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I feel like a singer now. All right, let's get started. Good afternoon, everybody. Thank you for joining us. I'm Danilo Gargiulo, restaurant analyst here at Bernstein. Thank you so much for joining us, and thank you, Yum! Brands, for being here today. We have here with us Chris Turner, who's the CFO of Yum! Brands, and Chris joined Yum! from PepsiCo, where he served as a Senior Vice President and General Manager leading PepsiCo's retail and e-commerce businesses with Walmart in the U.S. and in more than 25 countries. Prior to that, he was serving as the SVP of Transformation for PepsiCo Frito-Lay North America business, where he was optimizing Frito-Lay's world-class direct store delivery capabilities. Prior to that, he was a very successful partner at a very small company called McKinsey. With us also, Tracy Skeans is with us.
She's the COO and Chief People and Culture Officer at Yum! Brands, and Tracy is, you know, the institutional knowledge, I should say, of Yum!. She's responsible for leading cross-brand collaborations on operational execution, people capability, and customer experience imperatives. She's overseeing business transformation now, and she leads food safety, human resources, equity and inclusion, and communication. Previously, as a Chief Transformation and People Officer, she was partnering with the CEO and global leadership team to execute the transformation to become a pure play franchisor in 2019. Tracy, welcome to the stage as well.
Thank you.
All right, let me get started, maybe with a quick opening. Chris, what would you like investors in the room to remember by the end of this conference?
Yeah, thanks, Danilo. Thanks for having us, and thanks to everyone who's made time to join us. Look, the Yum! global story, I think, is an amazing one, but our brightest days are actually ahead. A few things that I would want people to take away. One, while we're the largest restaurant company in the world in terms of unit count, we still think of ourselves as a growth company. We are driving every day to grow our business. If you think about our twin growth engines, KFC International and Taco Bell U.S., which represent 82%-83% of our operating profit around the globe, they are tremendous growth engines with structural advantage. Taco Bell U.S. in Q1 far outpaced the U.S. QSR industry because they provide an exciting brand, great food and innovation, all at tremendous value, and that was what consumers needed in Q1.
KFC International is our leading unit development engine. We opened, on average, over the last few years, a new restaurant in KFC International about every three hours. It is an amazing growth engine with tremendous franchise partners and great unit economics. Those are our two primary growth engines. We think of ourselves as a growth company. Second, I would want them to remember our resilience. While we think of ourselves as a growth company, our business model is inherently resilient in a volatile world with four iconic brands, 150 countries, and a 98% franchise model that gives us multiple layers of resilience to navigate any sort of macroeconomic environment. That is how, in the last two years, we have delivered 8% core operating profit growth and did that again in Q1.
The third thing I would say I want people to remember is we are transforming the company for future growth. Bite by Yum, our digital and technology capability, is probably the best example of that. It is the leading multi-brand, multi-country restaurant platform built by restaurateurs for restaurateurs. We have made a lot of progress with Bite, but our biggest days and biggest impact are ahead of us on that.
Great. Maybe let's dig into this transformation at Yum. Maybe Tracy, you've been part of the company for a long time. Can you walk us through the transformation over time? How has the strategic imperative at Yum! changed over the past 15 to 20 years, and how do you expect this transformation in strategy to be evolving in the next 5 to 10?
Sure. Like you say, institutional knowledge also means you've just been around for a really, really long time. You know, I joined Yum! in 2000, so it'll be 25 years in another month or two. At that point in time, we were only three years post our spin off of PepsiCo. You know, I was obviously much, much younger and more junior in the organization then. I think that that first sort of decade of the 2000s was about, you saw us doing a ton of expansion, really driving into international markets. That's when the China seeds were being planted.
It was interesting, like growing up in the company, when you're young, you, I worked for the Pizza Hut U.S. business, and had friends at Taco Bell U.S. and KFC U.S., but everything you heard about was international, international, China, China, China. I think at that phase, it was, how do you become a standalone company from PepsiCo? We were saddled with a ton of debt at the time, but the company was taking off, and the international and China businesses were really kind of pedal to the metal. I think the first major transformation came, which I worked on in 2000, at the beginning of 2014, which in some ways was just a way we run the company. At that time, we were geography-based.
You would have a CEO of KFC U.S., a CEO of KFC India, a CEO of KFC China, a CEO of KFC for all the other countries, and they all would have their own ideas about what KFC should be. At the beginning of 2014, we changed to be brand specific. I think that was the first pivotal moment of transformation to say, there is one Pizza Hut brand, there is one KFC brand, and there is one Taco Bell brand, which was a massive, you know, organizational transformation. You then go a few years forward, and we would, I think this is where our business model changed. In 2016, we completed the split.
By that time, the company was so large that the way we described it to investors at the time was, you really had two powerful, huge companies inside of one company: a China business that was all equity-owned, obviously a much higher risk profile to have a fully equity-owned business in China, and then the rest of the world, which was at that point 92%-93% franchised if you took out China. We split the companies. That transformation, again, it was a business model. That's what you're referring to, to say, we are going to be asset light now. Not only did we split the companies in two, we then set off in 2016, 2017, 2018 to become asset light.
The rest of the equity restaurants that we had, we started to sell them off and say, we want to be a pure play franchisor, which then led us into around 2020 when we were saying, hey, this is the time that we should start figuring out how to better leverage our scale. This is the start of kind of 2019 is when Chris joins us, 2019, 2020. Now we have an asset light portfolio. We do not spend much capital, but we also do not do much together as different brands. That then became what we believed was a disadvantage. Why should we not be doing more together? We started to look at the D&T area as a place where we would travel around the world, and you would see KFC in Asia looking at voice recognition technology and what they could do.
You would see Taco Bell in the U.S. doing something. You started to say, we should really perhaps change the way we operate so that we do these things together and can better exploit our scale. Just a few things happened right around that time, though. You had COVID happen in a pandemic. You then had a war with Russia and Ukraine. Different things happened. All along that, despite those crises that were affecting the business, we were sometimes slowly, sometimes quickly behind the scenes working to get to a point that we could really, really leverage the digital and technology capabilities.
Starting to change the way we operate, having the brands collaborate more together, rationalizing some resources so that we could take the savings and invest in AI, in digital and technology, doing that sometimes quietly behind the scenes while we navigated everything else. That is what has brought us now to Bite by Yum. We are to a point that the organization operates in a very different way. More than half of our 5,000 employees will be digital and technology employees, which is pretty phenomenal. Yet a lot of that happened sort of behind the scenes for several years, and now we start to see it taking off.
Excellent. By the way, I want to remind everybody, if you'd like to, submit any questions, you can use the Pigeonhole app, and you can visit pigeonhole.at with passcode SDC2025 to submit any questions. Chris, I would like to go back to your statement. You mentioned that you like investors to remember that or to appreciate that the growth mindset is still out there. Number two, that the business model is built for resilience. And then number three, that the digital component has a lot of potential. As a CFO, what do you think is still underappreciated in the stock today?
Yeah. Look, I think, if I think about the questions that we get from investors and things that people, you know, want to understand, they tie to some of those areas. If you think about our growth potential, you know, people sometimes say, hey, you got 60,000 restaurants around the globe. Can you really continue to build new restaurants at the clip that you do? I mentioned the new KFC International every three hours. In total, we open a new restaurant across all of our brands every two hours. The answer is yes. There's plenty of white space opportunity out there, and it's because our brands, KFC in particular, are just so translatable to consumers in every corner of the world. We have growth-minded franchise partners, and this is really important. Our franchisees are wired for development.
We've got franchisees who have incredible development capabilities. They've got the white space in their markets, and they're bringing that to life. So there's a ton of runway left from a unit development standpoint. You know, a lot of questions on Bite. And I, and I think the value of Bite and the value potential of Bite will continue to come to life over the coming years. We've made an incredible amount of progress, but really the value potential, we're only starting to unlock. And I think over the, you know, next, you know, several quarters and years, we'll continue to see more of the progress there. We shared a lot at our Taco Bell Investor Day earlier in the year about the impact that Bite is having at the restaurant level and with our franchisees.
Taco Bell U.S. is a place where we've implemented a lot of the Bite technology, and we shared a lot of information there about how when we grow the digital mix in that business, we see the absolute top line grow. We see the bottom line for our franchisees and our company stores grow. We even are now seeing better team member experience. This is technology working with our frontline team members. I want to help people continue to understand the value potential that Bite can create, you know, for our franchisees, but also for Yum. I think those are two big things that we need to continue to help people to understand.
Yeah. Maybe let's, let's go deeper on the first one, and then we're going to touch base on, on the digital side. As you're thinking about growing the units going forward, how much do you think the 5% increase in unit is going to be sustainable, you know, beyond 2025? You're in 2025, you mentioned that you're still going to be reaching 5% if you're excluding the one-off closures in Turkey. How sustainable do you think that this 5% is going to be going forward? And specifically, how much reliance on the algorithm do you place on KFC International versus how much growth potential do you see from Pizza Hut and Taco Bell in international markets?
Yeah. So, you know, for those of you less familiar with the story, our long-term growth algorithm, what we, what we try to deliver over the long term at Yum! is every year 5% unit growth, that coupled with same-store sales growth, translating to 7% system sales growth. We, you know, we want that to be the, the goal in a typical year, all translating to at least 8% core operating profit growth. If you think about those elements, ever since 2021, we've delivered either 6% or 5% unit growth in each year. It's been a, you know, tremendous focus for us. I think we have a competitive advantage in unit development markets around the globe. It's the things that I mentioned earlier, the white space coupled with tremendous franchise capabilities.
You know, I mentioned that we have, when you think of the term franchisee, sometimes you think of small business people, and we have some of those in our system. But about 70%-75% of our stores are owned by about 75 of our largest franchisees. Fourteen of those are publicly traded companies. These are larger, more sophisticated enterprises with a lot of capital to deploy. They think through macro volatility in the short term and say, this is an opportunity for us to continue to grow. Yum! China has done an amazing job of this as an example. It is that combination of factors that I think gives us confidence that over the long term, we can continue to deliver on that 5% unit growth.
KFC International has traditionally been the lead developer, and I think that will continue to be the case. The place where there is tremendous untapped opportunity is in Taco Bell International. We have had explosive growth there. We had about 400 units in 2018, 2019. We are now over 1,000 units in Taco Bell International. It takes a little longer to bring consumers along in markets around Mexican and California-inspired cuisine and to understand the Taco Bell brand. We think in the long run, there should be thousands and thousands of Taco Bell International units around the globe. That is one that we are working to, you know, always accelerate and grow.
Great. Tracy, last night you were mentioning the two case examples, right, of the U.K. versus China. In one example, Taco Bell has done tremendously well. Like in the U.K., they really are accelerating the speed of opening. In China, there is a bit of a reset moment to maybe shift the strategy of openings as well as operations within the store. Can you help us understand your learnings in this journey of making a brand, which is so California and Mexican inspired, to become an international player?
Yeah, and it's actually, my guess is it's an experience all of us could kind of relate to that what we found. I mean, first of all, when KFC went into China, it took, for goodness sakes, I mean, it took 10 plus years to get it even to a point that then it started cranking. You know, new brands, new foods in different countries takes a while. When we first entered Taco Bell into China, I mean, I remember being there to the first flagship store, watching it open. For right or for wrong, you know, it's normal for our franchisees to tweak things in country. That's part of, you know, they have to have certain standards, but they also make changes.
What we found thus far is that, you know, despite our incredible partnership with Yum! China, when it comes to Taco Bell, they've made some tweaks to the brand that do, that, that they're not fully resonating yet. We find ourselves at this reset moment. At the same time, their growth on KFC and Pizza Hut continues and, you know, phenomenal operators there. I think the Taco Bell brand still has some work to do. On the flip side, our KFC business in the U.K. and our Pizza Hut business has always been strong. KFC especially very strong in the U.K. Now as Taco Bell's entering, I think you have a couple different things going on.
I think you've got some franchise partnerships that are, in that, in that market with Taco Bell, perhaps more, tell me exactly what to do and I will do it and not mess with it as much. That sounds very simple, but sometimes that works. Here, here's the answer. Do that. Some really good collaboration with the other franchisees and teams in that market, and Taco Bell seems to be taking off there much more quickly than other places. We are excited about that. There is this, we are seeing it happen in other parts of the world. We have had it happening in India and some other places that Mexican food and the form of Mexican food is not familiar to everyone.
There are a great couple ads that we've done and some work on social media in one of our, I think one of our European countries, sort of trying to teach people to tilt your head when you bite a taco. Sounds kind of kitschy, but actually is a type of, almost marketing tactics that you've got to have to build a brand from scratch that no one else has ever seen.
Chris, maybe how much is the algorithm hinging on a recovery in China? Because one of the questions that investors might be thinking through is, you know, so far China has been, you know, the biggest developer for KFC. Admittedly, like Yum! China has been growing units even when nobody expected them to be opening units, you know, in the middle of COVID, showing again, resilience and commitment from franchisees. How long do you think this could continue if the macroeconomic conditions were not to recover? How much opportunity do you see to open in white space outside of China if that were to become the reality?
Yeah. So our, you know, our partners at Yum! China are amazing leaders and amazing restaurant operators. And while we have, you know, well north of 10,000 units in China, we're still very under-penetrated. And you've heard them say on their earnings calls, they're only serving one third of the Chinese population. If you look at the, the density of our restaurant count relative to the consuming class population, it's only about a third of where we are in the U.S.. So there's still tremendous white space for them to grow into. You're seeing them move into lower tier cities in Pizza Hut, you know, where they have the traditional format there has been these large dine-in restaurants. They're building more delivery-oriented satellite units around those. So lots of remaining potential. And you've heard them talk about having two to three-year paybacks on these units.
The unit economics are there, and that's why they continue to build in those brands. Now, the macros have been more volatile. They've talked about the volatile macros and the impact on same-store sales growth. We would all love to get to a more stable state there where we're seeing consistent, you know, strong same-store sales growth. I think if you were to compare how Yum! China's performing on that dimension relative to a lot of its competitors, it is outperforming the competitors in a volatile environment. They're doing a nice job, driving the business. While it has been our primary unit growth driver, we expect to have unit growth in countries around the globe. We, you know, we typically open in well over 100 countries each year. We talk with our franchise partners.
We want our franchise partners to be what we call three C. The first is capable. We need them to run great restaurants. The second is being well capitalized. The third is what really differentiates us from a development standpoint versus other franchisors is we want them to be committed. What committed means in our language is committed to using some of the profits that they generate from the business to reinvest in unit growth. As we have more units, we develop greater scale, our marketing becomes more efficient, our procurement and purchasing becomes more efficient, our technology becomes more efficient. There are returns to scale as we grow in markets around the globe. Our expectation is that every market should be developing and growing the unit count.
Yeah. I mean, to be honest, I found, I recently visited Italy and I did not think like KFC would be working in Napoli, my home city, and it was actually packed.
I was with our partners there last summer and was on the ground visiting restaurants. It's super exciting to see what's happening there. I mean, they've gone from below 100 units. They're going to be, you know, they've added a lot of units. The AUVs are strong. The business is strong. They've got some exciting flagship locations, I think, that are planned in the future. That's a very exciting market.
Yeah. I wonder, you also see the competition stepping up, right? You see many competitors now, especially in the chicken space, starting to have international vision and be more expansive about the opportunity that they see. Now you mentioned before the three C and the commitment and how there is scarcity of talent and scarcity of franchisees. So can you help us understand how the evolution of the competition in these different markets could be potentially a hindrance to the growth of Yum! or whether you think you have a protected, you know, defensible structure that will enable you to grow despite the competition potentially rising?
Yeah. Look, we want to be laser-focused on beating the competition. Everyone at Yum! wakes up every day and says, how do I go win market share? How am I outcompeting the very good competitors we have in each of our markets around the globe? Now, when I talked about those twin growth engines, Taco Bell U.S. and KFC International, they do have structural advantage. You know, we talk about Taco Bell as the category of one in the U.S.. They're by far the largest player in Mexican QSR. Globally, KFC is really the only large-scale chicken-focused player. You know, they are significantly bigger than any other chicken-focused player from a global standpoint. We do not take that for granted.
Anytime our competitors are moving into new markets, we want to be there to win the consumer's hearts and minds, continue to win the consumer's hearts and minds. Our team is wired for that. One of the competitive advantages that we have that I do think gives us a defensible moat, but again, we do not take it for granted, is our franchising capability. If you look at how restaurant brands that have grown from the U.S. to global markets, really the only successful ones that have done it at massive scale have done it through franchising. That is just the case. You know, there are about five companies that have figured that out. That is a very hard capability to develop. We have been at it. You know, PepsiCo was at it. We have been at it for decades and decades.
We've learned a lot about how to be what we think is the, the world's franchisor of choice. And we've developed what we think are the best franchise partners in, in the vast majority of the markets in which we operate. I think as, you know, these U.S. brands that have done a really nice job in the U.S., where we have, you know, KFC U.S. is a very small part of KFC Global. You know, for them to expand globally, they're going to have to figure out how to do, you know, how to do franchising. A lot of them are company-operated models in the U.S.. I think that's a moat. Again, we want our team showing up and outcompeting the competition every day. We don't take anything for granted.
Can you also talk about the supply chain benefits that you have, you know, the benefit of scale from a supply chain standpoint, particularly on the procurement side? Eventually we're going to switch gears onto the digital side as well. What kind of role does digital have in the ecosystem to protect your strategic positioning?
This, you know, next layer of competitive advantage comes from scale and you're, you're hitting on supply chain. One of the benefits of having four brands in our portfolio is we leverage our purchasing scale across those brands. In the U.S., we have one of the largest co-ops in the U.S. that's jointly owned by our franchise partners and by Yum! that has a team of professional strategic sources. This is called Restaurant Supply Chain Solutions, or RSCS. They do procurement on behalf of all four of our brands in the U.S.. As Taco Bell shifts more into chicken, they're able to leverage the scale of the chicken purchasing that we do at KFC. Globally, there are a set of categories that have a more global, you know, procurement environment, equipment being an example.
In those categories, we have a Yum! global supply chain team that works with our franchise partners around the globe to take advantage of cross-country scale and cross-brand scale. That is something. We have franchise partners who are of a scale that they are developing their own supply chain capabilities that give them a competitive advantage in specific markets. I was in South America a couple of years ago, and I have spent a lot of time with this franchisee since then. Juan Carlos Serrano, the Serrano Group, now have a number of commissaries that they have built that sit above the restaurants that have chicken processing capabilities, some really interesting ice cream capabilities that give them a cost and service advantage that would be very hard for anybody new to the market to replicate.
Got it. Switching on the other side of the growth engine, right? So far we've been talking about international, but Taco Bell has been explosive in their growth. You know, looking at the first quarter, they've been outpacing pretty much every, you know, QSR, that is at least publicly traded. What do you attribute the strength of and the resilience of Taco Bell to?
Yeah. You know, Taco Bell U.S., one of those twin growth engines, for those who did not see the results in Q1, put up a +9% same-store sales growth in Q1 in a really tough environment here where, you know, that was far outpacing the rest of QSR. What makes Taco Bell work? We call it the magic formula. It starts with a culturally relevant brand, a really buzzy brand. Sean Tresvant and the marketing team at Taco Bell do an incredible job of this. They speak to the cultural rebel. Now we serve just about everyone in the U.S., but, you know, even guys like myself, I think of myself in the back of my brain somewhere, hey, I can still be a cultural rebel. Speaking to the cultural rebel resonates with just about all consumers in the U.S..
It starts with that. Second, you know, QSR, you always want craveable food that you feel good about eating. And Taco Bell has an amazing menu. It's distinctive. You, you won't find Taco Bell's products at any other competitor. And they have this innovation engine that continues to produce hits. You have the core, but then you have the innovation engine. We did an event in Brooklyn back in February called Live Más Live, which is our annual innovation event. Think of Steve Jobs releasing, you know, back in the day, the next, you know, innovation from Apple. This is sort of like that. Our innovation experts do make a big scene of this. You can go find the video online. The innovation engine keeps, there's always something new to try at Taco Bell.
You couple those two, or you tie those two things with an incredible value orientation. You can get amazing value at Taco Bell. You know, items at $1, $2, $3. We have the Luxe Craving Meals at $5, $7, $9. Taco Bell is viewed as a place where you can get tremendous value and you can if you want it. The magic formula, the way it works, people may come for value, but a lot of them choose to then buy off the core menu or off the innovation menu at a slightly higher price point, still a tremendous value. That is what allows us to have a buzzy brand that grows, but has very high margins for our franchisees and really strong unit economics. It is a really special positioning and formula that Taco Bell has that gives its power.
Part of that is based on leveraging Yum! scale in purchasing and in technology in a way that further benefits the bottom line.
That's about 80% of people, if I recall correctly, right?
80, 80% of our U.S. operating profit comes from Taco Bell because it's a, it's a big business. It's our biggest U.S. business. And we own about 450 of the restaurants there. So we also have the profit stream from those restaurants.
Now how do you, how do you think about your positioning versus, say, the burger category over the next five years, specifically maybe for Taco Bell?
Yeah. You know, I think Taco Bell has a very differentiated position. You know, it comes from that category of one, really the only scaled Mexican QSR player. With such an innovative menu, you're always able to do something different. You're not constantly, you know, people ask us a lot of questions last year about the burger wars and the price competition. Taco Bell during COVID never really came off of value. They always had strong value. They dialed back on innovation a little bit because consumers cared about being able to deliver and delivery capabilities and running the restaurant safely for team members and consumers. We enabled that by dialing back on innovation a bit.
As we returned to a more normal QSR environment, you know, where many of our competitors in the burger space came off of value and they have come back on value, because we never came off of value, what we have done is we have turned the innovation knob back up. We need a little more excitement to ensure consumers are still excited about coming to Taco Bell. We dialed it up last year. We dialed it up again this year, but we have great operations that allow us to have more innovation while still delivering on a speedy, easy experience for consumers. I think it is that differentiation across all of those elements that will allow us to compete very well against the rest of QSR.
Tracy, you know Sean really well, clearly having hired him. What do you think he can bring to the table above and beyond the innovation that you think is going to be in outer years? Not something that he has already worked on so far, but something that you think is within the possibilities of Taco Bell that we might be exploring, say, three, five years down the line?
Sure. I mean, before that, I just want to add on to one thing that Chris said when you asked the question about Taco Bell and, you know, we talk about this magic formula. We also talked earlier about the resilience that we feel Yum! overall has. I would just add on to the Taco Bell answer that it's the leadership team that provides, that has to be the magic to the magic formula. Obviously, you have to have a cool brand and the brand that speaks to the cultural rebel and makes the rest of us wish that we also were cultural rebels, but we're drawn to it anyway. It's the team that does that. I, that doesn't mean that it's that exact team all the time.
I think that's an interesting point that, you know, Sean's only been with us a few years. He's been in the CEO seat for less than 18 months and was with us before that as Chief Brand Officer for a short time. There is enough talent on that team and they work in a way that they're able to, year after year after year, keep that innovation going, move the value dial when they need to, coupled with the franchise base. I really stand by that it's the leadership of Taco Bell and a lot of other parts of Yum! too that keep things going. Sean himself, we were very purposeful, hiring him.
That might not be a shocker, but we, all over the globe, we have strong marketing capability and that we've been known for that for the 28 years of Yum!'s existence. There's a difference between strong marketing capability and the skillset and, you know, in my kind of layman words, the brand visionary, someone that says, I am, yes, I can adapt to whether marketing used to be done more on television and now it's done social media or it's digital marketing or it's performance marketing. Someone that really lives and breathes brand, who is the brand, who will be drawn to the brand? That's Sean.
In my opinion, personally, the last person that we had that was really great at that was probably Greg Creed in terms of one of our, we've got them out there, but in terms of the biggest leaders, that was the way that Greg Creed, when he was CEO of Taco Bell and then CEO of Yum! Brands, kind of, it was all about the brand. That's where I think Sean is already helping. We were just on a, one of the things we try to do more than ever is to get collaboration going amongst the brands that, you know, so Chris and I were on a call just yesterday talking with the Pizza Hut team about something. Sean was on that call and weighed in with about the vibe and the feel of the brand.
That is not necessarily like a quantitative answer. I can say, here is what Sean will do, but you put his capability into the brand combined with the other great skillsets of the leadership team and the rest of the Yum! leaders. I think we have really dialed up our sort of brand visionary capability, which is needed to stay relevant across the world.
Excellent. Let's move on to the second part for investors to remember, which is digital. In layman's word, what do you think is the biggest capability that Bite by Yum! could be unlocking for franchisees and for consumers?
Yeah, great. You know, Bite by Yum!, as I said earlier, is an integrated suite of technology capabilities that cover all areas of what's needed to run a great restaurant business, the consumer experience, the franchisee and team member operational experience, and the insights that you can generate leveraging the data. So it's an ecosystem where the components of the system work and work together as one integrated stack. We've been developing this and we've decided this year it was the time, we've made enough progress, let's brand it as Bite to help people understand what we've developed and to kind of understand it as a software as a service capability. We've also evolved our organization to be organized as a modern software company, a SaaS company.
we've made really good progress in deploying it in the U.S. and we're starting to deploy it internationally. The most important piece for Bite, the thing that we all look at first is, is it having the intended business impact in markets where we deploy it and for our franchise partners and their stores where we've implemented Bite? We want to see us accelerate the top line. That happens when you're providing an easy consumer experience, when you're able to elevate your marketing because of the learnings that you have about the consumer base and help deliver for them what they are expecting when they open the app or when they, you know, see an advertisement for us in email or text or even in broader channels. We want to make sure we're lifting the top line.
That, the way we see that come to life is in higher frequency, greater penetration, and in bigger check sizes. We also want to make sure that our franchisees, even with the cost of the technology, that they are expanding their bottom line, as well. We look at how are we making the jobs in the restaurants easier for our team members to operate? How are we helping them be more productive? We want to see that translate to restaurant economics. At our Taco Bell Investor Day back in February, we shared a lot of information and some of the data that we shared was the correlation between at a store level in Taco Bell U.S., the expansion of digital mix and how that correlates to the absolute top line growing at a restaurant level and EBITDA at a restaurant level growing.
Those are the needles that we look at first. Is this delivering on the business proposition in the markets and for our franchisees where we've deployed it? As long as we're doing that, we're doing the right thing. We're delivering on our commitment to franchisees to have leading edge technology that leverages the scale advantages of the Yum! system and helps them do it with economics that just can't be matched by anyone else out on the market. As long as that's working, we then say, hey, now we got to get this across the system. We have to deploy it. We've done a good job deploying elements of Bite across the U.S..
We've started in international, but it was at our global franchise convention just last month in April in Sydney, where we have all of our global franchise partners come together that we really did an unveil of the Bite ecosystem. You know, we do this franchise convention every two years. We talk about our strategy, our brand strategy, how we're bringing things to life. This year it had this element that felt like a big, you know, software trade show almost. There were opportunities for franchisees to go into breakouts, to touch, see, feel, Bite, to meet our team members. That generated a lot of interest. We've had a lot of follow-ups.
We've had franchisees who've traveled over to Dallas since then where we've gone deep and now we've got to, you know, develop the right plans with our franchise partners to bring this to life in markets around the globe. That is the next element, how are we deploying? Of course, we invested ahead on behalf of our franchisees because we thought that was the right thing to do for the long term. That pressured our G&A line in 2021, 2022, 2023. As franchisees adopt, it helps to reduce the burden on the P&L of those investments because a lot of the benefits flow to their bottom line. Of course, in many cases, they are already working with third parties in these markets. It is not net new spend in large part for our franchise partners.
They're just moving that to help us, you know, offset some of the burden on our, you know, for the investments that we've made. That's, you know, one thing that we watch is what we call it bending the curve of the G&A load of the technology investments. Of course, the last thing is we're just in the early days. As you develop these data assets, you develop the ability to implement new AI capabilities. We've got 40 different AI projects, but we're in the very early days of really realizing the tremendous additional value sources that could come from having a business like this.
Speaking of recouping the initial investment that you made ahead of franchisees, have you already recouped the investment that you made on a cumulative basis or is there more scope going forward for you to see, you know, a G&A, potential, opportunity within the organization? If the answer is yes, how do you balance between, you know, bringing down to the bottom line and kind of meeting the 8% plus adjusted operating income growth, versus reinvesting in the business?
Yeah. You know, go back to where I started on what we want Bite to deliver. It has to improve the business performance in the stores, lift the top line, drive the bottom line, all in a way with advantaged economics for our franchisees. We want them to have the best capabilities at the best cost available on the market. We got to deliver on that. I mentioned that these investments pressured G&A. You saw our G&A grow at a higher rate than you might have expected in those early years. It has become a more normalized rate the last couple of years. This is one of the factors as we bend the curve that is helping us to sort of manage that line. That said, we have become a real software as a service provider.
Along with that comes the responsibility to always make sure that your technology capabilities are relevant in the future. We have now got teams that are looking, you know, three, five years out and beyond, and we have to be investing in those R&D type capabilities to develop the leading edge and stay at the leading edge and ensure that, you know, we always have a healthy platform. We are always delivering day to day in the right way with reliable service to our franchise partners. We are making investments in those areas. As we have become a more digital enterprise, it has allowed us to operate more efficiently, even in legacy parts of the business.
You know, this is really about optimizing our resources, so that we're taking advantage of productivity opportunities where we can, so we continually reinvest in things that will drive long-term health and growth.
How do you think about the balance between building in-house these capabilities versus, I think you acquired four companies in the process of building Bite? How did you select what kind of capabilities you were acquiring versus which one you were building? How do you see the strategy of Bite versus Build change over time?
Yeah. We made four small tech acquisitions in 2021, although the majority of the capabilities we actually built, you know, Tracy and team helped us hire literally thousands of technology professionals. It is the largest function internally at Yum! by headcount. We have got a mix of build and buy along the way. Then you also have acquiring just services from other parties. Look, anything that is really commoditized that is not a distinct competitive advantage, where the switching costs are low, we are probably going to still buy on the market. It does not make sense for us to go build server farms or things like that. Anything that is central to our competitive advantage or the competitive advantage of our franchise partners, we think it makes sense to own and to control, and to have as a part of this integrated system.
You know, in part, it gives you more flexibility. When things are integrated, you know, imagine new AI capabilities being developed in the future. It's hard to predict right now, 12 months from now, what new capabilities will be there. But you know that when they're developed, you're going to want to be able to integrate them quickly into your tech stack. Now, if in our 150 countries around the globe, we still have different tech stacks in every one, you're going to spend all your time building integration layers, and integrating these new products, which would take forever. If we can get to where we have a more consistent, integrated stack, we'll be able to build those integration layers once, that can work and more quickly scale and roll out across the system. We should have a cost advantage.
We should have a speed advantage, and bring more and better capabilities to life across the system.
Great. Now if we think about the vision that you have for Bite, I think I recall you mentioned you would like Bite to be in the entire world, maybe except for China. Where do you see the capabilities on personalizations, one-on-one outreach with consumers today versus your vision? Like how far along in the journey is Bite today?
Yeah. Yeah, we do, you know, we do see, you know, an opportunity with our partners. We got to prove the business case to them around the globe. You know, I think that our Yum! China team, they have an amazing technology capability for a bunch of reasons. It probably makes sense for that to be a separate technology capability, but we think we can bring, you know, Bite to scale around the globe. You know, I mentioned not only is it the consumer experience, the operational experience, but also the insights that you generate and how you translate those to better marketing, better consumer experience. We are doing some great work on that front. Our marketing teams have been piloting. We've mentioned on the last couple of earnings calls, AI-driven marketing personalization in each of our brands in the U.S..
We're still in the early days on it, but the early read on that is very positive and we're excited about it. I think you'll continue to see us expand there. You saw us announce earlier this year the first partnership in the restaurant space with NVIDIA. NVIDIA is our partner on the AI front. That is unlocking our engineers working with their engineers will unlock a lot of new capabilities that we'll bring to life. One of the first places that we're focused there is on voice AI. Taco Bell has about 500 units that have voice AI deployed. NVIDIA is giving us another leg of capability there that we'll be bringing to life. The consumer response has been very positive. One of the most exciting things is our team member response has been very positive.
We actually see in our restaurants where we've deployed voice AI, the team member experience improves and turnover goes down. It makes the jobs easier and easier to operate. The restaurant's easier to operate. We think it's that combination of our amazing talent and culture that our franchisees have and that we have in the restaurants combined with technology that will be the way forward.
It looks like from an organizational standpoint, you've aligned Bite to be a standalone, you know, a standalone entity, if you will, or a standalone part of the organization with Joe leading, more cross-organizational focus. You know, we've seen also a great result or a great interest from your franchisees potentially adopting Bite. We've seen, you know, team members, as you pointed out, really liking the Bite by brand, the Bite by Yum! as a platform. What will it take or what kind of postmark would you need to see in order for you to maybe consider a spinoff of Bite? And granted, nobody has seen the P&L of Bite.
We do not know if it makes sense from a shareholder standpoint, but you being the CFO, what kind of leading indicators would you be willing to wait for before saying, yeah, it probably makes sense to see a separate entity outside of the Yum! ecosystem and serving more than just the Yum! brand?
Yeah. Look, you're, I mean, you're really dreaming big, down the road. Right now our focus is on serving our franchise partners as well as we possibly can through Bite and ensure that we're delivering on the business case. There's a lot of work to be done, as I mentioned, to deploy Bite around the globe. That's our primary focus, is taking care of those franchise partners. I, you know, you said Bite as a standalone. I, Bite is still very heavily integrated in our brands. Like there's a brand component to Bite that is ensuring that we bring Bite to life in a way that is relevant for each of our brands. You know, what a consumer expects in their digital experience in KFC in Thailand is probably very different than what they expect in Pizza Hut in Central America.
We make sure that that comes to life in a brand relevant way. You know, we may need to serve some other restaurant companies. You know, we have franchisees who have brands outside of the core Yum! brand. That will be something we will probably need to tackle as we expand around the globe. I would not rule out more and more of that happening, but right now ensuring that our franchise partners and our business today is seeing the benefits of Bite is focus number one.
Excellent. Tracy, you're in a very tough spot of feeling the big shoe of David leaving, you know, retiring, I should say, next year. So what characteristics do you think that the board might be looking for as a successor of David, given the success that he has as a CEO of Yum!?
I'll say what I can. Obviously, putting a CEO in to Yum! is definitely the board's responsibility. I can attest to the fact that they have been diligent in their efforts. They formed a subcommittee of the board that has been working diligently on this. I feel really good about that, not just as an employee and viewing Yum! as my second family, but as a shareholder myself. You don't work somewhere for 25 years and then think, okay, you know, I'm glad to see them being so careful about it. This will be the fourth CEO for Yum! after David Novak, Greg, and David.
I mean, I can just, a lot of the things they're talking about, obviously big strategic thinking, someone that understands the global nature of our business, you know, one of the reasons that we are so resilient, as Chris said before, is because we operate all over the world and we operate with multiple brands and we operate through 1,500 franchisees. That type of leadership requires a lot of important traits, you know, strategic vision and understanding of all of the different levers that need to be moved around and ability to act with speed. You know, I'm certainly not at liberty to say here are the exact criteria that the board have listed out. That's their responsibility. I feel satisfied with how cautious and careful the board is being to make sure we get to the very right answer.
It's a great company with an incredibly, incredibly bright future. Whoever goes in, I have a lot of confidence that they will shepherd it in the right direction.
Excellent. Chris, one final question 'cause we are at time. I mean, this is a strategic decision conference after all. We look, you know, beyond next quarter, next year, but in five years' time, how do you think Yum! is going to be evolving? Do you think that will involve also some additional acquisitions?
Yeah. I think the runway ahead for each of our existing brands is bright. Mission one is to continue to drive growth in unit count and in AUVs in unit economics for our franchise partners. We want them to be just as successful as we are along the journey. We think Bite and growing Bite is an important part of that. We have our work cut out for us on that front, but I am super excited and super confident about the success that we will have on that journey. We have always kept our eyes open for potential acquisitions. We added the Habit Burger Grill back in 2020. I think the long-term future for Habit is very bright. We always keep our eyes open because we do think scale matters more than ever.
We think technology matters more than ever. We think talent matters more than ever. We have an abundance of all of those. We think, you know, brands entering the portfolio could benefit from those things. It clearly, the bar is high for making any sort of acquisition. It would have to be a growth unlock. It would have to be a brand that really could leverage those elements of our scale. There would have to be a very compelling story for our shareholders, for us to do that. We would be very selective, but we always keep our eyes open. There is amazing white space and growth ahead in our current portfolio for iconic brands. That is what gets us all really excited every day.
Excellent. Tracy, Chris, thank you very much for joining us. Thank you, everybody, for participating. Thank you.
Thank you.