MW Yum Brands becomes the latest fast-food company to lean into AI - and its stock gains

By James Rogers

The Byte digital-ordering platform makes it easier for consumers to place orders and reduces complexity for employees, according to Yum CFO Chris Turner

Yum Brands Inc. is stepping up its efforts to harness AI, the operator of the Pizza Hut, Taco Bell and KFC fast-food chains announced Thursday - with the technology expected to boost the company's ability to grow sales, according to Chief Executive David Gibbs.

In addition to its AI push, Yum $(YUM)$ also announced its fourth-quarter results Thursday, which topped Wall Street's profit and revenue estimates. The company's shares were up 8.6% in Thursday afternoon trading.

The Louisville, Ky.-based company unveiled Byte by Yum!, a collection of artificial-intelligence-driven software-as-a-service products for its restaurants. The technology encompasses mobile-app and web ordering; point-of-sale, kitchen and delivery optimization; menu management; inventory and labor management; and team-member tools, Yum said. Currently, 25,000 Yum restaurants worldwide are using at least one Byte by Yum! product, the company noted in a statement.

Speaking during a conference call to discuss the company's results, Gibbs said that by building its own "tech stack" and putting it all "under the Byte umbrella," the company is boosting its ability for sales growth and also making things easier for employees and restaurants.

"My experience working in this business for 35 years is when you're beholden to third-party platforms on technology, it's very difficult and it creates a lot of friction in the business," he said.

During the conference call, Yum Chief Financial Officer Chris Turner said that all U.S.-based Taco Bell, KFC and Pizza Hut locations are already powered by the company's Byte digital-ordering products, with Pizza Hut "substantially completing" its transition during the quarter. Three international markets, including the U.K, also migrated to the Byte platform in 2024, he added.

Related: Yum Brands' stock falls after earnings miss with consumer still pressured

In 2025, Yum plans to expand Byte to five additional markets, according to Turner, while also introducing AI-driven personalization and the company's omnichannel loyalty software.

"The Byte digital-ordering platform and its seamless connection with our Byte restaurant technologies make it easier for consumers to place digital orders while reducing complexity for our team members," he said.

Yum is also focusing on AI-driven marketing to enable "hyperpersonalized messaging and experiences," the CFO said. "Already, our U.S. brands are leveraging AI to execute targeted campaigns, with early tests on email promotions resulting in a doubling of consumer engagement compared with traditional approaches," Turner added.

Yum's Byte kitchen and delivery system, formerly known as Dragontail, is now live in over 8,000 restaurants across multiple markets, Turner said. Full implementation is planned for U.S.-based Pizza Hut and KFC locations this year, he added, with continued expansion globally.

Within Taco Bell U.S., Yum continues to launch its Byte back-of-house technology, reaching more than 1,500 restaurants in 2024, Turner said. The company "plans to scale it across the entire system in 2025," he added.

Related: Taco Bell's success boosts Yum Brands' stock, as Pizza Hut and KFC see weakness

Other restaurant chains are harnessing AI. Rival Chipotle Mexican Grill Inc. $(CMG)$, for example, is using AI to combat churn.

Yum had net income of $423 million, or $1.49 a share, for the quarter, down from $463 million, or $1.62 a share, in the prior year's quarter.

The company's adjusted fourth-quarter profit was $1.61 a share, above the FactSet analyst consensus estimate of $1.60 a share. Revenue rose to $2.362 billion from $2.036 billion, above the analyst revenue estimate of $2.356 billion.

Yum highlighted same-store sales growth at Taco Bell U.S. and unit growth at KFC. "Our twin growth engines remain strong with Taco Bell U.S. delivering same-store sales growth of 5% in the fourth quarter, meaningfully outpacing the industry, and KFC International delivering its second consecutive year with over 2,000 net new units," Gibbs said in a statement.

The KFC division opened 1,100 new restaurants during the fourth quarter.

Related: Chipotle's sales have been 'volatile.' Can new menu items, kitchen upgrades and AI smooth things out?

"In 2024, we opened 4,535 new stores across more than 100 countries," Turner said in a statement. "Our digital progress this year was similarly enviable, with digital sales up approximately 15% and digital mix surpassing 50%, reflecting steady progress towards our ambition to reach 100% digital sales," he added.

Yum Brands also announced a 6% increase in the company's quarterly dividend to 71 cents a share Thursday.

-James Rogers

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February 06, 2025 13:41 ET (18:41 GMT)

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