Item 1. Financial Statements

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Item 1. Financial Statements


CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions, except per share data)
	Quarter ended				Year to date
Revenues	9/30/2025		9/30/2024		9/30/2025		9/30/2024
Company sales	$	697	$	621	$	1,974	$	1,667
Franchise and property revenues	857		804		2,476		2,350
Franchise contributions for advertising and other services	426		401		1,249		1,170
Total revenues	1,979		1,826		5,699		5,187
Costs and Expenses, Net
Company restaurant expenses	587		523		1,668		1,393
General and administrative expenses	282		263		885		830
Franchise and property expenses	35		36		107		90
Franchise advertising and other services expense	427		401		1,251		1,169
Refranchising (gain) loss	(17)		(12)		(33)		(31)
Other (income) expense	(1)		(4)		(15)		(10)
Total costs and expenses, net	1,313		1,207		3,863		3,441
Operating Profit	666		619		1,836		1,746
Investment (income) expense, net	—		(1)		(1)		21
Other pension (income) expense	1		(2)		—		(5)
Interest expense, net	124		120		368		358
Income Before Income Taxes	541		502		1,470		1,372
Income tax provision	144		120		446		309
Net Income	$	397	$	382	$	1,024	$	1,063

Basic Earnings Per Common Share	$	1.42	$	1.36	$	3.67	$	3.77

Diluted Earnings Per Common Share	$	1.41	$	1.35	$	3.64	$	3.73

Dividends Declared Per Common Share	$	0.71	$	0.67	$	2.13	$	2.01

See accompanying Notes to Condensed Consolidated Financial Statements.


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)
	Quarter ended				Year to date
	9/30/2025		9/30/2024		9/30/2025		9/30/2024

Net Income	$	397	$	382	$	1,024	$	1,063
Other comprehensive income (loss), net of tax
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature
Adjustments and gains (losses) arising during the period	(6)		34		71		26
Reclassification of adjustments and (gains) losses into Net Income	—		—		—		—
	(6)		34		71		26
Tax (expense) benefit	—		—		—		—
	(6)		34		71		26
Changes in pension and post-retirement benefits
Unrealized gains (losses) arising during the period	—		—		—		—
Reclassification of (gains) losses into Net Income	3		—		5		1
	3		—		5		1
Tax (expense) benefit	(1)		—		(1)		—
	3		—		4		1
Changes in derivative instruments
Unrealized gains (losses) arising during the period	5		(4)		8		12
Reclassification of (gains) losses into Net Income	(4)		(9)		(15)		(25)
	1		(13)		(6)		(13)
Tax (expense) benefit	—		3		2		3
	1		(10)		(5)		(10)

Other comprehensive income (loss), net of tax	(2)		24		71		17
Comprehensive Income	$	394	$	406	$	1,095	$	1,080

See accompanying Notes to Condensed Consolidated Financial Statements.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)
	Year to date
	9/30/2025		9/30/2024
Cash Flows – Operating Activities
Net Income	$	1,024	$	1,063
Depreciation and amortization	139		120

Refranchising (gain) loss	(33)		(31)
Investment (income) expense, net	(1)		21

Deferred income taxes	175		5
Share-based compensation expense	54		52
Changes in accounts and notes receivable	51		28
Changes in prepaid expenses and other current assets	(8)		(21)
Changes in accounts payable and other current liabilities	(42)		(46)
Changes in income taxes payable	(31)		(67)
Other, net	65		52
Net Cash Provided by Operating Activities	1,393		1,176

Cash Flows – Investing Activities
Capital spending	(236)		(151)
Proceeds from sale of Devyani Investment	—		104

Acquisition of KFC U.K. and Ireland restaurants	—		(174)
Other restaurant acquisitions	(100)		(31)
Proceeds from refranchising of restaurants	53		48
Maturities (purchases) of Short term investments, net	91		(91)
Other, net	(16)		3
Net Cash Used in Investing Activities	(208)		(292)

Cash Flows – Financing Activities
Proceeds from long-term debt	1,493		237
Repayments of long-term debt	(957)		(472)
Revolving credit facility, three months or less, net	(350)		205
Short-term borrowings by original maturity
More than three months - proceeds	58		—
More than three months - payments	(43)		—
Three months or less, net	—		—
Repurchase shares of Common Stock	(374)		(327)
Dividends paid on Common Stock	(592)		(565)

Other, net	(57)		(69)
Net Cash Used in Financing Activities	(822)		(991)
Effect of Exchange Rates on Cash and Cash Equivalents	29		10
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	393		(97)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Beginning of Period	807		724
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - End of Period	$	1,200	$	627





See accompanying Notes to Condensed Consolidated Financial Statements.


CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
(in millions)
	9/30/2025		12/31/2024
ASSETS
Current Assets
Cash and cash equivalents	$	1,045	$	616
Accounts and notes receivable, net	744		775
Prepaid expenses and other current assets	415		480
Total Current Assets	2,204		1,871

Property, plant and equipment, net	1,422		1,304
Goodwill	779		736
Intangible assets, net	462		416
Other assets	1,428		1,329
Deferred income taxes	898		1,071
Total Assets	$	7,193	$	6,727

LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and other current liabilities	$	1,217	$	1,211
Income taxes payable	36		31
Short-term borrowings	48		27
Total Current Liabilities	1,301		1,269

Long-term debt	11,506		11,306
Other liabilities and deferred credits	1,890		1,800
Total Liabilities	14,698		14,375

Shareholders’ Deficit
Common Stock, no par value, 750 shares authorized; 278 shares issued in 2025 and 279 shares issued in 2024	—		—
Accumulated deficit	(7,183)		(7,256)
Accumulated other comprehensive loss	(322)		(392)
Total Shareholders’ Deficit	(7,505)		(7,648)
Total Liabilities and Shareholders’ Deficit	$	7,193	$	6,727

See accompanying Notes to Condensed Consolidated Financial Statements.


CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (Unaudited)
YUM! BRANDS, INC. AND SUBSIDIARIES
Quarters and years to date ended September 30, 2025 and 2024
(in millions)
	Yum! Brands, Inc.
	Issued Common Stock			Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Shareholders' Deficit
	Shares	Amount
Balance at June 30, 2025	278	$	—	$	(7,361)	$	(319)	$	(7,680)
Net Income				397				397
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						(6)		(6)

Pension and post-retirement benefit plans (net of tax impact of $1 million)						3		3
Derivative instruments						1		1
Comprehensive Income								394
Dividends declared				(197)				(197)
Repurchase of shares of Common Stock(1)	—	(16)		(20)				(36)
Employee share-based award exercises	—	(2)		—				(2)
Share-based compensation events		19						19
Balance at September 30, 2025	278	$	—	$	(7,183)	$	(322)	$	(7,505)

Balance at December 31, 2024	279	$	—	$	(7,256)	$	(392)	$	(7,648)
Net Income				1,024				1,024
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						71		71

Pension and post-retirement benefit plans (net of tax impact of $1 million)						4		4
Derivative instruments (net of tax impact of $2 million)						(5)		(5)
Comprehensive Income								1,095
Dividends declared				(594)				(594)
Repurchase of shares of Common Stock(1)	(3)	(20)		(354)				(374)
Employee share-based award exercises	1	(41)		(3)				(44)
Share-based compensation events		62						62

Balance at September 30, 2025	278	$	—	$	(7,183)	$	(322)	$	(7,505)

Balance at June 30, 2024	281	$	—	$	(7,321)	$	(309)	$	(7,630)
Net Income				382				382
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						34		34

Pension and post-retirement benefit plans						—		—
Derivative instruments (net of tax impact of $3 million)						(10)		(10)
Comprehensive Income								406
Dividends declared				(188)				(188)
Repurchase of shares of Common Stock	(2)	(15)		(262)				(277)
Employee share-based award exercises	1	—						—
Share-based compensation events		15						15

Balance at September 30, 2024	280	$	—	$	(7,389)	$	(285)	$	(7,674)

Balance at December 31, 2023	281	$	60	$	(7,616)	$	(302)	$	(7,858)
Net Income				1,063				1,063
Translation adjustments and gains (losses) from intra-entity transactions of a long-term investment nature						26		26

Pension and post-retirement benefit plans						1		1
Derivative instruments (net of tax impact of $3 million)						(10)		(10)
Comprehensive Income								1,080
Dividends declared				(568)				(568)
Repurchase of shares of Common Stock	(2)	(59)		(268)				(327)
Employee share-based award exercises	1	(66)						(66)
Share-based compensation events		65						65

Balance at September 30, 2024	280	$	—	$	(7,389)	$	(285)	$	(7,674)

(1)Includes excise tax on share repurchases

See accompanying Notes to Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in millions, except per share data)

Note 1 - Financial Statement Presentation

We have prepared our accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by Generally Accepted Accounting Principles in the United States (“GAAP”) for complete financial statements. Therefore, we suggest that the accompanying Financial Statements be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (“2024 Form 10-K”).

Yum! Brands, Inc. and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 62,000 restaurants in more than 155 countries and territories. As of September 30, 2025, 98% of these restaurants were owned and operated by franchisees. The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-inspired and pizza categories, respectively. The Habit Burger & Grill is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more.

As of September 30, 2025, YUM consisted of four operating segments:

The KFC Division which includes our worldwide operations of the KFC concept
The Taco Bell Division which includes our worldwide operations of the Taco Bell concept
The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept
The Habit Burger & Grill Division which includes our worldwide operations of the Habit Burger & Grill concept

YUM's fiscal year begins on January 1 and ends December 31 of each year, with each quarter comprised of three months. The majority of our U.S. subsidiaries and certain international subsidiaries operate on a weekly periodic calendar where the first three quarters of each fiscal year consist of 12 weeks and the fourth quarter consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscal years with 53 weeks. For subsidiaries that operate on this periodic weekly calendar, 2024 included a 53rd week. Our remaining international subsidiaries operate on a monthly calendar similar to that on which YUM operates.

Our preparation of the accompanying Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The accompanying Financial Statements include all normal and recurring adjustments considered necessary to present fairly, when read in conjunction with our 2024 Form 10-K, the results of the interim periods presented. Our results of operations, comprehensive income, cash flows and changes in shareholders' deficit for these interim periods are not necessarily indicative of the results to be expected for the full year.

In the first quarter of 2025, the Company prospectively changed its basis of presentation to round financial figures in the Financial Statements and as presented in the tabular presentations in these Notes to the nearest whole number in millions in all instances. As a result, some totals and percentages may not recompute based on rounded figures as presented within the Financial Statements and these Notes. Previously, amounts were presented to ensure that all numbers herein recomputed, resulting in the presentation of certain figures inconsistent with their underlying rounding.

Our significant interim accounting policies include the recognition of advertising and marketing costs, generally in proportion to revenue, and the recognition of income taxes using an estimated annual effective tax rate.

We have reclassified certain items in the Financial Statements for the prior periods to be comparable with the classification for the quarter and year to date ended September 30, 2025. These reclassifications had no effect on previously reported Net Income.

Note 2 - Restaurant Acquisitions

KFC United Kingdom ("U.K.") and Ireland Restaurant Acquisition

On April 29, 2024, we completed the acquisition of all of the issued shares of two franchisee entities that owned 216 KFC restaurants in the U.K. and Ireland. The acquisition created a significant opportunity to accelerate KFC's growth strategy in the large and growing U.K. and Ireland chicken market. The purchase price to be allocated for accounting purposes of $177 million consisted of cash, net of cash acquired, in the amount of $180 million, which included $174 million paid in 2024 and $6 million paid in 2025, offset by the settlement of a liability of $3 million related to our preexisting contractual relationship with the franchisee.

The acquisition was accounted for as a business combination using the acquisition method of accounting. The preliminary allocation of the purchase price is based on management's analysis, including preliminary work performed by third party valuation specialists, as of April 29, 2024.

During the quarter ended June 30, 2025, we finalized our preliminary estimate of the fair value of net assets acquired. The components of the final purchase price allocation, subsequent to the adjustments to the allocation in the quarter ended June 30, 2025 and prior quarters were as follows:


Total Current Assets	$	2
Property, plant and equipment, net	99
Reacquired franchise rights (included in Intangible assets, net)	48
Operating lease right-of-use assets (included in Other assets)	124
Total Identifiable Assets	273
Total Current Liabilities	(30)
Operating lease liabilities (included in Other liabilities and deferred credits)	(115)
Other liabilities	(41)
Total Liabilities Assumed	(186)
Total identifiable net assets	87
Goodwill	90
Purchase price to be allocated	$	177

The cumulative adjustments to the preliminary estimate of identifiable net assets acquired (as recorded in the June 30, 2024 quarter of acquisition) resulted in a corresponding $14 million increase in estimated goodwill due to the following changes to the preliminary purchase price allocation.


	Increase (Decrease) in Goodwill

Increase in Property, plant and equipment, net	$	(11)
Increase in Required franchise rights	(1)
Increase in Operating lease right-of-use assets	(15)
Increase in Total Current Liabilities	12
Increase in Operating lease liabilities	13
Increase in Other liabilities	10
Increase in consideration	6
Total increase in Goodwill	$	14

Reacquired franchise rights, which were valued based on after-royalty cash flows expected to be earned by the acquired restaurants over the remaining term of their then-existing franchise agreements, have an estimated weighted average useful life of 5 years.

Other Restaurant Acquisitions

In addition to the acquisition discussed above, we acquired 8 and 71 restaurants from franchisees in the quarter and year to date ended September 30, 2025, respectively, including 19 KFC, 16 Taco Bell and 36 Pizza Hut restaurants (the "Other restaurant acquisitions"). Total cash consideration paid in connection with these acquisitions was $100 million, net of cash acquired.

These restaurant acquisitions were accounted for as business combinations using the acquisition method of accounting. The primary assets recorded as a result of the preliminary purchase price allocations were operating lease right-of-use assets (and corresponding lease liabilities) of $52 million, reacquired franchise rights of $55 million and goodwill of $31 million. Reacquired franchise rights, which were valued similarly to those in the KFC U.K. and Ireland restaurant acquisition, have estimated weighted average useful lives of 5 years for the KFCs, 17 years for the Taco Bells and 6 years for the Pizza Huts.

For both the KFC U.K. and Ireland restaurant acquisition and the Other restaurant acquisitions, the excess of the purchase price over the estimated fair value of the net, identifiable assets acquired was recorded as goodwill. The goodwill recognized represents expected benefits of the acquisitions that do not qualify for recognition as intangible assets. This includes value arising from cash flows expected to be earned in years subsequent to the expiration of the terms of franchise agreements existing upon acquisition. The goodwill is expected to be partially deductible for income tax purposes and has been allocated to the respective reporting units.

The financial results of all acquired restaurants have been included in our Condensed Consolidated Financial Statements since the respective dates of acquisition, which individually and in the aggregate, did not significantly impact our results for the quarter and year to date ended September 30, 2025. Pro forma financial information of the combined entities for the periods prior to acquisition is not presented due to the immaterial impact of the restaurant acquisitions on our Condensed Consolidated Financial Statements. The direct transaction costs associated with the restaurant acquisitions were also not material and were expensed as incurred.

During the quarter ended September 30, 2025, we executed purchase agreements with a franchisee to acquire 128 Taco Bell restaurants across the Southeast U.S. for approximately $670 million in cash. These acquisitions are expected to close in the quarter ended December 31, 2025.

Note 3 - Earnings Per Common Share (“EPS”)


	Quarter ended				Year to date
	2025		2024		2025		2024
Net Income	$	397	$	382	$	1,024	$	1,063

Weighted-average common shares outstanding (for basic calculation)	278		282		279		282
Effect of dilutive share-based employee compensation	3		3		2		3
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)	281		285		281		285

Basic EPS	$	1.42	$	1.36	$	3.67	$	3.77

Diluted EPS	$	1.41	$	1.35	$	3.64	$	3.73
Unexercised employee SARs, RSUs, PSUs and stock options (in millions) excluded from the diluted EPS computation(a)	1.2		1.7		1.4		1.8

(a)These unexercised employee stock appreciation rights (“SARs”), restricted stock units (“RSUs”), performance share units (“PSUs”) and stock options were not included in the computation of diluted EPS because to do so would have been antidilutive for the periods presented.

Note 4 - Shareholders' Deficit

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during the years to date ended September 30, 2025 and 2024 as indicated below. All amounts exclude applicable transaction fees and excise taxes on share repurchases.


	Shares Repurchased (thousands)		Dollar Value of Shares Repurchased				Remaining Dollar Value of Shares that may be Repurchased
Authorization Date	2025	2024	2025		2024		2025
May 2024	2,540	2,068	$	372	$	277	$	1,238
September 2022	—	366	—		50		—
Total	2,540	2,434	$	372	$	327	$	1,238

In May 2024, our Board of Directors authorized share repurchases of up to $2 billion (excluding applicable transaction fees and excise taxes) of our outstanding Common Stock through December 31, 2026. As of September 30, 2025 we have remaining capacity to repurchase up to $1.2 billion of Common Stock under the May 2024 authorization.

Changes in Accumulated other comprehensive loss (“AOCI”) are presented below.


	Translation Adjustments and Gains (Losses) From Intra-Entity Transactions of a Long-Term Nature		Pension and Post-Retirement Benefits		Derivative Instruments		Total
Balance at June 30, 2025, net of tax	$	(162)	$	(141)	$	(16)	$	(319)

OCI, net of tax

Gains (losses) arising during the period classified into AOCI, net of tax	(6)		—		4		(2)

(Gains) losses reclassified from AOCI, net of tax	—		3		(3)		—
	(6)		3		1		(2)
Balance at September 30, 2025, net of tax	$	(167)	$	(139)	$	(15)	$	(322)

Balance at December 31, 2024, net of tax	$	(238)	$	(143)	$	(11)	$	(392)

OCI, net of tax

Gains (losses) arising during the period classified into AOCI, net of tax	71		—		7		78

(Gains) losses reclassified from AOCI, net of tax	—		4		(11)		(7)
	71		4		(5)		71
Balance at September 30, 2025, net of tax	$	(167)	$	(139)	$	(15)	$	(322)

Note 5 - Other (Income) Expense


	Quarter ended				Year to date
	9/30/2025		9/30/2024		9/30/2025		9/30/2024
Foreign exchange net (gain) loss	$	2	$	(3)	$	(5)	$	2
Impairment and closure expense	—		—		2		1
Other	(3)		(1)		(11)		(11)
Other (income) expense	$	(1)	$	(4)	$	(15)	$	(10)

Note 6 - Supplemental Balance Sheet Information

Accounts and Notes Receivable, net

The Company’s receivables are primarily generated from ongoing business relationships with our franchisees as a result of franchise and lease agreements. Trade receivables consisting of royalties from franchisees are generally due within 30 days of the period in which the corresponding sales occur and are classified as Accounts and notes receivable, net in our Condensed Consolidated Balance Sheets. Accounts and notes receivable, net also includes receivables generated from advertising cooperatives that we consolidate.


	9/30/2025		12/31/2024
Accounts and notes receivable, gross	$	818	$	849
Allowance for doubtful accounts	(74)		(74)
Accounts and notes receivable, net	$	744	$	775

Prepaid Expenses and Other Current Assets


	9/30/2025		12/31/2024
Income tax receivable	$	108	$	55
Restricted cash	132		155
Short term investments	—		91
Assets held for sale	8		21
Prepaid expenses	105		100
Other current assets	62		58
Prepaid expenses and other current assets	$	415	$	480

Property, Plant and Equipment, net


	9/30/2025		12/31/2024
Property, plant and equipment, gross	$	2,909	$	2,688
Accumulated depreciation and amortization	(1,487)		(1,384)
Property, plant and equipment, net	$	1,422	$	1,304


Other Assets	9/30/2025		12/31/2024
Operating lease right-of-use assets(a)	$	955	$	881

Franchise incentives	169		144

Other	304		304
Other assets	$	1,428	$	1,329

(a) Non-current operating lease liabilities of $926 million and $862 million as of September 30, 2025 and December 31, 2024, respectively, are included in Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets.

Reconciliation of Cash and Cash Equivalents for Condensed Consolidated Statements of Cash Flows


	9/30/2025		12/31/2024
Cash and cash equivalents as presented in Condensed Consolidated Balance Sheets	$	1,045	$	616
Restricted cash included in Prepaid expenses and other current assets(a)	132		155
Restricted cash and restricted cash equivalents included in Other assets(b)	22		36

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents as presented in Condensed Consolidated Statements of Cash Flows	$	1,200	$	807

(a) Restricted cash within Prepaid expenses and other current assets reflects the cash related to advertising cooperatives which we consolidate that can only be used to settle obligations of the respective cooperatives and cash held in reserve for Taco Bell Securitization interest payments.

(b) Primarily trust accounts related to our self-insurance program.

Note 7 - Income Taxes


	Quarter ended						Year to date
	2025			2024			2025			2024
Income tax provision	$	144		$	120		$	446		$	309
Effective tax rate	26.7		%	23.8		%	30.3		%	22.5		%

Our estimated effective tax rate for the full fiscal year is expected to be higher than the U.S. federal statutory rate of 21%, primarily due to state income taxes and U.S. taxes on foreign earnings partially offset by taxes on income earned in foreign jurisdictions with statutory tax rates below 21%. Additionally, our third quarter and year to date effective tax rates are higher than the prior year primarily due to the following unfavorable factors:

The impact of recording $3 million and $105 million in the quarter and year to date ended September 30, 2025, respectively, related to a reserve associated with a Mexican subsidiary's ability to utilize certain losses to offset recapture gains triggered by a tax deconsolidation in Mexico in 2009. During the quarter ended March 31, 2025, a Mexican court ruled that such losses could not be utilized to offset the recapture gain. As such, the Company recorded the reserve and continues to record the ongoing foreign exchange and inflationary adjustments associated with the reserve. The Company is appealing the decision and does not expect resolution of this matter within twelve months.
On July 4, 2025, H.R.1, commonly known as the One Big Beautiful Bill Act ("OBBBA") was enacted into law in the U.S. As a result of the enactment, during the quarter ended September 30, 2025 we recorded $90 million of tax expense primarily associated with a change in management's judgment regarding our ability to utilize U.S. foreign tax credit related deferred tax assets prior to their expiration. Of this amount, $76 million related to taxable events and related positions prior to enactment with the remaining $14 million attributable to the post-enactment period.

The above unfavorable factors were partially offset by the following favorable factors:

The impact of recognizing $63 million in tax benefit in the quarter ended September 30, 2025, associated with releasing reserves due to the favorable resolution of an audit.
The impact of recognizing $6 million in tax benefit in the quarter ended September 30, 2025, as compared to $3 million of tax expense recognized in the quarter ended September 30, 2024, associated with adjustments related to prior year taxes.

Note 8 - Revenue Recognition

Disaggregation of Total Revenues

The following tables disaggregate revenue by Concept, for our two most significant markets based on Operating Profit and for all other markets. We believe this disaggregation best reflects the extent to which the nature, amount, timing and uncertainty of our revenues and cash flows are impacted by economic factors.


	Quarter ended 9/30/2025
		KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Total
U.S.
Company sales		$	26	$	296	$	9	$	130	$	461
Franchise revenues		46		229		59		2		335
Property revenues		3		8		1		1		13
Franchise contributions for advertising and other services		11		174		67		1		254

China
Franchise revenues		74		—		19		—		93

Other
Company sales		234		2		—		—		235
Franchise revenues		325		17		67		—		408
Property revenues		11		—		—		—		11
Franchise contributions for advertising and other services		150		4		18		—		172
		$	879	$	730	$	240	$	134	$	1,983	(a)

(a) Does not include a charge of $4 million to Unallocated Franchise revenues during the quarter ended September 30, 2025.


	Quarter ended 9/30/2024
	KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Total
U.S.
Company sales	$	17	$	267	$	1	$	133	$	418
Franchise revenues	44		211		66		2		323
Property revenues	4		8		1		1		14
Franchise contributions for advertising and other services	10		161		71		1		243

China
Franchise revenues	70		—		17		—		87

Other
Company sales	203		—		—		—		203
Franchise revenues	288		15		66		—		369
Property revenues	11		—		—		—		11
Franchise contributions for advertising and other services	138		4		16		—		158
	$	785	$	666	$	238	$	137	$	1,826


	Year to date 9/30/2025
		KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Total
U.S.
Company sales		$	72	$	843	$	20	$	385	$	1,320
Franchise revenues		130		664		185		5		985
Property revenues		9		25		3		2		40
Franchise contributions for advertising and other services		31		504		203		2		741

China
Franchise revenues		209		—		52		—		261

Other
Company sales		648		6		—		—		654
Franchise revenues		923		45		195		—		1,163
Property revenues		32		—		1		—		33
Franchise contributions for advertising and other services		447		10		51		—		508
		$	2,501	$	2,098	$	710	$	395	$	5,704	(a)

(a) Does not include a charge of $5 million to Unallocated Franchise revenues during the year to date ended September 30, 2025.


	Year to date 9/30/2024
		KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Total
U.S.
Company sales		$	45	$	775	$	5	$	399	$	1,224
Franchise revenues		134		608		200		5		947
Property revenues		10		27		3		2		42
Franchise contributions for advertising and other services		30		468		217		2		717

China
Franchise revenues		200		—		51		—		251

Other
Company sales		443		—		—		—		443
Franchise revenues		842		43		191		—		1,076
Property revenues		33		—		1		—		34
Franchise contributions for advertising and other services		397		9		47		—		453
		$	2,134	$	1,930	$	715	$	408	$	5,187

Contract Liabilities

Our contract liabilities are comprised of unamortized upfront fees received from franchisees and are presented within Accounts payable and other current liabilities and Other liabilities and deferred credits in our Condensed Consolidated Balance Sheets. A summary of significant changes to the contract liability balance during 2025 is presented below.


	Deferred Franchise Fees
Balance at December 31, 2024	$	438
Revenue recognized that was included in unamortized upfront fees received from franchisees at the beginning of the period	(62)
Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as revenue during the period	49
Other(a)	6
Balance at September 30, 2025	$	431

(a) Primarily includes the impact of foreign currency translation.

We expect to recognize contract liabilities as revenue over the remaining term of the associated franchise agreement as follows:


Less than 1 year	$	75
1 - 2 years	67
2 - 3 years	58
3 - 4 years	50
4 - 5 years	43
Thereafter	138
Total	$	431

Note 9 - Reportable Operating Segments

The Company's operating segments maintain separate financial information, and our Chief Operating Decision Maker (“CODM”), the Company's Chief Executive Officer, evaluates the operating segments' operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company's segments based on Divisional Operating Profit and is involved in determining and reviewing forecasted Divisional Operating Profit as part of the annual plan process. Throughout the year, the CODM considers forecast to actual results and variances on a monthly and quarterly basis to allocate resources for the segments' operations. The CODM also considers this information in determining how to prioritize capital allocation, including investments in restaurant development, technology and human capital, while maintaining a strong and flexible balance sheet, offering a competitive dividend and returning excess cash to shareholders. Our CODM manages assets on a consolidated basis. Accordingly, segment assets are not reported to our CODM or used in his decisions to allocate resources or assess performance of the segments. Therefore, total segment assets and long-lived assets have not been disclosed. The significant expense categories and amounts presented in the tables below align with the segment-level information that is regularly provided to the CODM.


	Quarter ended 9/30/2025
	KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Total
Company Sales	$	259	$	298	$	9	$	130	$	697
Franchise and property revenues	459		254		146		3		861
Franchise contributions for advertising and other services	161		178		85		1		426
	879		730		240		134		1,983

Less:
Company restaurant expenses	224		227		10		121		583
General and administrative expenses	88		50		50		13		201
Franchise and property expenses	15		8		11		1		35
Franchise advertising and other services expense	160		177		89		1		427

Other (income) expense	—		—		(4)		—		(3)
Division Operating Profit (Loss)	$	392	$	267	$	84	$	(2)	$	741

Unallocated amounts:(a)
Corporate and unallocated G&A expenses(b)									$	(80)
Unallocated Company restaurant expenses(c)									(4)
Unallocated Franchise and property revenues									(4)

Unallocated Refranchising gain (loss)									17
Unallocated Other income (expense)									(3)
Consolidated Operating Profit									666
Investment income (expense), net									—
Other pension income (expense)									(1)
Interest expense, net									(124)
Income before income taxes									$	541

Other Segment Disclosures


	KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Corporate and Unallocated		Total
Depreciation and Amortization(d)	$	14	$	17	$	6	$	7	$	8	$	50
Capital Spending	34		26		8		14		12		94


	Quarter ended 9/30/2024
	KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Total
Company Sales	$	220	$	267	$	1	$	133	$	621
Franchise and property revenues	417		234		150		3		804
Franchise contributions for advertising and other services	148		165		87		1		401
	785		666		238		137		1,826

Less:
Company restaurant expenses	192		205		1		122		520
General and administrative expenses	86		41		51		11		189
Franchise and property expenses	20		6		9		1		36
Franchise advertising and other services expense	148		163		89		1		401

Other (income) expense	—		—		(3)		1		(2)
Division Operating Profit	$	339	$	251	$	91	$	1	$	682

Unallocated amounts:(a)
Corporate and unallocated G&A expenses(b)									$	(74)
Unallocated Company restaurant expenses(c)									(3)


Unallocated Refranchising gain (loss)									12
Unallocated Other income (expense)									2
Consolidated Operating Profit									619
Investment income (expense), net									1
Other pension income (expense)									2
Interest expense, net									(120)
Income before income taxes									$	502

Other Segment Disclosures


	KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Corporate and Unallocated		Total
Depreciation and Amortization(d)	$	9	$	15	$	4	$	7	$	9	$	44
Capital Spending	13		16		4		11		8		52


	Year to Date 9/30/2025
	KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Total
Company Sales	$	721	$	848	$	20	$	385	$	1,974
Franchise and property revenues	1,303		735		436		8		2,482
Franchise contributions for advertising and other services	478		514		255		2		1,249
	2,501		2,098		710		395		5,704

Less:
Company restaurant expenses	635		649		21		352		1,657
General and administrative expenses	255		148		159		39		600
Franchise and property expenses	51		22		32		3		107
Franchise advertising and other services expense	472		510		268		2		1,251

Other (income) expense	1		—		(9)		1		(8)
Division Operating Profit	$	1,088	$	770	$	239	$	—	$	2,096

Unallocated amounts:(a)
Corporate and unallocated G&A expenses(b)									$	(285)
Unallocated Company restaurant expenses(c)									(11)
Unallocated Franchise and property revenues									(5)

Unallocated Refranchising gain (loss)									33
Unallocated Other income (expense)									8
Consolidated Operating Profit									1,836
Investment income (expense), net									1
Other pension income (expense)									—
Interest expense, net									(368)
Income before income taxes									$	1,470

Other Segment Disclosures


	KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Corporate and Unallocated		Total
Depreciation and Amortization(d)	$	35	$	49	$	15	$	20	$	22	$	139
Capital Spending	71		75		23		32		35		236


	Year to Date 9/30/2024
	KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Total
Company Sales	$	488	$	775	$	5	$	399	$	1,667
Franchise and property revenues	1,219		678		446		7		2,350
Franchise contributions for advertising and other services	427		477		264		2		1,170
	2,134		1,930		715		408		5,187

Less:
Company restaurant expenses	428		590		5		366		1,389
General and administrative expenses	253		137		153		38		581
Franchise and property expenses	46		22		19		3		90
Franchise advertising and other services expense	424		473		270		2		1,169

Other (income) expense	(3)		(1)		(10)		1		(13)
Division Operating Profit (Loss)	$	986	$	709	$	278	$	(2)	$	1,971

Unallocated amounts:(a)
Corporate and unallocated G&A expenses(b)									$	(249)
Unallocated Company restaurant expenses(c)									(4)


Unallocated Refranchising gain (loss)									31
Unallocated Other income (expense)									(3)
Consolidated Operating Profit									1,746
Investment income (expense), net(e)									(21)
Other pension income (expense)									5
Interest expense, net									(358)
Income before income taxes									$	1,372

Other Segment Disclosures


	KFC Division		Taco Bell Division		Pizza Hut Division		Habit Burger & Grill Division		Corporate and Unallocated		Total
Depreciation and Amortization(d)	$	19	$	44	$	11	$	22	$	24	$	120
Capital Spending	32		57		9		28		25		151

Revenues by Country(f)


	Quarter ended				Year to date
	2025		2024		2025		2024
United States	$	1,063	$	995	$	3,085	$	2,928
United Kingdom	245		216		683		492
Other	672		615		1,931		1,766
	$	1,979	$	1,826	$	5,699	$	5,187

(a)Amounts have not been allocated to any segment for performance reporting purposes.

(b)Corporate and unallocated G&A expenses include charges of $5 million and $11 million in the quarters ended September 30, 2025 and 2024, respectively, related to our resource optimization program and $3 million in the quarter

ended September 30, 2025 related to our brand headquarters consolidation. Corporate and unallocated G&A expenses include charges of $37 million and $57 million in the years to date ended September 30, 2025 and 2024, respectively, related to our resource optimization program and $20 million in the year to date ended September 30, 2025, related to our brand headquarters consolidation.

(c)Unallocated Company restaurant expenses include amortization of reacquired franchise rights.

(d)The amounts of depreciation and amortization disclosed by reportable segment are primarily included within the segment expense captions of Company restaurant expenses and G&A expenses.

(e)Investment income (expense), net includes $20 million of pre-tax investment losses related changes in fair value of our approximate 5% minority interest in Devyani International Limited prior to the date of sale during the year to date ended September 30, 2024.

(f)The United States and United Kingdom represented 10% or more of our total revenues for certain periods presented.

Note 10 - Pension Benefits

We sponsor qualified and supplemental (non-qualified) noncontributory defined benefit pension plans covering certain full-time salaried and hourly U.S. employees. The most significant of these plans, the YUM Retirement Plan (the “Plan”), is funded. We fund our other U.S. plans as benefits are paid. Our two significant U.S. plans, including the Plan and a supplemental plan, were previously amended such that any salaried employee hired or rehired by YUM after September 30, 2001, is not eligible to participate in those plans. Additionally, these two plans in the U.S. are currently closed to new hourly participants.

The components of net periodic benefit cost associated with our U.S. pension plans are as follows:


	Quarter ended				Year to date
	2025		2024		2025		2024
Service cost	$	1	$	1	$	3	$	3
Interest cost	11		10		33		31
Expected return on plan assets	(13)		(12)		(40)		(38)
Amortization of net (gain) / loss	—		—		1		1
Amortization of prior service cost	—		—		1		1
Net periodic benefit cost (income)	$	(1)	$	(1)	$	(2)	$	(2)

Additional loss recognized due to settlements(a)	$	2	$	—	$	3	$	—

(a)Loss is a result of settlement transactions which exceeded the sum of annual service and interest costs for the applicable plan. This loss was recorded in Other pension (income) expense.

Note 11 - Short-term Borrowings and Long-term Debt


Short-term Borrowings	9/30/2025		12/31/2024
Current maturities of long-term debt	$	36	$	29
Other	15		—
	51		29
Less current portion of debt issuance costs and discounts	(3)		(2)
Short-term borrowings	$	48	$	27

Long-term Debt
Securitization Notes	$	4,306	$	3,743
Subsidiary Senior Unsecured Notes	750		750
Revolving Facility	—		350
Term Loan A Facility	497		500
Term Loan B Facility	1,433		1,444
YUM Senior Unsecured Notes	4,550		4,550
Finance lease obligations	71		67
	$	11,607	$	11,404
Less long-term portion of debt issuance costs and discounts	(67)		(69)
Less current maturities of long-term debt	(36)		(29)
Long-term debt	$	11,506	$	11,306

Taco Bell Funding, LLC (the “Issuer”), a special purpose limited liability company and a direct, wholly-owned subsidiary of Taco Bell Corp. (“TBC”), through a series of securitization transactions, has previously issued fixed rate senior secured notes collectively referred to as the “Securitization Notes” (details can be found within our 2024 Form 10-K). On September 24, 2025, the Issuer completed refinancing certain of such notes through the issuance of additional Securitization Notes totaling $1.5 billion (the “2025-1 Notes”). The net proceeds from the issuance of the 2025-1 Notes were used to repay in full an existing series of Securitization Notes totaling $938 million with an Anticipated Repayment Date (as defined in the Base Indenture) of May 2026. The remaining net proceeds were used to pay certain transaction-related expenses and for general corporate purposes (including, without limitation, purchases of franchised restaurants in the quarter ended December 31, 2025). The following table summarizes the series of Securitization Notes issued in the quarter ended September 30, 2025:


				Interest Rate
Issuance Date	Anticipated Repayment Date(a)	Outstanding Principal (in millions)		Stated		Effective(b)
September 2025	August 2030	$	1,000	4.821	%	5.039	%
September 2025	August 2032	$	500	5.049	%	5.213	%

(a) The legal final maturity date of the 2025-1 Notes is in August 2055. However, if the Issuer has not repaid or refinanced any series of these or previously existing Securitization Notes, prior to their respective Anticipated Repayment Dates, the rapid amortization of principal of all Securitization Notes may occur, in which event additional interest will accrue on all Securitization Notes, as provided in the Base Indenture for the Securitization Notes.

(b) Includes the effects of the amortization of any debt issuance costs.

Payments of interest and principal on the 2025-1 Notes are made from the continuing fees paid pursuant to the franchise and license agreements with all U.S. Taco Bell restaurants, including both company and franchise operated restaurants. Interest on and principal payments of the 2025-1 Notes are due on a quarterly basis. In general, no amortization of principal of the 2025-1 Notes is required prior to their Anticipated Repayment Dates unless as of any quarterly measurement date the consolidated leverage ratio (the ratio of total debt to Net Cash Flow (as defined in the Base Indenture)) for the preceding four fiscal quarters of either the Company and its subsidiaries or the Issuer and its subsidiaries exceeds 5.5:1, in which case amortization payments of 1% per year of the outstanding principal as of the closing of the related 2025-1 Notes are required.

As a result of the issuance of the 2025 Notes, $14 million of fees were capitalized as debt issuance costs. The debt issuance costs are being amortized to Interest expense, net through the Anticipated Repayment Dates of the Securitization Notes utilizing the effective interest rate method.

Details of our Short-term borrowings and Long-term debt as of December 31, 2024 can be found within our 2024 Form 10-K.

Cash paid for interest during the years to date ended September 30, 2025 and 2024, was $364 million and $356 million, respectively.

Note 12 - Derivative Instruments

We use derivative instruments to manage certain of our market risks related to fluctuations in foreign currency exchange rates, interest rates and equity prices.

Foreign Currency Contracts

During the quarter ended September 30, 2025, we entered into a foreign currency forward contract with a U.S. dollar notional amount of approximately $80 million to reduce the foreign currency exposure relating to our net investment in certain Indian rupee functional currency operations. This forward contract is designated as a net investment hedge and the related mark-to-market adjustments are being recorded as a cumulative translation adjustment within AOCI. This foreign currency forward contract did not have a material impact on our Condensed Consolidated Financial Statements for the quarter and year to date ended September 30, 2025, and will mature in March 2026.

Interest Rate Swaps

In March 2025, interest rate swaps which reduced our historical exposure to interest rate risk for $1.5 billion of our variable-rate debt interest payments primarily under our Term Loan B Facility expired. Through their expiration in March 2025, these interest rate swaps were highly effective cash flow hedges.

On April 4, 2025, we entered into a new interest rate swap ("2025 interest rate swap") to fix the interest rate on $1.5 billion of borrowings, primarily under our Term Loan B Facility, from April 2025 to March 2028. Like the expired interest rate swaps, the 2025 interest rate swap was designated as a cash flow hedge as the changes in the future cash flows of the swap are expected to offset changes in expected future interest payments on the related variable-rate debt. The 2025 interest rate swap results in a fixed rate of 5.09% on the swapped portion of the Term Loan B Facility (excluding debt issuance costs). Through September 30, 2025, the swap was a highly effective cash flow hedge.

Gains or losses on the interest rate swaps are reported as a component of AOCI and reclassified into Interest expense, net in our Condensed Consolidated Statements of Income in the same period or periods during which the related hedged interest payments affect earnings.

Gains and losses on these interest rate swaps recognized in OCI and reclassifications from AOCI into Net Income were as follows:


	Quarter ended								Year to date
	Gains/(Losses) Recognized in OCI				(Gains)/Losses Reclassified from AOCI into Net Income				Gains/(Losses) Recognized in OCI				(Gains)/Losses Reclassified from AOCI into Net Income
	2025		2024		2025		2024		2025		2024		2025		2024

Interest rate swaps	$	1	$	(5)	$	(4)	$	(9)	$	7	$	9	$	(12)	$	(26)

Income tax benefit/(expense)	—		1		1		2		(2)		(3)		3		6

As of September 30, 2025, the estimated net gain included in AOCI related to our cash flow hedges that will be reclassified into earnings in the next 12 months is $4 million, based on current Secured Overnight Financing (“SOFR”) interest rates.

Total Return Swaps

We have entered into total return swap derivative contracts, with the objective of reducing our exposure to market-driven changes in certain of the liabilities associated with compensation deferrals into our Executive Income Deferral (“EID”) plan. While these total return swaps represent economic hedges, we have not designated them as hedges for accounting purposes. As a result, the changes in the fair value of these derivatives are recognized immediately in earnings within General and administrative expenses in our Condensed Consolidated Statements of Income largely offsetting the changes in the associated EID liabilities. The fair value associated with the total return swaps as of both September 30, 2025 and December 31, 2024, was not significant.

As a result of the use of derivative instruments, the Company is exposed to risk that the counterparties will fail to meet their contractual obligations. To mitigate the counterparty credit risk, we only enter into contracts with major financial institutions carefully selected based upon their credit ratings and other factors, and continually assess the creditworthiness of counterparties. At September 30, 2025, all of the counterparties to our derivative instruments had investment grade ratings according to the three major ratings agencies. To date, all counterparties have performed in accordance with their contractual obligations.

See Note 13 for the fair value of our derivative assets and liabilities.

Note 13 - Fair Value Disclosures

As of September 30, 2025, the carrying values of cash and cash equivalents, restricted cash, accounts receivable, short-term borrowings and accounts payable approximated their fair values because of the short-term nature of these instruments. The fair value of our notes receivable, net of allowances, and lease guarantees, less reserves for expected losses, approximates their carrying value. The following table presents the carrying value and estimated fair value of the Company’s debt obligations:


	9/30/2025				12/31/2024
	Carrying Value		Fair Value (Level 2)		Carrying Value		Fair Value (Level 2)

Securitization Notes(a)	$	4,306	$	4,143	$	3,743	$	3,561
Subsidiary Senior Unsecured Notes(b)	750		759		750		739
Term Loan A Facility(b)	497		494		500		496
Term Loan B Facility(b)	1,433		1,433		1,444		1,451
YUM Senior Unsecured Notes(b)	4,550		4,534		4,550		4,368

(a) We estimated the fair value of the Securitization Notes using market quotes and calculations. The markets in which the Securitization Notes trade are not considered active markets.

(b) We estimated the fair value of the YUM and Subsidiary Senior Unsecured Notes, Term Loan A Facility and Term Loan B Facility using market quotes and calculations based on market rates.

Recurring Fair Value Measurements

The following table presents fair values for those assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall.


			Fair Value
	Condensed Consolidated Balance Sheet	Level	9/30/2025		12/31/2024
Assets
Investments	Other assets	1	$	1	$	1

Investments	Other assets	3	7		7
Interest Rate Swaps	Prepaid expenses and other current assets	2	4		5
Interest Rate Swaps	Other liabilities and deferred credits	2	(4)		—

The fair value of the Company’s interest rate swaps were determined based on the present value of expected future cash flows considering the risks involved, including nonperformance risk, and using discount rates appropriate for the duration based on observable inputs.

Note 14 - Contingencies

Internal Revenue Service Proposed Adjustment

As a result of an audit by the Internal Revenue Service (“IRS”) for fiscal years 2013 through 2015, in August 2022 we received a Revenue Agent’s Report (“RAR”) from the IRS asserting an underpayment of tax of $2.1 billion plus $418 million in penalties for the 2014 fiscal year. Additionally, interest on the underpayment is estimated to be approximately $1.7 billion through the third quarter of 2025. The proposed underpayment relates primarily to a series of reorganizations we undertook during that year in connection with the business realignment of our corporate and management reporting structure along brand lines. The IRS asserts that these transactions resulted in taxable distributions of approximately $6.0 billion.

We disagree with the IRS’s position as asserted in the RAR and intend to contest that position vigorously. In September 2022, we filed a Protest with the IRS Examination Division disputing the proposed underpayment of tax and penalties, and our matter was referred to the IRS Office of Appeals. Upon conclusion of the proceedings with the IRS Office of Appeals without resolution, we received an IRS Notice of Deficiency in March 2025. On June 4, 2025, we filed a petition in the United States Tax Court disputing the IRS Notice of Deficiency and the IRS filed its Answer on September 12, 2025. The litigation is ongoing.

The Company does not expect resolution of this matter within twelve months and cannot predict with certainty the timing of such resolution. The Company believes that it is more likely than not the Company’s tax position will be sustained; therefore, no reserve is recorded with respect to this matter.

An unfavorable resolution of this matter could have a material, adverse impact on our Condensed Consolidated Financial Statements in future periods.

Lease Guarantees

As a result of having assigned our interest in obligations under real estate leases as a condition to the refranchising of certain Company-owned restaurants, and guaranteeing certain other leases, we are frequently secondarily liable on lease agreements. These leases have varying terms, the latest of which expires in 2065. As of September 30, 2025, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the primary lessee was approximately $325 million. The present value of these potential payments discounted at our pre-tax cost of debt at September 30, 2025, was approximately $275 million. Our franchisees are the primary lessees under the vast majority of these leases. We generally have cross-default provisions with these franchisees that would put them in default of their franchise agreement in the event of non-payment under the lease. We believe these cross-default provisions significantly reduce the risk that we will be required to make payments under these leases, although such risk may not be reduced in the context of a bankruptcy or other similar restructuring of a large franchisee or group of franchisees. The liability recorded for our expected losses under such leases as of September 30, 2025, was not material.

Legal Proceedings

We are subject to various claims and contingencies related to lawsuits, real estate, environmental and other matters arising in the normal course of business. An accrual is recorded with respect to claims or contingencies for which a loss is determined to be probable and reasonably estimable.

India Regulatory Matter

Yum! Restaurants India Private Limited (“YRIPL”), a YUM subsidiary that operates KFC and Pizza Hut restaurants in India, is the subject of a regulatory enforcement action in India (the “Action”). The Action alleges, among other things, that KFC International Holdings, Inc. and Pizza Hut International failed to satisfy certain conditions imposed by the Secretariat for Industrial Approval in 1993 and 1994 when those companies were granted permission for foreign investment and operation in India. The conditions at issue include an alleged minimum investment commitment and store build requirements as well as limitations on the remittance of fees outside of India.

The Action originated with a complaint and show cause notice filed in 2009 against YRIPL by the Deputy Director of the Directorate of Enforcement (“DOE”) of the Indian Ministry of Finance following an income tax audit for the years 2002 and 2003. The matter was argued at various hearings in 2015, but no order was issued. Following a change in the incumbent official holding the position of Special Director of DOE (the “Special Director”), the matter resumed in 2018 and several additional hearings were conducted.

On January 29, 2020, the Special Director issued an order imposing a penalty on YRIPL and certain former directors of approximately Indian Rupee 11 billion, or approximately $125 million. Of this amount, $120 million relates to the alleged failure to invest a total of $80 million in India within an initial seven-year period. We have been advised by external counsel that the order is flawed and have filed a writ petition with the Delhi High Court, which granted an interim stay of the penalty order on March 5, 2020. In November 2022, YRIPL was notified that an administrative tribunal bench had been constituted to hear an appeal by DOE of certain findings of the January 2020 order, including claims that certain charges had been wrongly dropped and that an insufficient amount of penalty had been imposed. A hearing with the administrative tribunal scheduled for July 9, 2025 has been rescheduled to January 6, 2026. A hearing scheduled for August 19, 2025, before the Delhi High Court has been continued to December 10, 2025, and the stay order remains in effect. We deny liability and intend to continue vigorously defending this matter. We do not consider the risk of any significant loss arising from this order to be probable.

Other Matters

We are currently engaged in various other legal proceedings and have certain unresolved claims pending, the ultimate liability for which, if any, cannot be determined at this time. However, based upon consultation with legal counsel, we are of the opinion that such proceedings and claims are not expected to have a material adverse effect, individually or in the aggregate, on our Condensed Consolidated Financial Statements.

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