YUM! Brands Inc. will roll out delivery across its entire KFC footprint in the U.S. during 2019 as the restaurant operator also aims to transform its Pizza Hut restaurants to leverage a lopsided U.S. carryout and delivery business, executives said May 1.
"We're excited about the operational ease and increased check growth for our franchisees, and we look forward to the nationwide launch of KFC delivery in the U.S. later this year," Yum! Brands CEO Greg Creed said during a conference call discussing the company's first-quarter earnings.
Shares in Yum! Brands dipped 2.9% in morning trading on May 1 to $101.32 after the company posted year-over-year earnings drops that fell mostly in line with analyst expectations. However, same-store sales grew above expectations driven by strong performance at KFC.
The fried chicken chain already offers delivery through Grubhub Inc. at 2,200 U.S. locations and the program is "going well," Creed said. Yum! Brands had more than 4,000 KFC locations in the U.S. as of Dec. 31, 2018, according to an annual filing with the Securities and Exchange Commission.
"I think what we're seeing is what we expected to see, which is a sort of a focus on dinner, focus on big packs, bone-in and obviously it's incremental," Creed said of KFC delivery.
U.S. restaurant chains are increasingly looking to delivery to help boost sales in the face of changing consumer preferences and, in some cases, declining customer traffic. The KFC rollout will follow the expansion of delivery at Taco Bell, which began offering nationwide delivery through Grubhub in February.
"Given it's early days, we aren't going to provide specific data, but I will say that both traffic and check saw benefits from the launch," Creed said during the call.
Yum! Brands bought $200 million in Grubhub stock and formed a partnership with the company in 2018 with the intention of rolling out delivery to its restaurant chains.
The company is also in the midst of an ongoing effort to transform its U.S. Pizza Hut restaurants to leverage customer preferences for carryout and delivery over dining in restaurants, executives said.
"In the U.S. the vast majority of our business comes to the delivery [and] carryout channels, but still close to half the assets are dine-in assets," President, COO and CFO David Gibbs said during the call.
Pizza Hut booked flat U.S. same-store sales in the first quarter and a 1% decline in system sales because of restaurant closures, Gibbs said. The company is upgrading, relocating and closing restaurants in some areas to take advantage of the U.S. trend, though executives did not provide a timeline for the transformation or any expectations of a potential lift to sales.
About 200 U.S. Pizza Hut locations also offer delivery through Grubhub, though Pizza Hut drivers deliver orders, Creed said.
"We are excited by the incremental customers we're seeing come through that marketplace but obviously the vast majority of the business is still coming through our Pizza Hut traditional business," Creed said.