Good morning. Welcome to Third Quarter 2020 Yum! Brands Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Keith Siegner, VP of Investor Relations, M&A and Treasurer. Please go ahead.

Thanks, operator. Good morning, everyone, and thank you for joining us. On our call today are David Gibbs, our CEO; Chris Turner, our Chief Financial Officer; and Dave Russell, our Senior Vice President and Corporate Controller. Following remarks from David and Chris, we’ll open the call to questions. Before we get started, I’d like to remind you that this conference call includes forward-looking statements. Forward-looking statements are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. We’re going to do our best to provide our current thinking about the impact of the COVID-19 pandemic on our business, but obviously, this situation is completely unprecedented and evolving. So any forward-looking remarks should be considered in light of the uncertainty regarding the severity and duration of the pandemic and the variables that will be impacted as a result. All forward-looking statements are made only as of the date of this announcement and should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the SEC. In addition, please refer to our earnings releases and relevant sections of our filings with the SEC to find disclosures and reconciliations of non-GAAP financial measures that may be used on today’s call. Please note the following regarding our basis of presentation. First, all system sales results exclude the impact of foreign currency. Second, core operating profit growth figures exclude the impact of foreign currency and special items. For more information on our reporting calendar for each market, please visit the Financial Reports section of our website. We are broadcasting this conference call via our website. This call is also being recorded and will be available for playback. Please be advised that if you ask a question, it will be included in both our live conference and in any future use of the recording. We’d like to make you aware of upcoming Yum! investor events. First, disclosures pertaining to outstanding debt in our restricted group capital structure will be provided at the time of the Form 10-Q filing. Second, fourth quarter earnings will be released on February 4, 2021, with the conference call on the same day. Now I’d like to turn the call over to Mr. David Gibbs.

Thank you, Keith, and good morning, everyone. I want to start by saying thank you to our entire global system for exceptional execution of our Recipe for Growth and Good strategy during the quarter. Our employees, franchisees and restaurant team members are successfully adapting to this year’s ever-changing environment, while also accelerating progress on our digital and technology journey. We’ve deepened collaboration around the world and across functions and brands to bring customers our delicious food through safe contactless methods, while also caring for our team members, employees and communities. For that, I am incredibly proud. These efforts led to encouraging third quarter results, including a return to year-over-year core operating profit growth. Our restaurants that had temporarily closed because of the pandemic continued to reopen throughout the quarter. And despite many of our restaurants operating with only a portion of their normal sales channels, same-store sales growth in our open stores was approximately flat in aggregate. While 2020 has presented many challenges, our portfolio of brands has proven resilient. Our balance sheet and liquidity position are strong, franchisee health has improved and we’re incredibly well positioned to drive global growth and maximize stakeholder value for years to come. Our Recipe for Growth using our four key growth drivers continues to guide our long-term strategy. So I’ll start with an overall review of third quarter results and use a few examples to illustrate the power of our relevant, easy and distinctive, or R.E.D. for short; unmatched operating capability and unrivaled culture and talent growth drivers. Then Chris will share more details of our Q3 results, including some discreet one-time impacts, our bold restaurant development growth driver and our healthy liquidity position. First, Q3 results. Overall Yum! system sales grew 1% with a 2% increase in net unit’s year-over-year, partially offset by a 2% same-store sales decline. COVID continued to impact the business both in terms of temporary closures of restaurants and limitations on the use of dining rooms, which some of our markets heavily rely upon. Despite the challenges related to COVID, we delivered core operating profit growth of 7%. This strength can be attributed to strong growth in our Taco Bell division and an improvement in franchisee health. Our third quarter same-store sales declines were once again, primarily driven by temporary closures. You may recall that as of our last earnings call we had less than 2,500 units fully closed. This number decreased to approximately 1,100 by the end of the quarter. And today it stands at about 1,000, which means roughly 98% of our system is open in a full or limited capacity. Assets located in malls, transportation centers, airports and the like continue to be pressured, making up many of the closures. Geographically, Pizza Hut at U.S., Latin America, Asia, and India make up the majority of these closures, but the situation remains dynamic and largely dependent on government responses to COVID based on local conditions. At the end of the quarter, we continued to have a significant number of our open restaurants, subject to dining room closures, or other limitations on access. However, as I mentioned earlier, despite the drag from these limitations, our off-premise channels aided by digital, enabled our open store base to deliver same-store sales that were flat for the quarter. This was an improvement of a few points from what we saw in the second quarter. Now let’s talk about our four R.E.D brands. Starting with KFC division, which now accounts for approximately 48% of our divisional operating profit; Q3 system sales declined 1% as a 4% same-store sales decline was partially offset by 5% net new unit growth. KFC continued to reopen temporarily closed stores and ended Q3 with about 99% open in a full or limited capacity. The rapid recovery at KFC has largely been driven by off-premise capability, acceleration of digital and the reopening of temporarily closed stores. Many markets have started to show improvements, though the pace is varied. During the quarter, markets with robust, off-premise, and/or digital capabilities excelled, including strength in the U.S., the UK, Australia, Japan and Canada. Many of these markets delivered sales performance above their pre-COVID levels, and collectively represent about 30% of the KFC global portfolio. KFC continues to innovate on our core menu, including launching great products like the Famous Chicken Chicken Sandwich in Canada, and the Slab in Australia, and adding new bundles that offer great value for off-premise family dining. Importantly, markets such as Africa, much of Asia, parts of Europe and the Middle East started to show sequential improvement during the quarter by growing their off-premise capabilities to partially offset their dine-in reliance. KFC’s most impacted geographies where markets where most of our temporary closures remained elevated, including Latin America and Caribbean, Asia, India, and the Middle East. These markets also tend to be are more dine-in-centric and had lower consumer mobility during the quarter. KFC U.S. had another fantastic quarter with 9% same-store sales growth owing to the continued strength of our group occasion business and digital. Our KFC U.S. drive-thru sales grew about 60% year-over-year with our largest day part growth occurring at midday and continued strength during the dinner day part. We also hit a delivery milestone with about 80% of KFC’s in the U.S. now delivering many through multiple aggregator partners. Moving on to Pizza Hut, which now accounts for approximately 18% of our divisional operating profit, the division reported a Q3 system sales decline of 4% with a 3% same-store sales decline and a 4% net new unit decline. Global off-premise same-store sales grew mid-teens year-over-year, which is clearly encouraging. COVID is highlighting how important the future of off-premise is and we intend to use this momentum to further advance the off-premise category and continue to decrease our dine-in asset footprint. Please note that as we lean in on this opportunity to transition the asset base, we may continue to see closures present the near-term headwind to overall division net unit growth in Q4 and into next year. During the quarter, Pizza Hut continued to reopen temporarily closed stores and ended Q3 with about 96%, at least partially open in a full or limited capacity. Express units continue to be pressured, making up many of the remaining closures. The 9% same-store sales decline at Pizza Hut international for Q3 marked a significant improvement from Q2 lows, but the continued softness was largely a result of markets with substantial dine-in footprints such as China, parts of Asia, Central America and Europe. On the other hand, our off-premise focused markets continued to see strength. Canada, Japan, Taiwan, and Australia, all posted strong results, while the UK delivery business and South Africa saw improved momentum during the quarter. Importantly, our off-premise channel generated another quarter of positive 10% same-store sales growth, giving us confidence that our off-premise strategy is working and will be the foundation of the long-term growth story. Similarly, Pizza hut U.S. had another positive quarter with same-store sales growth of 6% with our off-premise channel generating 17% same-store sales growth, despite a 4% drag from closures and sales headwinds in express units. In addition to digital and convenience driving sales, we promoted abundant value with our $10 tastemaker, followed by a $11.99 Large 3-Topping Stuffed Crust Pizza, and $12.99 Double It Box. As for Taco Bell, which now accounts for approximately 35% of our divisional operating profit, system sales group 5%, driven by 3% same-store sales growth, and 3% net new unit growth. Taco Bell continued to reopen temporarily closed stores and ended Q3 with about 80 closures. And even more impressive was the profitability delivered by Taco Bell in part due to a 400 basis point increase in restaurant margins, a testament to the strength of the brand and the operating capabilities of the team. We expect these margins will likely return closer to historical levels as check averages normalize, dining room patronage increases and value focus moves to balance abundant value with price point value. In the U.S., Taco Bell’s focus on abundant value offerings continued as the primary theme throughout the quarter. We also reintroduced innovation beginning with the debut of the Grilled Cheese Burrito, which quickly became a customer favorite mixing at 9%.This was followed by the $5 Grande Nachos Box, and $1 Nacho Crunch Double Stacked Taco. Taco Bell also continued to focus on a faster and easier customer experience by expanding aggregator partners and digital reach while breaking records in drive-thru times. Drive-thru demand skyrocketed this quarter as Taco Bell served over 30 million more cars and was 17 seconds faster year-over-year. During the quarter, we also unveiled our new Go Mobile asset design in the U.S. These assets will have a smaller footprint with a big emphasis on digital and off-premise with dedicated mobile pickup lanes and bellhops for outside in-person ordering. Better experience for customers and better economics for franchisees is a winning formula. Stay tuned for more about this exciting development opportunity. Now on to the Habit. We continued to reopen temporarily closed stores and ended Q3 with 97% of Habit restaurants open in a full or limited capacity. Same-store sales declined only 3% as effective off-premise solutions basically offset the dine-in sales mix loss, which was over half of sales pre-COVID. Supporting this, digital sales maintained second quarter’s 40% mix, even with dining rooms and patios reopening. The Habit restaurants with drive-thru capabilities are performing exceptionally well, and they’re yet another proof point for us as we continue to position the brand to fit the needs of consumers today. This is a perfect segue to our unrivaled culture and talent growth driver. When we first approached the Habit team about joining Yum!, one of our biggest takeaways was their operational excellence, consistently serving delicious quality food to customers. Now that they are part of Yum!, it’s clear that they fit right in with our culture as well. We’re extremely pleased with Russ Bendel and the team’s ability to pivot. They joined our organization during this unprecedented time and jumped right into action, making sure that their food was accessible and safe, low contact and off-premise environment. Many of you have asked us about our interest in refranchising the Habit. Interest is extremely high, but we plan to be judicious with the approach and timing as we refine the off-premise aspects of the model, likely picking a few cornerstone partners to begin with. Now on to our unmatched franchise operating capability. We’ve continued to accelerate our digitally enabled off-premise capabilities across the globe. We now have over 35,000 restaurants offering delivery around the world, representing an 11% increase year-over-year, in part driven by expanded aggregator partnerships. In addition to Grubhub, we now have order and delivery agreements in place with numerous scale delivery aggregators in both the U.S. and around the world, expanding our overall accessibility to customers through whatever channel they prefer. Our digital sales mix sustained second quarter’s 30% of system sales and an 11-point year-over-year improvement. To put that into context, during the quarter, digital sales were approximately $4 billion, a $1 billion step up from Q3 2019. Our brands working in concert with our Yum!’s central technology team have shown remarkable agility and will continue to unlock sales growth over the near- and long-term. To that end, we’re optimizing our resources, reallocating them towards critical areas of the business that will drive future growth with strategic initiatives that include accelerating our digital technology and innovation capabilities to deliver a modern world-class team member and customer experience and improve unit economics. Like many companies, optimization includes managing expenses through a number of levers, including reduced travel, elimination of large meetings, freezing open roles, optimizing current roles, no 2021 salary increases and offering an early retirement program in the U.S. Of course, over time, we’ll continue to invest in new roles across Yum! and our brands to support the most important areas of growth in our company. We’re confident in the resilience of our highly diversified global business model and believe that investing in things that are integral to our growth and social impact strategy will help us emerge as an even stronger company. During the quarter, we published our 2019 Recipe for Good report. Since our last report, we have made significant progress, advancing our sustainability agenda globally with expanded efforts to offer customers more balanced choices, including plant-based and vegetarian menu items, and continuing action on climate change by increasing efficiencies in our restaurants and corporate offices and making progress on key deforestation commitments, including paper, palm oil, beef, and soy. And as we mentioned last quarter, we are stepping up our investment in Yum!’s new social purpose to unlock opportunity in our people and communities, while championing equity, inclusion, and belonging across all aspects of our brands and franchise business. With that, Chris, over to you.

Thank you, David, and good morning, everyone. Today, I’ll discuss our third quarter results, bold restaurant development and our strong liquidity and balance sheet position. To begin, let’s discuss Q3. As David mentioned, overall Yum!’s system sales grew 1%. This was driven by a 2% increase in net unit’s year-over-year, partly offset by a 2% same-store sales decline. Core operating profit grew 7% in the quarter, outpacing system sales growth, owing to strength at Taco Bell and improved franchisee health. EPS, excluding special items, was $1.01. This represented a 27% increase compared to ex-special EPS of $0.80 in Q3 2019. I’ll now provide some additional color on several line items, beginning with general and administrative expenses. G&A, excluding the impact of the acquisition of the Habit, FX and special items increased by 3% over the third quarter 2019 due to charitable contributions related to COVID relief efforts; incentive compensation and other items, which offset reductions in T&E and other efficiencies. We are constantly balancing the need to be efficient with the desire to lean in on digital and technology during a period when acceleration in these initiatives should only enhance our competitive advantage. For the fourth quarter, our current estimate is that consolidated G&A expenses will approximate the fourth quarter of 2019 due to accelerated growth initiatives, which may offset continued efficiencies. Interest expense, ex-special was approximately $127 million, a 6% increase from the prior year, driven by higher outstanding borrowings offset by a decrease in rate on our floating rate debt. We recorded $8 million of pre-tax investment income related to the change in fair value of our investment in Grubhub, which resulted in a $0.02 benefit to EPS in the third quarter. Our Grubhub investment favorably impacted year-over-year EPS growth by $0.17 this quarter, as we lapped $60 million of pre-tax investment expense in the third quarter of 2019, which generated a negative $0.15 impact to Q3 2019 EPS. Our effective tax rate was 19.3% during the quarter, an increase from the prior year due to reversals of reserves in the prior year, as well as lower year-over-year share-based compensation benefits. Before moving on to bold restaurant development, I’d like to add some detail around the impact of quarterly timing on our profitability this quarter, and how that relates to Q4. Beginning with bad debt, our franchise and property expenses were $13 million in the quarter compared to $43 million in the prior year. During the first half of 2020, we recorded significant bad debt expense due to the uncertainty surrounding COVID and increasing past due receivables from certain franchisees. During the third quarter, we saw significant recoveries of amounts past due in KFC international, as well as in the Pizza Hut U.S. business, including NPC. These recoveries resulted in a net $21 million benefit to operating profit related to bad debt during the quarter, an improvement of $30 million compared to $9 million of expense in the third quarter of 2019. Now moving on to bold restaurant development. We delivered 2% net new unit growth over the third quarter of 2019. This includes the addition of 276 Habit restaurants in Q1 of this year and the stellar unit growth we had in Q4 2019 offset by COVID-related dislocations and Pizza Hut closures. We always anticipated uncertainties and delays could arise in development owing to global macro conditions, including the potential for COVID-related dislocations. This remained the case in the third quarter, as we opened 556 restaurants and closed 823, including 672 closures at Pizza Hut. Gross openings were led by China, Asia, the U.S., Russia, and Thailand. To put the quarter into context, three of our four brands have positive net new units year-to-date, despite these macro headwinds. This adds to our confidence that a return to net unit growth rates equal to, or better than 2019 is a question of when, not if. Nothing has changed on this front and we remain confident that these uncertainties should abate in time, and that we will generate meaningful net unit growth backed by strong unit level economics for years to come. In regards to Pizza Hut, where units have declined 5% year-to-date, there are several factors at play, which should assist in the transition to a healthier global estate off of which to grow. First, as it relates to the Chapter 11 filing of NPC, one of our Pizza Hut U.S. franchisees, we consented to up to 300 mutually selected closures of underperforming and primarily dine-in stores. These closures are largely complete and are reflected in our ending unit count for the third quarter. Second, on our Q4 2018 earnings call, we mentioned that we anticipated between 100 and 150 closures due to overlap following our Telepizza alliance. While only six overlap closures occurred in 2019, 47 closures have occurred thus far in 2020. Third, COVID dislocations have impacted off-premise location development as with our other brands. Fourth, while COVID has hastened the transition and the closure of casual dining based restaurants, we still have a lot of work to do on transitioning the global asset base to off-premise focused assets. For both Pizza Hut U.S. and international, the closures for the quarter resulted in an asset mixed shift to about 36% dine-in, down from 38% in Q2. We expect the mix to continue to migrate downward over time, though caution the transition will continue to take some time. The hasten transition in the Pizza Hut asset base and the closure of Telepizza overlap units will present a near-term headwind to the divisions net unit growth in Q4 and into next year. Taking this dynamic into account, along with lingering COVID-related uncertainties on our global development across all brands, we currently estimate Yum!’s overall absolute units to be roughly flat at the end of Q4 as compared to the end of Q3. This would be an improvement from both the second and third quarters’ results and a solid step toward returning to net unit growth rates equal to or better than 2019 Now, for an update on our balance sheet and liquidity position, as well as our latest thoughts on capital structure and priorities for capital allocation. First, we ended Q3 with cash and cash equivalents of $1.1 billion, excluding restricted cash. Consolidated net leverage was 5.2 times, which is marginally above our historical target of approximately 5 times. I’d like to highlight that owing to the improvement and stabilization in our core business, we felt confident enough to repay the entire outstanding balance of our revolving credit facility, which had been $575 million drawn as of the end of the second quarter. When considered alongside, the $0.47 dividend we paid during the third quarter, we believe this should clearly demonstrate the confidence we have in our liquidity position at this time. Second, we refinanced our 5% coupon rate restricted group notes due in 2024 with newly issued 10.5-year unsecured holding company notes with a coupon rate of 3.625%. This coupon rate now represents the lowest fixed rate coupon in our debt structure, a testament to the health of our global system. In addition to lowering the coupon rate and extending the maturity by approximately seven years, the refinancing action increased flexibility since the new notes are not subject to financial maintenance and debt incurrence covenants, which the restricted group notes were subject to. Third, our capital priorities remain unchanged, invest in the business, maintain a healthy balance sheet, pay a competitive dividend and return remainder excess cash flows to shareholders via repurchases. Commensurate with the performance of the business, the health of our balance sheet and liquidity position and our confidence in returning to 5 times consolidated net leverage by second quarter of 2021, we plan to resume share repurchases in the fourth quarter. Now, the team and I are happy to take your questions.

We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Dennis Geiger from UBS. Go ahead.

Great. Thanks for the question. Just wondering if you could talk a bit more about Taco Bell, strength of the brand and the strength of the franchisees you touched on. And just kind of thinking about maintaining the industry-leading momentum in recent years; and maybe if you can comment someone on latest developments, loyalty program, delivery, and kind of the opportunity going forward post-COVID, as we think about menu simplification speed and what that new product pipeline could look like, please? Thank you.

Thanks, Dennis. Look, the Taco Bell brand performance in Q3 is obviously something we’re very proud of. Mark King and his team have done an amazing job of pivoting in this environment to meet the consumers’ new needs. So you touched on a couple of other things that they’ve done – to do so, but the ability to embrace larger meals – family meals, they’ve seen a doubling of their party size meals. They’ve obviously rolled out a lot of tech, rolled out a loyalty program to connect better with consumers and giving them access to delivery. They’ve added delivery partners as the quarter went on and they’re now on multiple platforms. And I think Taco Bell always has their finger on the pulse of the consumer. That’s what makes the brand great, the way they connect with consumers. They’ve recognized that this is – we’re really in an environment where the food is going from something as fuel to being something a little bit more like entertainment. This is an environment where people are now comfortable with how things are going to be for awhile and they’re looking for a little bit more excitement. That’s why you saw the success of something like the Grilled Cheese Burrito that got rolled out and was well received by consumers. So across multiple fronts, the brand is really connecting well with consumers and excited about the progress they made. Obviously, the margin progress they made in the quarter is somewhat related to the limited hours. The menu simplification that you mentioned, Dennis, was also helpful in that regard. So I think they’re getting through this in an admirable way.

Thanks. Next question, please.

Our next question is from John Ivankoe from JPMorgan. Go ahead.

Hi, thank you so much. The question was also on Taco Bell, but I want to pivot it a little bit. Can you talk about your experience with new unit openings internationally? I mean, are you kind of seeing the type of new consumer reception and trust that you see in the U.S. internationally in a post-COVID environment? And guess what, some of your international franchisees are telling you in terms of their willingness to kind of accelerate unit development of this important brand. And where I want to go with that is, do you think Taco Bell – it is potentially the driver internationally to get you back to 4%-plus unit development, where – is Yum! in a position where it can start to take advantage of what is obviously a much stronger balance sheet and cash position to maybe consider even adding additional either brands to the portfolio to add to some of that international unit growth? Thank you.

Hey, John, this is Chris. Good question. Look, I think I’ll start a little bit more broadly. As you think about the development journey, we’ve got three of our four brands, where we’ve had positive net new unit growth globally so far this year. Taco bell is one of those. We remain very confident in the long-term potential for development in Taco Bell around the globe. In certain markets, the sales in this situation have been impacted, but there are other markets where the business has done quite strongly through COVID, including all of the things that are supporting us around the globe in terms of shift to off-premise and digital and delivery, those trends have existed in the Taco Bell international stores. And so in the long run, we continue to remain confident in Taco Bell’s international growth as a pillar of our overall unit development engine. Nothing’s changed there in the long run. It’s just the uncertainty on the timing of us getting on that track.

Yes. On Taco Bell development, I mean, just to pick an example, market Australia just opened their 15th units starting from scratch two years ago. That unit in its first day did weekly type sales volumes. The team in Australia, we’ve got two great franchise partners. They couldn’t be more excited. They have big plans for development next year, probably more than doubling the unit count there. So I think your question though is really country specific. Like everything, if we talk about averages on average, we’re pretty excited about development, but there’s going to be pockets and countries where we have franchisees that have – are more reliant on dine-in for any of our brands, they’re more affected by this obviously. And so we’ll have impact in certain markets and hopefully other markets where we’re on fire with our off-premise business can make up for that.

Our next question is from David Palmer from Evercore ISI.

Great. Thank you. Good morning. I’ll just squeeze in two quick ones. So just if you have a big comment to be made about what your divestiture of Grubhub, what that stake – removal of that stake means about your strategy with delivery over the long-term? And maybe you’re thinking about the future of third-party delivery in general. And then also on Pizza Hut, what would you say to people about this brand longer-term? Post-COVID, you’ve put a new brand management there. There’s been some closures. You’ve gotten rid of some margin dilutive value, but what would you say about the restaging of that brand and sort of the concern that it remains in a fragile financial state and the brand is just benefiting right now from COVID. Thanks.

Thanks. I’ll take your first question and turn it over to David for your second question. Yes, during the quarter we did sell our position in the Grubhub shares, all 2.8 million shares for a total of $206 million. That doesn’t reflect anything about our view on the delivery space in general. As David mentioned, we’ve expanded our relationships with aggregators. Our overall thesis is we want to be where our consumers want to do business with our brands. And if that’s through a delivery channel with an aggregator, we want to be there. And with the relationships we continue to bring online in the U.S. and around the globe, we’re off to solid starts on those. It’s also a story of leveraging our scale. When we bring our restaurants under those platforms, the economics improve for the aggregator, and we’re able to get advantage economics for our franchisees and for Yum! when we do it. So we think it’s a way to drive profitable growth for the system.

Yes. On the other point on Grubhub, obviously, that our ability and our scale, our ability to get a board seat participate and understand what’s going on in the aggregator space was helpful to us with that investment. And we made a little money on the investment on the side. So I think that worked out the way we essentially had hoped. Turning to your question on Pizza Hut, obviously, this is an environment right now as we – as us and a lot of people have talked about where existing trends in the restaurant industry have just been accelerated. It’s not as so much about new trends being introduced. It’s just existing trends being accelerated like off-premise, like delivery, like ordering through tech. Pizza Hut is perfectly positioned for a lot of those trends. And that’s why you’re seeing such a strong performance from the Pizza Hut brand right now in the off-premise category. Our delivery carry out sales in the U.S., if you just isolate those sales, are up 21% mid-teens globally. So we do think the brand is well positioned for the future based on these accelerating trends. Franchisees are obviously benefiting from that in terms of their financial condition. And the opportunity to execute the strategy that we’ve talked about for now for a couple of years about wanting to get out of certain dine-in assets that aren’t brand building assets that are essentially holding us back. We’ve accelerated the transition out of those assets as you’re seeing in the numbers. So, certainly it’s a brand with a bright future in our portfolio, but still has a lot of work to do to pivot the asset base, the asset base that makes sense for today’s consumer.

Our next question is from Brian Bittner from Oppenheimer. Go ahead.

Thanks. Good morning. I want to follow-up on the unit growth. When you’re talking about unit growth, I noticed a couple of times in your prepared remarks that not only do you think you can get back to 2019’s pace of unit growth, which was over 4% and kind of hit on all cylinders, but you’ve said you could potentially do better than that. I’m just wondering, what’s driving that commentary. Are you starting to see specific incremental growth opportunities open up because of what’s happened through the pandemic or any other color you can put on that comment would be helpful. Thanks.

Great. Good question. Look, if we think about the overall development picture, as we’ve said before, we remained very bullish on the long-term opportunity for Yum! And we think it’s, as we said, a matter of when, not if, we get back to that long-term unit growth algorithm. The macros are promising. Our brand stand tall in this type of environment, they stand for value which pivoted to off-premise. So that’ll drive the top line for the stores. Our teams are developing prototypes that are fit for this with lower footprint sizes that have great digital capabilities and enhance even further our off-premise capabilities. And in certain markets, there likely will be some real estate tailwinds from a real estate cost standpoint. And our franchisees have been growth minded, historically, and they’ve shown their resilience through this situation and we’ve got great development teams. And even if you just think about what’s happening this year in the pandemic, there are some very positive signs. As I mentioned earlier, three of the four brands have grown their units this year. And if you think about KFC and Taco Bell alone, we’ve had 540 net new units this year, which is three, three quarters, 1.5 of net new unit growth. Even at Pizza Hut, we’re working through the asset transformation that David mentioned, we’ve had 340 gross opening so far this year. So it indicates that our development teams and our franchisees are working hard there. So all of that I think is what gives us the long-term confidence. I’d love to say that we’ll get there as soon as we can. And our teams are going to be striving to do even more as you described, but we’re confident in the long run. We still have uncertainty about the timing of it. And that’s why we just can’t commit to the exact timing of when we get back to that algorithm. You’ve seen the news from Western Europe over the last couple of days. That’s an example of the types of things that are driving the uncertainty on exactly how this will play out. And that’s why we just can’t provide specific guidance on the timing or the exact number.

Our next question is from John Glass for Morgan Stanley. Go ahead.

Thanks. Good morning. Two questions. One is on Pizza Hut. Can you just help us understand what the system sales impact would be for the closures? Either the year-to-date, the 5% closures or decline in 5%, what was the system sales? I assume these are lowered volume units. And if you think about the portfolio over time, is there a way to think about the system sales impact versus just a unit closure, so we can try to understand the financial impact? And then Chris, can you also just on the bad debt recoveries, where are you now? So is this an expected fourth quarter benefit again? And what’s kind of the order of magnitude that’s still outstanding recoveries versus a normalized level to get back to sort of what you’re fully up to normalized levels of collections?

Great. Couple of good questions there. Look, I’ll give you a couple of facts that help on the Pizza Hut side just as we think about the closures that we’re seeing. First, there, more than 50% of the closures are our dine-in units and our express units, and that’s how we’re driving the asset transformation. That’s why you saw the two-point reduction in the dine-in percentage of the estate both in the U.S. and internationally. And as you might expect, those stores that were closing are underperforming stores. So on average, in the U.S. as an example, the average unit volume of the closed stores is about two-thirds that of the overall system average. And that’s true, whether you’re talking about the regular stores that are closing, the dine-in stores that are closing, or the express units, they’re both on the underperforming side. So hopefully that gives you a little bit of a feel for the nature of how we’re cleaning up underperforming assets and driving this asset transformation in Pizza Hut. On the bad debt side, yes, you saw this quarter the recoveries were dramatic. We think that is a great signal about the long-term health of the franchisee base and the resiliency of the franchisee base and the way that we’ve worked with them through the pandemic. In the quarter, relative to last year, it was about a $30 million swing, $17 million in KFC and about $13 million in Pizza Hut, mostly in Pizza Hut U.S. Look, in the long run, we hope to get back to more normal levels of bad debt expense, but I think we’ve got to remain vigilant in the near-term just given the uncertainties around COVID. But we’re certainly pleased with what happened in the quarter and think overall it’s a great sign of the resiliency of our franchisee base and business model.

Our next question is from Sara Senatore from Bernstein. Go ahead.

Thank you. A quick follow-up on that question, please. The follow-up was, if you could just talk a bit about Taco Bell’s business mix before the current crisis. I knew breakfast has historically been about 6% of sales, but what would late night or fourth meal look like? I’m trying to figure out what the sort of headwinds might be from those day parts which has lagged. So that’s just a quick housekeeping. And then could you talk about sort of acquisitions and portfolio, I mean, given [Technical Difficulty] would you consider a larger acquisition [Technical Difficulty] may not be top of the list of things you’re focused on. But I would say after a circle of mixed track record in the past of acquisitions for Yum!, there seems to be – at this point relatively unambiguous in its success.

Yes. Thanks, Sara. And part of your question broke up at least for us here, but I think I got it. On the Taco Bell mix and the impact from the impact to ours, our breakfast business, as you said, typically mix is around 6%. I think that mix is down to four now as a number of people have stopped serving breakfast, although it’s still in more than half of our stores. And we obviously we are committed to breakfast long-term and expect to be back into that with all stores as time goes on. I do – as far as the impact to the business, it’s a point or two of same-store sales impact depending on how you want to cut it. So it’s nothing that we can’t overcome, obviously, as we pivot to other means of serving customers. And then the question on acquisitions, I think we mentioned it in the speeches, I’ll repeat it. We’re really pleased with the acquisitions that we’ve done, whether it’d be the QuikOrder acquisition that we did on the technology side a couple of years ago. We recently bought Heartstyles, Collider, a consumer insights company. Now these are smaller acquisitions, but more recently obviously the Habit Burger Grill. It’s worth really taking a look at what they have done in this environment. They went from over 50% of their sales coming from dine-in and another good portion of their sales coming from carry out in the restaurant to pivoting almost everything coming outside the restaurant and recovering to nearly flat. I think they’re basically flat in the stores that are open. So I think that’s an incredibly positive data point for a brand that we believe is on the rise. We have lots of interests in the franchise community from it. But we’re in no rush to do another acquisition. We want to digest Habit, get that established, get the right partners around the world and get the growth going there. And if we continue to see the kinds of results that we think we’re going to see and that we have seen from them that would be obviously a positive data point as we think about other similar type acquisitions down the road.

Our next question is from David Tarantino from Baird. Go ahead.

Hi, good morning. My question is on G&A. I just want to make sure I understand your comments there. What is your long-term G&A outlook? Is it still a target of 1.7% of system sales? And I guess the nature of my question is I think you talked about achieving some efficiencies in the current environment about reinvesting. Just want to try to reconcile that on your long-term target.

Yes. So David on G&A, we’ve removed guidance right now, but in general, the way we think about G&A is coming out of the transformation we were right-sized. We did a lot of work in the transformation to right-size the expense base. And so we were already fairly lean and of course our mindset is one that’s driven by lean. We’re going to invest in things that make sense and drive value for the customer and for the business. But we’re going to make sure that we’re reducing expense otherwise and managing those expenses carefully on things that aren’t driving value. And right now I think the main thing we’re doing on G&A is continuing to reallocate spend to things that will drive long-term growth. So we’re continuing to invest ahead in digital and technology, invest in our Recipe for Good. And so that’s our focus. At the same time, in order to create room for that investment, we are doing the things you’d expect us to be doing in terms of optimizing the way that we work, taking advantage of the cost reduction opportunities that COVID puts on the table. And so we’re trying to manage it very smartly. Obviously in the long run, some of those day-to-day expenses will start to come back, but we’ll continue to manage this in a lean way.

This concludes the question-and-answer session. I would now like to turn the conference back over to Chris Turner for closing remarks.

Great. I’ll actually let David give the closing remarks here.

Yes. Thanks for everybody’s time today. Obviously, we’re excited and proud of the results that we put up in Q3, showing strong sequential improvement on the recovery from Q2, driven by the things that we wanted to see. Our ability to adapt and pivot to off-premise, embrace digital, the billion dollars of extra digital sales in the quarter, just like we did in Q2 is incredibly encouraging. But yet, we know it’s a fluid environment, and that as we’re seeing in Europe, it’s just not an environment where we can predict and guide for 2021. We do have confidence in our team based on how they recovered so far, and that whatever thrown our way, we’ll be able to pivot to it. As we’ve gone into Q4, the trends from Q3 have continued, but we know that it’s an uncertain environment and that we’ll be faced with more challenges and excited about the way the business can pivot, meet those challenges and continue to thrive. So thank you for your time today.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.