Yum Brands after China: CFO talks about acquisitions and the ‘new Yum’

David Gibbs was promoted to president and CFO of Yum Brands this year. | Courtesy of Business Wire

Yum Brands hasn’t shut the door on the possibility of acquiring another chain restaurant, but don’t expect any big announcements soon.

“Acquisitions of another concept is not high on our list just yet,” David Gibbs, president and chief financial officer of Louisville-based Yum Brands, said at Barclays 2016 Gaming, Lodging, Leisure, Restaurant & Food Retail Conference in New York.

The restaurant company is not “actively looking” to buy another business, he said.

Last month, a restaurant analyst raised the possibility that the well capitalized Yum Brands could purchase Dunkin’ Brands, which owns Dunkin’ Donuts, and help the brand expand internationally.

The company is looking, however, to acquire restaurant chains that could be converted into a Yum  subsidiary. For example, in Australia, the company bought Eagle Boys stores and plans to convert them into Pizza Hut locations. Eagle Boys is an Australian pizza chain.

International growth outside of China is a major focus for Yum Brands now that the spinoff is complete.

The pace of international development for Taco Bell is ramping up, Gibbs said, and the chain just opened a location in Brazil. Pizza Hut recently entered Sub-Saharan Africa, and KFC is about to have more than 500 stores operating in Russia where it is “putting up some phenomenal numbers,” he said.

There also is room for improvement here in America, according to Gibbs. “I think in the U.S. we have plenty of upside to expand our brands.”

Sales at KFC keep improving, thanks to the chain’s Colonel-focused advertising campaign, and Taco Bell remains a top-performing brand for Yum Brands, having found its foothold among millennial consumers.

“It was, food was just seen as fuel, and then food was seen as an experience, and now it is, food needs to be an experience worth sharing,” Gibbs said, adding that Taco Bell is the epitome of a business that has successfully created an experience worth sharing. “That is a brand that is resonating to the consumer.”

Compared to its siblings KFC and Taco Bell, Pizza Hut continues to struggle to increase its same-store sales, so Yum Brands is taking steps to change that, Gibbs said.

Yum Brands is working with Pizza Hut franchisees to upgrade and remodel its outdated dine-in stores and in some cases, build new stores from the ground up. “I think we feel good about the foundation we are building in the U.S.,” he said.

Also, by the end of 2017, Pizza Hut will go from having eight different point-of-sale systems in its U.S. restaurants to having one point-of-sale system across the brand, creating greater coordination and efficiency.

Despite Yum China Holdings being its own separation company now, Gibbs still fielded a couple of questions at the conference about China operations.

“Some of us jokingly say, ‘What are we going to talk about on our earnings call?’ ” Gibbs said, adding that without the company’s time and energy going toward China, “the new Yum is going to be more focused.”

Analysts, particularly in the past year, would mostly ask questions about Yum Brands operations in China.

“It doesn’t leave a lot of time to think about how you are going to accelerate growth in other places around the world,” he said.

Now that the companies are officially split, Gibbs said he can’t answer many specifics about how Yum China Holdings is operating or comment on whether they plan to acquire another company, including food delivery company Daojia that it is reportedly in talks with.

However, he did say that any acquisition could impact Yum Brands, because the company is set to receive a 3 percent licensing fee from Yum China Holdings based on its sales numbers.

“If they make investments in technology that drive sales in our three brands, that’s great for Yum.”