond amounts we have reserved, as well as decreased future collections from franchisees.

In certain instances we offered grace periods to our franchisees, who were in good standing with the Company and needed greater access to capital, for certain near-term payments due to us.

Offering grace periods negatively impacts the Company’s cash flows in the short-term, and if grace periods are necessitated in the future there is no guarantee that our franchisees will ultimately pay amounts due.

Further, in some cases, we are contingently liable for franchisee lease obligations, and a failure by a franchisee to perform its obligations under such lease could result in direct payment obligations for YUM.

If such conditions persist and continue to adversely affect our business, this could give rise to impairment in the value of other tangible or intangible assets.

In addition, food safety issues such as food tampering, contamination and adulteration occur or may occur within our system from time to time.

*Health concerns arising from the outbreak of a health epidemic or pandemic may have an adverse effect on our business.*

The occurrence of such an outbreak or other adverse public health developments could materially disrupt our business and operations.

Such events could also significantly impact our industry and cause a temporary closure of restaurants, which could severely disrupt our or our franchisees’ operations and have a material adverse effect on our business, financial condition and results of operations.

Outbreaks of avian flu occur from time to time around the world, and such outbreaks have resulted in confirmed human cases.

Because poultry is a menu offering for our Concepts, this would likely result in lower revenues and profits for us and our Concepts’ franchisees.

Nearly all of this unit growth is expected to result from new unit openings by our Concepts’ franchisees.

For example, NPC International, Inc. (“NPC”), which had been our largest Pizza Hut U.S. franchisee, filed voluntary petitions in July 2020 to restructure under Chapter 11 of the U.S. Bankruptcy Code.

In connection with this bankruptcy filing, we consented to the closure of up to 300 mutually selected underperforming units, primarily dine-in locations.

Furthermore, the COVID-19 pandemic has caused and may continue to cause financial distress for some portion of our Concepts’ franchisees.

Our reliance on master franchise arrangements can decrease our level of control over our Concepts’ restaurants and increase certain risks arising from franchise operations.

For example, we rely on our master franchisees to monitor and enforce sub-franchisee compliance with our operating standards, and a failure to comply with such standards could adversely affect our business.

*The financial performance of certain of our Concepts’ franchisees has an outsized impact on our operating results.*

However, we had fewer net restaurant openings and greater permanent restaurant closures during 2020 compared to our recent history and expectations as the result of the COVID-19 pandemic.

Additionally, we experienced higher closures in the Pizza Hut system during 2020 as a result of our previously announced efforts to accelerate the transformation of the Pizza Hut restaurant estate to a more modern and delivery-based business and other business model pressures impacting certain Pizza Hut restaurants.

Further, there is no assurance that any new restaurant will produce operating results similar to those of our existing restaurants.

alliance with Telepizza Group S.A. effectuated in December 2018, and our acquisition of QuikOrder, LLC completed in December 2018.

as well as limitations on the remittance of fees outside of the country (See Note 20).

Additionally, we could be subject to litigation and government enforcement actions as a result of any such failure.

Our failure or the failure of our franchisees to adhere to or successfully implement appropriate processes to adhere to the requirements of GDPR, CCPA and other evolving laws and regulations in this area could result in financial penalties, legal liability and could damage our and our Concepts’ brands’ reputations.

If more restrictive or inconsistent

legal requirements are adopted by international, state and/or federal authorities in the future and/or regulators’ enforcement priorities shift, compliance costs and potential liability could increase for the Company and our Concepts’ franchisees, which could cause reputational harm and have an adverse effect on our business.

Such platforms may experience disruptions, which could harm our ability to compete and conduct our business.*

As a result, our Concepts and our Concepts’ franchisees are increasingly reliant on digital ordering and payment as a sales channel.

In particular, political tensions between the U.S. and China escalated in 2020, with a number of actions taken by the U.S. government, such as the Clean Network program announced on August 5, 2020, to protect U.S. telecommunication and technology infrastructure, and two executive orders issued by President Trump on August 6, 2020, to ban, within 45 days of such date, any person or property subject to the jurisdiction of the U.S. from any transaction related to WeChat, to the extent that any such transaction is identified by the Secretary of Commerce as being subject to the prohibitions stated in the executive orders.

While the directives issued by the Secretary of Commerce arising from

the executive orders only identified prohibited transactions that are limited to the territory of the U.S. and therefore are not expected to impact Yum China's operations in China, we cannot foresee whether and how similar or additional policy actions taken by the U.S. or Chinese governments will impact our business and financial performance.

If Yum China’s ability to use WeChat or other third-party mobile payment apps in its operations is restricted, its business, operations, financial condition and results of operations could be materially and adversely affected, which could have a negative impact on the royalty paid to us.

Many of our trademarks and service marks are registered in the U.S. and/or foreign jurisdictions.

Brands, Inc. and its subsidiaries (collectively referred to herein as the [removed: "Company",] [added: “Company”,] “YUM”, [removed: "we", "us"] [added: “we”, “us”] or [removed: "our")] [added: “our”)] franchise or operate a system of over [removed: 50,000] [added: 53,000] restaurants in [removed: more than 150] [added: 157] countries and territories, primarily under the concepts of KFC, [removed: Pizza Hut,] Taco [removed: Bell] [added: Bell, Pizza Hut] and The Habit Burger Grill (collectively, the [removed: "Concepts").][added: “Concepts”).]

The Company's KFC, [removed: Pizza Hut and] Taco Bell [added: and Pizza Hut] brands are global leaders of the chicken, [removed: pizza and] Mexican-style [added: and pizza] food categories, respectively.

The Habit Burger Grill, a concept we acquired [removed: on] [added: in] March [removed: 18,] 2020, is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more.

Of the over [removed: 50,000] [added: 53,000] restaurants, 98% are operated by franchisees.

As of December 31, [removed: 2020,] [added: 2021,] YUM consists of four operating segments:

- [removed: Maintaining an optimized] [added: Targets a] capital structure of ~5.0x Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) [added: consolidated] net [removed: leverage.][added: leverage;]

- [removed: Invest] [added: Invests] capital in a manner consistent with an asset light, franchisor model; [removed: and]

- [removed: Allocate] [added: Allocates] G&A in an efficient manner that provides leverage to operating profit growth while at the same time opportunistically investing in strategic growth [removed: initiatives.][added: initiatives; and]

- Same-store sales growth is the estimated percentage change in system sales of all restaurants that have been open and in the YUM system for one year or [removed: more,] [added: more (except as noted below),] including those temporarily closed.

Throughout 2020 [added: and 2021] we [added: have] had a significant number of restaurants that were temporarily [removed: closed,] [added: closed] including restaurants closed due to government and landlord [removed: restrictions,] [added: restrictions] as a result of COVID-19.

In [added: 2021 and] 2020, when calculating [added: respective] same-store sales growth we also included in our prior year base the sales of stores that were added as a result of our acquisition of The Habit Restaurants, Inc. on March 18, 2020, and that were open for one year or more.

In 2019, when calculating same-store sales growth we also included in our prior year base the sales of stores that were added as a result of the [added: Food Delivery Brands Group, S.A. (previously named] Telepizza [added: Group S.A. (“Telepizza”))] strategic alliance in December 2018 and that were open for one year or more.

[removed: -] Net new unit growth reflects [removed: new] [added: gross] unit openings offset by permanent store closures, by us and our franchisees.

To determine whether a restaurant meets the definition of a unit we consider [added: factors such as] whether the restaurant has operations that are ongoing and independent from another YUM unit, serves the primary product of one of our Concepts, operates under a separate franchise agreement (if operated by a franchisee) and has substantial and sustainable sales.

We believe [added: gross unit openings and] net new unit growth [removed: is] [added: are] useful to investors because we depend on [removed: net] new units for a significant portion of our growth.

Additionally, [added: gross unit openings and] net new unit growth [removed: is] [added: are] generally reflective of the economic returns to us and our franchisees from opening and operating our Concept restaurants.

System sales reflect the results of all restaurants regardless of ownership, including [removed: Company-][added: Company-owned and franchise restaurants.]

Company restaurant margin as a percentage of sales [added: ("Company restaurant margin %")] is defined as [removed: Restaurant] [added: Company restaurant] profit divided by Company sales.

[removed: Restaurant] [added: We use Company restaurant] profit [removed: is] [added: for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe Company restaurant profit provides] useful [added: information] to investors as [removed: it provides a measure of] [added: to the] profitability [removed: for] [added: of] our Company-owned restaurants.

Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance [removed: internally.][added: internally;]

For discussion of our results of operations for [removed: 2019] [added: 2020] compared to [removed: 2018,] [added: 2019,] refer to the Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, [removed: 2019,] [added: 2020,] filed with the SEC on February [removed: 19, 2020.][added: 22, 2021.]

For [removed: 2020,] [added: 2021,] GAAP diluted EPS [removed: decreased 29%] [added: increased 77%] to [removed: $2.94] [added: $5.21] per share, and diluted EPS, excluding Special Items, increased [removed: 2%] [added: 23%] to [removed: $3.62] [added: $4.46] per share.

[removed: 2020] [added: 2021] financial highlights:

| KFC Division | | | [removed: (5)] [added: +16] | | | | | | [removed: (9)] [added: +11] | | | | | | [removed: +4] [added: +8] | | | | | | [removed: (12)] [added: +33] | | | | | | [removed: (12)] [added: +29] | | |

| Pizza Hut Division | | | [removed: (7)] [added: +6] | | | | | | [removed: (6)] [added: +7] | | | | | | [removed: (6)] [added: +4] | | | | | | [removed: (9)] [added: +16] | | | | | | [removed: (9)] [added: +13] | | |

| Taco Bell Division | | | [removed: Even] [added: +13] | | | | | | [removed: (1)] [added: +11] | | | | | | [removed: +1] [added: +5] | | | | | | [removed: +2] [added: +9] | | | | | | [removed: +2] [added: +9] | | |

| Worldwide | | | [removed: (4)] [added: +13] | | | | | | [removed: (6)] [added: +10] | | | | | | [removed: Even] [added: +6] | | | | | | [removed: (22)] [added: +42] | | | | | | [removed: (8)] [added: +18] | | |

| [added: Core Operating Profit] | | | [removed: System Sales, ex FX] | | | [added: $] | [added: 2] | | [removed: Core Operating Profit] | | | [added: $ | (22) | | | | | N/A | | |]

| [removed: Pizza Hut] [added: | | | KFC] Division | | | [removed: (6)] | | | [added: Taco Bell Division] | | | [removed: (8)] | | | [added: Pizza Hut Division | | | | | | Total | | |]

- During the year, we repurchased [removed: 2.4] [added: 13] million shares totaling [removed: $250] [added: $1,580] million at an average price of [removed: $103.][added: $121.70.]

- Foreign currency translation [added: favorably] impacted Divisional Operating Profit [removed: unfavorably] for the year by [removed: $9] [added: $54] million.

| | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | | | | | [removed: 2020] [added: 2021] | | | | | | | | | | | | [removed: 2019] [added: 2020] | | | | | | | | |

| Company sales | | | $ | [removed: 1,810] [added: 2,106] | | | | | $ | [removed: 1,546] [added: 1,810] | | | | | $ | [removed: 2,000] [added: 1,546] | | | | | [removed: 17] [added: 16] | | | | | | | | | | | | [removed: (23)] [added: 17] | | | | | | | | |

| Franchise and property revenues | | | [removed: 2,510] [added: 2,900] | | | | | | [removed: 2,660] [added: 2,510] | | | | | | [removed: 2,482] [added: 2,660] | | | | | | [removed: (6)] [added: 16] | | | | | | | | | | | | [removed: 7] [added: (6)] | | | | | | | | |

| Franchise contributions for advertising and other services | | | [removed: 1,332] [added: 1,578] | | | | | | [removed: 1,391] [added: 1,332] | | | | | | [removed: 1,206] [added: 1,391] | | | | | | [removed: (4)] [added: 18] | | | | | | | | | | | | [removed: 15] [added: (4)] | | | | | | | | |

| Total revenues | | | [removed: $] [added: 6,584] | [removed: 5,652] | | | | | [removed: $] [added: 5,652] | [removed: 5,597] | | | | | [removed: $] [added: 5,597] | [removed: 5,688] | | | | | [removed: 1] [added: 16] | | | | | | | | | | | | [removed: (2)] [added: 1] | | | | | | | | |

| [removed: Restaurant] [added: Company restaurant] profit | | | [removed: $] | [removed: 304] | | [removed: | | |] $ | [removed: 311] [added: 381] | | | | | $ | [removed: 366 | | | | | (2) | | | | | | | | | | | | (15) |] [added: 304] | | | | | [added: $] | [added: 311] | |

| [removed: Restaurant] [added: Company restaurant] margin % | | | [removed: 16.8] | | [removed: %] | [removed: | | | 20.1] [added: 18.1] | | % | | | | [removed: 18.3] [added: 16.8] | | % | | | | [removed: (3.3) | | | | | | ppts. | | | | | | 1.8 | | | | | | ppts.] [added: 20.1] | | [added: %] |

| G&A expenses | | | [removed: $] [added: 1,060] | [removed: 1,064] | | | | | [removed: $] [added: 1,064] | [removed: 917] | | | | | [removed: $] [added: 917] | [removed: 895] | | | | | [removed: (16)] [added: —] | | | | | | | | | | | | [removed: (2)] [added: (16)] | | | | | | | | |

| Franchise and property expenses | | | [removed: 145] [added: 117] | | | | | | [removed: 180] [added: 145] | | | | | | [removed: 188] [added: 180] | | | | | | [removed: 20] [added: 18] | | | | | | | | | | | | [removed: 4] [added: 20] | | | | | | | | |

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:

- Pays a competitive dividend and returns excess cash to shareholders through share repurchases.

- Gross unit openings reflects new openings by us and our franchisees.

- Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below).

Company restaurant profit is defined as Company sales less Company restaurant expenses, both of which appear on the face of our Consolidated Statements of Income.

Company restaurant expenses include those expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, cost of restaurant-level labor, rent, depreciation and amortization of restaurant-level assets and advertising expenses incurred by and on behalf of that Company restaurant.

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.

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.

- During the year, 4,180 gross units were opened contributing to the addition of 3,057 net new units

| Total costs and expenses, net | | | 4,445 | | | | | | 4,149 | | | | | | 3,667 | | | | | | (7) | | | | | | | | | | | | (13) | | | | | | | | |

| Income before income taxes | | | 1,674 | | | | | | 1,020 | | | | | | 1,373 | | | | | | 64 | | | | | | | | | | | | (26) | | | | | | | | |

| | | | | | | 2021 | | | | | | 2020 | | | | | | 2019 | | |

| | | | | | | 2021 | | | | | | 2020 | | | | | | 2019 | | |

These gains relate to

The redemption amount was equal to 102.625% of the $1,050 million aggregate principal amount redeemed, reflecting a $28 million “call premium”.

We recognized the call premium and the write-off of $6 million of unamortized debt issuance costs associated with the 2026 Notes within Interest expense, net.

The redemption amount included a $26 million call premium plus accrued and unpaid interest to the date of redemption of October 9, 2020.

We recorded the call premium, $6 million of unamortized debt issuance costs associated with the 2024 Notes and $2 million of accrued and unpaid interest associated with the period of time from prepayment of the 2024 Notes with the Trustee on September 25, 2020, to their redemption date within Interest expense, net.

We reflected the call premiums and charges associated with the redemptions as Special Items due to their collective size and the fact that the amounts are not indicative of our ongoing interest expense.

During the year ended December 31, 2021, we recorded as a Special Item an $8 million tax benefit related to prior refranchisings for which the associated pre-tax gain or loss was recorded as Special.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | 2021 | | | | | | 2020 | | | | | | 2019 | | |

| Special Items Income (Expense) - Operating Profit | | | | | | (9) | | | | | | (267) | | | | | | (11) | | |

| Effective Tax Rate excluding Special Items | | | | | | 21.4 | | % | | | | 15.9 | | % | | | | 19.8 | | % |

Reconciliation of GAAP Operating Profit to Company Restaurant Profit

| | | | | | | 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | KFC Division | | | | | | Taco Bell Division | | | | | | Pizza Hut Division | | | | | | Habit Burger Grill Division | | | | | | Corporate and Unallocated | | | | | | Consolidated | | |

| GAAP Operating Profit (Loss) | | | | | | $ | 1,230 | | | | | $ | 758 | | | | | $ | 387 | | | | | $ | 2 | | | | | $ | (238) | | | | | $ | 2,139 | |

| Less: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Franchise and property revenues | | | | | | 1,557 | | | | | | 742 | | | | | | 597 | | | | | | 4 | | | | | | — | | | | | | 2,900 | | |

| Franchise contributions for advertising and other services | | | | | | 640 | | | | | | 552 | | | | | | 385 | | | | | | 1 | | | | | | — | | | | | | 1,578 | | |

| Add: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| General and administrative expenses | | | | | | 377 | | | | | | 174 | | | | | | 201 | | | | | | 48 | | | | | | 260 | | | | | | 1,060 | | |

| Franchise advertising and other services expense | | | | | | 627 | | | | | | 553 | | | | | | 395 | | | | | | 1 | | | | | | — | | | | | | 1,576 | | |

| Refranchising (gain) loss | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (35) | | | | | | (35) | | |

| Other (income) expense | | | | | | (5) | | | | | | 1 | | | | | | (9) | | | | | | 1 | | | | | | 14 | | | | | | 2 | | |

| Company restaurant profit | | | | | | $ | 106 | | | | | $ | 225 | | | | | $ | 3 | | | | | $ | 47 | | | | | $ | — | | | | | $ | 381 | |

| Company sales | | | | | | $ | 596 | | | | | $ | 944 | | | | | $ | 46 | | | | | $ | 520 | | | | | $ | — | | | | | $ | 2,106 | |

On October 11, 2016, YUM announced our transformation plans to drive global expansion of our KFC, Pizza Hut and Taco Bell brands (“YUM's Strategic Transformation Initiatives”) following the spin-off of our China business into an independent publicly-traded company under the name of Yum China Holdings, Inc. (“Yum China”).

At this time, we established transformation goals to be met by the end of 2019 including becoming:

- More Focused.

By focusing on four growth drivers similar to those that make up our Recipe for Growth above we accelerated system sales growth to 8% in 2019 (excluding the impacts of the 53rd week and foreign currency translation).

- More Franchised.

The Company successfully increased franchise restaurant ownership to 98% as of the end of 2018.

- More Efficient.

The Company revamped its financial profile, improving the efficiency of its organization and cost structure globally, by:

- Reducing annual capital expenditures associated with Company-operated restaurant maintenance and other projects and funded additional capital for new Company units through the refranchising of existing Company units.

Capital spending in 2019 net of refranchising proceeds was $86 million.

- Lowering General and administrative expenses ("G&A") to 1.7% of system sales in 2019; and

From 2017 through 2019, we returned $6.5 billion to shareholders through share repurchases and cash dividends.

We funded these shareholder returns through a combination of refranchising proceeds, free cash flow generation and maintenance of our ~5.0x EBITDA consolidated net leverage.

We generated pre-tax proceeds of $2.8 billion through our refranchising initiatives to achieve targeted franchise ownership of 98%.

Refer to the Liquidity and Capital Resources section of this MD&A for additional details.

As a result of the impacts on our business due to the COVID-19 pandemic, certain measures we established as part of our transformation goals were negatively impacted in 2020.

For the full year 2020, G&A, excluding the impact of Special Items, represented 1.9% of consolidated system sales, primarily due to sales pressures resulting from the COVID-19 pandemic.

While we took certain austerity measures to reduce G&A spending such as lower travel related costs and a reduction of our Chief Executive Officer's salary, these reductions were offset by accelerated digital and technology spending to enhance our customer experience and off-premise capabilities.

We expect our G&A as a percentage of consolidated system sales to move back toward our historical target of 1.7% as sustained growth resumes.

Additionally, during 2020 our EBITDA was negatively impacted by the impacts of the COVID-19 pandemic, which increased our consolidated leverage, net of available cash.

We currently estimate we will grow back into our ~5.0x EBITDA consolidated net leverage by second quarter 2021.

Going forward, we expect to:

- Maintain a capital structure of ~5.0x EBITDA consolidated net leverage;

owned and franchise restaurants.

- Company restaurant profit ("Restaurant profit") is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | Results Excluding 53rd Week in 2019 (% Change) | | | | | | | | |

| KFC Division | | | (5) | | | | | | (11) | | |

| Taco Bell Division | | | +1 | | | | | | +4 | | |

| Worldwide | | | (3) | | | | | | (7) | | |

- During the year, net units increased by 183 units (including our acquisition of The Habit Burger Grill in the first quarter of 2020).

- During the year, we recognized pre-tax investment income of $69 million related to the change in fair value of our investment in Grubhub, Inc. common stock that we sold in the third quarter of 2020, which added $0.17 to diluted EPS for the year.

When coupled with $77 million of pre-tax investment expense in 2019, which resulted in a negative $0.19 impact to diluted EPS, our Grubhub investment favorably impacted year-over-year diluted EPS growth by $0.36.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | |

| YUM's Strategic Transformation Initiatives(c) | | | | | | — | | | | | | — | | | | | | (8) | | |

| Tax Benefit - U.S. Tax Act(g) | | | | | | — | | | | | | — | | | | | | 66 | | |

Refranchising gains and losses recorded during 2019 as Special Items primarily include gains or losses associated with sales of underlying real estate associated with stores that were franchised as of December 31, 2018, or true-ups to refranchising gains and losses recorded prior to December 31, 2018.

(c)In October 2016, we announced our strategic transformation plans to drive global expansion of the KFC, Pizza Hut and Taco Bell brands ("YUM's Strategic Transformation Initiatives") following the then anticipated spin-off of our China business (the "Separation") on October 31, 2016, into an independent, publicly-traded company under the name of Yum China Holdings, Inc. ("Yum China").

We have a market risk exposure to changes in interest rates, principally in the U.S. Our outstanding total debt, excluding finance leases and debt issuance costs and discounts, of [removed: $10.7] [added: $11.3] billion includes [removed: 78%] [added: 80%] fixed-rate debt and [removed: 22%] [added: 20%] variable-rate debt.

We have attempted to minimize the interest rate risk from variable-rate debt through the use of interest rate swaps that, as of December 31, [removed: 2020,] [added: 2021,] result in a fixed interest rate on [removed: $1.55] [added: $1.5] billion of our variable-rate debt.

As a result, approximately 93% of our [removed: $10.7] [added: $11.3] billion of outstanding debt at December 31, [removed: 2020,] [added: 2021,] is effectively fixed-rate debt.

[removed: As of both December 31, 2020 and] [added: At] December 31, [removed: 2019,] [added: 2021,] a hypothetical 100 basis-point increase in short-term interest rates would result, over the following twelve-month period after consideration of the aforementioned interest rate swaps, in an increase of approximately [removed: $8] [added: $7] million in Interest expense, net within our Consolidated Statement of Income.

The fair value of our cumulative fixed-rate debt of [removed: $8.4] [added: $9.5] billion as of December 31, [removed: 2020,] [added: 2021,] would decrease approximately [removed: $475] [added: $565] million as a result of the same hypothetical 100 basis-point increase.

At December 31, [removed: 2020,] [added: 2021,] a hypothetical 100 basis-point [removed: decrease] [added: increase] in short-term interest rates would [removed: increase] [added: decrease] the liability associated with the fair value of our interest rate swaps by approximately [removed: $24] [added: $46] million.

The Company’s foreign currency net asset exposure (defined as foreign currency assets less foreign currency liabilities) totaled approximately [removed: $1.3] [added: $1.1] billion as of December 31, [removed: 2020.][added: 2021.]

For the fiscal year ended December 31, [removed: 2020,] [added: 2021,] Operating Profit would have decreased approximately [removed: $115] [added: $145] million if [removed: all foreign currencies had uniformly weakened 10% relative to the U.S. dollar.]

We are subject to volatility in food costs [added: at our Company-operated restaurants] as a result of market risk associated with commodity prices.

all foreign currencies had uniformly weakened 10% relative to the U.S. dollar.

Equity Investment Risk

YUM holds approximately 53 million shares of Devyani International Limited (“Devyani”) common stock (See Note 5).

As of December 31, 2021, the National Stock Exchange of India Limited composite closing sales price of Devyani was Indian Rupee 165.05.

A hypothetical 10% decline in the price of these shares would result in a $12 million decrease in the fair value of these investments, which would be reflected as a charge in Investment (income) expense, net within our Consolidated Statements of Income.

The effects of changes in market prices for equity securities are unpredictable, which could cause significant fluctuations in our quarterly and annual results.

YUM has over [removed: 50,000] [added: 53,000] restaurants in [removed: more than 150] [added: 157] countries and territories primarily operating under the four concepts of KFC, [removed: Pizza Hut,] Taco [removed: Bell] [added: Bell, Pizza Hut] and The Habit Burger Grill (the “Concepts”).

The Company’s KFC, [removed: Pizza Hut and] Taco Bell [added: and Pizza Hut] brands are global leaders of the chicken, [removed: pizza and] Mexican-style food [added: and pizza] categories, respectively.

The Habit Burger Grill, a concept we acquired [removed: on] [added: in] March [removed: 18,] 2020, is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more.

At December 31, [removed: 2020,] [added: 2021,] 98% of our [added: Concepts'] units are operated by independent franchisees or licensees under the terms of franchise or license agreements.

The following is a summary of our Concepts’ operations and a brief description of each Concept as of and for the year ended December 31, [removed: 2020:][added: 2021:]

| | | | | | | Number of Units | | | | | | % of Units International | | | | | | Number of Countries and Territories | | | | | | % Franchised | | | | | | System [removed: Sales(a)(b)] [added: Sales(a)] (in Millions) | | | | | |

| Pizza Hut Division | | | | | | [removed: 17,639] [added: 18,381] | | | | | | [removed: 63] [added: 64] | | % | | | | [removed: 110] [added: 111] | | | | | | 99 [removed: %] | | [added: %] | | | | [removed: 11,955] [added: 12,955] | | | | | |

| Taco Bell Division | | | | | | [removed: 7,427] [added: 7,791] | | | | | | [removed: 8] [added: 10] | | % | | | | [removed: 31] [added: 32] | | | | | | 94 | | % | | | | [removed: 11,745] [added: 13,280] | | | | | |

| Habit Burger Grill Division | | | | | | [removed: 287] [added: 318] | | | | | | 3 | | % | | | | 3 | | | | | | [removed: 12] [added: 13] | | % | | | | [removed: 370] [added: 588] | | | | | |

As of December 31, [removed: 2020,] [added: 2021,] YUM consists of four operating segments:

The Company has franchise relationships that are particularly important to our business, such as our [removed: relationship] [added: relationships] with Yum [removed: China,] [added: China (defined below), and] our strategic alliance with [added: Food Delivery Brands Group, S.A. (previously named] Telepizza Group [removed: S.A.,] [added: S.A.),] who is the master franchisee of Pizza Hut in Latin America (excluding Brazil) [removed: and] [added: as well as] portions of Europe and our [removed: relationship] [added: relationships] with certain [added: other] large [removed: franchisees, such as Flynn Restaurant Group, an existing YUM franchisee, which recently announced its intention to acquire approximately 950 Pizza Hut U.S. restaurants which would make it the largest operator of Pizza Hut restaurants in the U.S.][added: franchisees.]

The Company [removed: has successfully increased franchise restaurant ownership in recent years, and] utilizes both store-level franchise and master franchise programs to grow our businesses.

Of our over [removed: 49,000] [added: 52,000] franchised units at December 31, [removed: 2020,] [added: 2021,] approximately 30% operate under our master franchise programs, including [removed: over 9,500] [added: nearly 10,800] units in mainland China.

Master franchisees are typically responsible for overseeing development within their territories and performing certain other administrative duties [removed: with regard to the oversight of sub-franchisees.]

[removed: Our] [added: As our] largest master franchisee, Yum China, pays the Company a continuing fee of 3% on system sales of our Concepts in mainland China.

The use by Yum China of certain of our material trademarks and service marks is governed by a master license agreement between Yum Restaurants Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned indirect subsidiary of Yum China, and YUM, through YRI China Franchising LLC, a subsidiary of [removed: YUM, effective from January 1, 2020, and previously through Yum!][added: YUM.]

Non-traditional units include express units [removed: and kiosks] that have a more limited menu, usually generate lower sales volumes and operate in non-traditional locations like malls, airports, gasoline service stations, train stations, subways, convenience stores, stadiums, amusement parks and colleges, where a full-scale traditional outlet would not be practical or efficient.

Our restaurant operations and results were significantly impacted by a novel strain of coronavirus, COVID-19, [added: beginning] in [removed: the year ended December 31, 2020.][added: 2020 and continuing into 2021.]

In [removed: 2020,] [added: 2021,] our system restaurants generated digital sales of [removed: $17] [added: $22] billion, which represented an approximate [removed: 45%] [added: 25%] increase over [removed: 2019.][added: 2020.]

Additionally, the number of restaurants that now offer delivery increased to over [removed: 35,000] [added: 45,000] restaurants, which represents over [removed: 70%] [added: 85%] of our global [removed: system.][added: system, more than a 25% increase over 2020.]

In the U.S., the Company, along with the representatives of the Company’s KFC, [removed: Pizza Hut and] Taco Bell [added: and Pizza Hut] franchisee groups, are members of Restaurant Supply Chain Solutions, LLC [removed: (“RSCS"),] [added: (“RSCS”),] a third party which is responsible for purchasing certain restaurant products and equipment.

The Company believes that many of these marks, including our Kentucky Fried Chicken®, KFC®, [removed: Pizza Hut®,] Taco [removed: Bell®] [added: Bell®, Pizza Hut®] and The Habit® marks, have significant value and material importance to our business.

Our Concepts also face competition as a result of convergence in grocery, convenience, deli and restaurant services, including the offering by the grocery industry of convenient meals, including pizzas and entrees with side [added: dishes.]

During [removed: 2020,] [added: 2021,] there were no material capital expenditures for environmental control facilities and no such material expenditures are anticipated.

As of December 31, [removed: 2020,] [added: 2021,] the Company and its subsidiaries employed approximately [removed: 38,000] [added: 36,000] persons, including approximately 23,000 employees in the U.S. and approximately [removed: 15,000] [added: 13,000] employees outside the U.S. Approximately 90% and 85% of our U.S. and international employees, respectively, work in restaurants while the remainder work in our restaurant-support centers.

In the U.S., approximately [removed: 85%] [added: 90%] of our Company-owned restaurant employees are part-time and [removed: at least 45%] [added: approximately 50%] have been employed by the Company for less than a year.

In addition to the persons employed by the Company and its subsidiaries, our approximately [removed: 2,000 franchisees] [added: 52,000 franchise restaurants] around the world are [removed: estimated to employ] [added: responsible for the employment of] over [added: an estimated] 1 million people [removed: working] [added: who work] in and [removed: supporting the approximately 49,000 restaurants they operate.][added: support those restaurants.]

Each year YUM and our franchisees around the world create thousands of restaurant jobs, which are part-time, entry-level opportunities to grow careers at our KFC, [removed: Pizza Hut,] Taco [removed: Bell] [added: Bell, Pizza Hut] and The Habit Burger Grill brands.

[removed: As evidence of] the opportunities these positions create, approximately 80% of our Company-owned Restaurant General Managers (“RGMs”) located in the U.S. have been promoted from other positions in our restaurants and such RGMs often earn competitive pay greater than the average American household income.

We are also highly focused on building an inclusive culture among our employees, franchisees, suppliers and partners to reflect [added: the diversity of our customers and communities.]

The most recent survey conducted was in [removed: 2019] [added: 2021] and reflected an engagement level among our employees significantly exceeding the average engagement levels of benchmarked companies.

[removed: We also intend to make available the] [added: Our] Heartstyles program [added: is also available] to our franchisees so that their employees may benefit as well.

- Enabling a culture that fuels results and cross-brand collaboration on operational execution, people capability and customer experience initiatives [removed: across] [added: throughout] our system.

In [removed: 2019,] [added: 2020,] approximately [removed: 40%] [added: 45%] of our global leadership roles were held by women and approximately [removed: half] [added: 55%] of our global above-restaurant workforce were women.

| KFC Division | | | | | | 26,934 | | | | | | 85 | | % | | | | 149 | | | | | | 99 | | % | | | | $ | 31,365 | | | | |

| YUM | | | | | | 53,424 | | | | | | 67 | | % | | | | 157 | | | | | | 98 | | % | | | | $ | 58,188 | | | | |

The Company has successfully increased franchise restaurant ownership in recent years, and currently has approximately 1,500 franchisees with whom we have franchise contracts.

with regard to the oversight of sub-franchisees.

On October 31, 2016, we completed the spin-off of our China business into an independent, publicly-traded company under the name of Yum China Holdings, Inc. (“Yum China”).

As COVID-19 spread throughout the U.S. and the rest of the world, governmental authorities implemented measures to reduce the spread of COVID-19.

These measures include restrictions on travel outside the home and have other limitations on business and other activities as well as encouraging social distancing.

As a result of COVID-19, we and our franchisees have experienced significant store closures and instances of reduced store-level operations, including reduced operating hours and dining-room closures.

We and our franchisees have also experienced interruptions of food and other supplies as well as labor shortages that have impacted restaurant operations.

The impact on our sales in each of our markets has been dependent on the timing, severity and duration of the outbreak, measures implemented by government authorities to reduce the spread of COVID-19, as well as our reliance on dine-in sales in the market.

For our restaurants that prominently feature drive-thru, carryout and delivery options, COVID-19 has in many cases contributed to an increase in sales during 2020 and 2021.

As evidence of

| KFC Division | | | | | | 25,000 | | | | | | 84 | | % | | | | 146 | | | | | | 99 | | % | | | | $ | 26,289 | | | | |

| YUM | | | | | | 50,353 | | | | | | 65 | | % | | | | 155 | | | | | | 98 | | % | | | | $ | 50,359 | | | | |

(b) System sales of Habit Burger Grill are for the period from March 18, 2020 through December 31, 2020.

Restaurants Asia Pte.

Ltd., another subsidiary of YUM, from October 31, 2016 to December 31, 2019.

This included having a significant number of our open restaurants subject to dining room closures and other limitations on access.

dishes.

the diversity of our customers and communities.

COVID-19 Response

In connection with navigating the COVID-19 pandemic, we have been heavily focused on the health and safety of the employees, customers and franchisees of our Concepts.

Our response efforts during the pandemic have included the following:

- Supporting impacted employees through establishment of a global medical relief fund through Yum!

Brands Foundation, Inc. for Company-owned and franchise restaurant team members diagnosed with COVID-19 or acting as the primary caregiver for someone diagnosed with COVID-19.

- Assisting franchisees through a global franchise health and COVID-19 support team for business continuity and providing assistance to franchisees who were in good standing and needed more access to capital, primarily through deferrals of capital obligations for remodels and new development.

Additionally, where necessary, we provided grace periods for near-term payments due to YUM.

- Keeping restaurants open safely through increased use of low contact options such as delivery, drive-thru and curbside pickup, providing for contactless delivery, increased cleaning and sanitization and providing for personal protective equipment, temperature checks and counter shields.

Finally, as a publicly-traded company, disputes arise from time-to-time with our shareholders, including allegations that the Company breached federal securities laws [removed: or that officers and/or directors breached fiduciary duties.]

or that officers and/or directors breached fiduciary duties.

| | | | | | | EXCHANGE ACT OF 1934 for the fiscal year ended | | | December 31, [removed: 2020] [added: 2021] | | |

The aggregate market value of the voting stock (which consists solely of shares of Common Stock) held by non-affiliates of the registrant as of June 30, [removed: 2020,] [added: 2021,] computed by reference to the closing price of the registrant’s Common Stock on the New York Stock Exchange Composite Tape on such date was approximately [removed: $26.2] [added: $34.0] billion.

The number of shares outstanding of the registrant’s Common Stock as of February [removed: 12, 2021,] [added: 15, 2022,] was [removed: 300,055,312] [added: 288,980,982] shares.

Portions of the definitive proxy statement furnished to shareholders of the registrant in connection with the annual meeting of shareholders to be held on May [removed: 11, 2021,] [added: 19, 2022,] are incorporated by reference into Part III.

The Company has received no written comments regarding its periodic or current reports from the staff of the Securities and Exchange Commission that were issued 180 days or more preceding the end of its [removed: 2020] [added: 2021] fiscal year and that remain unresolved.

As of year end [removed: 2020,] [added: 2021,] the Company’s Concepts owned land, building or both for [removed: 333] [added: 325] restaurants worldwide in connection with the operation of our [removed: 1,098] [added: 1,051] Company-owned restaurants.

- The Pizza Hut Division owned land, building or both for [removed: 3] [added: 2] restaurants.

- The Taco Bell Division owned land, building or both for [removed: 260] [added: 253] restaurants.

The Company currently also owns land, building or both related to approximately 500 franchise restaurants [added: that it leases to franchisees] and leases land, building or both related to approximately [removed: 350] [added: 300] franchise [removed: restaurants, not included in the property counts above,] [added: restaurants] that it [removed: leases or] subleases to franchisees, principally in the U.S., United Kingdom, Australia and Germany.

Taco Bell [added: Division] leases its corporate headquarters and research facility in Irvine, California.

The executive officers of the Company as of February [removed: 19, 2021,] [added: 22, 2022,] and their ages and current positions as of that date are as follows:

David Gibbs, [removed: 57,] [added: 58,] is Chief Executive Officer of YUM a position he has held since January 2020.

Scott Catlett, [removed: 44,] [added: 45,] is Chief Legal and Franchise Officer and Corporate Secretary of YUM.

Mark King, [removed: 61,] [added: 62,] is Chief Executive Officer of Taco Bell Division, a position he has held since August 2019.

[removed: Tony Lowings, 62,] [added: Sabir Sami, 54,] is Chief Executive Officer of KFC Division, a position he has held since January [removed: 2019.][added: 2022.]

David Russell, [removed: 51,] [added: 52,] is Senior Vice President, Finance and Corporate Controller of YUM.

Tracy Skeans, [removed: 48,] [added: 49,] is Chief Operating Officer and Chief People Officer of YUM.

Prior to this position, Ms. Skeans served as Chief People Officer of Pizza Hut Division from December 2013 to December 2014 and [added: Chief People Officer of Pizza Hut U.S. from October 2011 to November 2013.]

[removed: Arthur Starrs, 44,] [added: Aaron Powell, 50,] is Chief Executive Officer of Pizza Hut Division, a position he has held since [removed: August 2019.][added: September 2021.]

Christopher Turner, [removed: 46,] [added: 47,] is Chief Financial Officer of YUM, a position he has held since August 2019.

[removed: Prior to leading PepsiCo’s] Walmart business, he served in various positions including Senior Vice President of Transformation for PepsiCo’s Frito-Lay North America business from July 2017 to December 2017 and Senior Vice President of Strategy for Frito-Lay from February 2016 to June 2017.

Before joining YUM, Mr. Powell served in various positions at Kimberly-Clark from September 2007 to August 2021.

Prior to joining Kimberly-Clark, he served in various positions at Bain & Company and Proctor & Gamble.

From January 2020 to December 2021 he served in a dual role as KFC Division Chief Operating Officer and Managing Director of KFC Asia.

Prior to this, from April 2013 to December 2019, he was Managing Director for the KFC Middle East, North Africa, Pakistan and Turkey markets.

Before joining YUM in 2009, Mr. Sami served in various leadership roles at Procter & Gamble, the Coca-Cola Company and Reckitt Benckiser.

Prior to leading PepsiCo’s

Prior to that, he served as President and Chief Operations Officer of KFC Division from August 2018 to December 2018.

From November 2016 to July 2018 he served as Managing Director of Asia-Pacific and from February 2013 to October 2016 as Managing Director of KFC SOPAC (Australia and New Zealand).

Mr. Lowings served in various positions including Chief Operations Officer of YRI and Managing Director of Latin America and the Caribbean for KFC, Pizza Hut and Taco Bell and General Manager of KFC and Pizza Hut in Australia and New Zealand from January 2010 to January 2013.

Chief People Officer of Pizza Hut U.S. from October 2011 to November 2013.

He served as President of Pizza Hut U.S. from May 2016 to July 2019 and he served as General Manager and Chief Financial Officer of Pizza Hut U.S. from November 2013 to April 2016.

As of February [removed: 12, 2021,] [added: 15, 2022,] there were [removed: 39,395] [added: 37,439] registered holders of record of the Company’s Common Stock.

In [removed: 2020,] [added: 2021,] the Company declared and paid four cash dividends of [removed: $0.47] [added: $0.50] per share.

The following table provides information as of December 31, [removed: 2020,] [added: 2021,] with respect to shares of Common Stock repurchased by the Company during the quarter then ended.

[removed: On November 21, 2019,] [added: In May 2021,] our Board of Directors authorized share repurchases [removed: through June] [added: from July 1,] 2021 [added: through December 31, 2022] of up to $2 billion (excluding applicable transaction fees) of our outstanding Common Stock.

As of December 31, [removed: 2020,] [added: 2021,] we have remaining capacity to repurchase up to [removed: $1.75 billion] [added: $950 million] of Common Stock under this authorization.

This graph compares the cumulative total return of our Common Stock to the cumulative total return of the S&P 500 Index and the S&P 500 Consumer Discretionary Sector Index, a peer group that includes YUM, for the period from December [removed: 31, 2015] [added: 30, 2016] to December 31, [removed: 2020.][added: 2021.]

The graph assumes that the value of the investment in our Common Stock and each index was $100 at December [removed: 31, 2015,] [added: 30, 2016,] and that all cash dividends were reinvested.

[removed: ][added: ]

| | | | | | | [removed: 12/31/2015] [added: 12/30/2016] | | | | | | [removed: 12/30/2016] [added: 12/29/2017] | | | | | | [removed: 12/29/2017] [added: 12/31/2018] | | | | | | [removed: 12/31/2018] [added: 12/31/2019] | | | | | | [removed: 12/31/2019] [added: 12/30/2020] | | | | | | [removed: 12/31/2020] [added: 12/31/2021] | | |

In February 2022, the Board of Directors declared a dividend of $0.57 per share to be distributed March 11, 2022 to shareholders of record at the close of business on February 18, 2022.

| 10/1/21 - 10/31/21 | | | | | | 1,303 | | | | | | $ | 124.89 | | | | | 1,303 | | | | | | $ | 1,507 | |

| 11/1/21 - 11/30/21 | | | | | | 2,177 | | | | | | $ | 126.00 | | | | | 2,177 | | | | | | $ | 1,233 | |

| 12/1/21 - 12/31/21 | | | | | | 2,153 | | | | | | $ | 131.22 | | | | | 2,153 | | | | | | $ | 950 | |

| Total | | | | | | 5,633 | | | | | | $ | 127.74 | | | | | 5,633 | | | | | | $ | 950 | |

| YUM | | | | | | $ | 100 | | | | | $ | 131 | | | | | $ | 150 | | | | | $ | 167 | | | | | $ | 184 | | | | | $ | 239 | |

| S&P 500 | | | | | | $ | 100 | | | | | $ | 122 | | | | | $ | 116 | | | | | $ | 153 | | | | | $ | 181 | | | | | $ | 233 | |

| S&P Consumer Discretionary | | | | | | $ | 100 | | | | | $ | 123 | | | | | $ | 124 | | | | | $ | 159 | | | | | $ | 211 | | | | | $ | 263 | |

| 10/1/20 - 10/31/20 | | | | | | 160 | | | | | | $ | 93.48 | | | | | 160 | | | | | | $ | 1,985 | |

| 11/1/20- 11/30/20 | | | | | | 1,224 | | | | | | $ | 101.49 | | | | | 1,224 | | | | | | $ | 1,861 | |

| 12/1/20 - 12/31/20 | | | | | | 1,034 | | | | | | $ | 107.10 | | | | | 1,034 | | | | | | $ | 1,750 | |

| Total | | | | | | 2,418 | | | | | | | | | | | | 2,418 | | | | | | | | |

| YUM | | | | | | $ | 100 | | | | | $ | 123 | | | | | $ | 162 | | | | | $ | 185 | | | | | $ | 207 | | | | | $ | 227 | |

| S&P 500 | | | | | | $ | 100 | | | | | $ | 112 | | | | | $ | 136 | | | | | $ | 130 | | | | | $ | 171 | | | | | $ | 203 | |

| S&P Consumer Discretionary | | | | | | $ | 100 | | | | | $ | 106 | | | | | $ | 130 | | | | | $ | 131 | | | | | $ | 168 | | | | | $ | 224 | |

Selected Financial Data

Yum!

Brands, Inc. and Subsidiaries

(in millions, except per share and unit amounts)

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | 2020 | | | | | | 2019 | | | | | | 2018 | | | | | | 2017 | | | | | | 2016 | | |

| Income Statement Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Company sales | | | $ | 1,810 | | | | | $ | 1,546 | | | | | $ | 2,000 | | | | | $ | 3,572 | | | | | $ | 4,189 | |

| Franchise and property revenues | | | 2,510 | | | | | | 2,660 | | | | | | 2,482 | | | | | | 2,306 | | | | | | 2,167 | | |

| Franchise contributions for advertising and other services | | | 1,332 | | | | | | 1,391 | | | | | | 1,206 | | | | | | — | | | | | | — | | |

| Total | | | 5,652 | | | | | | 5,597 | | | | | | 5,688 | | | | | | 5,878 | | | | | | 6,356 | | |

| Refranchising (gain) loss | | | (34) | | | | | | (37) | | | | | | (540) | | | | | | (1,083) | | | | | | (163) | | |

| Operating Profit | | | 1,503 | | | | | | 1,930 | | | | | | 2,296 | | | | | | 2,761 | | | | | | 1,682 | | |

| Investment (income) expense, net | | | (74) | | | | | | 67 | | | | | | (9) | | | | | | (5) | | | | | | (2) | | |

| Other pension (income) expense | | | 14 | | | | | | 4 | | | | | | 14 | | | | | | 47 | | | | | | 32 | | |

| Interest expense, net | | | 543 | | | | | | 486 | | | | | | 452 | | | | | | 445 | | | | | | 307 | | |

| Income from continuing operations before income taxes | | | 1,020 | | | | | | 1,373 | | | | | | 1,839 | | | | | | 2,274 | | | | | | 1,345 | | |

| Income from continuing operations | | | 904 | | | | | | 1,294 | | | | | | 1,542 | | | | | | 1,340 | | | | | | 1,018 | | |

| Income from discontinued operations, net of tax | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | 625 | | |

| Net Income | | | 904 | | | | | | 1,294 | | | | | | 1,542 | | | | | | 1,340 | | | | | | 1,643 | | |

| Basic earnings per share from continuing operations | | | 2.99 | | | | | | 4.23 | | | | | | 4.80 | | | | | | 3.86 | | | | | | 2.58 | | |

| Basic earnings per share from discontinued operations | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | 1.59 | | |

| Basic earnings per share | | | 2.99 | | | | | | 4.23 | | | | | | 4.80 | | | | | | 3.86 | | | | | | 4.17 | | |

| Diluted earnings per share from continuing operations | | | 2.94 | | | | | | 4.14 | | | | | | 4.69 | | | | | | 3.77 | | | | | | 2.54 | | |

| Diluted earnings per share from discontinued operations | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | 1.56 | | |

| Diluted earnings per share | | | 2.94 | | | | | | 4.14 | | | | | | 4.69 | | | | | | 3.77 | | | | | | 4.10 | | |

| Diluted earnings per share from continuing operations excluding Special Items | | | 3.62 | | | | | | 3.55 | | | | | | 3.17 | | | | | | 2.96 | | | | | | 2.46 | | |

| Cash Flow Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Provided by operating activities | | | $ | 1,305 | | | | | $ | 1,315 | | | | | $ | 1,176 | | | | | $ | 1,030 | | | | | $ | 1,248 | |

| Capital spending | | | 160 | | | | | | 196 | | | | | | 234 | | | | | | 318 | | | | | | 427 | | |

| Proceeds from refranchising of restaurants | | | 19 | | | | | | 110 | | | | | | 825 | | | | | | 1,773 | | | | | | 370 | | |

| Repurchase shares of Common Stock | | | 239 | | | | | | 815 | | | | | | 2,390 | | | | | | 1,960 | | | | | | 5,403 | | |

| Dividends paid on Common Stock | | | 566 | | | | | | 511 | | | | | | 462 | | | | | | 416 | | | | | | 744 | | |

| Balance Sheet Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Total assets | | | $ | 5,852 | | | | | $ | 5,231 | | | | | $ | 4,130 | | | | | $ | 5,311 | | | | | $ | 5,453 | |

| Long-term debt | | | 10,272 | | | | | | 10,131 | | | | | | 9,751 | | | | | | 9,429 | | | | | | 9,059 | | |

| Total debt | | | 10,725 | | | | | | 10,562 | | | | | | 10,072 | | | | | | 9,804 | | | | | | 9,125 | | |

| Other Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | Page Reference | | | [removed: | | |]

| Consolidated Financial Statements | | | | | | [removed: | | |]

[removed: |] Report of Independent Registered Public Accounting Firm [removed: | | | [57](#i089085605c504b5c8a281dbe36f6826c_88) | | | | | |]

| Consolidated Statements of Income | | | [removed: [60](#i089085605c504b5c8a281dbe36f6826c_91) | | |] [added: [54](#i592f8a9a13034219896dc2f640528fc8_91)] | | |

| Consolidated Statements of Comprehensive Income | | | [removed: [61](#i089085605c504b5c8a281dbe36f6826c_94) | | |] [added: [55](#i592f8a9a13034219896dc2f640528fc8_94)] | | |

| Consolidated Statements of Cash Flows | | | [removed: [62](#i089085605c504b5c8a281dbe36f6826c_97) | | |] [added: [56](#i592f8a9a13034219896dc2f640528fc8_97)] | | |

| Consolidated Balance Sheets | | | [removed: [63](#i089085605c504b5c8a281dbe36f6826c_100) | | |] [added: [57](#i592f8a9a13034219896dc2f640528fc8_100)] | | |

| Consolidated Statements of Shareholders’ Deficit | | | [removed: [64](#i089085605c504b5c8a281dbe36f6826c_106) | | |] [added: [58](#i592f8a9a13034219896dc2f640528fc8_103)] | | |

| Notes to Consolidated Financial Statements | | | [removed: [65](#i089085605c504b5c8a281dbe36f6826c_112) | | |] [added: [59](#i592f8a9a13034219896dc2f640528fc8_106)] | | |

[removed: Report] [added: | Report] of Independent Registered Public Accounting [removed: Firm][added: Firm | | | [52](#i592f8a9a13034219896dc2f640528fc8_88) | | |]

Brands, Inc. and [removed: Subsidiaries] [added: subsidiaries] (the Company) as of December 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] the related consolidated statements of income, comprehensive income, cash flows and shareholders’ deficit for each of the years in the three-year period ended December 31, [removed: 2020,] [added: 2021,] and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, [removed: 2020,] [added: 2021,] based on criteria established in *Internal Control – Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, [removed: 2020,] [added: 2021,] in conformity with U.S. generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2020] [added: 2021] based on criteria established in *Internal Control – Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

*Critical Audit [removed: Matters*][added: Matter*]

The critical audit [removed: matters] [added: matter] communicated below [removed: are matters] [added: is a matter] arising from the current period audit of the consolidated financial statements that [removed: were] [added: was] communicated or required to be communicated to the audit committee and that: (1) [removed: relate] [added: relates] to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of [added: a] critical audit [removed: matters] [added: matter] does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit [removed: matters] [added: matter] below, providing [added: a] separate [removed: opinions] [added: opinion] on the critical audit [removed: matters] [added: matter] or on the accounts or disclosures to which [removed: they relate.][added: it relates.]

As discussed in Note 18 to the consolidated financial statements, the Company has recorded unrecognized tax benefits, excluding associated interest, of [removed: $175] [added: $116] million.

Tax laws are complex and often subject to different interpretations by [removed: tax payers] [added: taxpayers] and the respective taxing authorities.

Subjective and complex auditor judgment was required to evaluate tax law and regulations, court rulings and audit settlements in the related taxing [removed: jurisdiction] [added: jurisdictions] to determine the population of significant uncertain tax positions identified by the Company arising from tax planning strategies.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s [added: process for] identification of uncertain tax [removed: positions process.][added: positions.]

[removed: *●*] [added: -] Obtaining an understanding of the Company’s tax planning strategies;

[removed: ●] [added: -] Identifying tax positions created by tax planning strategies and comparing the results to the Company’s identification of uncertain tax positions;

[removed: ●] [added: -] Evaluating the Company’s interpretation of tax laws and court rulings by developing an independent assessment; and

[removed: ●] [added: -] Performing an independent assessment to identify tax positions that may not be sustained upon examination by the respective taxing authority and comparing the results to the Company’s assessment.

[removed: February 19,] [added: | | | | | | |] 2021 [added: | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Fiscal years ended December 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018] [added: 2019] | | | | | | | | | | | | | | | | | | | | |

| | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | |

| Company sales | | | | | | $ | [removed: 1,810] [added: 2,106] | | | | | $ | [removed: 1,546] [added: 1,810] | | | | | $ | [removed: 2,000] [added: 1,546] | |

| Franchise and property revenues | | | | | | [removed: 2,510] [added: 2,900] | | | | | | [removed: 2,660] [added: 2,510] | | | | | | [removed: 2,482] [added: 2,660] | | |

| Franchise contributions for advertising and other services | | | | | | [removed: 1,332] [added: 1,578] | | | | | | [removed: 1,391] [added: 1,332] | | | | | | [removed: 1,206] [added: 1,391] | | |

| Total revenues | | | | | | [removed: 5,652] [added: 6,584] | | | | | | [removed: 5,597] [added: 5,652] | | | | | | [removed: 5,688] [added: 5,597] | | |

| Company restaurant expenses | | | | | | [removed: 1,506] [added: 1,725] | | | | | | [removed: 1,235] [added: 1,506] | | | | | | [removed: 1,634] [added: 1,235] | | |

| General and administrative expenses | | | | | | [removed: 1,064] [added: 1,060] | | | | | | [removed: 917] [added: 1,064] | | | | | | [removed: 895] [added: 917] | | |

| Franchise and property expenses | | | | | | [removed: 145] [added: 117] | | | | | | [removed: 180] [added: 145] | | | | | | [removed: 188] [added: 180] | | |

| Franchise advertising and other services expense | | | | | | [removed: 1,314] [added: 1,576] | | | | | | [removed: 1,368] [added: 1,314] | | | | | | [removed: 1,208] [added: 1,368] | | |

| Refranchising (gain) loss | | | | | | [removed: (34)] [added: (35)] | | | | | | [removed: (37)] [added: (34)] | | | | | | [removed: (540)] [added: (37)] | | |

| Other (income) expense | | | | | | [removed: 154] [added: 2] | | | | | | [removed: 4] [added: 154] | | | | | | [removed: 7] [added: 4] | | |

| Total costs and expenses, net | | | | | | [removed: 4,149] [added: 4,445] | | | | | | [removed: 3,667] [added: 4,149] | | | | | | [removed: 3,392] [added: 3,667] | | |

| Operating Profit | | | | | | [removed: 1,503] [added: 2,139] | | | | | | [removed: 1,930] [added: 1,503] | | | | | | [removed: 2,296] [added: 1,930] | | |

| | | | | | |

| | | | | | |

| | | | | | |

| | | | | | | (24) | | | | | | 39 | | | | | | 28 | | |

| | | | | | | (24) | | | | | | 39 | | | | | | 24 | | |

| | | | | | | 81 | | | | | | 10 | | | | | | (29) | | |

| | | | | | | 62 | | | | | | 8 | | | | | | (22) | | |

| | | | | | | 62 | | | | | | (93) | | | | | | (76) | | |

| | | | | | | 48 | | | | | | (70) | | | | | | (56) | | |

| Fiscal years ended December 31, 2021, 2020 and 2019 | | | | | | | | | | | | | | | | | | | | |

| Net Income | | | | | | $ | 1,575 | | | | | $ | 904 | | | | | $ | 1,294 | |

| Refranchising (gain) loss | | | | | | (35) | | | | | | (34) | | | | | | (37) | | |

| Fiscal years ended December 31, 2021, 2020 and 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Balance at December 31, 2021 | | | | | | 289 | | | | | | $ | — | | | | | $ | (8,048) | | | | | $ | (325) | | | | | | | | | | | $ | (8,373) | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

We account for our investment in Devyani and the entity that owns our KFC Brazil and Pizza Hut Brazil master franchisee rights as equity securities.

fair value in Investment (income) expense, net.

We account for our investment in the entity that operates Taco Bell units in India as an available-for-sale debt security.

This available-for-sale debt security is carried at fair value with unrealized gains and losses, net of tax, included as a component of Other comprehensive income (loss), on the Consolidated Statements of Comprehensive Income.

the application of the sales-based royalty exception within Topic 606.

liability and property losses (collectively, "property and casualty losses") are accrued when deemed probable and reasonably estimable.

| | | | | | |

| | | | | | |

| | | | | | |

These receivables

| | | | | | | 2021 | | | | | | 2020 | | |

Subsequent amortization

Derivative Financial Instruments. We use derivative instruments primarily to hedge interest rate and foreign currency risks, and to reduce our exposure to market-driven charges in certain of the liabilities associated with employee compensation deferrals into our Executive Income Deferral (“EID”) Plan.

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

The Company acquired The Habit Restaurants, Inc. and its subsidiaries (Habit Burger Grill) during 2020, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020, Habit Burger Grill’s internal control over financial reporting associated with approximately 9% of total assets and 6% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2020.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Habit Burger Grill.

*Change in Accounting Principle*

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in fiscal year 2019 due to the adoption of Topic 842, Leases.

The following are the primary procedures we performed to address this critical audit matter.

*Acquisition-date fair value of the brand and subsequent assessment of goodwill impairment - Habit Burger Grill*

As discussed in Note 3 to the consolidated financial statements, the Company completed the acquisition of The Habit Restaurants, Inc. (Habit Burger Grill) during fiscal year 2020 for total cash consideration of $408 million.

As a result of the transaction, the Company acquired certain intangible assets, including the Habit Burger Grill brand (the brand).

The acquisition-date fair value for the brand was $96 million.

The Company performs its goodwill impairment testing on an annual basis and whenever events

or circumstances indicate that the carrying value of a reporting unit likely exceeds it fair value.

As a result of the impact of COVID-19 on substantially all of Habit Burger Grill restaurants’ operations during the first quarter of 2020, the Company performed an interim impairment test of the Habit Burger Grill reporting unit (the reporting unit) and recorded a goodwill impairment charge of $139 million and a corresponding income tax benefit of $32 million.

We identified the evaluation of the acquisition-date fair value of the brand, and the subsequent fair value estimate of the reporting unit for the subsequent goodwill impairment assessment as a critical audit matter.

Subjective and complex auditor judgment was required to evaluate the acquisition-date fair value of the brand and subsequent fair value of the reporting unit.

The fair value estimates used the following significant assumptions for which there was limited observable market information: projected cash flows, including the projected growth in restaurant unit counts and average unit volumes, royalty rate, and discount rates.

The determined fair values of the brand and the reporting unit, which directly impacted the goodwill impairment charge, were subjective determinations and sensitive to variation.

Changes in those assumptions could have had a significant effect on acquisition-date fair value of the brand and subsequent fair value of the reporting unit.

In addition, due to the economic impact of the COVID-19 pandemic on the Company’s business, there was significant uncertainty associated with these inputs.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s acquisition and related impairment process, including controls related to:

● the development of the projected cash flows including the projected growth in restaurant unit counts and average unit volumes used to determine the acquisition-date brand fair value and subsequent fair value of the reporting unit

● the assumed royalty rate used to determine the acquisition-date fair value of the brand; and

● the assumed discount rates used to determine the acquisition-date brand fair value and subsequent fair value of the reporting unit

We compared the Company’s projected cash flows including the projected growth in restaurant unit counts and average unit volumes used in the valuations to the underlying business strategies and growth plans for the acquisition.

We compared the Company’s projected cash flows to Habit Burger Grill’s historical results.

We involved valuation professionals with specialized skills and knowledge who assisted in:

● evaluating the projected cash flows by comparing them to peer companies used in both the acquisition-date brand fair value and subsequent fair value of the reporting unit

● analyzing the assumed royalty rate by benchmarking against other acquisitions of peer companies; and

● evaluating the discount rates used in the valuations, by comparing them to discount rate ranges that were independently developed using publicly available market data for comparable entities.

| | | | | | | 39 | | | | | | 28 | | | | | | (98) | | |

| | | | | | | 39 | | | | | | 24 | | | | | | (92) | | |

| | | | | | | 10 | | | | | | (29) | | | | | | 54 | | |

| | | | | | | 8 | | | | | | (22) | | | | | | 41 | | |

| | | | | | | (93) | | | | | | (76) | | | | | | (20) | | |

| | | | | | | (70) | | | | | | (56) | | | | | | (14) | | |

| Contributions to defined benefit pension plans | | | | | | (6) | | | | | | (15) | | | | | | (16) | | |

| Acquisition of The Habit Restaurants, Inc., net of cash acquired | | | | | | (408) | | | | | | — | | | | | | — | | |

| Balance at December 31, 2017 | | | | | | 332 | | | | | | $ | — | | | | | $ | (6,063) | | | | | $ | (271) | | | | | | | | | | | $ | (6,334) | | | | | | | | | | |

| Reclassification of translation adjustments into income | | | | | | | | | | | | | | | | | | | | | | | | (4) | | | | | | | | | | | | (4) | | | | | | | | | | | |

Based on our evaluation under the framework in *Internal Control – Integrated Framework (2013)*, our management concluded that our internal control over financial reporting was effective as of December 31, [removed: 2020.][added: 2021.]

There were no changes with respect to the Company’s internal control over financial reporting or in other factors that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended December 31, [removed: 2020.][added: 2021.]

We have excluded from the scope of management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2020, the operations and related assets of The Habit Restaurants, Inc. and its subsidiaries (“The Habit Burger Grill”), which we acquired on March 18, 2020.

The Habit Burger Grill’s total assets and total revenues represented approximately 9% and 6% of the Company's respective consolidated total assets and total revenues as of and for the year ended December 31, 2020.

PART III

Not applicable.

PART III

| | | | | | |

| --- | --- | --- | --- | --- | --- |

Information regarding Section 16(a) compliance, the Audit Committee and the Audit Committee financial expert, the Company’s code of ethics and background of the directors appearing under the captions “Stock Ownership Information,” “Governance of the Company,” “Executive Compensation” and “Item 1: Election of [removed: Directors and Director biographies”] [added: Directors”] is incorporated by reference from the Company’s definitive proxy statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, [removed: 2020.][added: 2021.]

Information regarding executive and director compensation and the Management Planning and Development Committee appearing under the captions “Governance of the Company” and “Executive Compensation” is incorporated by reference from [removed: the Company’s definitive proxy statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2020.]

the Company’s definitive proxy statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2021.

Information regarding equity compensation plans and security ownership of certain beneficial owners and management appearing under the captions “Executive Compensation” and “Stock Ownership Information” is incorporated by reference from the Company’s definitive proxy statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, [removed: 2020.][added: 2021.]

Information regarding certain relationships and related transactions and information regarding director independence appearing under the caption “Governance of the Company” is incorporated by reference from the Company’s definitive proxy statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, [removed: 2020.][added: 2021.]

Information regarding principal accountant fees and services and audit committee pre-approval policies and procedures appearing under the caption “Item 2: Ratification of Independent Auditors” is incorporated by reference from the Company’s definitive proxy statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, [removed: 2020.][added: 2021.]

Our independent registered public accounting firm is KPMG, LLP, Louisville, Kentucky, Auditor Firm ID: 185.

| Date: | | | February [removed: 19, 2021] [added: 22, 2022] | | |

Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed on February [removed: 19, 2021,] [added: 22, 2022,] by the following persons on behalf of the registrant and in the capacities indicated.

| 3.2 | | | | | | | | | [Amended and restated Bylaws of YUM, effective [removed: July 15, 2016,] [added: November 12, 2021,] which are incorporated herein by reference from Exhibit [removed: 3.1] [added: 3.2] to YUM's Report on Form 8-K filed on [removed: July 19, 2016.](http://www.sec.gov/Archives/edgar/data/1041061/000104106116000086/ex31.htm)] [added: November 17, 2021.](http://www.sec.gov/Archives/edgar/data/1041061/000104106121000058/exhibit32-amended_andxre.htm)] | | | | | |

| | | | | | | | | | (i) | | | [removed: [6](http://www.sec.gov/Archives/edgar/data/1041061/000110465907075918/a07-25341_4ex4d1.htm)[6.875%] [added: [6.875%] Senior Notes due November 15, 2037, issued under the forgoing May 1, 1998, indenture, which notes are incorporated by reference from Exhibit 4.3 (included in Exhibit 4.1) to YUM's Report on Form 8-K filed on October 22, 2007.](http://www.sec.gov/Archives/edgar/data/1041061/000110465907075918/a07-25341_4ex4d1.htm) | | |

| | | | | | | | | | (ii) | | | [removed: [3.750%] [added: [3.875%] Senior Notes due November 1, [removed: 2021,] [added: 2023,] issued under the forgoing May 1, 1998, indenture, which notes are incorporated by reference from Exhibit 4.2 (included in Exhibit 4.1) to YUM's Report on Form 8-K filed [removed: August 29, 2011.](http://www.sec.gov/Archives/edgar/data/1041061/000110465911049192/a11-24230_4ex4d1.htm)] [added: October 31, 2013.](http://www.sec.gov/Archives/edgar/data/1041061/000110465913079610/a13-23145_1ex4d1.htm)] | | |

| | | | | | | | | | (iii) | | | [removed: [3.875%] [added: [5.350%] Senior Notes due November 1, [removed: 2023,] [added: 2043,] issued under the forgoing May 1, 1998, indenture, which notes are incorporated by reference from Exhibit [removed: 4.2] [added: 4.3] (included in Exhibit 4.1) to YUM's Report on Form 8-K filed October 31, 2013.](http://www.sec.gov/Archives/edgar/data/1041061/000110465913079610/a13-23145_1ex4d1.htm) | | |

| 10.1.3 | | | | | | | | | [Refinancing [removed: Amendment,] [added: Amendment No. 3,] dated as of April 3, 2018, to Credit Agreement dated as of June 16, 2016, among Pizza Hut Holdings, LLC, KFC Holding Co. and Taco Bell of America, LLC, as borrowers, the Lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Collateral Agent, Swing Line Lender, an L/C Issuer and Administrative Agent for the Lenders, which is incorporated herein by reference from Exhibit 10.1 to YUM's Report on Form 8-K as filed on April 9, 2018.](http://www.sec.gov/Archives/edgar/data/1041061/000110465918022987/a18-9774_1ex10d1.htm) | | | | | |

| 10.4.1† | | | | | | | | | [YUM! Brands Executive Income Deferral Program, Plan Document for the 409A Program, as effective January 1, 2005, and as Amended [removed: through June 30, 2009, which is incorporated by reference from Exhibit 10.10.1 to YUM's Quarterly Report on Form 10-Q for the quarter ended June 13, 2009.](http://www.sec.gov/Archives/edgar/data/1041061/000104106109000192/exhib10_10-1.htm)] [added: and Restated as of January 1, 2021, as attached herein.](https://www.sec.gov/Archives/edgar/data/1041061/000104106122000009/yum-12312021xex1041.htm)] | | | | | |

| 10.5.1† | | | | | | | | | [The Yum! Brands, Inc. Pension Equalization Plan, Restated Plan Document for the 409A Program effective January 1, 2005, [added: and] as [removed: amended through] [added: Amended and Restated as of] January 1, [removed: 2017, which is incorporated by reference from Exhibit 10.5.1 to YUM's Annual Report on Form 10-K for the fiscal year ended December 31, 2018.](http://www.sec.gov/Archives/edgar/data/1041061/000104106118000013/yum-12312017xex1051.htm)] [added: 2021, as attached herein.](https://www.sec.gov/Archives/edgar/data/1041061/000104106122000009/yum-12312021xex1051.htm)] | | | | | |

| 10.11.3† | | | | | | | | | [Form of YUM Long Term Incentive Plan Global YUM! Non-Qualified Stock Option Agreement (2019), which is incorporated herein by reference from Exhibit 10.11.3 to YUM’s [added: Quarterly] Report on Form 10-Q filed on May 8, 2019.](http://www.sec.gov/Archives/edgar/data/1041061/000104106119000018/yum-3312019xex10113.htm) | | | | | |

| 10.13.3† | | | | | | | | | [Yum! Brands, Inc. Long Term Incentive Plan Form of Global YUM! Stock Appreciation Rights Agreement (2019), which is incorporated herein by reference from Exhibit 10.13.3 to YUM’s [added: Quarterly] Report on Form 10-Q filed on May 8, 2019.](http://www.sec.gov/Archives/edgar/data/1041061/000104106119000018/yum-3312019xex10133.htm) | | | | | |

| 10.13.4† | | | | | | | | | [Yum! Brands, Inc. Long Term Incentive Plan Form of Global Restricted Stock Unit Agreement (2019), which is incorporated herein by reference from Exhibit 10.20 to YUM’s [added: Quarterly] Report on Form 10-Q filed on May 8, 2019.](http://www.sec.gov/Archives/edgar/data/1041061/000104106119000018/yum3312019-ex1020.htm) | | | | | |

| 10.14.1† | | | | | | | | | [YUM! Brands Leadership Retirement Plan, Plan Document for the 409A Program, as effective January 1, 2005, and as Amended [removed: through December, 2009, which is incorporated by reference from Exhibit 10.21.1 to YUM's Annual Report on Form 10-K for the fiscal year ended December 26, 2009.](http://www.sec.gov/Archives/edgar/data/1041061/000104106110000011/ex10-21_1.htm)] [added: and Restated as of January 1, 2021, as attached herein.](https://www.sec.gov/Archives/edgar/data/1041061/000104106122000009/yum-12312021xex10141.htm)] | | | | | |

| [removed: 10.19] [added: 10.1.4] | | | | | | | | | [removed: [Indenture,] [added: [Refinancing Amendment No. 4,] dated as of [added: March 15, 2021, to Credit Agreement dated as of] June 16, [removed: 2016, by and] [added: 2016] among [removed: KFC Holding Co.,] Pizza Hut Holdings, [removed: LLC] [added: LLC, KFC Holding Co.] and Taco Bell of America, LLC, as [removed: issuers,] [added: borrowers,] the [removed: Guarantors named therein] [added: Lenders from time to time party thereto] and [removed: The Bank of New York Mellon Trust Company,] [added: JPMorgan Chase Bank,] N.A., as [removed: trustee,] [added: Collateral Agent, Swing Line Lender, an L/C Issuer and Administrative Agent for the Lenders.,] which is incorporated herein by reference from Exhibit [removed: 4.1] [added: 10.1] to [removed: YUM's] [added: YUM’s] Report on Form 8-K filed on [removed: June 21, 2016.](http://www.sec.gov/Archives/edgar/data/1041061/000104106116000076/exhibit4_1.htm)] [added: March 18, 2021.](http://www.sec.gov/Archives/edgar/data/1041061/000110465921038363/tm219954d1_ex10-1.htm)] | | | | | |

| [removed: 10.21.3] [added: 10.21.4] | | | | | | | | | [Amendment No. 1 to Base Indenture, dated as of August 23, 2016, by and between the Issuer and Citibank, N.A. as Trustee and Series 2016-1 securities intermediary, which is incorporated herein by reference from Exhibit 10.22.3 to YUM's Annual Report on Form 10-K for fiscal year ended December 31, 2018.](http://www.sec.gov/Archives/edgar/data/1041061/000104106119000010/yum-12312018xex10223.htm) | | | | | |

| [removed: 10.21.4] [added: 10.21.5] | | | | | | | | | [Amendment No. 2 to Base Indenture, dated as of November 28, 2018, by and between the Issuer and Citibank, N.A. as Trustee and the Series 2018-1 securities intermediary, which is incorporated herein by reference from Exhibit 10.2 to YUM’s Report on Form 8-K filed on December 3, 2018.](http://www.sec.gov/Archives/edgar/data/1041061/000110465918071068/a18-40974_1ex10d2.htm) | | | | | |

| 10.26.1 | | | | | | | | | [Confirmatory License Agreement, dated as of January 1, 2020, by and between YRI China Franchising, LLC and Yum Restaurants Consulting (Shanghai) Company Limited, [removed: as attached herein.](https://www.sec.gov/Archives/edgar/data/1041061/000104106121000012/yum-12312020xex10261.htm)] [added: which is incorporated herein by reference from Exhibit 10.26.1 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.](http://www.sec.gov/Archives/edgar/data/1041061/000104106121000012/yum-12312020xex10261.htm)] | | | | | |

| 21.1 | | | | | | | | | [Active Subsidiaries of [removed: YUM.](https://www.sec.gov/Archives/edgar/data/1041061/000104106121000012/yum-12312020xex211.htm)] [added: YUM.](https://www.sec.gov/Archives/edgar/data/1041061/000104106122000009/yum-12312021xex211.htm)] | | | | | |

| 23.1 | | | | | | | | | [Consent of KPMG [removed: LLP](https://www.sec.gov/Archives/edgar/data/1041061/000104106121000012/yum-12312020xex231.htm)[.](https://www.sec.gov/Archives/edgar/data/1041061/000104106121000012/yum-12312020xex231.htm)] [added: LLP.](https://www.sec.gov/Archives/edgar/data/1041061/000104106122000009/yum-12312021xex231.htm)] | | | | | |

| 31.1 | | | | | | | | | [Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/1041061/000104106121000012/yum-12312020xex311.htm)] [added: 2002.](https://www.sec.gov/Archives/edgar/data/1041061/000104106122000009/yum-12312021xex311.htm)] | | | | | |

| 31.2 | | | | | | | | | [Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/1041061/000104106121000012/yum-12312020xex312.htm)] [added: 2002.](https://www.sec.gov/Archives/edgar/data/1041061/000104106122000009/yum-12312021xex312.htm)] | | | | | |

| 32.1 | | | | | | | | | [Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/1041061/000104106121000012/yum-12312020xex321.htm)] [added: 2002.](https://www.sec.gov/Archives/edgar/data/1041061/000104106122000009/yum-12312021xex321.htm)] | | | | | |

| 32.2 | | | | | | | | | [Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/1041061/000104106121000012/yum-12312020xex322.htm)] [added: 2002.](https://www.sec.gov/Archives/edgar/data/1041061/000104106122000009/yum-12312021xex322.htm)] | | | | | |

| 101.INS | | | | | | | | | [added: XBRL] Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | | | | |

| 4.2.2 | | | | | | | | | [Second Supplemental Indenture, dated as of April 1, 2021, by and between the Company and U.S. Bank National Association, as Trustee, which is incorporated herein by reference from Exhibit 4.1. to YUM’s Report on Form 8-K filed April 1, 2021.](http://www.sec.gov/Archives/edgar/data/1041061/000110465921045542/tm2111412d1_ex4-1.htm) | | | | | |

| 10.16.1† | | | | | | | | | [YUM! Brands Third Country National Retirement Plan Amendment, as effective January 1, 2021, as attached herein.](https://www.sec.gov/Archives/edgar/data/1041061/000104106122000009/yum-12312021xex10161.htm) | | | | | |

| 10.21.3 | | | | | | | | | [Series 2021-1 Supplement to Amended and Restated Base Indenture, dated as of August 19, 2021, by and between Taco Bell Funding, LLC, as issuer, and Citibank, N.A. as trustee and Series 2021-1 securities intermediary, which is incorporated herein by reference from Exhibit 10.2 to YUM’s Report on Form 8-K filed on August 25, 2021.](http://www.sec.gov/Archives/edgar/data/1041061/000110465921109373/tm2124137d2_ex10-2.htm) | | | | | |

| 10.21.6 | | | | | | | | | [Amended and Restated Base Indenture, dated as of August 19, 2021, by and between Taco Bell Funding, LLC, as issuer, and Citibank, N.A. as trustee and the Series 2021-1 securities intermediary, which is incorporated herein by reference from Exhibit 10.1 to YUM’s Report on Form 8-K filed on August 25, 2021.](http://www.sec.gov/Archives/edgar/data/1041061/000110465921109373/tm2124137d2_ex10-1.htm) | | | | | |

| 10.23.3 | | | | | | | | | [Amended and Restated Management Agreement, dated as of August 19, 2021, by and between Taco Bell Funding, LLC, as issuer, Taco Bell Franchise Holder 1, LLC, Taco Bell Franchisor, LLC, Taco Bell IP Holder, LLC, Taco Bell Franchisor Holdings, LLC and Taco Bell Corp., as manager, and Citibank, N.A. as trustee, which is incorporated herein by reference from Exhibit 10.3 to YUM’s Report on Form 8-K filed on August 25, 2021.](http://www.sec.gov/Archives/edgar/data/1041061/000110465921109373/tm2124137d2_ex10-3.htm) | | | | | |

| 10.30 | | | | | | | | | [Yum! Brands, Inc. Long Term Incentive Plan Form of Global Performance Share Unit Agreement (2021), which is incorporated herein by reference from Exhibit 10.20 to YUM’s Quarterly Report on Form 10-Q filed on May 5, 2021.](http://www.sec.gov/Archives/edgar/data/1041061/000104106121000022/yum-3312021xex1020.htm) | | | | | |

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| | | | | | | | | | (iv) | | | [5.350% Senior Notes due November 1, 2043, issued under the forgoing May 1, 1998, indenture, which notes are incorporated by reference from Exhibit 4.3 (included in Exhibit 4.1) to YUM's Report on Form 8-K filed October 31, 2013.](http://www.sec.gov/Archives/edgar/data/1041061/000110465913079610/a13-23145_1ex4d1.htm) | | |