Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction and Overview

The following Management's Discussion and Analysis (“MD&A”), should be read in conjunction with the unaudited Condensed Consolidated Financial Statements (“Financial Statements”), the Forward-Looking Statements and our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, (“2024 Form 10-K”). All Note references herein refer to the Notes to the Financial Statements. Tabular amounts are displayed in millions of U.S. dollars except per share and unit count amounts, or as otherwise specifically identified.

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

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, primarily under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger & Grill (collectively, the “Concepts”). The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-inspired and pizza categories, respectively. The Habit Burger & Grill, is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Of the over 62,000 restaurants, 98% are operated by franchisees.

YUM currently consists 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

Through our Recipe for Good Growth we intend to deliver iconic restaurant brands and consistently drive better customer experiences, improved unit economics and higher rates of growth. Key enablers include accelerated use of digital and technology, increased collaboration and better leverage of our systemwide scale. This is done through a framework of three pillars: being Loved, Trusted and Connected.

Loved: We grow by delighting customers with craveable food and a distinctive experience. We innovate and elevate our iconic restaurant brands that people trust and champion, resulting in relevant, easy and distinctive brands.

Trusted: We operate responsibly with consistency and efficiency in our restaurants, across our system and in our communities. This includes a commitment to our priorities for social responsibility, risk management and sustainable stewardship of our people, food and planet.

Connected: We use our teamwork, technology and global scale to serve every customer, everywhere, anytime. Our unmatched operating capability allows us to recruit and equip the best restaurant operators in the world to deliver great customer experiences. And our commitment to bold restaurant development drives market and franchise unit expansion with strong economics.

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

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

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 more, including those temporarily closed. From time-to-time restaurants may be temporarily closed due to remodeling or image enhancement, rebuilding, natural disasters, health epidemic or pandemic, landlord disputes, boycotts, social or civil unrest or other issues. The system sales of restaurants we deem temporarily closed remain in our base for purposes of determining same-store sales growth and the restaurants remain in our unit count (see below).

Same-store sales growth excludes, for subsidiaries operating on a monthly calendar, the extra day resulting from a leap year and excludes, for subsidiaries operating on a weekly periodic calendar, the last week of the year in fiscal years with 53rd weeks. We believe same-store sales growth is useful to investors because our results are heavily dependent on the results of our Concepts' existing store base. Additionally, same-store sales growth is reflective of the strength of our Brands, the effectiveness of our operational and advertising initiatives and local economic and consumer trends.

Gross unit openings reflects new openings by us and our franchisees. Net new unit growth reflects 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 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 gross unit openings and net new unit growth are useful to investors because we depend on new units for a significant portion of our growth. Additionally, gross unit openings and net new unit growth are generally reflective of the economic returns to us and our franchisees from opening and operating our Concept restaurants.
System sales and System sales excluding the impacts of foreign currency translation (“FX”) reflect the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants. Sales at franchise restaurants typically generate ongoing franchise and license fees for the Company at a rate of 3% to 6% of sales. Increasingly, customers are paying a fee to a third party to deliver or facilitate the ordering of our Concepts' products. We also include in System sales any portion of the amount customers pay these third parties for which the third party is obligated to pay us a license fee as a percentage of such amount. Franchise restaurant sales and fees paid by customers to third parties to deliver or facilitate the ordering of our Concepts' products are not included in Company sales on the Condensed Consolidated Statements of Income; however, any resulting franchise and license fees we receive are included in the Company's revenues. We believe System sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates our primary revenue drivers, Company and franchise same-store sales as well as net new unit growth.

In addition to the results provided in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”), the Company provides the following non-GAAP measurements:

Diluted Earnings Per Share excluding Special Items (as defined below);
Effective Tax Rate excluding Special Items;
Core Operating Profit. Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance internally;
Net Income excluding Special Items;
Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below).

These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measurements provide additional information to investors to facilitate the comparison of past and present operations.

Special Items are not included in any of our Division segment results as the Company does not believe they are indicative of our ongoing operations due to their size and/or nature. Our chief operating decision maker does not consider the impact of Special Items when assessing segment performance.

Company restaurant profit is defined as Company sales less Company restaurant expenses, both of which appear on the face of our Condensed 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. Company restaurant margin as a percentage of sales (“Company restaurant margin %”) is defined as Company restaurant profit divided by Company sales. We use Company restaurant profit for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe Company restaurant profit provides useful information to investors as to the profitability of our Company-owned restaurants. 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. Further, while we generally include depreciation and amortization of restaurant-level assets within Divisional Company restaurant expenses used to derive Divisional Company restaurant profit, we record amortization of reacquired franchise rights arising from acquisition accounting within Corporate and unallocated Company restaurant expenses as such amortization is not believed to be indicative of ongoing Divisional results as well as to enhance comparability of acquired stores' margins with those of existing restaurants for which reacquired franchise rights are not applicable. Company restaurant profit and Company restaurant margin % as presented may not be comparable to other similarly titled measures of other companies in the industry.

Certain performance metrics and non-GAAP measurements are presented excluding the impact of FX. These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the FX impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

Results of Operations

Summary

All comparisons within this summary are versus the same period a year ago.

Quarterly Financial Highlights:


	% Change
	System Sales, ex FX	Same-Store Sales	Units	GAAP Operating Profit	Core Operating Profit
KFC Division	+6	+3	+6	+16	+14
Taco Bell Division	+9	+7	+3	+7	+7
Pizza Hut Division	(1)	(1)	Even	(8)	(8)

YUM	+5	+3	+3	+8	+7

Year to date Financial Highlights:


	% Change
	System Sales, ex FX	Same-Store Sales	Units	GAAP Operating Profit	Core Operating Profit
KFC Division	+5	+2	+6	+10	+10
Taco Bell Division	+9	+7	+3	+9	+9
Pizza Hut Division	(2)	(1)	Even	(14)	(14)

YUM	+5	+3	+3	+5	+6

Additionally:

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


	Third Quarter			Year to date
	2025	2024	% Change	2025	2024	% Change
GAAP EPS	$1.41	$1.35	+5	$3.64	$3.73	(2)
Less Special Items EPS	$(0.16)	$(0.02)	NM	$(0.67)	$(0.14)	NM
EPS Excluding Special Items	$1.58	$1.37	+15	$4.32	$3.87	+11

Our diluted EPS, excluding Special Items, for the year to date ended September 30, 2024, was unfavorably impacted by $0.08 from after-tax investment losses.
Gross unit openings for the quarter were 1,131 units resulting in 744 net new units. Gross unit openings for the year to date were 2,753 units resulting in 670 net new units.

◦Net new unit growth for the year to date was impacted by unit closures in Turkey. On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S. (IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S., after failure by IS Gida to meet our standards. As a result, 283 KFC and 254 Pizza Hut restaurants in Turkey were closed in January.

Worldwide

GAAP Results


	Quarter ended								Year to date
	2025			2024			% B/(W)		2025			2024			% B/(W)
Company sales	$	697		$	621		12		$	1,974		$	1,667		18
Franchise and property revenues	857			804			7		2,476			2,350			5
Franchise contributions for advertising and other services	426			401			6		1,249			1,170			7
Total revenues	1,979			1,826			8		5,699			5,187			10

Company restaurant expenses	587			523			(12)		1,668			1,393			(20)
G&A expenses	282			263			(7)		885			830			(7)
Franchise and property expenses	35			36			6		107			90			(19)
Franchise advertising and other services expense	427			401			(7)		1,251			1,169			(7)
Refranchising (gain) loss	(17)			(12)			37		(33)			(31)			6
Other (income) expense	(1)			(4)			NM		(15)			(10)			NM
Total costs and expenses, net	1,313			1,207			(9)		3,863			3,441			(12)
Operating Profit	666			619			8		1,836			1,746			5

Investment (income) expense, net	—			(1)			NM		(1)			21			NM
Other pension (income) expense	1			(2)			(154)		—			(5)			(93)
Interest expense, net	124			120			(4)		368			358			(3)
Income before income taxes	541			502			8		1,470			1,372			7
Income tax provision (benefit)	144			120			(21)		446			309			(44)
Net Income	$	397		$	382		4		$	1,024		$	1,063		(4)

Diluted EPS(a)	$	1.41		$	1.35		5		$	3.64		$	3.73		(2)
Effective tax rate	26.7		%	23.8		%	(2.9)	ppts.	30.3		%	22.5		%	(7.8)	ppts.

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

Performance Metrics


Unit Count	9/30/2025	9/30/2024	% Increase (Decrease)
Franchise	60,640	58,775	3
Company-owned	1,376	1,270	8
Total	62,016	60,045	3


	Quarter ended		Year to date
	2025	2024	2025	2024
Same-store Sales Growth (Decline) %	3	(2)	3	(2)
System Sales Growth %, reported	6	1	5	1
System Sales Growth %, excluding FX	5	1	5	2

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


	Quarter ended				Year to date
	2025		2024		2025		2024

Consolidated
Company sales(a)	$	697	$	621	$	1,974	$	1,667
Franchise sales	16,354		15,401		46,858		44,952
System sales	17,051		16,022		48,832		46,619
Negative (Positive) Foreign Currency Impact(b)	(167)		N/A		(26)		N/A
System sales, excluding FX	$	16,884	$	16,022	$	48,806	$	46,619

KFC Division
Company sales(a)	$	259	$	220	$	721	$	488
Franchise sales	9,081		8,449		25,681		24,535
System sales	9,340		8,669		26,401		25,023
Negative (Positive) Foreign Currency Impact(b)	(134)		N/A		(31)		N/A
System sales, excluding FX	$	9,206	$	8,669	$	26,370	$	25,023

Taco Bell Division
Company sales(a)	$	298	$	267	$	848	$	775
Franchise sales	4,070		3,741		11,775		10,847
System sales	4,368		4,008		12,623		11,622
Negative (Positive) Foreign Currency Impact(b)	(7)		N/A		(5)		N/A
System sales, excluding FX	$	4,362	$	4,008	$	12,618	$	11,622

Pizza Hut Division
Company sales(a)	$	9	$	1	$	20	$	5
Franchise sales	3,167		3,183		9,301		9,486
System sales	3,177		3,184		9,321		9,491
Negative (Positive) Foreign Currency Impact(b)	(26)		N/A		10		N/A
System sales, excluding FX	$	3,151	$	3,184	$	9,331	$	9,491

Habit Burger & Grill Division
Company sales(a)	$	130	$	133	$	385	$	399
Franchise sales	36		28		101		84
System sales	166		161		486		483
Negative (Positive) Foreign Currency Impact(b)	—		N/A		—		N/A
System sales, excluding FX	$	166	$	161	$	486	$	483

(a)Company sales represents sales from our Company-operated stores as presented on our Condensed Consolidated Statements of Income.

(b) The foreign currency impact on System sales is presented in relation only to the immediately preceding year presented. When determining applicable System sales growth percentages, the System sales excluding FX for the current year should be compared to the prior year System sales.


Non-GAAP Items

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

	Quarter ended				Year to date
	2025		2024		2025		2024
Core Operating Profit Growth %	7		3		6		6
Diluted EPS Growth %, excluding Special Items	15		(5)		11		(1)
Effective Tax Rate excluding Special Items	20.8	%	23.9	%	21.4	%	22.9	%





Company restaurant profit	$	110		$	98		$	306		$	274
Company restaurant margin %	15.8		%	15.8		%	15.5		%	16.4		%


Reconciliation of GAAP Operating Profit to Core Operating Profit	Quarter ended				Year to date
	2025		2024		2025		2024
Consolidated
GAAP Operating Profit	$	666	$	619	$	1,836	$	1,746
Detail of Special Items:
(Gain) Loss associated with market-wide refranchisings(a)	—		(1)		—		3
Charges associated with Resource Optimization(b)	5		12		37		58
Charges associated with Brand HQ Consolidation(c)	3		—		20		—
German acquisition and Turkey termination-related costs(d)	1		—		8		—
Pizza Hut Strategic Options Review(e)	8		—		8		—

Special Items Expense - Operating Profit	18		11		73		61
(Positive) Foreign Currency Impact on Division Operating Profit	(7)		N/A		(1)		N/A
Core Operating Profit	$	677	$	630	$	1,909	$	1,807

Special Items as shown above were recorded to the financial statement line items identified below.

Condensed Consolidated Statements of Income Line Item
Decrease in Franchise and property revenues	$	4	$	—	$	5	$	—
Increase in General and administrative expenses	14		11		71		57
Increase in Refranchising (gain) loss	—		(1)		—		3
Increase in Other (income) expense	—		1		(3)		1
Special Items Expense - Operating Profit	$	18	$	11	$	73	$	61

KFC Division
GAAP Operating Profit	$	392	$	339	$	1,088	$	986
Negative (Positive) Foreign Currency Impact	(7)		N/A		(2)		N/A
Core Operating Profit	$	385	$	339	$	1,086	$	986

Taco Bell Division
GAAP Operating Profit	$	267	$	251	$	770	$	709
Negative (Positive) Foreign Currency Impact	—		N/A		—		N/A
Core Operating Profit	$	267	$	251	$	770	$	709

Pizza Hut Division
GAAP Operating Profit	$	84	$	91	$	239	$	278
Negative (Positive) Foreign Currency Impact	—		N/A		1		N/A
Core Operating Profit	$	84	$	91	$	240	$	278

Habit Burger & Grill Division
GAAP Operating Profit (Loss)	$	(2)	$	1	$	—	$	(2)
Negative (Positive) Foreign Currency Impact	—		N/A		—		N/A
Core Operating Profit (Loss)	$	(2)	$	1	$	—	$	(2)

Reconciliation of GAAP Net Income to Net Income excluding Special Items
GAAP Net Income	$	397	$	382	$	1,024	$	1,063
Special Items Expense - Operating Profit	18		11		73		61

Special Items Tax Expense (Benefit)(f)	28		(2)		116		(19)
Net Income excluding Special Items	$	442	$	391	$	1,214	$	1,105


	Quarter ended						Year to date
	2025			2024			2025			2024
Reconciliation of Diluted EPS to Diluted EPS excluding Special Items
Diluted EPS	$	1.41		$	1.35		$	3.64		$	3.73
Less Special Items Diluted EPS	(0.16)			(0.02)			(0.67)			(0.14)
Diluted EPS excluding Special Items	$	1.58		$	1.37		$	4.32		$	3.87

Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate	26.7		%	23.8		%	30.3		%	22.5		%
Impact on Tax Rate as a result of Special Items	5.9		%	(0.1)		%	8.9		%	(0.4)		%
Effective Tax Rate excluding Special Items	20.8		%	23.9		%	21.4		%	22.9		%

(a) Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with market-wide refranchisings. During the quarter and year to date ended September 30, 2024, we recorded net refranchising gains of $1 million and net refranchising losses of $3 million, respectively, that have been reflected as Special Items.

Additionally, we recorded net refranchising gains of $17 million and $11 million during the quarters ended September 30, 2025 and 2024, respectively, that have not been reflected as Special Items. During the years to date ended September 30, 2025 and 2024, we recorded net refranchising gains of $33 million and $34 million, respectively, that have not been reflected as Special Items. These net refranchising gains relate to refranchising of restaurants unrelated to market-wide refranchisings that we believe are indicative of our expected ongoing refranchising activity.

(b)We recorded charges of $5 million and $37 million during the quarter and year to date ended September 30, 2025, respectively, and $12 million and $58 million during the quarter and year to date ended September 30, 2024, respectively, primarily to Corporate and unallocated General and administrative expenses related to a resource optimization program. Over the past several years, this program has allowed us to reallocate significant resources to accelerate our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics. We expanded the program in 2024 to identify further opportunities to optimize the Company’s spending and identify additional, critical areas in which to potentially reallocate resources, both with a goal to enable the acceleration of the Company’s growth rate. Costs incurred to date related to the program primarily include severance associated with positions that have been eliminated or relocated and consultant fees. Due to their scope and size, these charges have been reflected as Special Items.

(c)During the quarter and year to date ended September 30, 2025, we recorded charges of approximately $3 million and $20 million, respectively, to Corporate and unallocated General and administrative expenses associated with our decision to designate two brand headquarters in the U.S., located in Plano, Texas and Irvine, California, to foster greater collaboration among brands and employees. This involved relocating the KFC U.S. corporate office to a KFC Global headquarters and requiring the majority of our U.S.-based remote employees to relocate to an appropriate headquarter office. Costs incurred to date primarily include severance for the employees who have chosen not to relocate and consultant fees. Due to their scope and size, these charges have been reflected as Special Items.

(d)On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S. (IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S. (IS Holding), after failure by IS Gida to meet our standards. As a result, 283 KFC restaurants and 254 Pizza Hut restaurants in Turkey were closed during the first quarter of 2025. We also re-acquired the master franchise rights in Germany for KFC and Pizza Hut from the owner of IS Holding in December 2024. We recorded charges of $1 million and $8 million during the quarter and year to date ended September 30, 2025, respectively, to Corporate and unallocated General and administrative expenses consisting primarily of severance costs associated with re-acquiring the master franchise rights in Germany. Consistent with prior charges related to the matter, these charges have been reflected as Special Items.

(e)We have begun a review of strategic options for the Pizza Hut brand. During the quarter ended September 30, 2025, we incurred approximately $4 million in third-party advising costs associated with this strategic options review and wrote-off approximately $4 million of franchise incentive assets associated with rationalizing the Pizza Hut estate in preparation for a potential transaction. These charges were recorded to Corporate and unallocated General and administrative expenses and Corporate and unallocated franchise and property revenues, respectively. Given the

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

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


	Quarter ended				Year to date
	9/30/2025		9/30/2024		9/30/2025		9/30/2024
Tax (Benefit) on Special Items Expense	$	(4)	$	(2)	$	(18)	$	(15)
Tax Expense - Foreign tax reserve	3		—		105		—
Tax Expense - U.S. OBBBA	76		—		76		—
Tax (Benefit) - Tax audit	(47)		—		(47)		—
Tax (Benefit) - Other Income tax impacts recorded as Special	—		—		—		(4)
Special Items Tax Expense (Benefit)	$	28	$	(2)	$	116	$	(19)

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

Tax Expense - Foreign tax reserve in the year to date ended September 30, 2025, is associated with a reserve, and the ongoing foreign exchange and inflationary adjustments, associated with a change in management's judgment around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico (see Note 7). This tax expense was reflected as a Special Item due to its size and the time elapsed since the years to which the reserve relates.

Tax Expense - U.S. OBBBA in the quarter and year to date ended September 30, 2025, reflects the tax expense recorded upon the July 4, 2025, enactment of H.R.1, commonly known as the One Big Beautiful Bill Act (“OBBBA”) in the United States. The tax expense was primarily associated with a change in management's judgment regarding our ability to utilize U.S. foreign tax credit related deferred tax assets that existed at the date of enactment and has been reflected as a Special Item due to the size of the non-recurring adjustment necessary upon enactment of the legislation.

Tax (Benefit) - Tax audit in the quarter and year to date ended September 30, 2025, reflects the benefit associated with the reversal of a reserve due to a favorable audit resolution. Such reserve was established in prior years and was originally recorded as a Special Item.

Other Income tax impacts recorded as Special in the year to date ended September 30, 2024, include benefits related to the reversal of a reserve due to the favorable resolution of a tax audit in a foreign jurisdiction. Such reserve was established in prior years related to income tax liabilities originally recorded as a Special Item as part of an intercompany restructuring of intellectual property.


Reconciliation of GAAP Operating Profit to Company Restaurant Profit
	Quarter ended 9/30/2025
	KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger & Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	$	392		$	267		$	84		$	(2)		$	(75)	$	666
Less:
Franchise and property revenues	459			254			146			3			(4)		857
Franchise contributions for advertising and other services	161			178			85			1			—		426
Add:
General and administrative expenses	88			50			50			13			80		282
Franchise and property expenses	15			8			11			1			—		35
Franchise advertising and other services expense	160			177			89			1			—		427
Refranchising (gain) loss	—			—			—			—			(17)		(17)
Other (income) expense	—			—			(4)			—			3		(1)
Company restaurant profit (loss)	$	36		$	71		$	(1)		$	9		$	(4)	$	110
Company sales	$	259		$	298		$	9		$	130		$	—	$	697
Company restaurant margin %	13.7		%	23.7		%	(12.2)		%	7.0		%	N/A		15.8		%


	Quarter ended 9/30/2024
	KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger & Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	$	339		$	251		$	91		$	1		$	(63)	$	619
Less:
Franchise and property revenues	417			234			150			3			—		804
Franchise contributions for advertising and other services	148			165			87			1			—		401
Add:
General and administrative expenses	86			41			51			11			74		263
Franchise and property expenses	20			6			9			1			—		36
Franchise advertising and other services expense	148			163			89			1			—		401
Refranchising (gain) loss	—			—			—			—			(12)		(12)
Other (income) expense	—			—			(3)			1			(2)		(4)
Company restaurant profit (loss)	$	28		$	62		$	—		$	11		$	(3)	$	98
Company sales	$	220		$	267		$	1		$	133		$	—	$	621
Company restaurant margin %	12.5		%	23.4		%	(6.1)		%	8.3		%	N/A		15.8		%


	Year to date 9/30/2025
	KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger & Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	$	1,088		$	770		$	239		$	—		$	(260)	$	1,836
Less:
Franchise and property revenues	1,303			735			436			8			(5)		2,476
Franchise contributions for advertising and other services	478			514			255			2			—		1,249
Add:
General and administrative expenses	255			148			159			39			285		885
Franchise and property expenses	51			22			32			3			—		107
Franchise advertising and other services expense	472			510			268			2			—		1,251
Refranchising (gain) loss	—			—			—			—			(33)		(33)
Other (income) expense	1			—			(9)			1			(8)		(15)
Company restaurant profit (loss)	$	85		$	199		$	(2)		$	34		$	(11)	$	306
Company sales	$	721		$	848		$	20		$	385		$	—	$	1,974
Company restaurant margin %	11.9		%	23.5		%	(9.2)		%	8.7		%	N/A		15.5		%


	Year to date 9/30/2024
	KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger & Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	$	986		$	709		$	278		$	(2)		$	(225)	$	1,746
Less:
Franchise and property revenues	1,219			678			446			7			—		2,350
Franchise contributions for advertising and other services	427			477			264			2			—		1,170
Add:
General and administrative expenses	253			137			153			38			249		830
Franchise and property expenses	46			22			19			3			—		90
Franchise advertising and other services expense	424			473			270			2			—		1,169
Refranchising (gain) loss	—			—			—			—			(31)		(31)
Other (income) expense	(3)			(1)			(10)			1			3		(10)
Company restaurant profit (loss)	$	60		$	185		$	—		$	33		$	(4)	$	274
Company sales	$	488		$	775		$	5		$	399		$	—	$	1,667
Company restaurant margin %	12.2		%	23.9		%	(1.9)		%	8.2		%	N/A		16.4		%

Items Impacting Reported Results and Reasonably Likely to Impact Future Results

The following items impacted reported results in 2025 and/or 2024 and/or are reasonably likely to impact future results. See also the Detail of Special Items in this MD&A for other items impacting results in 2025 or 2024.

Investment in Devyani

During the quarter ended March 31, 2024, we sold our approximate 5% minority investment in Devyani International Limited ("Devyani"), a franchise entity that operates KFC and Pizza Hut restaurants in India, for pre-tax proceeds of $104 million. Changes in the fair value of our ownership interest in Devyani prior to the date of sale resulted in pre-tax investment losses of $20 million in the year to date ended September 30, 2024.

Impact of Tax Law Changes

On July 4, 2025, H.R.1, commonly known as the One Big Beautiful Bill Act ("OBBBA") was enacted into law in the U.S. The OBBBA includes a broad range of domestic and international tax reform provisions, including extending and modifying certain key provisions from the Tax Cuts and Jobs Act, as well as provisions allowing accelerated tax deductions for qualified depreciable property and research expenditures. The OBBBA has multiple effective dates, with certain provisions becoming effective in 2025 and others effective through 2027. We currently anticipate the OBBBA will have a favorable impact on our ongoing effective tax rate beginning in 2026.

Pizza Hut Strategic Options Review

We have begun a review of strategic options for the Pizza Hut brand. We have not set a deadline or definitive timetable for the completion of the strategic options review, and there can be no assurance this review will result in any specific outcome or transaction. We incurred certain costs during the quarter ended September 30, 2025 associated with this strategic options review (see Detail of Special Items section of this MD&A) and expect to incur further costs of a currently indeterminate amount as this strategic options review progresses.

KFC Division

The KFC Division has 32,951 units, 89% of which are located outside the U.S. Additionally, 99% of the KFC Division units were operated by franchisees as of September 30, 2025.


	Quarter ended										Year to date
							% B/(W)										% B/(W)
	2025			2024			Reported		Ex FX		2025			2024			Reported		Ex FX
System Sales	$	9,340		$	8,669		8		6		$	26,401		$	25,023		6		5
Same-Store Sales Growth (Decline) %	3			(4)			N/A		N/A		2			(3)			N/A		N/A

Company sales	$	259		$	220		18		15		$	721		$	488		48		46
Franchise and property revenues	459			417			10		8		1,303			1,219			7		7
Franchise contributions for advertising and other services	161			148			9		7		478			427			12		11
Total revenues	$	879		$	785		12		10		$	2,501		$	2,134		17		16

Company restaurant profit	$	36		$	28		29		26		$	85		$	60		43		41
Company restaurant margin %	13.7		%	12.5		%	1.2	ppts.	1.3	ppts.	11.9		%	12.2		%	(0.3)	ppts.	(0.3)	ppts.

G&A expenses	$	88		$	86		(2)		Even		$	255		$	253		(1)		Even
Franchise and property expenses	15			20			26		29		51			46			(10)		(9)
Franchise advertising and other services expense	160			148			(9)		(7)		472			424			(11)		(10)
Operating Profit	$	392		$	339		16		14		$	1,088		$	986		10		10


			% Increase (Decrease)
Unit Count	9/30/2025	9/30/2024
Franchise	32,463	30,684	6
Company-owned	488	459	6
Total	32,951	31,143	6

Company sales and Company restaurant margin %

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

The year to date increase in Company sales, excluding the impacts of foreign currency translation, was driven by the KFC U.K. and Ireland restaurant acquisition (see Note 2) in the second quarter of 2024 and Company same-store sales growth of 4%.

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

The year to date decrease in Company restaurant margin percentage was driven by the margin percentages of the units included in the KFC U.K. and Ireland restaurant acquisition, partially offset by Company same-store sales growth.

Franchise and property revenues

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

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

G&A

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

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

Operating Profit

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

Taco Bell Division

The Taco Bell Division has 8,816 units, 87% of which are in the U.S. The Company owned 7% of the Taco Bell Division units in the U.S. as of September 30, 2025.


	Quarter ended										Year to date
							% B/(W)										% B/(W)
	2025			2024			Reported		Ex FX		2025			2024			Reported		Ex FX

System Sales	$	4,368		$	4,008		9		9		$	12,623		$	11,622		9		9
Same-Store Sales Growth %	7			4			N/A		N/A		7			3			N/A		N/A

Company sales	$	298		$	267		12		12		$	848		$	775		9		9
Franchise and property revenues	254			234			8		8		735			678			8		8
Franchise contributions for advertising and other services	178			165			9		9		514			477			8		8
Total revenues	$	730		$	666		10		10		$	2,098		$	1,930		9		9

Company restaurant profit	$	71		$	62		13		13		$	199		$	185		8		8
Company restaurant margin %	23.7		%	23.4		%	0.3	ppts.	0.3	ppts.	23.5		%	23.9		%	(0.4)	ppts.	(0.4)	ppts.

G&A expenses	$	50		$	41		(22)		(22)		$	148		$	137		(8)		(8)
Franchise and property expenses	8			6			(33)		(33)		22			22			3		3
Franchise advertising and other services expense	177			163			(9)		(9)		510			473			(8)		(8)
Operating Profit	$	267		$	251		7		7		$	770		$	709		9		9


			% Increase (Decrease)
Unit Count	9/30/2025	9/30/2024
Franchise	8,288	8,103	2
Company-owned	528	491	8
Total	8,816	8,594	3

Company sales and Company restaurant margin %

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

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

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

Franchise and property revenues

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

G&A

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

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

Operating Profit

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

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

Pizza Hut Division

The Pizza Hut Division has 19,872 units, 68% of which are located outside the U.S. The Pizza Hut Division uses multiple distribution channels including delivery, dine-in and express (e.g. airports) and includes units operating under both the Pizza Hut and Telepizza brands. Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of September 30, 2025.


	Quarter ended										Year to date
							% B/(W)										% B/(W)
	2025			2024			Reported		Ex FX		2025			2024			Reported		Ex FX

System Sales	$	3,177		$	3,184		Even		(1)		$	9,321		$	9,491		(2)		(2)
Same-Store Sales Growth (Decline) %	(1)			(4)			N/A		N/A		(1)			(5)			N/A		N/A

Company sales	$	9		$	1		520		520		$	20		$	5		301		301
Franchise and property revenues	146			150			(3)		(3)		436			446			(2)		(2)
Franchise contributions for advertising and other services	85			87			(2)		(2)		255			264			(4)		(4)
Total revenues	$	240		$	238		1		Even		$	710		$	715		(1)		(1)

Company restaurant profit (loss)	$	(1)		$	—		NM		NM		$	(2)		$	—		NM		NM
Company restaurant margin %	(12.2)		%	(6.1)		%	(6.1)	ppts.	(6.1)	ppts.	(9.2)		%	(1.9)		%	(7.3)	ppts.	(7.3)	ppts.

G&A expenses	$	50		$	51		Even		Even		$	159		$	153		(4)		(4)
Franchise and property expenses	11			9			(12)		(9)		32			19			(67)		(67)
Franchise advertising and other services expense	89			89			Even		Even		268			270			1		1
Operating Profit	$	84		$	91		(8)		(8)		$	239		$	278		(14)		(14)


			% Increase (Decrease)
Unit Count	9/30/2025	9/30/2024
Franchise	19,814	19,920	(1)
Company-owned	58	7	729
Total	19,872	19,927	Even

Franchise and property revenues

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

G&A

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

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

Operating Profit

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

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

Habit Burger & Grill Division

The Habit Burger & Grill Division has 377 units, the vast majority of which are in the U.S. The Company owned 80% of the Habit Burger & Grill Division units in the U.S. as of September 30, 2025.


	Quarter ended						Year to date
					% B/(W)						% B/(W)
	2025		2024		Reported	Ex FX	2025		2024		Reported	Ex FX
System Sales	$	166	$	161	3	3	$	486	$	483	1	1
Same-Store Sales Growth (Decline) %	1		(5)		N/A	N/A	(2)		(6)		N/A	N/A
Total revenues	$	134	$	137	(1)	(1)	$	395	$	408	(3)	(3)
Operating Profit (Loss)	$	(2)	$	1	(572)	(572)	$	—	$	(2)	82	82


Unit Count	9/30/2025	9/30/2024	% Increase (Decrease)
Franchise	75	68	10
Company-owned	302	313	(4)
Total	377	381	(1)

Corporate & Unallocated


	Quarter ended								Year to date
(Expense) / Income	2025			2024			% B/(W)		2025			2024			% B/(W)
Corporate and unallocated G&A	$	(80)		$	(74)		(10)		$	(285)		$	(249)		(15)
Unallocated Company restaurant expenses (See Note 9)	(4)			(3)			(56)		(11)			(4)			(171)
Unallocated Franchise and property revenues	(4)			—			NM		(5)			—			NM
Unallocated Refranchising gain (loss)	17			12			37		33			31			6
Unallocated Other income (expense)	(3)			2			NM		8			(3)			NM
Investment income (expense), net (see Note 9)	—			1			NM		1			(21)			NM
Other pension income (expense) (see Note 10)	(1)			2			(154)		—			5			(93)
Interest expense, net	(124)			(120)			(4)		(368)			(358)			(3)
Income tax provision (See Note 7)	(144)			(120)			(21)		(446)			(309)			(44)
Effective tax rate (See Note 7)	26.7		%	23.8		%	(2.9)	ppts.	30.3		%	22.5		%	(7.8)	ppts.

Corporate and unallocated G&A

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

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

Consolidated Cash Flows

Net cash provided by operating activities was $1,393 million in 2025 versus $1,176 million in 2024. The increase was primarily driven by lower income tax payments in the current year, an increase in Operating Profit before Special Items and lower incentive compensation payments.

Net cash used in investing activities was $208 million in 2025 versus $292 million in 2024. The change was primarily driven by maturities of short-term investments in the current year compared to net purchases of short-term investments in the prior year and lower current year spending on restaurant acquisitions, partially offset by lapping prior year proceeds arising from the sale of our approximate 5% minority investment in Devyani and higher current year capital spending.

Net cash used in financing activities was $822 million in 2025 versus $991 million in 2024. The change was primarily driven by net borrowings in the current year compared to net repayments in the prior year.

Liquidity and Capital Resources

We have historically generated substantial cash flows from our extensive franchise operations, which require a limited YUM investment, and from the operations of our Company-owned stores. Our annual operating cash flows have been in excess of $1.4 billion in each of the past four years and we expect that to continue to be the case in 2025. It is our intent to use these operating cash flows to continue to invest in growing our business and pay a competitive dividend, with any remaining excess then returned to shareholders through share repurchases. Subject to market conditions, we expect to maintain our consolidated net leverage ratio at approximately 4.0x Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") over the medium term by issuing incremental debt as our business grows.

To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.5 billion Revolving Facility under our Credit Agreement that was undrawn as of September 30, 2025. Borrowings under our Revolving Facility have original maturities of three months or less. We believe that our ongoing cash from operations, cash on hand, which was approximately $1,050 million at September 30, 2025, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

There have been no material changes to the disclosures made in Item 7 of the Company's 2024 Form 10-K regarding our material cash requirements, except that we executed purchase agreements with a franchisee to acquire 128 Taco Bell restaurants across the Southeast U.S. during the quarter ended September 30, 2025. These acquisitions are expected to close in the quarter ended December 31, 2025, with a total cash outlay of approximately $670 million, largely financed with cash on hand.

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

Debt Instruments

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

We ended the quarter with a consolidated net leverage ratio of 3.7x EBITDA. We continually reassess our optimal leverage ratio to maximize shareholder returns. We target a capital structure which we believe provides an attractive balance between optimized interest rates, duration and flexibility with diversified sources of liquidity and maturities spread over multiple years. We have credit ratings of BB+ (Standard & Poor's)/Ba2 (Moody's).

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


	2025		2026		2027		2028		2029		2030		2031		2032		2037		2043		Total
Securitization Notes					$	884	$	595	$	590	$	1,000	$	737	$	500					$	4,306
Credit Agreement	$	7	$	28	34		1,424		438												1,930
Subsidiary Senior Unsecured Notes					750																750
YUM Senior Unsecured Notes											800		1,050		2,100		$	325	$	275	4,550

Total	$	7	$	28	$	1,668	$	2,019	$	1,028	$	1,800	$	1,787	$	2,600	$	325	$	275	$	11,536

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

New Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which updates income tax disclosure requirements related to the income tax rate reconciliation and requires disclosure of income taxes paid by jurisdiction. The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2025 with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is permitted. We are currently evaluating the impact of the standard on our disclosures.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40), which requires new financial statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions. The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2027, and subsequent interim periods, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is permitted. We are currently evaluating the impact of the standard on our disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which amends certain aspects of the accounting for software costs, including removing software development project stages and requiring companies to capitalize costs when both 1) management authorizes or commits to funding a software project and 2) it is probable that the project will be completed and the software will be used to perform the function intended. The standard is effective for the Company in our first quarter of fiscal 2028, with early adoption permitted and can be applied on a prospective, retrospective or modified prospective basis. We are currently evaluating the impact of the standard on our condensed consolidated financial statements.

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