Chief Executive Officer at Yum! Brands
Thank you, Jodi, and good morning everyone. I'm pleased to share our strong third quarter results underpinned by record breaking unit development, continued strong digital sales and the adaptability of our brands to meet the needs of our consumers in an ever-changing environment.
During the third quarter, we delivered 5% same-store sales growth or 3% same-store sales growth on a two-year basis. Despite a challenging operating environment due to the ongoing COVID pandemic, I'm extremely proud that we opened 760 net new units; a Q3 record, with broad-based strength across our portfolio. While Yum! China continues to be a leader in development, we opened 379 net new units across the rest of our portfolio, roughly equivalent to our Q3 2019 global net new units, including China. Our continued positive development momentum this quarter is a testament to the strength of our iconic brands, fueled by strong unit economics and a healthy well-capitalized franchise system primed for sustained growth.
Now, we'll discuss our Q3 results and two of the four growth drivers that underpin our Recipe for Growth: our Relevant, Easy and Distinctive brands or RED for short; and our unrivaled culture and talent. I will also share an update on our ESG agenda, which we call our Recipe for Good. Then Chris will talk about our other two growth drivers: our unmatched operating capability; and Bold Restaurant Development, in addition to providing more details on our third quarter financial performance and our strong balance sheet and liquidity position.
First, the two highlights from the quarter. Overall Yum! third quarter system sales grew 8%, led by same-store sales growth of 5%. On a two-year basis, same-store sales grew 3%, which includes the impact of around 500 stores or 1% temporarily closed due to COVID as of the end of Q3. COVID restrictions that limited mobility in a few markets, primarily in Asia, had a significant impact on sales. However, our sales momentum remained strong, as evidenced by the fact that our global two-year same-store sales growth, excluding Asia, accelerated since last quarter. Sales strength continued in many developed markets, including the U.S., U.K. and Canada with significant recovery seen across Europe as restrictions eased throughout the quarter. We've also seen pockets of strength in our portfolio of emerging markets, including the Middle East, Latin America, Africa and India, to name a few.
As we previously shared, looking across the more than 150 countries in which we operate, our recovery will neither be consistent from country-to-country nor linear within a country, reinforcing the competitive advantages of our diversified portfolio and our ability to serve customers through multiple on- and off-premise channels.
A key growth driver for our business remains the continued acceleration of our digital and technology strategy, including how we leverage our global scale with technology investments to enhance the customer and employee experience, strength in restaurant unit economics and provide a competitive advantage for our franchisees. We're seeing strong and sustained momentum through our digital and off-premise channels across our global business even as customers return to our dining rooms. We posted over $5 billion in global digital sales with a near 40% digital mix during Q3. We continued to expand delivery capabilities across the globe, setting a record this quarter with over 41,000 stores offering delivery to our customers.
Most recently, we acquired Dragontail Systems, which will allow us to tap into the power of artificial intelligence to streamline the end-to-end food preparation process and further enhance our delivery capabilities. Where we've deployed Dragontail's cutting-edge technology, we found that it makes it easier for team members to operate and run a restaurant and helps our franchisees strengthen store operations, all resulting in a better customer experience.
This is the perfect segue to talk about our four RED brands. Starting with the KFC division, which accounts for 52% of our operating profit, Q3 system sales grew 11%, driven by 6% same-store sales growth and 7% unit growth. On a two-year basis, Q3 same-store sales were up 1%, which included the impact of 1% of the stores being temporarily closed due to COVID. At KFC International, same-store sales grew 6% during the quarter. Same-store sales declined 1% on a two-year basis. As previously mentioned, increased COVID case counts and limited mobility in a few key Asian markets pressured topline trends in the quarter. This quarter, several Western European markets joined the group of resilient market, leading the recovery where sales have fully recovered to pre-COVID levels. Strong digital and off-premise growth, newsworthy products and doubling down on value offerings have fueled topline growth in these markets, coupled with the continued strength of the chicken category across the QSR segment growth.
Next, at KFC U.S., same-store sales grew 4% during the quarter, while same-store sales increased 13% on a two-year basis. The continued success of our chicken sandwich and the strength of the group occasion remains significant drivers of our same-store sales growth. Additionally, as of July, our year-to-date digital sales in the U.S. surpassed our full year 2020 digital sales. We speak to the results we're seeing from our investments in this critical growth channel.
Now on to the Pizza Hut Division, which accounts for 17% of our operating profit. Q3 system sales grew 4%, driven by 1% unit growth and 4% same-store sales growth. For the Division, two-year same-store sales grew 1% during the quarter, which included the impact of 1% of stores being temporarily closed as of the end of Q3 2021. Pizza Hut International same-store sales grew 6% during the quarter. On a two-year basis same-store sales declined 4%. While our Pizza Hut International business continues to be pressured, given our substantial dine-in index, the sustained strength in our off-premise business as reflected by 21% same-store sales growth on a two-year basis bodes well for the future of the brand and continues to fuel franchisee interest in investing in assets focused on serving the off-premise occasions. Our markets continue to demonstrate what it means to be RED by focusing on strong value propositions and innovative partnerships, including Beyond Meat product offerings in two markets this quarter.
At Pizza Hut U.S., we continued to see positive momentum with 2% same-store sales growth. On a two-year basis, same-store sales grew 8% and the off-premise channel grew 17%. Pizza Hut continues to delight customers by bringing Only For Pizza Hut premium innovation with the launch of the Edge Pizza and a return of the successful Detroit-Style Pizza in Q3. Additionally, we promoted the Dig Dinner Box during back-to-school season for offering easy dinner solution for our Pizza Hut customers.
Moving on to Taco Bell, which accounts for 31% of our operating profit, third quarter system sales grew 8%, driven by 3% unit growth and 5% same-store sales growth. Two-year same-store sales growth was 8% for the quarter. Taco Bell continues to focus on long-term growth opportunities by expanding into multiple category entry points, including the relaunch of breakfast in August and the fried chicken category with the Crispy Chicken Sandwich Taco during the quarter. Meanwhile, Taco Bell International remains focused on their mission to make Tacos cool around the world, while also ensuring the brand is culturally relevant in each market.
In the U.K., we gave away free taco to the country to celebrate England advancing to the finals in the European Championship. Players on the English team even tweeted on behalf of the brand, resulting in Taco Bell being one of the top trending brands on Twitter during the finals.
And finally, at the Habit Burger Grill, we saw system sales grow 19% during the quarter, driven by 11% same-store sales growth and 7% unit growth. on a two-year basis, same-store sales grew 7%, which included the impact of about 1% of stores being temporarily closed as of the end of Q3. We continue to see strong results through our digital channels, even as customers return to our dining room. During the quarter, we launched the culinary-forward Balsamic Grilled Chicken and Asparagus Salad that highlighted our unmatched char-grilled chicken and seasonal ingredients.
Now I'll discuss our unrivaled culture and talent growth drivers. A hallmark of Yum! is our people-first culture. We have tremendous leaders across our organization that have been developed internally to lead our brands and because of our culture, we're able to attract world-class external talent. This quarter, we have the opportunity to announce some exciting internal promotions with planned leadership transitions.
First, Tony Lowings, CEO of KFC will be retiring on March 1, 2022. I want to thank Tony for his more than 25 years working at Yum! He has embodied, what it means to be a people-first leader throughout his career and will no doubt leave a lasting legacy on the KFC brand. Tony's successor will be Sabir Sami, KFCs Global Chief Operations Officer who is an incredibly well respected and experienced leader, who has played a pivotal role in the KFC global business. Sabir's promotion to CEO of KFC provide us an opportunity to elevate another internal talent with Dyke Shipp stepping in as President of KFC after serving as KFCs Global Chief People and Development Officer. With their combined experience of over 40 years with Yum!, both Sabir and Dyke will assume their new roles effective January 1, 2022. I couldn't be more confident in our ability to continue to unleash the power of this iconic brand with both Sabir and Dyke leading KFC.
Next, we recently announced that David Graves, Pizza Hut U.S. General Manager, will be promoted to President of Pizza Hut U.S. effective January 1, 2022. Alongside Kevin Hochman, David has helped architect the Pizza Hut U.S. strategy and is the right person to lead the way forward for the brand by continuing to partner with our franchisees. With this promotion, Kevin Hochman, Interim President of Pizza Hut U.S. and President of KFC U.S., will return full time to KFC U.S. I would like to thank Kevin for his unwavering commitment and leadership over the past two years as he led the Pizza Hut U.S. business and franchisees for a critical turnaround that has shown tremendous progress to date, all while simultaneously taking KFC U.S. to new heights. These internal promotions demonstrate that our deep bench of experienced leaders is a real competitive advantage for us across the restaurant industry.
Lastly, we recruited significant external talent with the appointment of Aaron Powell as Chief Executive Officer of Pizza Hut. Aaron joined us from Kimberly-Clark, where he most recently led their Asia-Pacific business. We're thrilled to have Aaron join our leadership team with his seasoned CPG executive experience and believe his leadership, alongside Vipul Chawla and David Graves will help fuel the brand growth strategy.
Equally as important as our Recipe for Growth is our Recipe for Good. I could not be prouder of the progress Yum! and our brands have made this year in sharpening the focus and execution of our ESG agenda, particularly on climate action and sustainable packaging, alongside our global Unlocking Opportunity Initiative to tackle inequality. We are advancing our plans to reduce greenhouse gas emissions across our global system and supply chain by nearly half by 2030 while we work to implement, learn from, and scale pilots for reusable, recyclable and compostable packaging in the front of our restaurants to meet our 2025 public commitment. Across all of our brands, we're focused on building a resilient business for the future with purpose and sustainability at the core.
Our iconic brands and unmatched scale put us in a class of our own. We're competitively-advantaged, given the size and capabilities of our franchise system and I'm thrilled with our teams as we continue to be nimble and meet the consumer where they are. Overall, I'm proud of how our business is performing and I'm confident that we're positioned to win in a post-COVID world.
With that, Chris, over to you.