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“While Yum’s share performance hinges on China,” Senatore continued, “we believe the rest of the business should continue to perform in line with expectations, with potential for upside from the recent reorganization.”

She specified that Taco Bell, the largest contributor of profit and sales growth in the United States, was “on solid footing and has a reasonable good chance of succeeding at the important breakfast daypart.”

Combining the U.S. system with the markets of the former Yum Restaurants International division to make three individual, global divisions for KFC, Pizza Hut and Taco Bell should “create the potential for better growth and profitability, as managers are compensated on the strength of each brand, rather than geographies,” Senatore wrote. Historically, the old alignment created incentives for Yum to grow KFC worldwide, often at the expense of Pizza Hut or Taco Bell.

The United States should be a stable market for Yum, particularly Taco Bell, she forecasted.

“The brand’s successes with Doritos Locos Tacos and creative marketing have helped drive comps over the last two years,” she wrote, “and we believe that continued good execution, along with expansion into new dayparts, could sustain Taco Bell’s top-line momentum in a slow-growing informal eating-out market.”

In the rest of the world, emerging markets are a key opportunity and favor Yum’s established capital-light franchising model, she added.

“We believe that a continued focus on a franchised model in fast-growing emerging markets makes the most strategic sense,” Senatore wrote. “Comps have been sluggish, but we anticipate that a revival of emerging-market demand growth will help sustain top-line trends over the long term, as the mix of Yum’s restaurant portfolio shifts.”

Yum operates or franchises more than 40,000 restaurants in more than 130 countries.

Contact Mark Brandau at mark.brandau@penton.com
Follow him on Twitter: @Mark_from_NRN