TRANSFORMATION JOURNEY COMPLETE

UNLOCKING POTENTIAL
FOR YUM!

Dear Fellow Stakeholders:

was a truly historic year for Yum!. We successfully completed our three-year transformation and delivered on all of our bold commitments. Plus, we surpassed two milestones that are a testament to Yum!’s incredible scale as we eclipsed $50 billion in system sales and marked the opening of our 50,000th restaurant. None of this would have been possible without our unrivaled culture and talent and over 2,000 franchisees who run 98% of our restaurants globally and employ more than 1.5 million restaurant team members. Because of our journey to become more focused, franchised and efficient, we are well-positioned to accelerate growth and improve franchise unit economics over the long term.

Our new Recipe for Growth and Good will Unlock our Potential and reflects the importance of collaboration as we continue to build the world’s most loved, trusted and fastest-growing brands.

Our Recipe for Growth, using our four key growth drivers, is the foundation upon which our sustainable, long-term results are being built. These growth capabilities, outlined below, are the key drivers of samestore sales and net-new unit growth and serve as our guiding principles in all business decisions.

1. Unrivaled Culture and Talent. We will leverage culture and people capability to fuel brand performance and franchisee success.
2. Unmatched Franchise Operating Capability. We will recruit and equip the best restaurant operators in the world to deliver great customer experiences.
3. Relevant, Easy and Distinctive Brands. We will innovate and elevate iconic restaurant brands people trust and champion.
4. Bold Restaurant Development. We will drive market and franchise unit expansion with strong economics and value.

Our Recipe for Good is focused on leading with socially responsible and sustainable stewardship of our food, planet and people.

1. Food: Serve delicious food people trust.
2. Planet: Grow sustainably.
3. People: Unlock potential in people and communities.

I firmly believe our culture is a competitive advantage for Yum! With culture as the driving force behind our results, I’m pleased to share the following highlights from 2019:

• Our worldwide system sales grew 9%, led by 10% growth at KFC, 9% at Taco Bell and 8% at Pizza Hut.
• Our same-store sales grew 3%, led by 5% growth at Taco Bell and followed by 4% at KFC with Pizza Hut even for the year.
• We achieved net-new unit growth of 4%, including 2,040 net-new units, which represents a 70% increase versus 2016 when we began our transformation. We opened, on average, 9 gross restaurants per day in 2019.
• We ended the year with over 50,000 global restaurants in approximately 287 brand-country combinations.
• We are 98% franchised, with 913 company units as of the end of 2019.
• Our core operating profit grew 12%.
• We returned $1.3 billion of capital to shareholders through share repurchases and dividends.
• KFC is “Always Original”. KFC continued to bolster its brand positioning and beloved core menu items with innovative new products. We remain dedicated to making the brand R.E.D. – relevant, easy and distinctive – by investing in innovation, technology and enhanced asset formats. KFC now delivers from 15,000-plus restaurants across more than 90 countries.
• Pizza Hut continued its commitment to ensure that every customer has a Hot, Fast and Reliable experience around the world by making improvements in food quality, speed of service and loyalty programs as well as upgrading its technology for online ordering and delivery.
• Taco Bell truly is a Category of One for Everyone. 2019 was the brand’s eighth consecutive year of positive same-store sales growth, a testament to the strength of the leadership team and its partnerships with franchisees. In addition to a relentless commitment to value and innovation for which Taco Bell is known, I am particularly excited that 2019 marked the completion of the nationwide kiosk rollout to nearly 6,500 restaurants and that Taco Bell delivery is available in over 5,100 restaurants across the U.S. through our strategic partnership with Grubhub.

In closing, 2019 marked the successful conclusion of our massive transformation, and we began 2020 with the exciting news that we are adding The Habit Burger Grill to the Yum! family. This deal should enable us to offer an exciting new investment opportunity to our existing franchisees and expand an award-winning, trend-forward brand through the power of Yum!’s unmatched scale.

That said, the COVID-19 (coronavirus) pandemic continues to rapidly evolve, and our No. 1 priority is the health and safety of our employees, franchisees and customers. We are closely monitoring the situation and the ever-changing intelligence from public health, travel and national security authorities in countries where we operate to ensure we protect our people, customers and brands. With our franchisees, we have industry-leading action plans, standards and policies in the restaurants to prevent and limit the spread of COVID-19. As the world’s largest restaurant company, our customers span ages, backgrounds and borders, and we remain committed to serving them in a way that protects their health and safety. Times like these are a reminder that we are all globally connected and each have a role to play in helping others. At Yum!, we are committed to doing just that.

David Gibbs, CEO