Yum Brands Inc. (NYSE: YUM), the parent company of KFC and Pizza Hut with a market capitalization of $35.87 billion, has terminated its franchise agreements with IS Gida A.S., which operates all of the KFC and Pizza Hut locations in Turkey. This decision, announced today, follows the franchisee's failure to meet Yum Brands' operational standards.
The termination impacts 283 KFC and 254 Pizza Hut restaurants, which are expected to close temporarily. According to InvestingPro data, Yum Brands maintains a strong financial health score of "GOOD," suggesting robust operational capabilities despite regional challenges.
The company also disclosed that in December 2024, it re-acquired the master franchise rights in Germany for both KFC and Pizza Hut from the owner of IS Holding, although this event is unrelated to the termination in Turkey and has no impact on the German market.
Yum Brands anticipates a pre-tax special charge of approximately $60 million in the fourth quarter of 2024. This charge consists mainly of transaction costs from the German acquisition and costs related to the termination of the franchisee agreement in Turkey. The underperformance of the Turkish stores, which reported sales significantly below the global average, means that the loss of royalties from the closures is not expected to materially affect Yum!'s core operating profit in 2025 and beyond.
With last twelve months revenue of $7.22 billion and a healthy gross profit margin of 48.57%, the company appears well-positioned to absorb these costs. For deeper insights into Yum Brands' financial metrics and growth potential, investors can access the comprehensive Pro Research Report available on InvestingPro.
The closure of the Turkish stores will be noted as a reduction in Yum Brands' reported unit counts at the end of the first quarter of 2025. Despite this adjustment, the company remains confident in its global growth trajectory and does not foresee any impact on other markets due to this termination.
This confidence is supported by the company's track record of maintaining dividend payments for 21 consecutive years and achieving a 10.74% dividend growth in the last twelve months. Analysts maintain a positive outlook, with price targets ranging from $130 to $162 per share.
This development was formally communicated through a current report filed with the Securities and Exchange Commission on January 8, 2025. The filing was made in accordance with the requirements of the Securities Exchange Act of 1934. Yum Brands, headquartered in Louisville, Kentucky, is known for its global presence in the fast-food industry, with thousands of restaurants worldwide across its various brands.
In other recent news, Yum! Brands (NYSE:YUM) has seen a series of upgrades and positive outlooks from financial analysts. Argus upgraded Yum! Brands stock to Buy, citing strong sales and promising growth prospects, particularly from AI-driven marketing initiatives. The firm set a new price target of $155, influenced by solid same-store sales at KFC and Taco Bell. Guggenheim also maintained a positive outlook, raising the stock's price target to $155, and expects a recovery in the Middle East and Asia markets. Bernstein, however, advised caution regarding restaurant concepts with significant international exposure, including Yum! Brands.
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