Yum! Brands Annual Report 2020

FY2020 Annual Report · Yum! Brands

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Unlocking opportunity for

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Yum! Brands, Inc., trades under the symbol YUM and is proud to meet the listing requirements of the NYSE, the world’s leading equities market.

YUM! BRANDS 2020 ANNUAL REPORT

David Gibbs,
Chief Executive Officer
Yum! Brands, Inc.

UNLOCKING OPPORTUNITY
FOR GROWTH & GOOD!

Dear fellow stakeholders:

At Yum!, we have a clear vision for building the world’s most loved,
trusted and fastest growing restaurant brands. It begins with our
franchisees and restaurant team members who bring our vision to
life, one meal at a time. Our unified global system serves millions of
customers each day, provides opportunities for our team members and
supports the communities in which we operate. As the world’s largest
restaurant company with more than 50,000 restaurants, our unmatched
scale enhances our ability to create competitive advantages to fuel our
Recipe for Growth and Good.

We enter 2021 a stronger company that is primed to grow, made better
and more resilient by the challenges of 2020. I am incredibly proud of
our people and the way we came together to navigate these challenges.
We galvanized our global system’s commitment to our Growth and
Good strategy, underpinned by an unmatched culture of cross-brand
collaboration, people and franchisees that has put us on solid footing to
move forward.

Across Yum!, we intensified our focus on leveraging our scale and
created sustainable competitive advantages to fuel growth for our
franchisees. This includes the continual acceleration of digital and
technology initiatives to enhance the customer experience, off-premise
capabilities and unit economics across the globe.

2020 Highlights: More than 35,000 of our restaurants are offering
delivery, representing a 16% increase year-over-year, driven in part
by expanded aggregator partnerships. We ended 2020 on a digital
sales high note of a record $17 billion, about a 45% increase over the
prior year. On average, we opened seven gross restaurants per day,
and we ended the year with more than 50,000 global restaurants in
approximately 290 brand-country combinations, with system sales
exceeding $50 billion.

n KFC is “Always Original.” Across the globe, KFC continued to invest
in innovation by rebundling, repackaging and reconceptualizing
our core menu items. From our world famous Original Recipe to
new signature flavors and formats, KFC is all about making the most
craveable, Colonel-inspired chicken in the world, the right way, with
our 11 secret herbs and spices.

n Pizza Hut continued its commitment to ensuring every customer
has a Hot, Fast and Reliable experience, supporting the shift to
off-premise and abundant value offerings. As the first to provide
America with Pan Pizza and Stuffed Crust Pizza, Pizza Hut is a true
innovator in the pizza category.

n Taco Bell is truly a Category of One for Everyone. We believe everyone deserves

the right to Live Más and spent 2020 with a focus on progressing digital capabilities
with our new Taco Bell Rewards loyalty program and delivery, as well as promoting
opportunities to enjoy Cravings Boxes and Party Packs.

n The Habit Burger Grill is the spirit of Santa Barbara, and our commitment to quality is
at the heart of everything we do. In 2020, we built customer awareness through new
access options and digital engagement and shifted our marketing to focus on Family
Meal Bundles.

Our Recipe for Growth’s four pillars are the foundation upon which we’re building
sustainable, long-term results. These growth capabilities, outlined below, are the key
drivers of same-store sales and net new unit growth and serve as our guiding principles in
all business decisions.

1. Unrivaled Culture & Talent

We are leveraging culture and people capability to fuel brand performance and
franchisee success.

2. Bold Restaurant Development

We are driving market and franchise unit expansion with strong economics.

3. Unmatched Operating Capability

We are recruiting and equipping the best restaurant operators in the world to deliver
great customer experiences.

4. Relevant, Easy & Distinctive Brands

We are innovating and elevating iconic restaurant brands people trust and champion.

Our Recipe for Good is focused on leading with socially responsible and sustainable
stewardship of our people, food and planet.

1. People: We Unlock Opportunity

We are stepping up our investment in Yum!’s new social purpose to unlock opportunity
in our people and communities, with a special focus on championing equity, inclusion
and belonging across all aspects of our brands and franchise business.

2. Food: We Serve Food People Trust

We have an unwavering commitment to serve food that people trust. That means
going above and beyond when it comes to food safety, listening and responding
to customers’ evolving preferences and improving the nutritional value of our
menu items.

3. Planet: We Grow Sustainably

We are balancing business growth with environmental sustainability. With the Yum!
franchise system opening new restaurants every day, it’s important that we use
our scale for good to minimize the environmental impact of our restaurants and
supply chain.

As I enter my second year leading Yum!, I’m more confident than ever that our consumer-
focused, digitally enabled brands will grow same-store sales, unit economics will support
profitable development, and Yum! is well positioned to maximize value creation for
years to come. Thank you to our shareholders, customers and Yum! family for your
continued support.

David Gibbs, CEO

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

VDI-W7-PFL-0069
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YUM! Brands, Inc.
1441 Gardiner Lane
Louisville, Kentucky 40213

April 1, 2021

Dear Fellow Shareholders:

On behalf of your Board of Directors, we are pleased to invite you to attend the 2021 Annual Meeting of
Shareholders of YUM! Brands, Inc. The Annual Meeting will be held Tuesday, May 11, 2021, at 9:00 a.m., central
time, in the YUM! Brands Center of Restaurant Excellence at 7100 Corporate Drive in Plano, Texas or via live
webcast at www.virtualshareholdermeeting.com/YUM2021.

Due to public health and safety concerns posed by the COVID-19 pandemic, shareholders are encouraged to
attend via the webcast. We intend to hold our annual meeting in person and via webcast. However, we continue to
monitor the situation regarding COVID-19 closely, taking into account guidance from the Centers for Disease
Control and Prevention and the World Health Organization. The health and well-being of our various stakeholders is
our top priority. Accordingly, we are planning for the possibility that the annual meeting may be required to be
postponed or held solely by webcast, if then permitted under applicable law, in the event we or governmental
officials determine that it is not advisable to hold an in-person meeting. In the event the annual meeting is
postponed or held solely by webcast, we will announce that fact as promptly as practicable, and details on how to
participate will be issued by press release, posted on the Investor Relations section of our website and filed with the
U.S. Securities and Exchange Commission as additional proxy material. This proxy statement contains information
about the matters to be voted on at the Annual Meeting and the voting process, as well as information about our
directors and most highly paid executive officers.

Once again, we encourage you to take advantage of the Securities and Exchange Commission rule allowing
companies to furnish proxy materials to their shareholders over the Internet. We believe that this e-proxy process
expedites shareholders’ receipt of proxy materials, lowers the costs of delivery and helps reduce the Company’s
environmental impact.

Your vote is important. We encourage you to vote promptly whether or not you plan to attend the meeting. You
may vote your shares via a toll-free telephone number or over the Internet. If you received a paper copy of the
proxy card by mail, you may sign, date and mail the proxy card in the envelope provided. Instructions regarding the
three methods of voting prior to the meeting are contained on the notice or proxy card.

If you plan to attend the meeting in person, please bring your notice, admission ticket from your proxy card or proof
of your ownership of YUM common stock as of March 15, 2021 as well as valid picture identification. Whether or
not you attend the meeting in person or via live webcast, we encourage you to consider the matters presented in
the proxy statement and vote as soon as possible.

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Sincerely,

David Gibbs
Chief Executive Officer

Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to Be Held on
May 11, 2021—this notice and the proxy statement are available at https://investors.yum.com/governance/
governance-documents. The Annual Report on Form 10-K is available at https://investors.yum.com/
financial-information/annual-reports/.

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

VDI-W7-PF3-0933
14.4.13.0

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YUM! Brands, Inc.
1441 Gardiner Lane
Louisville, Kentucky 40213

Notice of Annual Meeting
of Shareholders

Tuesday, May 11, 2021 9:00 a.m.
YUM! Brands Center of Restaurant Excellence, 7100 Corporate Drive, Plano, Texas 75024 or via live
webcast at www.virtualshareholdermeeting.com/YUM2021.

ITEMS OF BUSINESS:

(1)

(2)

(3)
(4)

To elect twelve (12) directors to serve until the 2022 Annual Meeting of Shareholders and until their
respective successors are duly elected and qualified.
To ratify the selection of KPMG LLP as our independent auditors for the fiscal year ending December 31,
2021.
To consider and hold an advisory vote on executive compensation.
To transact such other business as may properly come before the meeting.

WHO CAN VOTE?:

You can vote if you were a shareholder of record as of the close of business on March 15, 2021.

ANNUAL REPORT:

A copy of our 2020 Annual Report on Form 10-K is included with this proxy statement.

WEBSITE:

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You may also read the Company’s Annual Report and this Notice and proxy statement on our website at
https://investors.yum.com/financial-information/annual-reports/.

DATE OF MAILING:

This Notice, the proxy statement and the form of proxy are first being mailed to shareholders on or about April 1, 2021.

By Order of the Board of Directors

Scott A. Catlett
Chief Legal & Franchise Officer & Corporate Secretary

YOUR VOTE IS IMPORTANT

Under securities exchange rules, brokers cannot vote on your behalf for the election of directors or on
executive compensation related matters without your instructions. Whether or not you plan to attend the
Annual Meeting, please provide your proxy by following the instructions on your Notice or proxy card. On or
about April 1, 2021, we mailed to our shareholders a Notice containing instructions on how to access the proxy
statement and our Annual Report and vote online.
If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you
request a copy. Instead, you should follow the instructions included in the Notice on how to access and review
the proxy statement and Annual Report. The Notice also instructs you on how you may submit your vote by proxy
over the Internet.
If you received the proxy statement and Annual Report in the mail, please submit your proxy by marking, dating
and signing the proxy card included and returning it promptly in the envelope enclosed. If you are able to attend the
Annual Meeting and wish to vote your shares personally, you may do so at any time before the proxy is exercised.

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

VDI-W7-PFL-2567
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Table of Contents

PROXY STATEMENT

QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

GOVERNANCE OF THE COMPANY

Director Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MATTERS REQUIRING SHAREHOLDER ACTION

ITEM 1 Election of Directors (Item 1 on the Proxy Card) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2 Ratification of Independent Auditors (Item 2 on the Proxy Card) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
ITEM 3 Advisory Vote on Executive Compensation (Item 3 on the Proxy Card)

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STOCK OWNERSHIP INFORMATION

DELINQUENT SECTION 16(a) REPORTS

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants of Plan-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding Equity Awards at Year-End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Option Exercises and Stock Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonqualified Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential Payments Upon Termination or Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CEO Pay Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EQUITY COMPENSATION PLAN INFORMATION

AUDIT COMMITTEE REPORT

ADDITIONAL INFORMATION

12
17

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YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

VDI-W7-PFL-2470
14.4.13.0

ADG perec0sl
CLE

YUM! Brands, Inc.
1441 Gardiner Lane
Louisville, Kentucky 40213

PROXY STATEMENT

For Annual Meeting of Shareholders To Be Held On

May 11, 2021

The Board of Directors (the “Board of Directors” or the “Board”) of YUM! Brands, Inc., a North Carolina corporation
(“YUM” or the “Company”), solicits the enclosed proxy for use at the Annual Meeting of Shareholders of the
Company to be held at 9:00 a.m. (Central Time), on Tuesday, May 11, 2021, at the YUM! Brands Center of
Restaurant Excellence at 7100 Corporate Drive in Plano, Texas 75024 or
via live webcast at
www.virtualshareholdermeeting.com/YUM2021.

This proxy statement contains information about the matters to be voted on at the Annual Meeting and the voting
process, as well as information about our directors and most highly paid executive officers.

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QUESTIONS AND ANSWERS ABOUT THE
MEETING AND VOTING

What is the purpose of the Annual Meeting?

At our Annual Meeting, shareholders will vote on several important Company matters. In addition, our management
will report on the Company’s performance over the last fiscal year and, following the meeting, respond to questions
from shareholders.

Why am I receiving these materials?

The Board has made these materials available to you over
the internet, or has delivered printed versions of these
materials to you by mail, in connection with the Board’s
solicitation of proxies for use at the 2021 Annual Meeting of
Shareholders (the “Annual Meeting”). The Annual Meeting
is scheduled to be held on Tuesday, May 11, 2021 at
9:00 a.m. Central Time, at 7100 Corporate Drive, Plano,

Texas or via live webcast through the link set forth above.
You will need the 16-digit control number provided on the
Notice of Internet Availability of Proxy Materials or your
proxy card (see below). This solicitation is for proxies for
use at the Annual Meeting or at any reconvened meeting
the Annual
after an adjournment or postponement of
Meeting.

YUM! BRANDS, INC. - 2021 Proxy Statement 1

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

VDI-W7-PFL-2470
14.4.13.0

ADG perec0sl
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QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

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Why did I receive a one-page Notice in the mail regarding the Internet
availability of proxy materials this year instead of a full set of proxy
materials?

As permitted by Securities and Exchange Commission
(“SEC”) rules, we are making this proxy statement and
our Annual Report available to our shareholders
electronically via the Internet. On or about April 1,
2021, we mailed to our shareholders a Notice
containing instructions on how to access this proxy
statement and our Annual Report and vote online. If
you received a Notice by mail you will not receive a
printed copy of the proxy materials in the mail unless
you request a copy. The Notice instructs you on how
to access and review all of the important information

contained in the proxy statement and Annual Report.
The Notice also instructs you on how you may submit
your proxy over the Internet. If you received a Notice by
mail and would like to receive a printed copy of our
proxy materials, you should follow the instructions for
requesting such materials contained on the Notice.

We encourage you to take advantage of the availability
of the proxy materials on the Internet in order to help
lower the costs of delivery and reduce the Company’s
environmental impact.

Who may attend the Annual Meeting?

The Annual Meeting is open to all shareholders of record as of close of business on March 15, 2021, or their duly
appointed proxies.

What do I need to bring to attend the Annual Meeting In-Person?

ticket, we will admit you only if we are able to verify that
you are a YUM shareholder. Your admittance to the
Annual Meeting will depend upon availability of seating.
All shareholders will be required to present valid picture
IF YOU DO NOT
identification prior to admittance.
HAVE VALID PICTURE IDENTIFICATION AND EITHER
AN ADMISSION TICKET OR PROOF THAT YOU OWN
YUM COMMON STOCK, YOU MAY NOT BE
ADMITTED INTO THE ANNUAL MEETING.

and other

similar devices,

Please note that computers, cameras, sound or video
recording equipment, cellular and smart phones,
large bags,
tablets
briefcases and packages will not be allowed in the
meeting room. Seating is limited and admission is on a
first-come, first-served basis. Seating may be further
to comply with applicable
limited if necessary
COVID-19 safety guidelines.

You will need valid picture identification and either an
admission ticket or proof of ownership of YUM’s
common stock to enter the Annual Meeting. If you are
a registered owner, your Notice will be your admission
ticket.

If you received the proxy statement and Annual Report
by mail, you will find an admission ticket attached to
the proxy card sent to you. If you plan to attend the
Annual Meeting in person, please so indicate when you
vote and bring the ticket with you to the Annual
Meeting. If your shares are held in the name of a bank
or broker, you will need to bring your legal proxy from
your bank or broker and your admission ticket. If you
do not bring your admission ticket, you will need proof
of ownership to be admitted to the Annual Meeting. A
recent brokerage statement or letter from a bank or
broker is an example of proof of ownership. If you
the Annual Meeting without an admission
arrive at

2 YUM! BRANDS, INC. - 2021 Proxy Statement

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

VDI-W7-PFL-2470
14.4.13.0

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QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

What will I need in order to attend the Annual Meeting Online?

You may also attend the Annual Meeting, vote and submit
a question during the Annual Meeting by visiting
www.virtualshareholdermeeting.com/YUM2021 and using
your 16-digit control number (included on your Notice
Regarding the Availability of Proxy Materials, Proxy Card, or
Voter Instruction Form) to enter the meeting. If you are not
a stockholder of record by holding shares as a beneficial
owner in street name, you may be required to provide
proof of beneficial ownership, such as your most recent

account statement as of the Record Date, a copy of the
voting instruction form provided by your broker, bank,
trustee, or nominee, or other similar evidence of ownership.
If you do not comply with the procedures outlined above,
you will not be admitted to the virtual Annual Meeting.
Online access will begin at 8:45 a.m. Eastern Time, and we
encourage you to access the meeting prior to the start
time. The meeting webcast will begin promptly at 9:00 a.m.
Central Time on May 11, 2021.

May shareholders ask questions?

the Company will answer
Yes. Representatives of
shareholders’ questions of general
interest following the
Annual Meeting. In order to give a greater number of
shareholders an opportunity to ask questions, individuals
or groups will be allowed to ask only one question and no
repetitive or follow-up questions will be permitted. If you

Who may vote?

choose to attend the online meeting, you may submit a
question
visiting
www.virtualshareholdermeeting.com/YUM2021 and using
your 16-digit control number to enter the meeting.

the Annual Meeting

during

Questions will be answered as time allows.

You may vote if you owned YUM common stock as of the close of business on the record date, March 15, 2021.
Each share of YUM common stock is entitled to one vote. As of March 15, 2021, YUM had 298.6 million shares of
common stock outstanding.

What am I voting on?

You will be voting on the following three (3) items of
business at the Annual Meeting:

(cid:129) The election of twelve (12) directors to serve until the
next Annual Meeting of Shareholders and until their
respective successors are duly elected and qualified;

(cid:129) The ratification of the selection of KPMG LLP as our
the fiscal year ending

independent auditors for
December 31, 2021; and

(cid:129) An advisory vote on executive compensation.

We will also consider other business that properly
comes before the meeting.

How does the Board of Directors recommend that I vote?

Our Board of Directors recommends that you vote your
shares:

(cid:129) FOR the ratification of the selection of KPMG LLP as

our independent auditors; and

(cid:129) FOR each of

the nominees named in this proxy

(cid:129) FOR the proposal regarding an advisory vote on

statement for election to the Board;

executive compensation.

YUM! BRANDS, INC. - 2021 Proxy Statement 3

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YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

VDI-W7-PFL-2470
14.4.13.0

ADG perec0sl
CLE

QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

How do I vote before the Annual Meeting?

There are three ways to vote before the meeting:

(cid:129) By Internet — If you have Internet access, we
encourage you to vote on www.proxyvote.com by
following instructions on the Notice or proxy card;

(cid:129) By telephone — by making a toll-free telephone call
from the U.S. or Canada to 1(800) 690-6903 (if you
have any questions about how to vote over the
phone, call 1(888) 298-6986); or

(cid:129) By mail — If you received your proxy materials by
mail, you can vote by completing, signing and
returning the enclosed proxy card in the postage-
paid envelope provided.

If you are a participant in the direct stock purchase and
dividend reinvestment plan (ComputerShare CIP), as a
receive all proxy
registered shareholder, you will
materials and may vote your shares according to the
procedures outlined herein.

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If you are a participant in the YUM! Brands 401(k) Plan
(“401(k) Plan”), the trustee of the 401(k) Plan will only
vote the shares for which it has received directions to
vote from you.

Proxies submitted through the Internet or by telephone
as described above must be received by 11:59 p.m.,

Can I vote at the Annual Meeting?

Shares registered directly in your name as the
shareholder of record may be voted in person or online
at the Annual Meeting. Shares held through a broker
or nominee may be voted in person only if you obtain a
legal proxy from the broker or nominee that holds your
shares giving you the right to vote the shares.

Can I change my mind after I vote?

Eastern Time, on May 10, 2021. Proxies submitted by
mail must be received prior to the meeting. Directions
submitted by 401(k) Plan participants must be received
by 12:00 p.m., Eastern Time, on May 9, 2021.

Also, if you hold your shares in the name of a bank or
broker, your ability to vote by telephone or the Internet
depends on their voting processes. Please follow the
directions on your notice carefully. A number of
brokerage firms and banks participate in a program
provided through Broadridge Financial Solutions, Inc.
(“Broadridge”) that offers telephone and Internet voting
options. If your shares are held in an account with a
brokerage firm or bank participating in the Broadridge
program, you may vote those shares telephonically by
calling the telephone number shown on the voting
instruction form received from your brokerage firm or
bank, or through the Internet at Broadridge’s voting
website
submitted
through the Internet or by telephone through the
Broadridge program must be received by 11:59 p.m.,
Eastern Time, on May 10, 2021.

(www.proxyvote.com).

Votes

Even if you plan to attend the Annual Meeting, we
encourage you to vote your shares by proxy. You may
still vote your shares in person at the meeting even if
you have previously voted by proxy.

You may change your vote at any time before the polls
close at the Annual Meeting. You may do this by:

(cid:129) Giving written notice to the Corporate Secretary of

the Company prior to the Annual Meeting; or

(cid:129) Signing another proxy card with a later date and

returning it to us prior to the Annual Meeting;

(cid:129) Voting again by telephone or through the Internet
prior to 11:59 p.m., Eastern Daylight Saving Time, on
May 10, 2021;

(cid:129) Voting again at the Annual Meeting.

Your attendance at the Annual Meeting will not have
the effect of revoking a proxy unless you notify our
Corporate Secretary in writing before the polls close
that you wish to revoke a previous proxy.

4 YUM! BRANDS, INC. - 2021 Proxy Statement

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QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

Who will count the votes?

Representatives of Computershare, Inc. will count the votes and will serve as the independent inspector of election.

What if I return my proxy card but do not provide voting instructions?

If you vote by proxy card, your shares will be voted as
you instruct by the individuals named on the proxy
card. If you sign and return a proxy card but do not
specify how your shares are to be voted, the persons
named as proxies on the proxy card will vote your
shares in accordance with the recommendations of the
Board. These recommendations are:

(cid:129) FOR the election of the twelve (12) nominees for

director named in this proxy statement (Item 1);

(cid:129) FOR the ratification of the selection of KPMG LLP as
our independent auditors for the fiscal year 2021
(Item 2); and

(cid:129) FOR the proposal regarding an advisory vote on

executive compensation (Item 3).

What does it mean if I receive more than one proxy card?

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It means that you have multiple accounts with brokers
and/or our transfer agent. Please vote all of
these
shares. We recommend that you contact your broker
to consolidate as many
and/or our

transfer agent

the same name and
accounts as possible under
address. Our transfer agent is Computershare, Inc.,
which may be reached at 1 (888) 439-4986 and
internationally at 1 (781) 575-2879.

Will my shares be voted if I do not provide my proxy?

Your shares may be voted if they are held in the name
of a brokerage firm, even if you do not provide the
brokerage firm with voting instructions. Brokerage firms
have the authority under
the New York Stock
Exchange rules to vote shares for which their
customers do not provide voting instructions on certain
“routine” matters.

The proposal to ratify the selection of KPMG LLP as
our
fiscal year 2021 is
considered a routine matter for which brokerage firms

independent auditors for

may vote shares for which they have not received
voting instructions. The other proposals to be voted on
at our Annual Meeting are not considered “routine”
under applicable rules. When a proposal
is not a
routine matter and the brokerage firm has not received
voting instructions from the beneficial owner of the
shares with respect to that proposal, the brokerage
firm cannot vote the shares on that proposal. This is
called a “broker non-vote.”

How many votes must be present to hold the Annual Meeting?

Your shares are counted as present at the Annual
Meeting if you attend the Annual Meeting in person or
online or if you properly return a proxy by Internet,
telephone or mail.
for us to conduct our
Annual Meeting, a majority of the outstanding shares of

In order

YUM common stock, as of March 15, 2021, must be
present or represented by proxy at the Annual Meeting.
This is referred to as a quorum. Abstentions and broker
non-votes will be counted for purposes of establishing
a quorum at the Annual Meeting.

YUM! BRANDS, INC. - 2021 Proxy Statement 5

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How many votes are needed to elect directors?

You may vote “FOR” each nominee or “AGAINST” each
nominee, or “ABSTAIN” from voting on one or more
nominees. Unless you mark “AGAINST” or “ABSTAIN”
with respect to a particular nominee or nominees or for all
nominees, your proxy will be voted “FOR” each of the
director nominees named in this proxy statement. In an
uncontested election, a nominee will be elected as a
director
the number of “FOR” votes exceeds the
number of “AGAINST” votes. Abstentions will be counted

as present but not voted. Abstentions and broker
non-votes will not affect the outcome of the vote on
directors. Full details of the Company’s majority voting
policy are set out in our Corporate Governance Principles
https://investors.yum.com/governance/governance-
at
documents/ and at page 22 under “What other significant
Board practices does the Company have? — Majority
Voting Policy.”

How many votes are needed to approve the other proposals?

In order to be approved, the other proposals must
receive the “FOR” vote of a majority of the shares,
present in person or represented by proxy, and entitled
to vote at the Annual Meeting. For each of these items,
you may vote “FOR”,
“ABSTAIN.”
Abstentions will be counted as shares present and
entitled to vote at the Annual Meeting. Accordingly,

“AGAINST” or

abstentions will have the same effect as a vote
“AGAINST” the proposals. Broker non-votes will not be
counted as shares present and entitled to vote with
respect to the particular matter on which the broker
has not voted. Thus, broker non-votes will not affect
the outcome of any of these proposals.

When will the Company announce the voting results?

The Company will announce the voting results of the Annual Meeting on a Current Report on Form 8-K filed within
four business days of the Annual Meeting.

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What if other matters are presented for consideration at the Annual
Meeting?

The Company knows of no other matters to be submitted to the shareholders at the Annual Meeting, other than the
proposals referred to in this Proxy Statement. If any other matters properly come before the shareholders at the
Annual Meeting, it is the intention of the persons named on the proxy to vote the shares represented thereby on
such matters in accordance with their best judgment.

6 YUM! BRANDS, INC. - 2021 Proxy Statement

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START PAGE

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GOVERNANCE OF THE COMPANY

The business and affairs of YUM are managed under the direction of the Board of Directors. The Board believes
that good corporate governance is a critical factor in achieving business success and in fulfilling the Board’s
responsibilities to shareholders. The Board believes that its practices align management and shareholder interests.

The corporate governance section of the Company website makes available the Company’s corporate governance
materials, including the Corporate Governance Principles (the “Governance Principles”), the Company’s Articles
of Incorporation and Bylaws, the charters for each Board committee, the Company’s Global Code of Conduct,
the Company’s Political Contributions and U.S. Government Advocacy Policy, and information about how to
report concerns about the Company. To access these documents on the Company’s website, please visit,
https://investors.yum.com/governance/governance-documents/.

CORPORATE GOVERNANCE

Governance Highlights
SHAREHOLDER RIGHTS

COMPENSATION

12 Director Nominees

Annual Election of Directors

11 Independent Nominees

Majority Voting of Directors

Proxy Access

Shareholder Communication
Process for communicating with
Board

Active Shareholder Engagement
Program

Directors with experience,
qualification and skills across a
wide range of public and private
companies

Board access to Senior
Management and Independent
Advisors

Independent Non-Executive
Chairperson

Independent Board Committees

Executive Sessions of
Independent Directors at every
regular Board and Committee
meeting

Risk Oversight by Board and its
Committees

Annual Board and Committee
Self-Evaluations

All Directors Attended at least
75% of Meetings Held

YUM’s Global Code of Conduct

Political Contributions and U.S.
Government Advocacy Policy

Audit Committee Complaint
Procedures Policy regarding
Accounting Matters

No Hedging or Pledging of
Company Stock

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Independent Management
Planning and Development
Committee

Independent Compensation
Consultant

Executive Compensation is Highly
Performance Based to Align with
Shareholder Interests and
Promote Company Business
Strategy

At Risk Pay Tied to Performance

Strong Stock Ownership
Guidelines

No Employment Agreements or
Guaranteed Bonuses

Compensation Recovery Policy
(Clawback) applies to Equity and
Bonus Awards

Double trigger vesting upon
Change in Control

No excise tax gross up

YUM! BRANDS, INC. - 2021 Proxy Statement 7

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What is the composition of the Board of Directors and how often are
members elected?

Our Board of Directors presently consists of 12 directors whose terms expire at this Annual Meeting. Our directors
are elected annually. The average director tenure is 5 years, with our longest- and shortest-tenured directors having
served for 15 years (Mr. Nelson) and for five months (Ms. Hobart), respectively. Messrs. Walter and Cavanagh
exited the Board in May and October of 2020, respectively.

As discussed in more detail later in this section, the Board has determined that 11 of the 12 individuals standing for
election are independent under the rules of the New York Stock Exchange (“NYSE”). The director tenure of the 12
individuals standing for election is reflected in the following chart:

5 Directors

2 Directors

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How often did the Board meet in fiscal 2020?

The Board of Directors met 8 times during fiscal 2020. Each of the directors who served in 2020 attended at least
75% of the meetings of the Board and the committees of which he or she was a member and that were held during
the period he or she served as a director.

What is the Board’s policy regarding director attendance at the Annual
Meeting of Shareholders?

The Board of Directors’ policy is that all directors should attend the Annual Meeting and all persons then serving as
directors attended the 2020 Annual Meeting.

How does the Board select nominees for the Board?

The Nominating and Governance Committee considers
candidates for Board membership suggested by its
members and other Board members, as well as
management and shareholders. The Committee’s charter
provides that it may retain a third-party executive search
firm to identify candidates from time to time.

In accordance with the Governance Principles, our Board
seeks members from diverse professional backgrounds
who combine a broad spectrum of experience and
expertise with a reputation for integrity. Directors should
have experience in positions with a high degree of
responsibility, be leaders in the companies or institutions

8 YUM! BRANDS, INC. - 2021 Proxy Statement

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with which they are affiliated and are selected based
upon contributions they can make to the Board and
management. The Committee’s assessment of a
proposed candidate will include a review of the person’s
judgment, experience, independence, understanding of
the Company’s business or other related industries and
such other factors as the Nominating and Governance
Committee determines are relevant in light of the needs
of the Board of Directors. The Committee believes that its
nominees should reflect a diversity of experience, gender,
race, ethnicity and age. The Board does not have a
specific
The
Committee also considers such other relevant factors as
it deems appropriate, including the current composition
the balance of management and
of
independent directors, the need for Audit Committee
expertise and the evaluations of other prospective
nominees, if any.

the Board,

regarding

diversity.

director

policy

In connection with this evaluation, it is expected that
the Nominating and Governance
each member of
Committee will
interview the prospective nominee
before the prospective nominee is presented to the full
Board for
completing this
evaluation and interview process, the Committee will
make a recommendation to the full Board as to the
person(s) who should be nominated by the Board, and
the Board determines the nominee(s) after considering
the recommendation and report of the Committee.

consideration. After

GOVERNANCE OF THE COMPANY

The Company’s strategic vision is grounded in our
“Recipe for Growth and Good.” Our Recipe for Growth
focuses on four growth drivers intended to accelerate
same-store sales growth and net-new restaurant
development at KFC, Pizza Hut and Taco Bell around
the world. The Company remains focused on building
the world’s most loved, trusted and fastest growing
restaurant brands by:

(cid:129) Growing Unrivaled Culture and Talent to leverage
our culture and people capability to fuel brand
performance and franchise success;

(cid:129) Developing Unmatched Operating Capability, by
recruiting and equipping the best
restaurant
operators in the world to deliver great customer
experiences;

(cid:129) Building Relevant, Easy and Distinctive Brands, by
innovating and elevating iconic restaurant brands
people trust and champion; and

(cid:129) Achieving Bold Restaurant Development by driving
expansion with strong

and franchise

market
economics.

We look for director candidates who have the skills
and experience necessary to help us achieve success
with respect
to the four growth drivers and the
Company’s implementation of its “Recipe for Growth.”
As a result, the skills that our directors possess are
thoroughly considered to ensure that they align with
the Company’s goals.

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YUM! BRANDS, INC. - 2021 Proxy Statement 9

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The following table describes key characteristics of the Company’s “Recipe for Growth” and indicates how the skills
our Board collectively possesses positively impacts the growth drivers:

Yum!’s Recipe for Growth

Relevant Skills our Board Collectively Possesses

Growing Unrivaled Culture and Talent, by leveraging our
culture and people capability to fuel brand performance and
franchise success

Talent Development. Experience building the knowledge, skills, and
abilities of employees and helping them develop and achieve their
potential within an organization.

Leadership Experience. Experience as executive ofﬁcer level
business leader who demonstrates strong abilities to motivate and
manage others and to effectively manage organizations.

Developing Unmatched Operating Capability, by recruiting
and equipping the best restaurant operators in the world to
deliver great customer experiences

Industry/Operations. Experience and understanding of operational
and strategic issues facing large restaurant or consumer service driven
companies.

Building Relevant, Easy and Distinctive Brands, by
innovating and elevating iconic restaurant brands people trust
and champion

Achieving Bold Restaurant Development, by driving market
and franchise expansion with strong economics

Marketing/Brand Management. Experience marketing and managing
well-known brands or the types of products and experiences we sell.

Technology or Digital. Experience in leadership and understanding of
technology, digital platforms and new media, data security, and data
analytics.

Global Experience. Experience at multinational companies or in
international markets, which provides useful business and cultural
perspectives.

Finance. Experience in public company management and ﬁnancial
stewardship.

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Our “Recipe for Good” provides a roadmap for socially responsible and sustainable stewardship of people, food
and planet. This allows us to elevate the importance of people and continue building an equitable and inclusive
culture that, in turn, helps us better serve our customers and communities where we operate. Guided by this
Recipe, we will strive to unlock potential
in people and communities, grow sustainably and continue to serve
delicious food that people trust. By leveraging our Recipe for Good in 2020, we were able to launch our Unlocking
Opportunity Initiative which focuses on equity and inclusion, education, and entrepreneurship and is supported by a
$100 million investment over five years. Through the guiding principles that underlie our Recipe for Growth and
Good, we are confident that we will continue to be successful in unlocking our potential.

We believe that each of our directors has met the guidelines set forth in the Governance Principles. As noted in the
director biographies that follow in this section, our directors have experience, qualifications and skills across a wide
range of public and private companies, possessing a broad spectrum of experience both individually and
collectively. In addition to the information provided in the director biographies, our director nominees’ qualifications,
experiences and skills are summarized in the following matrix. This matrix is intended to provide a summary of our
directors’ qualifications and should not be considered to be a complete list of each nominee’s strengths and
contributions to the Board.

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Experience/Background
Leadership Experience

Global Experience

Finance

Industry/Operations

Marketing/Brand management

Talent Development

Technology or Digital

10 YUM! BRANDS, INC. - 2021 Proxy Statement

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GOVERNANCE OF THE COMPANY

Lauren R. Hobart was appointed to the Board in November 2020 and will stand for election to the Board by our
shareholders for the first time. Ms. Hobart was recommended to our Nominating and Governance Committee by
our Non-Executive Chairperson. For a shareholder to submit a candidate for consideration by the Nominating and
Governance Committee, a shareholder must notify YUM’s Corporate Secretary, YUM! Brands, Inc., 1441 Gardiner
Lane, Louisville, Kentucky 40213. The recommendation must contain the information described on page 76.

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Director Biographies

Background
Paget L. Alves served as Chief Sales Officer of Sprint Corporation, a wireless and wireline
communications services provider,
from January 2012 to September 2013 after serving as
President of that company’s Business Markets Group beginning in 2009. Mr. Alves currently serves
on the boards of directors of Assurant, Inc. and Synchrony Financial. Mr. Alves has previously
served as a Director of Ariel Investments, LLC and International Game Technology PLC.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Operating, finance and management experience, including as Chief Sales Officer of a wireless

and wireline communications company

(cid:129) Global sales experience

(cid:129) Public company directorship and committee experience

Background
Keith Barr is the Chief Executive Officer of InterContinental Hotels Group plc (IHG), a predominately
franchised, global organization that includes brands such as InterContinental Hotels & Resorts,
Holiday Inn Family and Crowne Plaza Hotels & Resorts. He has served in this role since July 2017.
He served as Chief Commercial Officer of IHG from 2013 to July 2017 and prior to that, as Chief
Executive Officer of IHG’s Greater China business. Prior to this position, Mr. Barr served IHG in a
number of senior positions in IHG’s Americas and Asia, Middle East and Africa (AMEA) regions.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Operating and management experience, including as Chief Executive Officer of a franchised,

global company

(cid:129) Expertise in strategic planning, branding and corporate leadership

Paget L. Alves

Age 66

Director since 2016

Independent

Committees:
(cid:129) Audit, Chair

Favorite YUM! Brands Food:

Chicken Chalupas

Keith Barr

Age 50

Director since 2020

Independent

Committees:
(cid:129) Management Planning and

Development

Favorite YUM! Brands Food:

7 Layer Burrito

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12 YUM! BRANDS, INC. - 2021 Proxy Statement

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GOVERNANCE OF THE COMPANY

Background
Christopher M. Connor served as Chairman and Chief Executive Officer of The Sherwin-Williams
Company, a global manufacturer of paint, architectural coatings, industrial finishes and associated
supplies, until 2016. Mr. Connor held a number of executive positions at Sherwin-Williams beginning
in 1983. He served as Chief Executive Officer from 1999 to 2015 and Chairman from 2000 to 2016.
He currently serves on the boards of Eaton Corporation plc and International Paper Company.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Operating and management experience, including as Chairman and CEO of a Fortune 500

company

(cid:129) Expertise in marketing, human resources,

talent development, public company executive

compensation, planning and operational and financial processes

(cid:129) Public company directorship and committee experience

Background
Brian C. Cornell joined the Yum! Brands Board in 2015 and has served as Non-Executive Chairman
since November 2018. Mr. Cornell is Chairperson and Chief Executive Officer of Target Corporation,
a general merchandise retailer. He has held this position since August 2014. Mr. Cornell served as
the Chief Executive Officer of PepsiCo Americas Foods, a division of PepsiCo, Inc. from March 2012
to July 2014. From April 2009 to January 2012, Mr. Cornell served as the Chief Executive Officer
and President of Sam’s Club, a division of Wal-Mart Stores, Inc. and as an Executive Vice President
of Wal-Mart Stores,
Inc. He has been a Director of Target Corporation since 2014. He has
previously served as a Director of Home Depot, OfficeMax, Polaris Industries Inc., Centerplate, Inc.
and Kirin-Tropicana, Inc.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Operating and management experience, including as Chairman and Chief Executive Officer of a

merchandise retailer

(cid:129) Expertise in strategic planning, retail business, branding and corporate leadership

(cid:129) Public company directorship experience and committee experience

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Christopher M. Connor

Age 65

Director since 2017

Independent

Committees:
(cid:129) Management Planning and

Development, Chair

Favorite YUM! Brands Food:

Chicken Pot Pie

Brian C. Cornell

Age 62

Director since 2015

Independent,

Non-Executive Chairman

Committees:
(cid:129) Management Planning and

Development

(cid:129) Nominating and Governance

Favorite YUM! Brands Food:

Classic Bean Burrito

YUM! BRANDS, INC. - 2021 Proxy Statement 13

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Background
Tanya L. Domier is Chief Executive Officer of Advantage Solutions, Inc., a North American provider
of outsourced sales, marketing and business solutions, and has served in that
role since
January 2013. Prior to serving as Advantage Solutions’ CEO, Ms. Domier served as its President
and Chief Operating Officer from 2010 to 2013. Ms. Domier joined Advantage Solutions in 1990
from the J.M. Smucker Company and has held a number of executive level roles in sales, marketing
and promotions. Ms. Domier has served as a director of Advantage Solutions since 2006 and
currently also serves as a director of Nordstrom, Inc.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Operating and management experience as Chief Executive Officer

(cid:129) Expertise in strategic planning, finance, global commerce and corporate leadership

(cid:129) Public company directorship and committee experience

Tanya L. Domier

Age 55

Director since 2018

Independent

Committees:
(cid:129) Audit

Favorite YUM! Brands Food:

Thin Veggie Lover’s Pizza

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David W. Gibbs

Age 58

Director since 2019

Favorite YUM! Brands Food:

Background
David W. Gibbs is the current Chief Executive Officer of YUM. He has served in that position since
January 2020. Prior to that, he served as President and Chief Operating Officer from August 2019 to
December 2019, as President, Chief Operating Officer and Chief Financial Officer
from
January 2019 to August 2019 and as President and Chief Financial Officer from May 2016 to
December 2018. Previously, Mr. Gibbs served as the Chief Executive Officer of the Company’s
Pizza Hut Division from January 2015 until April 2016 and was its President from January 2014
through December 2014. Mr. Gibbs served as a director of Sally Beauty Holdings from March 2016
until January 2020.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Operational and global management experience,

including as Chief Executive Officer, Chief

Operating Officer and Chief Financial Officer of the Company

(cid:129) Expertise in finance, strategic planning, global branding, franchising and corporate leadership

Award Winning
Charburger

(cid:129) Public company directorship and committee experience

14 YUM! BRANDS, INC. - 2021 Proxy Statement

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ADG manam0sl
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ˆ200197gNZwruvdRt2Š
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GOVERNANCE OF THE COMPANY

Background
Mirian M. Graddick-Weir retired as Executive Vice President of Human Resources for Merck & Co.,
Inc., a pharmaceutical company, in November, 2018. She had held that position since 2008. From
2006 until 2008, she was Senior Vice President of Human Resources of Merck & Co., Inc. Prior to
this position, she served as Executive Vice President of Human Resources of AT&T Corp. from 2001
to 2006. Ms. Graddick-Weir has served as a director of Booking Holdings, Inc. since June 2018.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Management experience,
pharmaceutical company

including as Executive Vice President of human resources for a

(cid:129) Expertise in global human resources, corporate governance and public company compensation

(cid:129) Public company directorship and committee experience

Background
Lauren R. Hobart is President and Chief Executive Officer of DICK’S Sporting Goods. She previously
served as President of DICK’S Sporting Goods, beginning in 2017. Prior to this role, Ms. Hobart
was Senior Vice President and Chief Marketing Officer of DICK’S Sporting Goods. Prior to joining
DICK’S Sporting Goods, Ms. Hobart spent 14 years at PepsiCo in various roles. Ms. Hobart
currently serves on the board of directors of DICK’S Sporting Goods and previously served on the
board of directors of Sonic Corp. from 2014 to 2018.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Operating, marketing and management experience, including as President of a merchandise

retailer

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(cid:129) Expertise in technology, finance, strategic planning and marketing

(cid:129) Public company directorship experience

Mirian M. Graddick-Weir

Age 66

Director since 2012

Independent

Committees:
(cid:129) Management Planning and

Development

(cid:129) Nominating and Governance,

Chair

Favorite YUM! Brands Food:

Hot Wings

Lauren R. Hobart

Age 52

Director since November 2020

Independent

Committees:
(cid:129) Audit

Favorite YUM! Brands Food:

Chicken Quesadilla

YUM! BRANDS, INC. - 2021 Proxy Statement 15

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GOVERNANCE OF THE COMPANY

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Background
Thomas C. Nelson is President and Chief Executive Officer of National Gypsum Company, a
building products manufacturer. He has held this position since 1999 and was elected Chairman of
the Board in January 2005. From 1995 to 1999, Mr. Nelson served as the Vice Chairman and Chief
Financial Officer of National Gypsum. Mr. Nelson previously worked for Morgan Stanley & Co. and in
the United States Defense Department as Assistant to the Secretary and was a White House Fellow.
He serves as a director of Atrium Health and has served as a director for the Federal Reserve Bank
of Richmond. His term with the Federal Reserve Bank of Richmond expired on December 31, 2020.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Operational and management experience, including as President and Chief Executive Officer of a

building products manufacturer

(cid:129) Senior government experience as Assistant to the Secretary of the United States Defense

Department and as a White House Fellow

(cid:129) Expertise in finance, strategic planning, business development and retail business

(cid:129) Public company directorship and committee experience

Background
P. Justin Skala is the Chief Executive Officer of BMI Group, the largest manufacturer of flat and
pitched roofing and waterproofing solutions throughout Europe. He has served in that role since
September 1, 2019. Prior to joining BMI Group, Mr. Skala served as Executive Vice President, Chief
Growth and Strategy Officer for the Colgate-Palmolive Company, from July 2018 until July 2019.
From 2016 until 2018 he served as Chief Operating Officer, North America, Europe, Africa/Eurasia
and Global Sustainability for Colgate-Palmolive Company. From 2013 to 2016 he was President of
Colgate-North America and Global Sustainability for Colgate-Palmolive Company. From 2010 to
2013 he was the President of Colgate - Latin America. From 2007 to 2010, he was President of
Colgate - Asia.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Global operating and management experience, including as Chief Executive Officer at a large
international manufacturer and as President of major divisions of a consumer products company

(cid:129) Expertise in branding, marketing, finance, sales, strategic planning and international business

development

Thomas C. Nelson

Age 58

Director since 2006

Independent

Committees:
(cid:129) Management Planning and

Development

(cid:129) Nominating and Governance

Favorite YUM! Brands Food:

Pepperoni Lover’s Pizza

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P. Justin Skala

Age 61
Director since 2016

Independent

Committees:
(cid:129) Audit

Favorite YUM! Brands Food:

KFC Bucket of Original
Recipe Chicken

16 YUM! BRANDS, INC. - 2021 Proxy Statement

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GOVERNANCE OF THE COMPANY

Background
Elane B. Stock has served as the Chief Executive Officer of ServiceMaster Brands, LLC since 2020.
Prior to this role, Ms. Stock served as Group President of Kimberly-Clark International, a division of
Kimberly-Clark Corporation, a global consumer products company, from 2014 to 2016. From 2012
to 2014 she was the Group President for Kimberly-Clark Professional. Prior to this role, Ms. Stock
was the Chief Strategy Officer of Kimberly-Clark Corporation. Earlier in her career, Ms. Stock was a
partner at McKinsey & Company in the U.S. and Ireland, where she was the Managing Director.
Ms. Stock currently serves on the Board of Reckitt Benckiser.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Global operating and management experience, including as group president of a consumer

products company

(cid:129) Expertise in branding, marketing, finance, sales, strategic planning and international business

development

Elane B. Stock

Age 56

Director since 2014

Independent

Committees:
(cid:129) Audit

Favorite YUM! Brands Food:

(cid:129) Public company directorship experience and committee experience

KFC Bucket of Original
Recipe Chicken

Annie Young-Scrivner

Age 52

Director since 2020
Independent

Committees:
(cid:129) Audit

Favorite YUM! Brands Food:

Pan Pepperoni
Pizza with Crushed Red Pepper

Background
Annie Young-Scrivner has served as the Chief Executive Officer of Wella Company, the parent of
beauty brands, including Clairol and OPI, since 2020. Prior to this role, Ms. Young-Scrivner was
Chief Executive Officer of Godiva Chocolatier, Inc., a manufacturer of Belgian chocolates. Prior to
joining Godiva in August 2017, Ms. Young-Scrivner was Executive Vice President, Global Digital &
Loyalty Development with Starbucks Corporation from 2015 until her departure in April 2017. At
Starbucks, Ms. Young-Scrivner also served as President, Teavana & Executive Vice President of
Global Tea from 2014 to 2015, Global Chief Marketing Officer & President of Tazo Tea from 2009 to
to joining Starbucks,
2012, and President of Starbucks Canada from 2012 to 2014. Prior
in sales, marketing and
Ms. Young-Scrivner held senior leadership positions at PepsiCo,
general management, including her role as Region President of PepsiCo Foods Greater China from
2006 to 2008. She has been a director of Tiffany & Co. since 2018, and has previously served as a
director of Macy’s, Inc.

Inc.

Specific Qualifications, Experience, Skills and Expertise:
(cid:129) Operating and management experience, including as Chief Executive Officer of consumer goods

company

(cid:129) Public company directorship and committee experience

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If elected, we expect that all of the aforementioned nominees will serve as directors and hold office until the 2022
Annual Meeting of Shareholders and until their respective successors have been elected and qualified.

Director Compensation

How are directors compensated?

Employee Directors. Employee directors do not
receive additional compensation for serving on the
Board of Directors.

Non-Employee Directors Annual Compensation. The
annual compensation for each non-employee Director is
summarized in the table below. For 2020, each
non-employee Director received an annual stock grant
retainer with a fair market value of $260,000. Directors

may request to receive up to one-half of their stock
retainer in cash. The request must be submitted to the
Chair of the Management Planning and Development
Committee. Directors may also defer payment of their
retainers
Deferred
Compensation Plan. Deferrals are invested in phantom
Company stock and paid out in shares of Company
stock. Deferrals may not be made for less than two years.

Directors

pursuant

the

YUM! BRANDS, INC. - 2021 Proxy Statement 17

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In recognition of

their added duties,

Chairperson of the Board and Committee Chairperson
Retainers.
the
Chairperson of the Board (Mr. Cornell in 2020) receives
an additional $170,000 stock retainer annually and the
Chairs of the Audit Committee (Mr. Nelson in 2020),
Management Planning and Development Committee
(Mr. Connor
in 2020) and the Nominating and
Governance Committee (Ms. Graddick-Weir in 2020)
each receive an additional $25,000, $20,000 and
$20,000 annual stock retainer,
respectively. These
committee chairperson retainers were paid in February
of 2020.

Initial Stock Grant upon Joining Board. Non-employee
directors also receive a one-time stock grant with a fair
market value of $25,000 on the date of grant upon
joining the Board, distribution of which is deferred until
termination from the Board.

Matching Gifts. To further YUM’s support for charities,
non-employee directors are able to participate in the
YUM! Brands, Inc. Matching Gifts Program on the same
terms as members of YUM’s Global Leadership Team.
Under this program, the YUM! Brands Foundation will
match up to $10,000 a year in contributions by the
director to a charitable institution approved by the YUM!
Brands Foundation. At its discretion, the Foundation may
match director contributions exceeding $10,000.

Insurance. We also pay the premiums on directors’ and
officers’ liability and business travel accident insurance

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policies. The annual cost of
this coverage was
approximately $2 million. This is not included in the tables
below as it
is not considered compensation to the
directors.

In setting director compensation,
the Company
considers the significant amount of time that directors
expend in fulfilling their duties to the Company as well
as the skill level required by the Company of members
of
the Board. The Board reviews each element of
director compensation at least every two years.

the Management Planning and
In November 2020,
Development Committee of
the Board (“Committee”)
benchmarked the Company’s director compensation
against director compensation from the Company’s
Executive Peer Group discussed at page 51. Data for
the Committee by its
this review was prepared for
independent
Compensation
consultant, Meridian
Partners LLC. This data revealed that the Company’s
total director compensation was at market median
measured against this benchmark, that the retainer paid
to our Non-Executive Chairperson is slightly above
market median and that
the retainers paid to the
the Audit Committee, Management
Chairpersons of
Planning and Development Committee and Nominating
and Governance Committee were generally consistent
with market practice, but were approximately $5,000
below market median. Based on this data,
the
Committee recommended no changes to our director
compensation program.

Name
(a)

Alves, Paget

Barr, Keith

Cavanagh, Michael

Connor, Christopher

Cornell, Brian

Domier, Tanya

Graddick-Weir, Mirian

Hobart, Lauren

Nelson, Thomas

Skala, Justin

Stock, Elane

Walter, Robert

Young-Scrivner, Annie

Fees Earned or
Paid in Cash
($)
(b)

—

Stock
Awards
($)(1)
(c)

260,000

220,000

260,000

280,000

430,000

260,000

280,000

25,000

285,000

260,000

220,000

Option/SAR
Awards
($)(2)
(d)

All Other
Compensation
($)(3)
(e)

Total
($)
(f)

270,000

230,000

260,000

280,000

430,000

260,000

280,000

25,000

285,000

260,000

10,000

—

10,000

270,000

—

220,000

—

(1) Amounts in column (c) represent the grant date fair value for annual stock retainer awards, Committee Chairperson retainer
awards, Non-Executive Chairperson awards granted to directors in 2020. Retainer awards are pro-rated for partial years of
service.

18 YUM! BRANDS, INC. - 2021 Proxy Statement

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(2) At December 31, 2020,

the aggregate number of stock appreciation rights (“SARs”) awards outstanding for each

GOVERNANCE OF THE COMPANY

non-employee director was:
Name

Alves, Paget

Barr, Keith

Cavanagh, Michael

Connor, Christopher

Cornell, Brian

Domier, Tanya

Hobart, Lauren

Graddick-Weir, Mirian

Nelson, Thomas

Skala, Justin

Stock, Elane

Young-Scrivner, Annie

Walter, Robert

SARs

—

18,531

—

6,491

—

22,752

24,631

4,646

10,003

—

24,631

(3) Amounts in this column represent charitable matching gifts.

What are the Company’s policies and procedures with respect to related
person transactions?

and

the Company.

they are in the best

Under the Company’s policies and procedures for the
review of related person transactions the Nominating
and Governance Committee reviews related person
transactions in which we are or will be a participant to
interests of our
determine if
shareholders
Transactions,
arrangements, or relationships or any series of similar
transactions, arrangements or relationships in which a
related person had or will have a material interest and
that exceed $100,000 are subject to the Nominating
and Governance Committee’s review. Any member of
the Nominating and Governance Committee who is a
related person with respect to a transaction under
review may not participate in the deliberation or vote
respecting approval or ratification of the transaction.

Related persons are directors, director nominees,
executive officers, holders of 5% or more of our voting
stock and their immediate family members. Immediate

stepchildren,

family members are spouses, parents, stepparents,
children,
daughters-in-law,
sons-in-law and any person, other than a tenant or
domestic employee, who resides in the household of a
director, director nominee, executive officer or holder
of 5% or more of our voting stock.

siblings,

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its review,

After
the Nominating and Governance
Committee may approve or ratify the transaction. The
related person transaction policies and procedures
provide that certain transactions are deemed to be
pre-approved, even though they exceed $100,000.
Pre-approved transactions include employment of
executive
and
director
transactions with other companies if the aggregate
amount of the transaction does not exceed the greater
that other company’s total
of $1 million or 2% of
revenues and the related person is not an executive
officer of that other company.

compensation,

officers,

Does the Company require stock ownership by directors?

stock

owned

common

The Board believes that the number of shares of the
Company’s
each
is a personal decision;
non-management director
however, the Board strongly supports the position that
non-management directors should own a meaningful
number of shares in the Company and expects that
each non-management director will (i) own Company
common shares with a value of at least five times the

annual Board retainer;
(ii) accumulate those shares
during the first five years of the director’s service on
the Board; and (iii) hold these shares at least until the
director departs the Board. Each director may sell
enough shares to pay taxes in connection with the
receipt of his or her retainer or the exercise of stock
appreciation rights and the ownership guideline will be
adjusted to reflect the sale to pay taxes.

YUM! BRANDS, INC. - 2021 Proxy Statement 19

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GOVERNANCE OF THE COMPANY

How much YUM stock do the directors own?

Stock ownership information for each director is shown in the table on page 34.

Does the Company have stock ownership guidelines for executives and
senior management?

The Committee has adopted formal stock ownership
guidelines that set minimum expectations for executive
and senior management ownership. These guidelines
are discussed on page 52.

The Company has maintained an ownership culture
among its executive and senior managers since its
formation. Substantially all executive officers and
members of senior management hold stock well
in
excess of the guidelines.

How Can Shareholders Nominate for the Board?

Director nominations for inclusion in YUM’s proxy
materials (Proxy Access). Our bylaws permit a
shareholder, or group of up to 20 shareholders, owning
continuously for at least three years shares of YUM
stock representing an aggregate of at least 3% of our
outstanding shares, to nominate and include in YUM’s
proxy materials director nominees constituting up to
20% of YUM’s Board, provided that the shareholder(s)
and nominee(s) satisfy the requirements in YUM’s
bylaws. Notice of proxy access director nominees for
the 2022 Annual Meeting of Shareholders must be
received by us no earlier than November 2, 2021, and
no later than December 2, 2021.

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Director nominations to be brought before the
Shareholders.
2022

Meeting

Annual

Director nominations that a shareholder intends to
present at the 2022 Annual Meeting of Shareholders,
other
than through the proxy access procedures
described above, must have been received no later
than February 10, 2022. These nominations must be
submitted by a shareholder in accordance with the
requirements specified in YUM’s bylaws.

Where to send director nominations for the 2022
Director
Annual Meeting
Shareholders.
nominations brought by
shareholders must be
delivered to YUM’s Corporate Secretary by mail at
YUM! Brands,
Inc., 1441 Gardiner Lane, Louisville,
Kentucky 40213 and received by YUM’s Corporate
Secretary by the dates set forth above.

What is the Board’s leadership structure?

On November 16, 2018, Brian C. Cornell assumed the
position of Non-Executive Chairperson of the Board.
Applying our Corporate Governance Principles,
the
Board determined that based on Mr. Cornell’s
independence, it would not appoint a Lead Director
when Mr. Cornell became Non-Executive Chairperson.

The Nominating and Governance Committee annually
reviews the Board’s leadership structure and evaluates
the performance and effectiveness of the Board of
Directors. The Board retains the authority to modify its
leadership structure in order to stay current with our
Company’s circumstances and advance the best
interests of the Company and its shareholders as and

20 YUM! BRANDS, INC. - 2021 Proxy Statement

when appropriate. The Board’s annual self-evaluation
includes questions regarding the Board’s opportunities
for open communication and the effectiveness of
executive sessions.

The Company’s Governance Principles provide that
the Chief Executive Officer
(“CEO”) may serve as
Chairperson of
the Board. These Principles also
provide for an independent Lead Director when the
CEO is serving as Chairperson. During 2020, our CEO
did not serve as Chairperson. Our Board believes that
Board independence and oversight of management
strong
are
independent Chairperson or Lead Director and

effectively maintained

through

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through the Board’s composition, committee system
and policy of having regular executive sessions of
non-employee directors, all of which are discussed
below. As Non-Executive Chairperson, Mr. Cornell
is
responsible for supporting the CEO on corporate
strategy
development.
Mr. Cornell also works with the CEO in setting the
agenda and schedule for meetings of the Board, in
addition to performing the duties that would otherwise
be performed by a Lead Director, as described below.

along with

leadership

GOVERNANCE OF THE COMPANY

As CEO, Mr. Gibbs is responsible for
leading the
Company’s strategies, organization design, people
development and culture, and for providing the
day-to-day leadership over operations.

To ensure effective independent oversight, the Board
has adopted a number of governance practices
discussed below.

What are the Company’s governance policies and ethical guidelines?

(cid:129) Board Committee Charters. The Audit, Management
Planning and Development, and Nominating and
Governance Committees of
the YUM Board of
Directors operate pursuant to written charters. These
charters were approved by the Board of Directors and
reflect certain best practices in corporate governance.
These charters comply with the requirements of the
NYSE. Each charter is available on the Company’s
https://investors.yum.com/governance/
website
committee-composition-and-charters/.

(cid:129) Governance Principles. The Board of Directors has
documented its corporate governance guidelines in
Inc. Corporate Governance
the YUM! Brands,
Principles. These guidelines are available on the
Company’s website at https://investors.yum.com/
governance/governance-documents/.

(cid:129) Ethical Guidelines. YUM’s Global Code of Conduct
the Company’s

emphasize

adopted

was

to the highest standards of business
commitment
conduct. The Code of Conduct also sets forth
information and procedures for employees to report
misconduct, ethical or accounting concerns, or other
violations of the Code of Conduct in a confidential
manner. The Code of Conduct applies to the Board of
Directors and all employees of the Company, including
the chief executive officer, the chief financial officer and
the principal accounting officer. Our directors and the
senior-most employees in the Company are required
to
interest
a
questionnaire and certify in writing that they have read
and understand the Code of Conduct. The Code of
Conduct is available on the Company’s website at
https://investors.yum.com/governance/governance-
documents/.
post
amendments to or waivers from its Code (to the extent
applicable to the Board of Directors or executive
officers) on this website.

The Company

complete

regularly

conflicts

intends

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What other significant Board practices does the Company have?

(cid:129) Private Executive Sessions. Our non-management
directors meet in executive session at each regular
Board meeting. The executive sessions are attended
only by the non-management directors and are
presided over by
the Lead Director or our
Non-Executive Chairperson, as applicable. Our
independent directors meet in executive session at
least once per year.

(cid:129) Role of Lead Director. Our Governance Principles
require the election, by the independent directors, of
a Lead Director when the CEO is also serving as
Chairperson.

The Board currently does not have a Lead Director, and
the duties of the Lead Director are fulfilled by Mr. Cornell

as Non-Executive Chairperson. Since Mr. Cornell
is
independent, the Board determined that it would not
appoint a separate Lead Director upon Mr. Cornell’s
appointment as Non-Executive Chairperson.

The Lead Director position is structured so that one
independent Board member
is empowered with
sufficient authority to ensure independent oversight of
the Company and its management. The Lead Director
position has no term limit and is subject only to annual
approval by the independent members of the Board.
Based upon the recommendation of the Nominating
and Governance Committee,
has
determined that the Lead Director, when appointed, is
responsible for:

the Board

YUM! BRANDS, INC. - 2021 Proxy Statement 21

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(a) Presiding at all executive sessions of the Board
and any other meeting of the Board at which the
Chairperson is not present, and advising the
Chairperson and CEO of any decisions reached or
suggestions made at any executive session,

(b) Approving in advance agendas and schedules for
is
Board meetings and the information that
provided to directors,

(c)

If requested by major shareholders, being available
for consultations and direct communication,

(d) Serving as a liaison between the Chairperson and

the independent directors, and

(e) Calling special meetings of

the independent

directors.

(cid:129) Advance Materials. Information and data important
to the directors’ understanding of the business or
matters to be considered at a Board or Board
committee meeting are,
to the extent practical,
distributed to the directors sufficiently in advance of
the meeting to allow careful
to the
meeting.

review prior

(cid:129) Board and Committees’ Evaluations. The Board
has an annual self-evaluation process that is led by
the Nominating and Governance Committee. This
assessment focuses on the Board’s contribution to
the Company and emphasizes those areas in which

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the Board believes a better contribution could be
made. As a part of this process, the Chairperson of
the Board or the Chairperson of the Nominating and
Governance Committee conduct personal interviews
with each member of the Board, the results of which
are summarized and discussed in an executive
session.
the Audit, Management
Planning and Development and Nominating and
Governance Committees also each conduct similar
annual self-evaluations.

In addition,

(cid:129) Majority Voting Policy. Our Articles of Incorporation
require majority voting for the election of directors in
uncontested elections. This means that director
nominees in an uncontested election for directors
must receive a number of votes “for” his or her
election in excess of the number of votes “against.”
The Company’s Governance Principles
further
provide that any incumbent director who does not
receive a majority of “for” votes will promptly tender
to the Board his or her resignation from the Board.
The resignation will specify that it is effective upon
the Board’s acceptance of
the resignation. The
through a process managed by the
Board will,
and
and Governance Committee
Nominating
excluding the nominee in question, accept or reject
the resignation within 90 days after
the Board
receives the resignation.
the Board rejects the
resignation, the reason for the Board’s decision will
be publicly disclosed.

What access do the Board and Board committees have to management and
to outside advisors?

(cid:129) Access

and

to Management

Employees.
Directors have full and unrestricted access to the
management and employees of
the Company.
Additionally, key members of management attend
Board meetings to present information about the
results, plans and operations of the business within
their areas of responsibility.

(cid:129) Access to Outside Advisors. The Board and its
committees may retain counsel or consultants without

obtaining the approval of any officer of the Company in
advance or otherwise. The Audit Committee has the
sole authority to retain and terminate the independent
auditor. The Nominating and Governance Committee
has the sole authority to retain search firms to be used
to identify director candidates. The Management
Planning and Development Committee has the sole
authority to retain compensation consultants for advice
on executive compensation matters.

What is the Board’s role in risk oversight?

The Board maintains overall responsibility for overseeing
the Company’s risk management, including succession
planning,
food safety and information and digital
security. In furtherance of its responsibility, the Board

has delegated specific risk-related responsibilities to the
Audit Committee and to the Management Planning and
Development Committee.

22 YUM! BRANDS, INC. - 2021 Proxy Statement

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
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engages

receives functional

in
risk management at

substantive
The Audit Committee
discussions of
regular
its
committee meetings held during the year. At these
meetings,
risk review reports
covering significant areas of risk from the employees
responsible for
these functional areas, as well as
receiving reports from the Chief Legal Officer and the
Vice President,
Internal Audit. Our Vice President,
Internal Audit reports directly to the Chairperson of the
Audit Committee and our Chief Financial Officer
(“CFO”). The Audit Committee also receives reports at
each meeting regarding legal and regulatory risks from
in separate executive
management and meets

GOVERNANCE OF THE COMPANY

sessions with our independent auditors and our Vice
President,
Internal Audit. The Audit Committee
provides a summary to the full Board at each regular
Board meeting of the risk area reviewed together with
any other risk related subjects discussed at the Audit
Committee meeting.

addition,

and
our Management
In
Development Committee considers the risks that may
be implicated by our compensation programs through
a risk assessment conducted by management and
reports its conclusions to the full Board.

Planning

What is the Board’s role in information security?

Information security and privacy has been and remains
of the utmost importance to the Company in light of
the value we place on maintaining the trust and
confidence of our consumers, employees and other
stakeholders. Accordingly, our Chief
Information
Security Officer and Chief Digital and Technology
Officer advise the Audit Committee (at least four times
per year) and the full Board of Directors regularly on
our program for managing information security risks,
including data privacy and data protection risks. We
internally follow the NIST Cybersecurity Framework to
assess the maturity of our cybersecurity programs.
Additionally, we have in place a formal privacy group
combining resources from our information security and
legal
teams. Other aspects of our comprehensive
information security program include:

(cid:129) Information security and privacy modules included in
our mandatory onboarding and annual compliance

training for restaurant support center employees, as
targeted specialized training for any
well as
employees that routinely have access to personal
data;

(cid:129) Regular

testing, both by internal and external

resources, of our information security defenses;

(cid:129) Periodic phishing drills with all restaurant support

center employees;

(cid:129) Global security and privacy policies; and

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(cid:129) Table-top exercises with senior

leaders covering
third-party data security

ransomware and other
threats.

In addition,
the Company maintains an information
security risk insurance policy that provides coverage
for data security breaches.

What is the Board’s role in the Company’s global sustainability initiatives?

sustainability

The Company has
an integrated, Board and
executive-level governance structure to oversee its
global
for
environmental, social and governance issues ultimately
resides with the Board of Directors. The Board
receives regular updates on these matters from
the
management

through the Audit Committee. At

initiatives.

Oversight

level,

operational
the Chief Communications and
Public Affairs Officer is responsible for overseeing the
global
reputation of YUM and is responsible for
shaping the Citizenship and Sustainability Strategy, as
approved by the Board, with the Chief Sustainability
Officer and Vice President of Government Relations.

YUM! BRANDS, INC. - 2021 Proxy Statement 23

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
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Has the Company conducted a risk assessment of its compensation policies
and practices?

at page 35,

As stated in the Compensation Discussion and
Analysis
the philosophy of our
compensation programs is to reward performance by
designing pay programs that incorporate team and
individual performance,
return;
emphasize long-term incentives; drive ownership
mentality; and require executives to personally invest in
Company stock.

and shareholder

for

2021,

programs

the Committee
all

examined our
In
early
compensation
to
employees
determine whether they encourage unnecessary or
excessive risk taking. In conducting this review, each
of our compensation practices and programs was
reviewed against the key risks facing the Company in
the conduct of its business. Based on this review, the
Committee concluded our compensation policies and
practices do not encourage our employees to take
unreasonable or excessive risks.

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As part of this assessment, the Committee concluded
the following policies and practices of the Company’s
cash and equity incentive programs serve to reduce
the likelihood of excessive risk taking:

(cid:129) Our Compensation system is balanced, rewarding

both short-term and long-term performance;

(cid:129) Long-term Company performance is emphasized.
The majority of
the
top-level employees is associated with the long-term
performance of the Company;

incentive compensation for

(cid:129) Strong stock ownership guidelines in place for
approximately 200 senior employees are enforced;

(cid:129) The annual

incentive and performance share plans
both cap the level of performance over which no
additional rewards are paid, thereby mitigating any
incentive to take unreasonable risk;

(cid:129) The annual incentive target setting process is closely
linked to the annual financial planning process and
supports the Company’s overall strategic plan,
which is reviewed and approved by the Board;

(cid:129) Compensation

performance

are
transparent and tied to multiple measurable factors,
none of which exceed a 50% weighting; measures
are both apparent to shareholders and drivers of
returns;

measures

(cid:129) The performance which determines employee
the Audit

closely monitored by

rewards
Committee and the full Board; and

(cid:129) The Company has a recoupment (clawback) policy.

How does the Board determine which directors are considered
independent?

The Company’s Governance Principles, adopted by
the Board, require that we meet the listing standards
of the NYSE. The full text of the Governance Principles
can be found on the Company’s website (https://
investors.yum.com/governance/governance-
documents/).

this review,

As a result of
the Board affirmatively
determined that all of the directors are independent of
the Company and its management under NYSE rules,
with the exception of David Gibbs, who is not
considered independent because of his employment
by the Company.

Pursuant
the Board
to the Governance Principles,
undertook its annual review of director independence.
During this review, the Board considered transactions
and relationships between each director or any
immediate family and the
member of his or her
Company and its subsidiaries and affiliates. As
provided in the Governance Principles, the purpose of
this review was to determine whether any such
relationships or transactions were inconsistent with a
determination that the director is independent.

relationship with the Company,

In determining that the other directors did not have a
the Board
material
determined that Messrs. Alves, Barr, Connor, Nelson,
Skala and Mmes. Domier, Graddick-Weir, Hobart,
Stock and Young-Scrivner had no other relationship
with the Company other than their relationship as a
director. The Board did note as discussed in the next
paragraph that Target Corporation, which employs
Mr. Cornell, has a business relationship with the
the Board
Company; however, as noted below,

24 YUM! BRANDS, INC. - 2021 Proxy Statement

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

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determined that this relationship was not material to
Mr. Cornell or Target Corporation, and therefore
determined that Mr. Cornell was independent. In early
2020, the Board determined that Robert C. Walter,
who served on the Board until May 2020, was also
independent.

is the Chairman and Chief Executive
Brian C. Cornell
Officer of Target Corporation. During 2020,
the
Company received approximately $5 million in license
fees from Target Corporation in the normal course of
the Company paid Target
business. Divisions of
Corporation approximately $1 million in rebates in
2020. The Board determined that these payments did
relationship between the
not create a material
Company and Mr. Cornell or the Company and Target
Corporation as the payments represent less than 2%
of Target Corporation’s revenues. Furthermore,
the
licensing relationship between the Company and
Target Corporation was initially entered into before

GOVERNANCE OF THE COMPANY

Mr. Cornell
Target Corporation.

joined the Board or became employed by

the Company,

addition, U.S.

Michael J. Cavanagh, who served on the Board until
October 2020, is the Senior Executive Vice President
and Chief Financial Officer of Comcast Corporation.
During 2019,
its affiliates and their
respective franchisees collectively paid approximately
for broadband
$42 million to affiliates of Comcast
services.
advertising
cooperatives, to which each of the Company’s brands
and their franchisees contribute funds to purchase
media
advertising, purchased approximately
$72 million in advertising from affiliates of Comcast. In
early 2020, the Board determined that these payments
did not create a material relationship between the
Company and Mr. Cavanagh or the Company and
Comcast Corporation as the payments represented
less than 2% of Comcast Corporation’s revenues.

brand

for

How do shareholders communicate with the Board?

and

other

parties

interested

Shareholders
in
communicating directly with individual directors, the
non-management directors as a group or the entire
Board may do so by writing to the Nominating and
Governance Committee, c/o Corporate Secretary,
YUM! Brands,
Inc., 1441 Gardiner Lane, Louisville,
Kentucky 40213. The Nominating and Governance
Committee of the Board has approved a process for
handling letters received by the Company and
addressed to individual directors, non-management
that
members of
process,
the Company
reviews all
such correspondence and regularly
forwards to a designated individual member of the
Nominating and Governance Committee copies of all
such correspondence (although we do not forward
commercial correspondence and correspondence
duplicative in nature; however, we will retain duplicate
correspondence and all duplicate correspondence will
be available for directors’ review upon their request)

the Corporate Secretary of

the Board. Under

the Board or

any

director

the Nominating

such
from shareholders

and a summary of all such correspondence. The
designated
and
Governance Committee will forward correspondence
directed to individual directors as he or she deems
appropriate. Directors may at any time review a log of
all correspondence received by the Company that is
the Board and request
addressed to members of
correspondence. Written
copies
correspondence
to
accounting, internal controls or auditing matters are
immediately brought to the attention of the Company’s
Audit Committee Chair and to the internal audit
department
accordance with
procedures established by the Audit Committee with
below).
respect
Correspondence
to
Management Planning and Development Committee
matters are referred to the Chair of the Management
Planning and Development Committee.

from shareholders

such matters

(described

handled

relating

and

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YUM! BRANDS, INC. - 2021 Proxy Statement 25

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

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What are the Company’s policies on reporting of concerns regarding
accounting?

Gardiner Lane, Louisville, KY 40213.
In addition, a
person who has such a concern about the conduct of
the Company or any of our employees may discuss
that concern on a confidential or anonymous basis by
contacting The Network at 1 (844) 418-4423. The
Network is our designated external contact for these
issues and is authorized to contact the appropriate
the Board of
members of management and/or
Directors with respect to all concerns it receives. The
full
text of our Policy on Reporting of Concerns
Regarding Accounting and Other Matters is available
on
https://investors.yum.com/
governance/governance-documents/.

our website

The Audit Committee has established policies on
reporting concerns regarding accounting and other
matters in addition to our policy on communicating
with our non-management directors. Any person,
whether or not an employee, who has a concern
about the conduct of the Company or any of our
people, with respect to accounting, internal accounting
controls or auditing matters, may, in a confidential or
anonymous manner, communicate that concern to our
Chief Legal Officer, Scott A. Catlett.
If any person
believes that he or she should communicate with our
Audit Committee Chair, Paget Alves, he or she may do
Inc., 1441
so by writing him at c/o YUM! Brands,

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26 YUM! BRANDS, INC. - 2021 Proxy Statement

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

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GOVERNANCE OF THE COMPANY

What are the Committees of the Board?

The Board of Directors has standing Audit, Management Planning and Development and Nominating and
Governance Committees.

Name of Committee
and Members
Audit:

Paget L. Alves, Chair
Tanya L. Domier
Lauren Hobart
P. Justin Skala
Elane B. Stock
Annie Young-Scrivner

Number of Meetings
in Fiscal 2020
8

Functions of the Committee
(cid:129) Possesses sole authority regarding the selection and retention

of independent auditors

(cid:129) Reviews and has oversight over the Company’s internal audit

function

(cid:129) Reviews and approves the cost and scope of audit and
non-audit services provided by the independent auditors
(cid:129) Reviews the independence, qualification and performance of

the independent auditors

(cid:129) Reviews the adequacy of the Company’s internal systems of

accounting and financial control

(cid:129) Reviews the annual audited financial statements and results of

the audit with management and the independent auditors
(cid:129) Reviews the Company’s accounting and financial reporting
principles and practices including any significant changes
(cid:129) Advises the Board with respect to Company policies and

procedures regarding compliance with applicable laws and
regulations and the Company’s Global Code of Conduct and
Policy on Conflicts of Interest

(cid:129) Discusses with management the Company’s policies with

respect to risk assessment and risk management. Further detail
about the role of the Audit Committee in risk assessment and
risk management is included in the section entitled “What is the
Board’s role in risk oversight?” set forth on page 22

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The Board of Directors has determined that all of the members of the Audit Committee are independent within the
meaning of applicable SEC regulations and the listing standards of the NYSE and that Mr. Alves, the Chair of the
Committee, is qualified as an audit committee financial expert within the meaning of SEC regulations. The Board
has also determined that Mr. Alves has accounting and related financial management expertise within the meaning
of the listing standards of the NYSE and that each member is financially literate within the meaning of the listing
standards of the NYSE.

Name of Committee
and Members
Management Planning
and Development:

Christopher M. Connor, Chair
Keith Barr
Brian C. Cornell
Mirian M. Graddick-Weir
Thomas C. Nelson

Functions of the Committee
(cid:129) Oversees the Company’s executive compensation plans and
programs and reviews and recommends changes to these
plans and programs

(cid:129) Monitors the performance of the Chief Executive Officer and
other senior executives in light of corporate goals set by the
Committee

(cid:129) Reviews and approves the compensation of the Chief Executive

Officer and other senior executive officers
(cid:129) Reviews management succession planning

Number of Meetings
in Fiscal 2020
5

The Board has determined that all of the members of the Management Planning and Development Committee are
independent within the meaning of the listing standards of the NYSE.

YUM! BRANDS, INC. - 2021 Proxy Statement 27

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

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Name of Committee
and Members
Nominating and
Governance:

Mirian M. Graddick-Weir, Chair
Brian C. Cornell
Thomas C. Nelson

Functions of the Committee
(cid:129) Identifies and proposes to the Board suitable candidates for

Board membership

(cid:129) Advises the Board on matters of corporate governance
(cid:129) Reviews and reassesses from time to time the adequacy of the

Company’s Corporate Governance Principles

(cid:129) Receives comments from all directors and reports annually to

the Board with assessment of the Board’s performance

(cid:129) Prepares and supervises the Board’s annual review of director

independence

Number of Meetings
in Fiscal 2020
4

The Board has determined that all of the members of the Nominating and Governance Committee are independent
within the meaning of the listing standards of the NYSE.

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28 YUM! BRANDS, INC. - 2021 Proxy Statement

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

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MATTERS REQUIRING SHAREHOLDER ACTION

ITEM 1

Election of Directors (Item 1 on the Proxy
Card)

Who are this year’s nominees?

There are twelve (12) nominees recommended by the Nominating and Governance Committee of the Board of
Directors for election this year to hold office until the 2022 Annual Meeting and until their respective successors are
elected and qualified. Their biographies are provided above at pages 12 to 17. The biographies of each of the
nominees contains information regarding the person’s service as a director, business experience, public-company
director positions held currently or at any time during the last five years, information regarding involvement in certain
legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused
the Nominating and Governance Committee and the Board to determine that the person should serve as a director
for the Company. In addition to the information presented above regarding each nominee’s specific experience,
qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director, we
also believe that all of our director nominees have a reputation for integrity, honesty and adherence to high ethical
standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a
commitment of service to YUM and our Board. Finally, we value their significant experience on other public
company boards of directors and board committees.

There are no family relationships among any of the directors and executive officers of the Company.

What is the recommendation of the Board of Directors?

The Board of Directors recommends that you vote FOR the election of these nominees.

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What if a nominee is unwilling or unable to serve?

That is not expected to occur. If it does, proxies may be voted for a substitute nominated by the Board of
Directors.

What vote is required to elect directors?

A nominee will be elected as a director if the number of “FOR” votes exceeds the number of “AGAINST” votes with
respect to his or her election.

Our policy regarding the election of directors can be found in our Governance Principles at https://
investors.yum.com/governance/governance-documents/ and at page 19 under “What other significant Board
practices does the Company have? — Majority Voting Policy.”

YUM! BRANDS, INC. - 2021 Proxy Statement 29

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

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ITEM 2 Ratification of Independent Auditors
(Item 2 on the Proxy Card)

What am I voting on?

A proposal to ratify the selection of KPMG LLP (“KPMG”) as our independent auditors for fiscal year 2021. The
Audit Committee of the Board of Directors has selected KPMG to audit our consolidated financial statements.
During fiscal 2020, KPMG served as our independent auditors and also provided other audit-related and non-audit
services.

Will a representative of KPMG be present at the meeting?

Representatives of KPMG will attend the Annual Meeting and will have the opportunity to make a statement if they
desire and will be available to respond to appropriate questions from shareholders.

What vote is required to approve this proposal?

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Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented
by proxy and entitled to vote at the Annual Meeting. If the selection of KPMG is not ratified, the Audit Committee
will reconsider the selection of independent auditors.

What is the recommendation of the Board of Directors?

The Board of Directors recommends that you vote FOR approval of this proposal.

What were KPMG’s fees for audit and other services for fiscal years 2020
and 2019?

The following table presents fees for professional services rendered by KPMG for the audit of the Company’s
annual financial statements for 2020 and 2019, and fees billed for audit-related services, tax services and all other
services rendered by KPMG for 2020 and 2019.

Audit fees(1)

Audit-related fees(2)

Tax fees(3)

All other fees

TOTAL FEES

2020

$5,597,000 $

$ 529,000 $

$ 511,000 $

0 $

2019
6,628,000

405,000

223,000

$6,637,000 $

7,256,000

(1) Audit fees include fees for the audit of the annual consolidated financial statements, reviews of the interim condensed
consolidated financial statements included in the Company’s quarterly reports, audits of the effectiveness of the Company’s
internal controls over financial reporting, statutory audits and services rendered in connection with the Company’s securities
offerings including comfort letters and consents.

(2) Audit-related fees include fees associated with audits of financial statements and certain employee benefit plans, agreed

upon procedures and other attestations.

(3) Tax fees consist principally of fees for international tax compliance, tax audit assistance, as well as value added tax and

other tax advisory services.

30 YUM! BRANDS, INC. - 2021 Proxy Statement

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

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MATTERS REQUIRING SHAREHOLDER ACTION

What is the Company’s policy regarding the approval of audit and non-audit
services?

The Audit Committee has implemented a policy for the
pre-approval of all audit and permitted non-audit
services,
including tax services, proposed to be
provided to the Company by its independent auditors.
Under the policy, the Audit Committee may approve
engagements on a case-by-case basis or pre-approve
engagements pursuant
to the Audit Committee’s
pre-approval policy. The Audit Committee may
delegate pre-approval
its
independent members and has currently delegated
pre-approval authority up to certain amounts to its
Chair.

to one of

authority

Pre-approvals for services are granted at the January
Audit Committee meeting each year. Any incremental
audit or permitted non-audit services which are
expected to exceed the relevant budgetary guideline
In considering
must subsequently be pre-approved.

reviews

the Audit Committee
a
pre-approvals,
the scope of services falling within
description of
pre-designated
specific
budgetary guidelines. Pre-approvals of designated
services are generally effective for
the succeeding
12 months.

imposes

services

and

The Corporate Controller monitors services provided
by the independent auditors and overall compliance
with the pre-approval policy. The Corporate Controller
reports periodically to the Audit Committee about the
status of outstanding engagements, including actual
services provided and associated fees, and must
the
promptly
pre-approval policy
the Audit
Committee. The complete policy is available on the
Company’s website at https://investors.yum.com/
governance/committee-composition-and-charters/.

non-compliance with

to the Chair of

report

any

ITEM 3 Advisory Vote on Executive Compensation

(Item 3 on the Proxy Card)

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What am I voting on?

In accordance with SEC rules, we are asking shareholders to approve, on a non-binding basis, the compensation
of the Company’s Named Executive Officers as disclosed in this proxy statement.

Our Performance-Based Executive Compensation Program Attracts and Retains Strong
Leaders and Closely Aligns with Our Shareholders’ Interests

Our performance-based executive
compensation
program is designed to attract, reward and retain the
talented leaders necessary for our Company to
succeed in the highly competitive market for talent,
while maximizing shareholder returns. This approach
has made our management team a key driver in the
Company’s strong performance over both the long-
and short-term. We believe that our compensation
program has attracted and retained strong leaders and
our
closely
is
shareholders.

aligned with

interests

the

In deciding how to vote on this proposal, we urge you
to read the Compensation Discussion and Analysis
section of this proxy statement, beginning on page 35,

which discusses in detail how our compensation
policies and procedures operate and are designed to
meet
and how our
Management Planning and Development Committee
makes compensation decisions under our programs.

compensation

goals

our

Accordingly, we ask our shareholders to vote in favor
of the following resolution at the Annual Meeting:

RESOLVED, that the shareholders approve, on an
advisory basis, the compensation awarded to our
Named Executive Officers, as disclosed pursuant
to SEC rules,
including the Compensation
Discussion and Analysis, the compensation tables
and related materials included in this proxy
statement.

YUM! BRANDS, INC. - 2021 Proxy Statement 31

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What vote is required to approve this proposal?

Approval of this proposal requires the affirmative vote
in person or
of a majority of shares present
represented by proxy and entitled to vote at
the
Annual Meeting. While this vote is advisory and
non-binding on the Company, the Board of Directors
and the Management Planning and Development
Committee will review the voting results and consider

shareholder concerns in their continuing evaluation of
the Company’s compensation program. Unless the
Board of Directors modifies its policy on the frequency
the next advisory vote on
of
the 2022
executive compensation will be held at
Annual Meeting of Shareholders.

this advisory vote,

What is the recommendation of the Board of Directors?

The Board of Directors recommends that you vote FOR approval of this proposal.

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32 YUM! BRANDS, INC. - 2021 Proxy Statement

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STOCK OWNERSHIP INFORMATION

Who are our largest shareholders?

This table shows ownership information for each YUM shareholder known to us to be the owner of 5% or more of
YUM common stock. This information is presented as of December 31, 2020 and is based on a stock ownership
report on Schedule 13G filed by such shareholders with the SEC and provided to us.

Name and Address of Beneficial Owner
T. Rowe Price Associates, Inc.

100 E. Pratt Street,
Baltimore, MD 21202

The Vanguard Group

100 Vanguard Blvd.
Malvern, PA 19355

Blackrock Inc.

55 East 52nd Street
New York, NY 10055

Magellan Asset Management Limited

19 Martin Place
Sydney, NSW, 2000, Australia

Number of Shares
Beneficially Owned

Percent
of Class

30,619,571(1)

10.1%

23,428,319(2)

7.77%

17,892,450(3)

5.9%

16,956.927(4)

5.62%

(1) The filing indicates sole voting power for 9,977,017 shares, shared voting power for 0 shares, sole dispositive power for

30,619,571 shares and shared dispositive power for 0 shares.

(2) The filing indicates sole voting power for 0 shares, shared voting power for 494,666 shares, sole dispositive power of

22,109,570 shares and shared dispositive power for 1,318,749 shares.

(3) The filing indicates sole voting power for 15,105,990 shares, shared voting power for 0 shares, sole dispositive power for

17,892,450 shares and shared dispositive power for 0 shares.

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(4) The filing indicates sole voting power for 13,666,472 shares, shared voting power for 0 shares, sole dispositive power for

16,956,927 shares and shared dispositive power for 0 shares.

How much YUM common stock is owned by our directors and executive
officers?

This table shows the beneficial ownership of YUM
common stock as of December 31, 2020 by

(cid:129) each of our directors,

(cid:129) each of

the executive officers named in the

Summary Compensation Table on page 55, and

(cid:129) all directors and relevant executive officers as a

group.

the following
Unless we note otherwise, each of
persons and their family members have sole voting
and investment power with respect to the shares of
common stock beneficially owned by him or her. None
of the persons in this table (nor the Directors and
executive officers as a group) holds in excess of one
percent of
the outstanding YUM common stock.
Please see table above setting forth information
five
concerning beneficial ownership by holders of
percent or more of YUM’s common stock.

stock

from the

appreciation

The table shows the number of shares of common
stock and common stock equivalents beneficially
owned as of December 31, 2020. Included are shares
that could have been acquired within 60 days of
December 31, 2020 through the exercise of stock
or
options,
deferred
distributions
compensation
additional
underlying stock units as described in footnote (4) to
the table. Under SEC rules, beneficial ownership
includes any shares as to which the individual has
either sole or shared voting power or
investment
power and also any shares that the individual has the
right to acquire within 60 days through the exercise of
any stock option or other right.

rights
Company’s
together with

(“SARs”)

plans,

YUM! BRANDS, INC. - 2021 Proxy Statement 33

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Number
of Shares
Beneficially
Owned(1)
6,309
—
—
452
4,957
—
—
15,360
5,224
4,019
30
76,940
3,235
8,204
4,269
46,560

Beneficial Ownership
Options/
SARs
Exercisable
within
60 Days(2)
—
—
—
1,746
—
6,158
—
6,895
1,257
2,633
—
246,203
676
48,088
507
100,223

Deferral
Plans Stock
Units(3)
—
—
—
—
—
—
—
—
—
—
—
20,470
—
9,557
—
1,668

Total
Beneficial
Ownership
6,309
—
—
2,198
4,957
6,158
—
22,255
6,481
6,652
30
343,613
3,911
65,849
4,776
148,451

Additional
Underlying
Stock
Units(4)
5,725
2,133
10,507
19,853
5,620
29,773
243
67,967
9,344
15,889
2,133
70,836
8,637
6,105
14,395
240

Total
12,034
2,133
10,507
22,051
10,577
35,931
243
90,222
15,825
22,541
2,163
414,449
12,548
71,954
19,171
148,691

198,890

542,897

40,752

782,539

310,081

1,092,620

Name
Paget Alves
Keith Barr
Christopher Connor
Brian C. Cornell
Tanya Domier(5)
Mirian M. Graddick-Weir
Lauren Hobart
Thomas C. Nelson
Justin Skala
Elane B. Stock
Annie Young-Scrivner
David Gibbs(5)
Christopher Turner
Tracy Skeans
Mark King
Anthony Lowings
All Directors and Executive

Officers as a Group
(19 persons)

(1) Shares owned outright. These amounts include the following shares held pursuant to YUM’s 401(k) Plan as to which each

named person has sole voting power:
(cid:129) Ms. Skeans, 2,651
(cid:129) Mr. Lowings, 1,200
(cid:129) all relevant executive officers as a group, 4,898 shares

(2) The amounts shown include beneficial ownership of shares that may be acquired within 60 days pursuant to SARs awarded
under our employee or director incentive compensation plans. For SARs, we report the shares that would be delivered upon
exercise (which is equal to the number of SARs multiplied by the difference between the fair market value of our common
stock at year-end and the exercise price divided by the fair market value of the stock).

(3) These amounts shown reflect units denominated as common stock equivalents held in deferred compensation accounts for
each of the named persons under our Director Deferred Compensation Plan or our Executive Income Deferral Program and
include full value awards. Amounts payable under these plans will be paid in shares of YUM common stock at termination of
directorship/employment or within 60 days, if so elected.

(4) The amounts shown include units denominated as common stock equivalents held in deferred compensation accounts
which become payable in shares of YUM common stock at a time (a) other than at termination of directorship/employment
or (b) after 60 days.

(5) For Ms. Domier, these shares are held in a trust. For Mr. Gibbs, 65,893 of these shares are held in trusts.

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34 YUM! BRANDS, INC. - 2021 Proxy Statement

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DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and
persons who own more than 10% of the outstanding shares of YUM common stock to file with the SEC reports of
their ownership and changes in their ownership of YUM common stock. Directors, executive officers and greater-
than-ten percent shareholders are also required to furnish YUM with copies of all ownership reports they file with
the SEC. To our knowledge, based solely on a review of the copies of such reports furnished to YUM and
representations that no other reports were required, all of our directors and executive officers complied with all
Section 16(a) filing requirements during fiscal 2020.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

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This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation philosophy and
the Management Planning and Development Committee (the
program,
“Committee”) for our named executive officers (“NEOs”) and factors considered in making those decisions.

the compensation decisions of

Table of Contents

I. Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36

A. YUM 2020 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
B. Named Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
C. Compensation Philosophy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
D. Compensation Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
E. Relationship between Company Pay and Performance for the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

II. Elements of Executive Compensation Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

A. Base Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
B. Annual Performance-Based Cash Bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
C. Long-Term Equity Performance-Based Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

III. 2020 Named Executive Officer Total Direct Compensation and Performance

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

IV. Retirement and Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

V. How Compensation Decisions Are Made . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

VI. Compensation Policies and Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52

YUM! BRANDS, INC. - 2021 Proxy Statement 35

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EXECUTIVE COMPENSATION

Executive Summary

A. YUM 2020 Performance

2020 presented unprecedented challenges to our
business that required the talents and diligence of the
Company’s leadership, employees and franchisee
partners to overcome. Despite these challenges, our
results demonstrated the Company’s resilience and
in place during the
validated the strategies put
transformation of YUM. We intensified our focus on
leveraging our scale and reinforced our growth model,
accelerating our investments in digital and technology
to enhance the customer experience, off-premise
capabilities and unit economics. In 2020, digital sales
hit a record of $17 billion, about a 45% increase over
the prior year, and exemplified the ability of our brands
In
to quickly pivot
addition, we were able to complete the acquisition of
The Habit Burger Grill in March, which added another
exciting, growth-focused brand to our portfolio. As we
have moved into 2021, we are more confident than
ever in the ability of our teams and franchisees to
compete and win in a rapidly changing world.

to meet new consumer needs.

The Company’s 2020 performance reflects the impact
of
the COVID-19 pandemic, which had significant
negative effects on our performance, particularly
during the second and third quarters. For the year, our
system sales declined 4% (excluding foreign currency
translation),
including a decline in same-store sales
growth of 6%. During the year we were able to deliver
development growth of 183 net-new units. Our core
operating profit decreased by approximately 8%
during 2020 (see pages 32 and 33 in Item 7 of YUM’s
Form 10-K for the fiscal year ended on December 31,

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Digital Sales

$17billion 35,000

Restaurants Offering
Delivery Globally

Approximately a
45% increase over
prior year

representing a
16% increase
year-over-year

36 YUM! BRANDS, INC. - 2021 Proxy Statement

2020 for a discussion of System Sales and Core
Operating Profit).

(ii)

success;

Going forward, we will continue to rely on Our Recipe
for Growth and Good. Under our Recipe for Growth,
we will
focus on our four key growth drivers which
continue to guide our long-term strategy and form the
basis of the Company’s strategic plans to accelerate
same-store sales growth and net-new restaurant
development around the world. The Company remains
focused on building the world’s most loved, trusted
and fastest growing restaurant brands by: (i) growing
Unrivaled Culture and Talent to leverage our culture
and people capability to fuel brand performance and
developing Unmatched
franchise
Operating Capability by recruiting and equipping the
best restaurant operators in the world to deliver great
customer experiences; (iii) building Relevant, Easy and
Distinctive Brands by innovating and elevating iconic
restaurant brands people trust and champion; and
(iv) achieving Bold Restaurant Development by driving
strong
market
economics. By leveraging our Recipe for Good - our
roadmap for socially responsible and sustainable
stewardship of people, food and planet internally and
across our supply chain and franchise system - we will
elevate the importance of people and continue building
an equitable and inclusive culture that, in turn, helps us
better serve our customers and communities where
in our business
we operate. We remain confident
model and in the strength of our iconic brands as we
look to accelerate growth in 2021.

expansion with

franchise

and

Restaurant Locations

50,353

Including
The Habit Burger Grill

Brand/Country
Combinations

290

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EXECUTIVE COMPENSATION

B. Named Executive Officers

The Company’s NEOs for 2020 are as follows:

Name

David W. Gibbs

Chris Turner

Tracy L. Skeans(1)

Mark King

Tony Lowings

Title

Chief Executive Officer

Chief Financial Officer

Chief Operating Officer and Chief People Officer

Chief Executive Officer of Taco Bell Division

Chief Executive Officer of KFC Division

(1) Effective January 29, 2021, Ms. Skeans was appointed Chief Operating Officer and Chief People Officer of the Company.

Prior to that she served as the Company’s Chief Transformation and People Officer.

C. Compensation Philosophy

The business performance of the Company is of the
utmost
importance in how our executives are
compensated. Our compensation program is designed
to both support our long-term growth model and hold

Objective

Attract and retain the best talent to achieve superior
shareholder results—To be consistently better than our
competitors, we need to recruit and retain superior talent
who are able to drive superior results. We have structured
our compensation programs to be competitive and to
motivate and reward high performers.
Reward performance—The majority of NEO pay is
performance based and therefore at risk. We design pay
programs that incorporate team and individual performance
goals that lead to shareholder return.
Emphasize long-term value creation—Our belief is simple:
if we create value for shareholders, then we share a portion
of that value with those responsible for the results.
Drive ownership mentality—We require executives to invest
in the Company’s success by owning a substantial amount
of Company stock.

D. Compensation Overview

2020 Compensation Highlights

(cid:129) In January of 2020,

the Committee made the

following decisions and took the following actions:

(cid:129) The Committee set our CEO target for total direct
compensation (base salary, annual cash bonus
and annual
long-term incentive award value at
grant date) at a level between the 25th and 50th
percentile of our Executive Peer Group (defined at
page 51) for the CEO role, to reflect newness in
role;

our executives accountable to achieve key annual
results
compensation
philosophy for the NEOs is reviewed annually by the
Committee and has the following objectives:

year. YUM’s

after

year

Base Salary

✓

Pay Element
Annual
Performance-Based
Cash Bonuses

Long-Term Equity
Performance-
Based Incentives

✓

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(cid:129) The Committee set the equity mix for our NEOs’
long-term incentive
50% stock
appreciation rights (“SARs”) and 50% performance
share units (“PSUs”);

awards

(cid:129) The Committee certified that our 2017 PSU
awards under our Performance Share Plan paid
out at 152.5% of target in 2020 based on the
Company’s Total Shareholder Return (“TSR”) at
the 75th percentile compared to the S&P 500
Consumer Discretionary Index and Earnings Per
Share (“EPS”) growth of 15.2%,
for the 2017-
2019 performance cycle (see discussion of PSUs
at page 43); and

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EXECUTIVE COMPENSATION

(cid:129) The Committee certified that the 2016 Launch
Grant PSU awards paid out at 100% of target in
2020 based on Company G&A expenses finishing
at 1.7% of system sales as of year-end 2019 and
the total number of company-owned units
finishing at 856 as of the end of 2018.

(cid:129) At our May 2020 Annual Meeting of Shareholders,
shareholders approved our “Say on Pay” proposal in
support of our executive compensation program,
with 88% of votes cast in favor of the proposal.

(cid:129) We continued our shareholder outreach program to
better understand our investors’ opinions on our
compensation practices and respond to their
questions. Committee and management
team
members from compensation, investor relations and
legal
in
be
engagement efforts during 2020 that served to
reinforce our open-door policy. The efforts included
contacting our largest 35 shareholders, representing
ownership of approximately 50% of our shares
(discussed further on page 49).

continued

involved

directly

COVID-Related Compensation Changes for 2020

that Mr.

Gibbs would

(cid:129) CEO Compensation. In March 2020, the Company
forgo
announced
approximately $900,000 of his 2020 base salary so
that this amount could be used to fund one-time
bonuses for the Company’s nearly 1,200 restaurant
general managers across the KFC, Pizza Hut, Taco
Bell and The Habit Burger Grill businesses. The
forgone salary was also used to help fund the Yum
Brand’s Foundation’s Global Employee Medical
Relief Fund. This fund provided financial hardship aid
the COVID-19
to those directly
pandemic,
and franchisee
restaurant employees.

including company

impacted by

(cid:129) Discretionary Adjustments.

authorized

the Committee

In recognition of
business results achieved relative to the unforeseen
impact that the COVID-19 pandemic had on our
business,
certain
discretionary adjustments to the team performance
factor component of our bonus formula for most
bonus-eligible employees,
including the NEOs
(discussed further on page 40). On the basis of
similar considerations, the Committee also approved
a one-time award of Company stock to Mr. Gibbs
and Ms. Skeans (as discussed at page 44).

E. Relationship between Company Pay and Performance for the CEO

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To focus on both the short-term and long-term
success of the Company, approximately 90% of our
CEO’s target compensation is “at-risk” pay, with the
If
compensation paid based on Company results.
short-term and long-term financial and operational
target goals are not achieved,
then performance-
related compensation will decrease. If target goals are
then performance-related compensation
exceeded,
increase. As demonstrated below, our target pay
will

mix for our CEO emphasizes our commitment
to
“at-risk” pay in order to tie pay to performance. The
discussion in this section is limited to Mr. Gibbs, our
CEO for 2020. Our other NEOs’ target compensation
is
of
considerations, which are discussed in Section III,
2020 Named
Total Direct
Executive Officer
Compensation and Performance Summary, found at
pages 44 to 48 of this CD&A.

substantially

subject

similar

set

Base

12%

Annual
Bonus
18%

Long-Term
Equity Incentive
70%

At Risk
88%

38 YUM! BRANDS, INC. - 2021 Proxy Statement

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EXECUTIVE COMPENSATION

CEO Total Direct Compensation

The Committee sets the CEO’s target for total direct
compensation (base salary, annual cash bonus and
annual
long-term incentive award value at grant date)
every year to align appropriately with market data of
our Executive Peer Group,
taking into account
Company performance, the CEO’s performance, time

job-related factors.

in role and other
In 2020,
Mr. Gibbs’ target total direct compensation was set
between the 25th and 50th percentiles of our
Executive Peer Group, reflecting his newness in role.
For 2020, 70% of our CEO’s target pay was in the
form of long-term equity incentive compensation.

Adjusted Operating
Proﬁt/Core
Operating Proﬁt1

System Sales
Growth2

Total Shareholder
Return3

($MM)

$16

$14

$12

$10

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Base

Bonus

Stock

SARs

PSUs

Target Total Direct Compensation

(1) Measures of results of operations for the purpose of evaluating performance against targets set under our YUM Leaders’
Bonus Program included Adjusted Operating Profit Growth in 2018 and, for 2020 and 2019, Core Operating Profit Growth
excluding the impact of a 53rd week in 2019.

(2) System sales growth excludes the impact of foreign currency translation and, for 2020 and 2019, the impact of a 53rd week

in 2019.

(3) Total shareholder return is calculated as the change in YUM share price from the beginning of the respective year until the

year-end, adjusted for dividends paid.

YUM! BRANDS, INC. - 2021 Proxy Statement 39

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EXECUTIVE COMPENSATION

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II. Elements of Executive Compensation Program

Our annual executive compensation program has three primary pay components: base salary; annual performance-
based cash bonuses; and long-term equity performance-based incentives. We also offer retirement and other
benefits.

Element

Base salary

Objective

Attract and retain high-caliber talent and provide a fixed level
of cash compensation

Annual Performance-Based Cash
Bonuses

Motivate high performance and reward short-term Company,
team and individual performance

Form

Cash

Long-Term Equity Performance-Based
Incentives

Align the interests of executives with shareholders and
emphasize long-term results

SARs & PSUs

Retirement and Additional Benefits

Provide for long-term retirement income and basic health and
welfare coverage

Various

A. Base Salary

We provide base salary to compensate our NEOs for
their primary roles and responsibilities and to provide a
stable level of annual compensation. A NEO’s salary
responsibility,
varies based on the role,

level of

individual performance, potential and
experience,
market value. Specific salary increases take into
account these factors. The Committee reviews each
NEO’s salary and performance annually.

t
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B. Annual Performance-Based Cash Bonuses

Our performance-based annual bonus program, the
YUM Leaders’ Bonus Program, is a cash-based plan.
The principal purpose of the YUM Leaders’ Bonus

Program is to motivate and reward short-term team
and individual performance that drives shareholder
value.

The formula for calculating the performance-based annual bonus under the YUM Leaders’ Bonus Program is the
product of the following:

Base Salary

Target Bonus
Percentage

Team Performance
(0 – 200%)

Individual Performance
(0 – 150%)

Bonus Payout
(0 – 300%)

Team Performance

and

input

The Committee carefully established team performance
measures, targets and weights in January 2020 after
receiving
from
management. The team performance targets were also
reviewed by the Committee to ensure that the goals
support the Company’s overall strategic objectives. This
process occurred prior to the onset of the COVID-19
pandemic in the United States and much of the world.

recommendations

The performance targets were developed through the
Company’s annual financial planning process, which
takes into account KFC, Pizza Hut and Taco Bell
(each, a “Division”) growth strategies, historical
performance, and the expected future operating
environment for each Division.

40 YUM! BRANDS, INC. - 2021 Proxy Statement

specific

for
each
the Company

team
When
setting targets
performance measure,
takes into
account overall business goals and structures targets
of desired
designed to motivate
performance consistent with our growth commitment
to shareholders.

achievement

the

impact

potential

A leverage formula for each team performance
measure magnifies
that
performance above or below the performance target
will have on the calculation of the annual bonus. This
leverage increases the payouts when targets are
exceeded and reduces payouts when performance is
below target. There is a threshold level of performance
for all measures that must be met in order for any
bonus to be paid, absent the use of discretion by the
circumstances.
extraordinary
Committee

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Additionally, all measures have a cap on the level of
performance over which no additional bonus will be
paid regardless of performance above the cap.

The Committee may approve adjustments to Division
targets or may exclude certain pre-established items
from the financial results used to determine the annual
bonus when doing so is consistent with the objectives
and intent at the time the targets were originally set, in
order to focus executives on the fundamentals of the
Company’s underlying business performance.

the

adjustments

adjusted the

In recognition of business results achieved relative to
the unforeseen impact that the COVID-19 pandemic
the Committee authorized
had on our business,
team
to
certain discretionary
performance factor component of our bonus formula
for most bonus-eligible employees,
including the
the reasons discussed in the following
NEOs. For
team
the Committee
paragraph,
performance factor for those bonus-eligible employees
otherwise receiving a “0,” including each NEO, to a 60,
except with respect to Mr. King. As described further
on page 42, Mr. King’s team performance factor was
adjusted to 70 rather than the earned 21 from the
Taco Bell Division. The Committee determined that the
payment of a discretionary bonus to all bonus-eligible
employees, including the NEOs, was appropriate given
the results achieved in 2020 towards stabilizing the
business and positioning it for success coming out of
the pandemic.

can

seen

results

These
the marked
improvements made from the second quarter, when
the pandemic had its greatest impact on our results.
Same-store sales improved from a decline of 15% in
Q2 to negative 1% in Q4, while core operating profit
excluding special
items improved from negative 25%
to negative 5% (excluding the impact of a 53rd week in
2019) during the same time period. Results benefitted
in part by strong operations,
to
contactless options, which helped enable temporary
store closures to improve from highs of nearly 20% of
our system to approximately 2% by year end.
Management’s performance and these results, some
of which are described below, were beneficial
to
stock price
reflected in
shareholders
rebounding from a low of $54.95 per share in the
second quarter to $108.56 at year end. Key actions
taken by management during the pandemic included:

including a pivot

our

(cid:129) Ensuring Strong liquidity- Solidifying the balance
sheet and mitigating liquidity risks through strong

EXECUTIVE COMPENSATION

cash management, including issuing $600 million in
unsecured notes in April, 2020 (the first offering of its
the pandemic in the
kind following the onset of
approximately
and
United States)
$1 billion in other debt;

refinancing

(cid:129) Protecting franchise partners- Supporting our
franchisees through strategic temporary deferral of
certain payment obligations (the vast majority of
which were repaid by year-end 2020) and capital
commitment obligation deferrals,
in addition to
addressing franchisees at risk of financial distress or
restructuring,
including the restructuring of our
largest franchisee in the U.S.;

(cid:129) Operational

excellence- Overseeing

flawless
supply chain execution, which allowed us to
maintain the ability to continue to safely serve menu
items to our worldwide customers, while also
sourcing critical personal protective equipment to
protect frontline workers;

(cid:129) Customer

focus- Adapting to new consumer
expectations, enabling the rapid pivot to curbside
pickup, delivery and other contactless options and
to meet new safety
operational
standards;

adjustments

(cid:129) Innovative technologies- Accelerating key digital
and technology initiatives, including rapid growth in
digital sales, which resulted in all-time digital sales
records for the Company in each of Q2, Q3, and
Q4;

(cid:129) Strategic growth- Completion of

the acquisition
and integration of The Habit Burger Grill, which
added approximately 275 restaurant locations with
exciting potential for global expansion;

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(cid:129) Commitment

to our people- Developing new
policies and implementing additional operational
safeguards to protect employee health and safety,
strengthening
increasing
from home
communication
environment to maintain employee morale; and

our
amidst

a work

culture

and

(cid:129) Community

Supporting

our
engagement-
to
communities by providing economic relief
restaurant employees who were adversely impacted
by the pandemic and launching our Unlocking
Opportunity
and
inclusion, education, and entrepreneurship.

to promote

Initiative

equity

The adjustment
to the team performance factor
resulted in a bonus significantly below the target
performance level
for each
intended to reward
it was
NEO. Nonetheless,
performance under unprecedented circumstances and

(a 100% bonus payout)

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EXECUTIVE COMPENSATION

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a rapid effective response to unforeseen events. This
adjustment in the team performance factor was also
the Company’s bonus-
extended equally to all of
eligible employees who did not otherwise earn a bonus
under the formula set by the Committee in January
2020. This group of bonus-eligible employees includes
a broad range of our employees, including those in
junior positions and extending up through senior
management. The Committee noted that year-over-

year-bonus payouts for these employees under the
YLB, including all the NEOs, were significantly lower
and that the Company elected not to award merit
salary increases for all employees for 2021. The
Company believes this was the right balance of
ensuring strong shareholder alignment and rewarding
employees fairly for results described above. The team
performance factor used for each NEO is more fully
described in the table below.

Detailed Breakdown of 2020 Team Performance

The team performance targets, actual results, weights
and overall performance for each measure for our
NEOs are outlined below. The long-term drivers of
value for YUM are profit growth, same-store sales
growth and new restaurant development. Accordingly,
prior to the onset of the COVID-19 pandemic, the
Committee approved these performance measures for
incentive plan and these
the Company’s annual

measures were included at both the corporate and
divisional levels. For Divisions, the team performances
were weighted 75% on Division operating measures
and
The
25% on YUM team performance.
Committee’s discretionary adjustments to the Team
Performance Factor component of our bonus formula
are also set forth below.

Team Performance

Earned Award
as % of Target Weighting

Earned
Team
Performance
Factor

Discretionary
Team
Performance
Factor

t
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NEO

Measures

Gibbs
Skeans
Turner

Core Operating Profit Growth1

System Same-Store Sales Growth

System Net New Units

FINAL YUM TEAM FACTOR

Lowings Core Operating Profit Growth1

System Same-Store Sales Growth

System Net New Units

Total Weighted Team
Performance — KFC 75%

Total Weighted Team
Performance — YUM 25%

FINAL KFC TEAM FACTOR

King

Core Operating Profit Growth1

System Same-Store Sales Growth

System Net New Units

Total Weighted Team
Performance — TB 75%

Total Weighted Team
Performance — YUM 25%

FINAL TACO BELL TEAM FACTOR

Target

Actual

$2,057MM
7.2%

$1,779MM
(7.2%)

2.6%

2,120

(6.2%)

183

$1,135MM
8.6%

$931MM
(10.8%)

3.0%

1,500

(8.6%)

896

50%

25%

50%

25%

$717MM
7.0%

$696MM
3.9%

3.25%

330

(0.7%)

50%

25%

(1) See pages 33 and 38 in Item 7 of YUM’s Form 10-K for the fiscal year ended on December 31, 2020 for a discussion of

Core Operating Profit in 2020. In this table, Core Operating Profit Growth excludes the impact of a 53rd week in 2019.

42 YUM! BRANDS, INC. - 2021 Proxy Statement

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Individual Performance

factor

individual
is
performance
Each NEO’s
the Committee based upon its
determined by
subjective determination of
the NEO’s individual
performance for the year, including consideration of
specific objective individual performance goals set at
The Committee’s
the beginning of
individual
to
determinations with
performance of our NEOs is set
forth below from
pages 44 to 48.

year.
respect

the

C. Long-Term Equity Performance-
Based Incentives

We provide performance-based long-term equity
compensation to our NEOs to encourage long-term
decision making that creates shareholder value. To
that end, we use equity vehicles that motivate and
balance the tradeoffs between short-term and long-
term performance. Performance-based long-term
equity compensation also serves as a retention tool.

Our NEOs are awarded long-term incentives annually
based on the Committee’s subjective assessment of
the following items for each NEO (without assigning
weight to any particular item):

(cid:129) Prior year individual and team performance

(cid:129) Expected contribution in future years

(cid:129) Consideration of

the
executive’s role compared with similar roles in
our Executive Peer Group

the market value of

(cid:129) Achievement of stock ownership guidelines

Equity Mix

Each year, the Committee reviews the mix of long-
term incentives. For 2020, the Committee continued to
choose SARs and PSU awards because these equity
vehicles focus and reward management for enhancing
thereby aligning our
long-term shareholder value,
NEOs with the interests of our shareholders.

At the beginning of 2020, the Committee determined a
target grant value for each NEO (based on time in role,
performance and market practice) and the split of that

EXECUTIVE COMPENSATION

value between SARs and PSU grants. For each NEO,
the target grant value was split 50% SARs and 50%
PSUs. For each NEO, the breakdown between SARs
award values and PSU award values can be found
under the Summary Compensation Table, page 55 at
columns e and f.

Stock Appreciation Rights Awards

The Committee believes that SARs reward long-term
value-creation generated from sustained results. They
are, therefore, strongly linked to and based on, the
performance of Yum common stock.
In 2020, we
granted to each of our NEOs SARs which have
ten-year terms and vest over four years. The exercise
price of each SAR award was based on the closing
market price of the underlying YUM common stock on
the date of grant. Therefore, SAR awards will only
have value if our NEOs are successful in increasing the
share price above the awards’ exercise price.

Performance Share Awards

supports

Pursuant to the Performance Share Plan under our
Long Term Incentive Plan (“LTIP”), we granted our
NEOs PSU awards in 2020. These PSU awards are
earned equally based on the Company’s 3-year
average TSR relative to the companies in the S&P 500
Consumer Discretionary Index and on compound
annual 3-year growth of the Company’s Earnings Per
Share (“EPS”). Incorporating TSR and EPS into the
the Company’s
annual PSU awards
pay-for-performance philosophy while diversifying
performance criteria by using measures not used in
the annual bonus plan and aligning our NEOs’ reward
If TSR is
with the creation of shareholder value.
negative, payouts may not exceed the target
irrespective of the actual TSR percentile ranking of the
threshold and maximum
Company. The target,
these
number of shares that may be paid under
awards for each NEO are described at page 57. The
Committee may, from time-to-time, grant PSU awards
to eligible employees to incentivize various strategic
initiatives, consistent with the terms of the LTIP.

P
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For the performance period covering 2020 – 2022, each NEO will earn a percentage of his or her target PSU
award, with 50% of the payout based on the achieved TSR percentile ranking and the other 50% based on EPS
growth. Indicative payouts as a percentage of target are as set forth in the table below:

TSR Percentile Ranking
Payout as % of Target
EPS Growth (3-year CAGR, ex foreign currency translation)

Payout as % of Target

Threshold Target Maximum

<30%
0%

<6%
0%

30%
35%

6%
35%

50%
100%

10%
100%

75%
200%

14%

200%

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EXECUTIVE COMPENSATION

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during

accrue

equivalents will

Dividend
the
performance period and will be distributed as
additional shares but only in the same proportion and
at the same time as the original awards are earned. If
no shares are earned, no dividend equivalents will be
paid. The awards are eligible for deferral under the
(“EID”)
Company’s
Program.

Income Deferral

Executive

In December 2020,
the Committee reviewed the
projected results of the PSU awards Mr. Gibbs and
Ms. Skeans received in 2018 (covering the 2018
through 2020 performance period). This award was
designed to be earned based on two metrics: (i) the
Company’s 3-year average TSR relative to the
companies in the S&P 500 Consumer Discretionary
Index and (ii) compound annual 3-year growth of the
Company’s EPS. For this performance period,
the
award provided that Mr. Gibbs and Ms. Skeans could
earn a percentage of their target PSU award, with
50% of
the payout based on the achieved TSR
percentile ranking and the other 50% based on EPS
growth. When reviewing performance for this award,
the Committee noted that despite strong performance
towards the performance targets prior to the onset of
the pandemic, which, as of December 31, 2019,
would have resulted in a payout at approximately 93%
for the EPS portion of the award, the impact of the
pandemic had so adversely affected the EPS metric
that the EPS portion of the award would pay out at
0%, as of year-end 2020.

t
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The Committee determined that Mr. Gibbs and
the
Ms. Skeans

compensated for

should be

to a price roughly equivalent

this was appropriate in order

pre-pandemic performance with respect to the EPS
metric of the award, given that the global disruption in
2020 could not have been reasonably accounted for
in 2018. The
when performance goals were set
Committee felt
to
recognize Mr. Gibbs’ and Ms. Skeans’ dynamic
the business through unprecedented
leadership of
turbulence, which was reflected in the Company’s
quick turnaround in performance, and to prevent
Mr. Gibbs and Ms. Skeans from being unfairly
penalized by the unanticipated impact of the pandemic
on the Company’s operating results. The Committee
also took into the consideration that the Company’s
stock price had rebounded from the lows of
the
to the
pandemic,
pre-pandemic trading price, which reduced negative
impact on shareholders. In addition to rewarding past
performance, the Committee further determined that
making a one-time award of Company common stock
would recognize Mr. Gibbs’ and Ms. Skeans’
leadership in a time of crisis (as reflected in the
detailed discussion of performance results under Team
also
Performance,
appropriately incentivizing their efforts to lead the
Company’s recovery and to be creative in navigating
an evolving landscape, which the Committee believed
would ultimately provide increased shareholder value.
The shares received by Mr. Gibbs and Ms. Skeans
were valued at $882,127 and $400,957, respectively
that would have been
(consistent with the payout
received had performance as of December 31, 2019
been maintained).

at page 40), while

above

III. 2020 Named Executive Officer Total Direct Compensation and

Performance Summary

Below is a summary of each of our NEOs’ total direct
compensation – which generally includes base salary,
annual cash bonus, and long-term incentive awards –
and an overview of their 2020 performance relative to
our annual and long-term incentive performance goals.

The process the Committee used to determine each
officer’s 2020 compensation is described more fully in
“How Compensation Decisions Are Made” beginning
on page 49.

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CEO Compensation

David Gibbs
Chief Executive Officer

2020 Performance Summary

Our Board, under the leadership of the Committee
Chair, approved Mr. Gibbs’ goals for his first year as
our Chief Executive Officer at the beginning of the year
and conducted a mid-year and year-end evaluation of
his performance. These evaluations included a review
of his leadership pertaining to the achievement of his
goals which included business results, leadership in
the development and implementation of Company
strategies, and development of Company culture and
talent. In addition, the Committee noted Mr. Gibbs’
leadership during a global pandemic that significantly
operations
and
impacted
worldwide.

restaurant

company

The Committee determined that Mr. Gibbs’ overall
performance for 2020 merited an individual factor of
130. This individual factor was combined with YUM’s
awarded team factor of 60 (discussed at page 40)
resulting in a below target annual cash bonus. This
determination was based on the Committee’s
subjective assessment of Mr. Gibbs’ performance
against his previously set goals which included the
following items and substantially reflect the impact of
to any
the pandemic (without assigning a weight
particular item):

(cid:129) Pivoting operations in the wake of operating
limitations (e.g., dining room closures)
to new
channels that enabled continued sales without
disruption (e.g., curbside pickup); produced record
digital sales of $17 billion, approximately a 45%
increase over the prior year;

(cid:129) Developing and implementing new policies and
protect

operational

safeguards

additional
employee health;

(cid:129) Avoiding potential disruptions in supply chain as a

result of COVID-19 global pandemic;

(cid:129) Mitigating significant permanent store-closure risks
arising from lockdowns and full or partial closures or
significant sales declines in various markets;

(cid:129) Supporting employees and communities in response
to the pandemic and social
justice movement by
taking actions to bring the Company’s Recipe for
Good to life;

EXECUTIVE COMPENSATION

(cid:129) Making significant investments in technologies and
new functions focused on analytics and innovation
through G&A reallocations;

(cid:129) Launching the Unlocking Opportunity

initiative
focused on equity and inclusion, education, and
entrepreneurship, supported by a $100 million
investment over five years; and

(cid:129) Developing leadership,

including development of
Tracy Skeans which led to her promotion to Chief
Operating Officer and Chief People Officer in early
2021, as well as
fostering customer-focused
employee culture.

2020 Committee Decisions

In January, Mr. Gibbs’ compensation was adjusted as
follows:

(cid:129) Base salary was increased to $1,200,000;

(cid:129) Annual cash bonus target percentage was increased

to 150% of base salary; and

(cid:129) Grant value of

long-term incentive equity awards
was increased to $7,000,000,
recognizing his
promotion into his new role and prior performance
as Chief Operating Officer and his impact on the
business.

These decisions positioned Mr. Gibbs’
target
direct compensation at between the 25th and 50th
percentiles of the Company’s Executive Peer Group
(defined at page 51).

total

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In March 2020, Mr. Gibbs voluntarily decided he would
forgo approximately $900,000 of his 2020 base salary
so that this amount could be used to fund one-time
bonuses for the Company’s nearly 1,200 restaurant
general managers across the businesses. His forgone
salary was also used to help fund the Yum Brands
Foundation’s Global Employee Medical Relief Fund,
which provided financial hardship grants to those
the COVID-19 pandemic,
directly
including
restaurant
and
employees. The forgone salary will not be excluded
from the calculation of Mr. Gibbs’ annual incentive for
2020 or in the overall calculation of his retirement
benefits.

impacted by
company

franchise

YUM! BRANDS, INC. - 2021 Proxy Statement 45

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EXECUTIVE COMPENSATION

The graphics below illustrate Mr. Gibbs’ direct compensation:

3%
Base

9%
Stock
award

14%
Bonus

38%
PSUs

36%
SARs

74%
Performance-based Compensation

Total: $9,853,523

y
t
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T
-
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l
a
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T

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t
a
s
n
e
p
m
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C
e
v
i
t
n
e
c
n

$3,764,303
PSUs

$3,500,016
SARs

T
o
t
a
l

A
n
n
u
a
l

C
o
m
p
e
n
s
a
t
i
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m
r
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T
t
r
o
h
S

l
a
t
o
T

n
o
i
t
a
s
n
e
p
m
o
C

$882,127
Stock Award

$1,404,000
Annual Bonus

Fixed

$303,077 Salary

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Other NEO 2020 Total Direct Compensation

Chris Turner
Chief Financial Officer

2020 Performance Summary

2020 Committee Decisions

that Mr.

determined

The Committee
Turner’s
performance merited a 140 individual performance
factor. The Committee recognized Mr. Turner’s
leadership in supporting the Company’s technology
teams in executing critical, rapid enhancements to the
customer experience during the pandemic and
enabling the Company to efficiently convert dine-in
sales to off-premises. He was also recognized for
leading a franchisee health initiative that supported
and for
franchisees
successfully managing the Company’s liquidity and
balance sheet strength throughout the pandemic. The
Committee
global
noted Mr.
responsibility for finance, corporate strategy, supply
chain and information technology. Mr. Turner’s
individual factor was combined with an awarded team
factor of 60 (discussed at page 40) to calculate his
annual cash bonus.

the pandemic

throughout

Turner’s

also

2019,

the Committee

In November
approved
adjustments to Mr. Turner’s compensation for 2020 to
reflect his performance and time in the role. The
adjustments are as follows:

(cid:129) Base salary was increased to $850,000;

(cid:129) Annual cash bonus target was increased to 100% of

base salary; and

(cid:129) Grant value of

long-term incentive equity awards
was increased to $2,000,000 to better align with
market compensation norms and internal peer
equity, as well as to reflect performance and his time
in role.

These adjustments positioned Mr. Turner’s 2020 total
direct compensation at between the 25th and 50th
percentiles of the Company’s Executive Peer Group
(defined at page 51) for his position.

46 YUM! BRANDS, INC. - 2021 Proxy Statement

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EXECUTIVE COMPENSATION

Tracy L. Skeans
Chief Operating Officer and Chief People Officer

2020 Performance Summary

2020 Committee Decisions

determined

The Committee
that Ms. Skeans’
performance merited a 140 individual performance
factor. The Committee recognized Ms. Skeans for
providing strategic leadership in the Company’s efforts
to create COVID-19 response policies and in executing
the roll-out of
upon those policies, as well as for
contactless delivery and contactless carryout across all
of the Company’s brands. She was also recognized for
her
leadership in the successfully integrating and
onboarding The Habit Burger Grill and for her efforts in
cultivating the Company’s culture and talent.

In recognition of Ms. Skeans’
increasing leadership
role within the Company and continued strong
performance, she was promoted to Chief Operating
Officer and Chief People Officer of
the Company,
effective January 29, 2021. She now has global
responsibility for leading cross-brand collaboration on
operational execution, people capability and customer
experience imperatives intended to fuel same-store
sales and net-new unit growth around the world. She
also oversees business transformation, operations,
food safety, human resources, equity and inclusion
and communications. Throughout 2020 she served as
the Company’s Chief Transformation and People
Officer. Ms. Skeans’ individual factor was combined
with an awarded team factor of 60 (discussed at
page 40) to calculate her annual cash bonus.

Mark King
Chief Executive Officer, Taco Bell Division

2019,

certain

the Committee

In November
approved
adjustments to Ms. Skeans’ compensation for 2020 to
non-traditional
reflect
responsibilities of her role, including oversight of the
Company’s food safety and communications teams,
as well as to reflect her performance and time in the
role. The adjustments are as follows:

additional

and

(cid:129) Base salary was increased to $750,000;

(cid:129) Annual cash bonus target increased to 90% of base

salary; and

(cid:129) Grant value of

long-term incentive equity awards

was increased to $1,600,000.

These decisions positioned Ms. Skeans’ total direct
compensation at between the 50th and 75th
percentiles of the Company’s Executive Peer Group
(defined at page 51) for her position, reflecting her time
in role and expanded responsibilities.

her

The Committee also approved a 2020 CEO Award
RSU grant with an economic value of $500,000,
recognizing
accelerating
leadership
diversity and inclusion initiatives, championing the use
of
and
developing and implementing talent and leadership
programs
and
best-in-class engagement scores.

around the globe,

repeatable models

that drove

attraction,

retention

for

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2020 Performance Summary

2020 Committee Decisions

that Mr.

The Committee

The Committee
King’s
determined
performance merited a 140 individual performance
factor.
recognized Mr. King’s
leadership in quickly pivoting the Taco Bell business
during the pandemic to accelerate the digital and
delivery business. He was also recognized for the
successful implementation of enhanced employee and
customer safety protocols across the business.
Mr. King’s individual factor was combined with a team
factor of 70 (discussed at page 40) to calculate his
annual cash bonus, a portion of which was earned
based on Taco Bell performance in the absence of
Committee discretion.

In January, Mr. King’s compensation was adjusted as
follows:

(cid:129) Base salary was increased to $925,000;

(cid:129) Annual cash bonus target remained at 100% of base

salary; and

(cid:129) Grant value of

long-term incentive equity awards
was set at $1,500,000 to align with market
compensation norms and internal peer equity, as
well as to reflect performance and his time in role.

Mr. King’s 2020 total direct compensation was between
the 50th and 75th percentiles of the Executive Peer
Group (defined at page 51) for his position.

YUM! BRANDS, INC. - 2021 Proxy Statement 47

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EXECUTIVE COMPENSATION

Tony Lowings
Chief Executive Officer, KFC Division

2020 Performance Summary

2020 Committee Decisions

The Committee determined that Mr.
Lowings’
performance merited a 125 individual performance
factor. The Committee recognized Mr. Lowings’
leadership in the pandemic, particularly
in the
acceleration of
restaurant efficiency, set-up and
agreed upon operating standards. He was also
recognized for KFC’s significant progress towards
digital and technology advancements. Mr. Lowings’
individual factor was combined with an awarded team
factor of 60 (discussed at page 40) to calculate his
annual cash bonus.

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IV. Retirement and Other Benefits

Retirement Benefits

We offer several
benefits.

types of competitive retirement

The YUM! Brands Retirement Plan (“Retirement Plan”)
is a broad-based qualified plan designed to provide a
retirement income based on years of service with the
Company and average annual earnings. The plan is
U.S.-based and was closed to new entrants in 2001.
Mr. Gibbs and Ms. Skeans are active participants in
the Retirement Plan.

For executives hired or re-hired after September 30,
the Company implemented the Leadership
2001,
Retirement Plan (“LRP”). This
is an unfunded,
unsecured account-based retirement plan which
allocates a percentage of pay to an account payable
to the executive following the executive’s separation of
employment from the Company. For 2020, Messrs.
Turner and King were eligible for the LRP. Under the
LRP, Messrs. Turner and King received an annual
allocation to their accounts equal to 4% of base salary

48 YUM! BRANDS, INC. - 2021 Proxy Statement

In January, Mr. Lowings’ compensation was adjusted
as follows:

(cid:129) Base salary was increased to $750,000;

(cid:129) Annual cash bonus target percentage increased to

100% of base salary; and

(cid:129) Grant value of

long-term incentive equity awards
was increased to $1,600,000 to better align with
market compensation norms and internal peer
equity, as well as to reflect performance and his time
in role.

These decisions positioned Mr. Lowings’ total direct
compensation at between the 25th and 50th
percentiles of the Executive Peer Group (defined at
page 51) for his position.

and target bonus, and will receive an annual earnings
credit that is equivalent to the Moody’s Aa Corporate
Bond Yield Average for maturities 20 years and above
(currently 2.47%) on the balance.

plan

retirement

account-based

The Company provides retirement benefits for certain
international employees through the Third Country
National Plan (“TCN”). The TCN is an unfunded,
that
unsecured
provides an annual contribution between 7.5% and
15% of salary and target bonus and an annual
earnings credit of 5% on the balance. The level of
contribution is based on the participants’ role and their
home country retirement plan. Mr. Lowings is the only
NEO who participates in the TCN. Under this plan,
Mr. Lowings receives an annual contribution equal to
15% of base salary and target bonus and an annual
earnings credit of 5%.

Benefits payable under these plans are described in
more detail beginning on page 61.

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EXECUTIVE COMPENSATION

Medical, Dental, Life Insurance and Disability Coverage

We also provide other benefits such as medical,
dental, life insurance and disability coverage to each
NEO through benefit plans, which are also provided to
all eligible U.S.-based salaried employees. Eligible
employees can purchase additional life, dependent life

Perquisites

executive

The Company provides very limited number of
perquisites to our NEOs. The CEO and his spouse
were required to use charter or approved commercial
aircraft for personal as well as business travel pursuant
to the Company’s
security program
established by the Board of Directors. Our program
provides that any costs for the CEO’s personal aircraft
use of above $300,000 will be reimbursed to the
Company in accordance with the requirements of the
Federal Aviation Administration regulations. We do not
provide tax gross-ups on the personal use of
the
charter or approved commercial aircraft. For 2020, the

and accidental death and dismemberment coverage
their employee benefits package. Our
as part of
broad-based employee disability plan limits the annual
benefit coverage to $300,000.

the pandemic in 2020,

incremental cost of Mr. Gibbs personal use of charter
or commercial aircraft was $230,030. Following the
the Committee
onset of
travel on
authorized the CEO to approve personal
Company-provided aircraft by the other NEOs,
in
their safety and
the importance of
recognition of
availability throughout
the pandemic. The personal
travel of the Non-CEO NEOs resulted in the following
incremental costs in 2020: $34,350 for Ms. Skeans
and $63,902 and $43,676 for Messrs. Turner and
King, respectively.

V. How Compensation Decisions Are Made

Shareholder Outreach, Engagement and 2020 Vote on NEO Compensation

favor

At our 2020 Annual Meeting of Shareholders, 88% of
votes cast on our annual advisory vote on NEO
compensation were
our NEOs’
compensation program, as disclosed in our 2020
proxy statement. During 2020, we continued our
shareholder outreach program to better understand
our investors’ opinions on our compensation practices
and respond to their questions. Committee members
and management team members from compensation,
investor relations and legal continued to be directly
involved in engagement efforts that served to reinforce
our open-door policy. The efforts included:

(cid:129) Contacting our largest 35 shareholders, representing

ownership of approximately 50% of our shares;

(cid:129) Dialogue with proxy advisory firms;

(cid:129) Investor road shows and conferences; and

(cid:129) Presenting shareholder feedback to the Committee.

annual

allow many
Our
shareholders the opportunity to provide feedback. The

engagement

efforts

Committee carefully considers shareholder and advisor
factors discussed in this
feedback, among other
compensation decisions.
CD&A,
in making its
including the 2020 voting
Shareholder
results on NEO compensation, has influenced and
reinforced a number of compensation design changes
over the years, including:

feedback,

(cid:129) Continued benchmarking of CEO compensation at

near market median;

(cid:129) Moved to two performance metrics under our annual

PSU awards (TSR and EPS); and

(cid:129) Changed PSU award metrics to include the
Company’s 3-year average TSR relative to the
companies in the S&P 500 Consumer Discretionary
Index, rather than the average relative to the entire
S&P 500.

The Company and the Committee appreciate the
feedback from our shareholders and plan to continue
these engagement efforts.

YUM! BRANDS, INC. - 2021 Proxy Statement 49

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EXECUTIVE COMPENSATION

Role of the Committee

Compensation decisions are ultimately made by the
Committee using its judgment, focusing primarily on
each NEO’s performance against his or her financial
and strategic objectives, qualitative factors and the
Company’s overall performance. The Committee
considers the target total direct compensation of each
NEO and retains discretion to make decisions that are

reflective of overall business performance and each
executive’s strategic contributions to the business. In
making its compensation decisions,
the Committee
typically follows the annual process described below,
but adds additional meetings when necessary in order
to address important business considerations, such as
the pandemic.

COMMITTEE ANNUAL COMPENSATION PROCESS

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Role of the Independent Consultant

The Committee’s charter states the Committee may
retain outside compensation consultants, lawyers or
other advisors. The Committee retains an independent
consultant, Meridian Compensation Partners, LLC
to advise it on certain compensation
(“Meridian”),
matters. The Committee has instructed Meridian that:

(cid:129) it is to act independently of management and at the

direction of the Committee;

(cid:129) it is to assist the Committee in its determination of
the annual compensation package for our CEO and
other NEOs.

The Committee considered the following factors,
in determining that Meridian is
among others,
independent of management and its provision of
services to the Committee did not give rise to a conflict
of interest:

(cid:129) its ongoing engagement will be determined by the

(cid:129) Meridian did not provide any services to the

Committee;

(cid:129) it is to inform the Committee of relevant trends and

regulatory developments;

(cid:129) it is to provide compensation comparisons based on
information that
is derived from comparable
businesses of a similar size to the Company for the
NEOs; and

Company unrelated to executive compensation;

(cid:129) Meridian has no business or personal relationship
with any member of the Committee or management;
and

(cid:129) Meridian’s partners and employees who provide
services to the Committee are prohibited from
owning YUM stock per Meridian’s firm policy.

50 YUM! BRANDS, INC. - 2021 Proxy Statement

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Comparator Compensation Data

Our Committee uses an evaluation of how our NEO
target direct compensation levels compare to
total
those of similarly situated executives at companies
that comprise our Executive Peer Group (defined
below) as one of
the factors in setting executive
compensation. The Executive Peer Group is made up
of retail, hospitality, food, nondurable consumer goods
service
eatery
companies,

and quick

specialty

EXECUTIVE COMPENSATION

restaurants, as these represent the sectors with which
the Company is most likely to compete for executive
talent. The companies selected from these sectors
must also be reflective of
the overall market
characteristics of our executive talent market, relative
leadership position in their sector, size as measured by
revenues, complexity of their business, and in many
cases global reach.

Executive Peer Group

The Committee periodically reviews the peer group to ensure it reflects desired comparisons and appropriate size
range. In August 2019, the Committee approved the peer group to be used for NEO pay determinations beginning
in 2020 (the “Executive Peer Group”). The updates to the Executive Peer Group were made to better align the size
of the peer group companies with YUM and include companies in relevant industry sectors. Many of these
companies have a global reach and multiple brands. The Executive Peer Group used for 2020 pay determinations
for all NEOs (including those made in November 2019 for Messrs. Gibbs and Turner and Ms. Skeans) is comprised
of the following companies:

Chipotle Mexican Grill, Inc. Gap, Inc.

Keurig Dr Pepper

McDonald’s Corporation

Starbucks Corporation

Colgate-Palmolive Company General Mills, Inc.

Kimberly-Clark Corp.

Mondelez Int’l., Inc.

V.F. Corp.

Darden Restaurants, Inc.

Hertz Global Holdings, Inc.

L Brands, Inc.

Ralph Lauren Corporation

Wyndham Worldwide, Inc.

Domino’s Pizza, Inc.

Hilton Worldwide Holdings

Lululemon Athletica

Estée Lauder Cos, Inc.

Kellogg Company

Marriott Int’l., Inc.

Restaurant Brands
International Inc.

The Sherwin-Williams
Company

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At the time the benchmarking analysis was prepared in
August 2019,
the Executive Peer Group’s median
revenues were $13.2 billion, while YUM
annual
equivalent
estimated at
$13.8 billion (calculated as described below).

revenues were

annual

size

responsibilities

franchise
For companies with significant and global
complex.
can
operations, measuring
responsibilities encompass more than
Management
just the revenues and operations directly owned and
operated by the company and include responsibilities
for managing relationships with franchisees and
developing and implementing global growth strategies.
and
Specific
implementing product
introductions, and product
specifications and supply, management of vendors,
and
marketing,
risk
implementations,
including setting and monitoring food
management,
safety
the Company’s
trademarks and other intellectual property, new unit
development, and customer satisfaction and overall
operations improvements across the entire franchise

standards, protection of

innovations
collections,

include managing

technological

payment

system. As a result of accelerating growth in recent
years,
the Company’s leadership now oversees
approximately 290 brand-country combinations and
approximately 2,000 franchisees. To appropriately
reflect this complexity in calibrating the size of our
organization and underlying operating divisions during
the 2019 benchmarking process, our philosophy was
to add 25% of franchisee and licensee sales to the
to establish an
GAAP-reported Company
appropriate revenue benchmark. The reason for this
approach was twofold:

sales

(cid:129) Market-competitive compensation opportunities are
related to scope of responsibility, often measured by
company size, i.e., revenues; and

(cid:129) Scope of responsibility for a franchising organization
lies between corporate-reported revenues and
system-wide sales.

approach to calibrating market

We believe this approach is measured and reasoned in
competitive
its
using
compensation
organizations unduly larger than the Company.

opportunities

without

YUM! BRANDS, INC. - 2021 Proxy Statement 51

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Competitive Positioning and Setting Compensation

At the beginning of 2020, the Committee considered
Executive Peer Group compensation data as a frame
of reference for establishing compensation targets for
base salary, annual bonus and long-term incentives for
each NEO.
In making compensation decisions, the
Committee considers market data for comparable
positions to each of our NEO roles. The Committee
reviews market data and makes a decision for each

NEO, most often in a range around market median for
each element of compensation, including base salary,
target bonus and long-term incentive target.
In
addition to the market data, the Committee takes into
account the role,
level of responsibility, experience,
individual performance and potential of each NEO. The
Committee reviews the NEOs’ compensation and
performance annually.

VI. Compensation Policies and Practices

Below are compensation and governance best practices we employ that provide a foundation for our
pay-for-performance program and align our program with Company and shareholder interests.

We Don’t Do

Employment agreements

Re-pricing of SARs

Grants of SARs with exercise price less than fair market
value of common stock on date of grant

Permit executives to hedge or pledge Company stock

Payment of dividends or dividend equivalents on PSUs
unless or until they vest

Excise tax gross-ups upon change in control

Excessive executive perquisites, such as country club
memberships

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✗

We Do

✓

Have an independent compensation committee
(Management Planning & Development Committee),
which oversees the Company’s compensation policies
and strategic direction

Directly link Company performance to pay outcomes

Have executive ownership guidelines that are reviewed
annually against Company guidelines

Have a “clawback” policy under which the Company
may recoup compensation if executive’s conduct
results in significant financial or reputational harm to
Company

✓ Make a substantial portion of NEO target pay “at risk”

✓

Have double-trigger vesting of equity awards upon a
change in control

Utilize an independent Compensation Consultant

Incorporate comprehensive risk mitigation into plan
design

Periodically review our Executive Peer Group to align
appropriately with Company size and complexity

Evaluate CEO and executive succession plans

Conduct annual shareholder engagement program to
obtain feedback from shareholders for consideration in
annual compensation program design

YUM’s Executive Stock Ownership Guidelines

The Committee has established stock ownership guidelines for approximately 200 of our senior employees,
including the NEOs. If a NEO or other executive does not meet his or her ownership guidelines, he or she is not
eligible for a long-term equity incentive award. In 2020, all NEOs subject to guidelines met or exceeded their
ownership guidelines.

52 YUM! BRANDS, INC. - 2021 Proxy Statement

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EXECUTIVE COMPENSATION

NEO

Gibbs

Turner(3)

Skeans

King(3)

Lowings

Ownership Guidelines

Shares Owned(1)

Value of Shares(2) Multiple of Salary

7x base salary

3x base salary

2x base salary

3x base salary

341,216

3,911

58,967

4,776

148,691

$37,042,409

424,578

$ 6,401,458

518,483

$16,141,895

30.9

0.5

8.5

0.6

21.5

(1) Calculated as of December 31, 2020 and represents shares beneficially owned outright, shares underlying vested

in-the-money SARs, and all RSUs awarded under the Company’s EID Program.

(2) Based on YUM closing stock price of $108.56 as of December 31, 2020.
(3) Messrs. Turner and King both joined the Company in 2019 and have up to five years to reach the target levels of ownership

set forth in our Ownership Guidelines.

Payments upon Termination of Employment

The Company does not have agreements with its
executives concerning payments upon termination of
employment except in the case of a change in control
of the Company. The Committee believes these are
appropriate agreements for retaining NEOs and other
executive officers to preserve shareholder value in
case of a potential change in control. The Committee
periodically reviews these agreements and other
aspects of the Company’s change-in-control program.

equity

amount will be paid, but
the NEO will be solely
responsible for any potential excise tax payment. Also,
the Company has implemented “double trigger”
vesting for
to which
outstanding awards will fully and immediately vest only
if the executive is employed on the date of a change in
control of the Company and is involuntarily terminated
(other than by the Company for cause) on or within
two years following the change in control.

awards, pursuant

The Company’s change-in-control agreements,
in
general, entitle executives who are direct reports to
our CEO and are terminated other than for cause
within two years of the change in control, to receive a
benefit of two times salary and bonus. The terms of
these change-in-control agreements are described
beginning on page 67.

retirement,

the Company provides
In case of
retirement benefits described above,
life insurance
benefits (to employees eligible under the Retirement
Plan), the continued ability to exercise vested SARs
and to vest in SARs granted at least one year prior to
retirement, and the ability to vest in performance share
awards on a pro-rata basis.

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The Company does not provide tax gross-ups for
executives, including the NEOs, for any excise tax due
under Section 4999 of the Internal Revenue Code and
has implemented a “best net after-tax” approach to
address any potential excise tax
imposed on
executives. If any excise tax is due, the Company will
not make a gross-up payment, but instead will reduce
payments to an executive if the reduction will provide
the NEO the best net after-tax result. If full payment to
a NEO will result in the best net after-tax result, the full

YUM’s SARs Granting Practices

the

overall

policy,

compensation

With respect to consideration of how these benefits fit
into
the
change-in-control benefits are reviewed from time to
for
time by the Committee (most recently in 2020)
competitiveness. The Committee believes the benefits
provided in case of a change in control are
appropriate, support shareholder
interests and are
consistent with the policy of attracting and retaining
highly qualified employees.

Historically, we have made SARs grants annually at
the Committee’s January meeting. This meeting date
is set by the Board of Directors more than six months
prior to the actual meeting. The Committee sets the
annual grant date as the second business day after
our fourth quarter earnings release. The exercise price
of these awards is set as the closing price on the date
of grants. We make grants at the same time other

elements of annual compensation are determined so
that we can consider all elements of compensation in
making the grants. We do not backdate or make
grants retroactively. In addition, we do not time such
grants in coordination with our possession or release
of material, non-public or other information. All equity
awards are granted under our shareholder approved
LTIP.

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ˆ200197gNZux4YdYMDŠ
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Grants may also be made on other dates the Board of
Directors meets. These grants generally are CEO
Awards, which are awards to individual employees
in recognition of
(subject
superlative performance and extraordinary impact on
business results.

to Committee approval)

recommends the awards be made
Management
pursuant to our LTIP to the Committee, however, the
Committee determines whether and to whom it will

issue grants and determines the amount of the grant.
The Board of Directors has delegated to our CEO and
our Chief People Officer, the ability to make grants to
employees who are not executive officers and whose
grant
is less than approximately 30,000 SARs
annually. In the case of these grants, the Committee
sets all the terms of each award, except the actual
number of SARs, which is determined by our CEO and
our Chief People Officer pursuant
to guidelines
approved by the Committee in January of each year.

Limits on Future Severance Agreement Policy

The Committee has adopted a policy to limit future
severance agreements with our NEOs and our other
executives. The policy requires the Company to seek
shareholder approval for future severance payments to
a NEO if such payments would exceed 2.99 times the
sum of (a) the NEO’s annual base salary as in effect
immediately prior to termination of employment; and
(b) the highest annual bonus awarded to the NEO by
the Company in any of the Company’s three full fiscal

years immediately preceding the fiscal year in which
termination of employment occurs or,
if higher, the
executive’s target bonus. Certain types of payments
are excluded from this policy, such as amounts
payable under arrangements that apply to classes of
employees other than the NEOs or that predate the
implementation of the policy, as well as any payment
the Committee determines is a reasonable settlement
of a claim that could be made by the NEO.

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Compensation Recovery Policy

Pursuant to the Company’s Compensation Recovery
Policy (i.e., “clawback”), the Committee may require
executive officers (including the NEOs)
to return
compensation paid or may cancel any award or
bonuses not yet vested or earned if the executive
officers engaged in misconduct or
violation of
Company policy that resulted in significant financial or
reputational harm or violation of Company policy, or

Hedging and Pledging of Company Stock

Under our Code of Conduct, no employee or director
is permitted to engage in securities transactions that
would allow them either to insulate themselves from,
or profit from, a decline in the Company stock price.
Similarly, no employee or director may enter
into
hedging transactions in the Company’s stock. Such

incentive compensation. Under

inaccurate metrics in the
contributed to the use of
calculation of
this
policy, when the Board determines that recovery of
compensation is appropriate,
the Company could
require repayment of all or a portion of any bonus,
incentive payment, equity-based award or other
compensation, and cancellation of an award or bonus
to the fullest extent permitted by law.

transactions include (without limitation) short sales as
well as any hedging transactions
in derivative
securities (e.g. puts, calls, swaps, or collars) or other
speculative transactions related to YUM’s stock.
Pledging of Company stock is also prohibited.

Management Planning and Development Committee Report

The Management
and Development
Planning
Committee of the Board of Directors reports that it has
reviewed and discussed with management the section
of
“Compensation
Discussion and Analysis” and, on the basis of that

statement

proxy

titled

this

review and discussion, recommended to the Board
that the section be incorporated by reference into the
Company’s Annual Report on Form 10-K and included
in this proxy statement.

THE MANAGEMENT PLANNING AND DEVELOPMENT COMMITTEE

Christopher M. Connor, Chair
Keith Barr
Brian C. Cornell
Mirian M. Graddick-Weir
Thomas C. Nelson

54 YUM! BRANDS, INC. - 2021 Proxy Statement

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

VDI-W7-PF10-026
14.4.13.0

ADG kirkw0ca
CLE

ˆ200197gNZxbqgM8M8Š
14*
2C

39521 TX 55
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PS

200197gNZxbqgM8M8

CLN

26-Mar-2021 23:46 EST

EXECUTIVE COMPENSATION

The following tables provide information on the compensation of the Named Executive Officers (“NEOs”) for our
2020 fiscal year. The Company’s NEOs are our Chief Executive Officer, Chief Financial Officer and our three other
most highly compensated executive officers for our 2020 fiscal year, determined in accordance with SEC rules.

Summary Compensation Table

Year
(b)

Salary
($)(1)
(c)

Bonus
($)(2)
(d)

Stock
Awards
($)(3)
(e)

Option/
SAR
Awards
($)(4)
(f)

Non-Equity
Incentive Plan
Compensation
($)(5)
(g)

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(6)
(h)

All Other
Compensation
($)(7)
(i)

Total
($)

2020 303,077 1,404,000 4,646,430 3,500,016
— 7,393,577 2,225,003
2019 984,615
— 1,375,001 1,375,009
2018 890,769

2020 848,077
2019 283,846

714,000 1,075,610 1,000,015
—
500,000 1,500,009

2020 749,731
2019 708,846
2018 664,231

567,000 1,761,429

800,001
— 1,075,731 1,000,017
— 625,015 1,625,010

—
2,399,800
1,467,113

—
463,021

—
1,165,057
824,766

4,517,703
3,988,755
1,870,004

404
—

1,852,419
1,433,369
325,022

260,225 14,631,451
151,402 17,143,152
19,101 6,996,997

167,796 3,805,902
54,290 2,801,166

42,396 5,772,976
51,529 5,434,549
8,665 4,072,709

2020 921,154 1,134,550
2019 370,385

806,652
500,000 2,500,015

750,011
—

271,950
591,189

466
—

134,567 4,019,350
33,021 3,994,610

2020 753,846
2019 699,789

562,500

860,421

800,001
— 806,874 1,750,030

—
1,464,120

23,908
11,975

578,915 3,579,591
262,690 4,995,478

P
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Name and
Principal Position
(a)

David W. Gibbs
Chief Executive
Officer of YUM

Chris Turner(8)

Chief Financial
Officer of YUM
Tracy L. Skeans
Chief Operating
Officer and Chief
People Officer of YUM

Mark King(8)

Chief Executive
Officer of
Taco Bell Division

Tony Lowings(8)
Chief Executive
Officer of
KFC Division

(1) Amounts shown are not reduced to reflect the NEOs’ elections, if any, to defer receipt of salary into the Executive Income

Deferral (“EID”) Program or into the Company’s 401(k) Plan.

(2) Amounts in this column for 2020 represent amounts paid to our NEOs under the Yum Leaders’ Bonus Program as a result
of discretionary adjustments to the team performance factor, which are described further in our Compensation Discussion
and Analysis (“CD&A”) at page 35.

(3) For Messrs. Turner, King and Lowings, amounts shown in this column represent the grant date fair values for performance
share units (PSUs) granted in 2020, 2019 and/or 2018. For Mr. Gibbs and Ms. Skeans, amounts in this column represent
the grant date fair values for performance share units (PSUs) granted in 2020, 2019 and 2018 and a discretionary stock
award paid in December 2020, which is described further in CD&A at page 44. Further information regarding the 2020
awards is included in the “Grants of Plan-Based Awards” and “Outstanding Equity Awards at Year-End” tables later in this
proxy statement. The grant date fair value of the PSUs reflected in this column is the target payout based on the probable
outcome of the performance condition, determined as of the grant date. The maximum potential values of the February 2020
PSUs is 200% of target. For 2020, Mr. Gibbs’ PSU maximum value at grant date fair value would be $7,528,606;
Mr. Turner’s’ PSU maximum value would be $2,151,220; Ms. Skeans’’ PSU maximum value would be $1,720,842;
Mr. King’s’ PSU maximum value would be $1,613,304 and Mr. Lowings’ PSU maximum value would be $1,720,842. For
Ms. Skeans, this amount also includes the February 2020 CEO RSU award with a grant date fair value of $500,051.

(4) The amounts shown in this column represent the grant date fair values of the stock appreciation rights (SARs) awarded in
2020, 2019 and 2018, respectively. For a discussion of the assumptions and methodologies used to value the awards
reported in column (e) and column (f), please see the discussion of stock awards and option awards contained at Note 15 to
the Consolidated Financial Statements in Item 8 of YUM’s Form 10-K for the fiscal year ended December 31, 2020. See the
Grants of Plan-Based Awards table for details.

(5) Amounts in this column reflect the annual

incentive awards earned for the 2020, 2019 and 2018 fiscal year performance
periods, which were awarded by our Management Planning and Development Committee (“Committee”) in January 2021,
January 2020 and January 2019, respectively, under the Yum Leaders’ Bonus Program, which is described further in our
CD&A beginning at page 35 under the heading “Annual Performance-Based Cash Bonuses”.

YUM! BRANDS, INC. - 2021 Proxy Statement 55

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

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CLE

EXECUTIVE COMPENSATION

ˆ200197gNZxbqwNbMTŠ
9*
2C

39521 TX 56
PMT
PS

200197gNZxbqwNbMT

CLN

26-Mar-2021 23:46 EST

(6) Amounts in this column represent for Mr. Gibbs and Ms. Skeans the amounts of aggregate change in actuarial present
values of their accrued benefits under all actuarial pension plans (using interest rate and mortality assumptions consistent
with those used in the Company’s financial statements). For Mr. Gibbs and Ms. Skeans, the actuarial present value of their
benefits under the pension plan increased $270,282 and $196,918, respectively, during the 2020 fiscal year. In addition, for
Mr. Gibbs and Ms. Skeans, the actuarial present value of their benefits under the Yum! Brands Pension Equalization Plan
(“PEP”) increased $4,247,421 and $1,655,501 respectively, during the 2020 fiscal year. For Mr. Lowings, amounts in this
column represent the above market earnings as established pursuant to SEC rules which have accrued to his account under
the Third Country National Plan (“TCN”) which is described in more detail beginning at page 63 under the heading
“Nonqualified Deferred Compensation”. For Messrs. Turner and King, amounts in this column represent the above market
earnings as established pursuant to SEC rules which have accrued to his account under the Leadership Retirement Plan
(“LRP”) which is described in more detail beginning at page 63 under the heading “Nonqualified Deferred Compensation”.
Messrs. Turner and King were hired after September 30, 2001, and are ineligible for the Company’s actuarial pension plans.
Mr. Lowings worked outside of the United States prior to September 30, 2001 and is ineligible for the Company’s actuarial
pension plans. See the Pension Benefits Table at page 61 for a detailed discussion of the Company’s pension benefits.

(7) Amounts in this column are explained in the All Other Compensation Table and footnotes to that table, which follows.
(8) Messrs. Turner, Lowings and King became NEOs in 2019. No amounts are reported for them for 2018 since they were not

NEOs for those years.

All Other Compensation Table

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The following table contains a breakdown of
Compensation in the Summary Compensation Table above for 2020.

the compensation and benefits included under All Other

Name
(a)
Gibbs
Turner
Skeans
King
Lowings

Perquisites and
other personal
benefits
($)(1)
(b)
242,910
96,320
38,454
44,073
334,574

Tax
Reimbursements
($)
(c)
—
—
—
—
—

Insurance
premiums
($)(2)
(d)
17,315
3,476
3,942
16,494
12,535

LRP/TCN
Contributions
($)(3)
(e)
—
68,000
—
74,000
230,288

Total
Other
($)
($)
(g)
(f)
— 260,225
— 167,796
— 42,396
— 134,567
578,915

1,518

(1) Amounts in this column include executive physical examinations and charitable matching gifts. For Messrs. Gibbs, Turner,
King and Ms. Skeans, amount in this column also includes personal use of charter and commercial aircraft. None of the
amounts in this column individually exceeded the greater of $25,000 or 10% of the total amount of these perquisites and
other personal benefits shown in this column for each NEO, except with respect to the cost of personal use of charter and
commercial aircraft by Mr. Gibbs ($213,566), Mr. Turner ($63,902), Ms. Skeans ($28,033) and Mr. King ($43,381) and a
charitable matching gift by Mr. Turner ($30,000). Ms. Skeans’ and Messrs. Turner’s and King’s personal use of charter
aircraft was approved by Mr. Gibbs and was necessitated by travel safety considerations brought on by the onset of the
COVID-19 pandemic. For Mr. Lowings these amounts include a mobility premium ($247,321), and expenses incurred on
account of his relocation to his home country and home country leave ($76,812).

(2) These amounts reflect the income each executive was deemed to receive from IRS tables related to Company-provided life
insurance in excess of $50,000. The Company provides every salaried employee with life insurance coverage up to one
times the employee’s base salary plus target bonus.

(3) For Messrs. Turner and King, this column represents the Company’s annual allocations to the LRP, an unfunded, unsecured
account based retirement plan. For Mr. Lowings, this column represents the Company’s annual allocation to the TCN, an
unfunded, unsecured account based retirement plan.

56 YUM! BRANDS, INC. - 2021 Proxy Statement

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

VDI-W7-PF10-026
14.4.13.0

ADG kirkw0ca
CLE

ˆ200197gNZxbr7=9tAŠ
8*
2C

39521 TX 57
PMT
PS

200197gNZxbr7=9tA

CLN

26-Mar-2021 23:47 EST

EXECUTIVE COMPENSATION

Grants of Plan-Based Awards

The following table provides information on SARs, RSUs, PSUs and other equity awards granted in 2020 to each of
the Company’s NEOs. The full grant date fair value of these awards is shown in the Summary Compensation Table
at page 55.

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)

Estimated Future Payouts
Under Equity Incentive Plan
Awards(2)

Grant
Date
(b)

Threshold
($)
(c)

Target
($)
(d)

Maximum
($)
(e)

Threshold
(#)
(f)

Target
(#)
(g)

Maximum
(#)
(h)

All Other
Stock
Awards:
Number
of Shares
of Stock
Units
(#)(3)
(i)

All Other
Option/
SAR
Awards;
Number of
Securities
Underlying
Options
(#)(4)
(j)

Exercise
or Base
Price of
Option/
SAR
Awards
($/Sh)(5)
(k)

Grant
Date Fair
Value
($)(6)
(l)

2/10/2020
2/10/2020
2/10/2020
2/10/2020
12/15/2020

2/10/2020
2/10/2020
2/10/2020
2/10/2020

2/10/2020
2/10/2020
2/10/2020
2/10/2020
2/10/2020
12/15/2020
2/10/2020
2/10/2020
2/10/2020

2/10/2020
2/10/2020
2/10/2020
2/10/2020

0 1,800,000 5,400,000

850,000 2,550,000

— 17,012
— 17,012

34,024
34,024

4,861
4,861

9,722
9,722

675,000 2,025,000

—

925,000 2,775,000

750,000 2,250,000

— 3,889
— 3,889

7,777
7,777

3,646
3,646

7,291
7,291

3,889
— 3,889

7,777
7,777

8,215

4,861

3,734

189,600

54,172

43,337

40,629

43,337

102.87 3,500,016
102.87 1,750,024
102.87 2,014,278
882,127
107.38

102.87 1,000,015
500,051
102.87
575,559
102.87

102.87
102.87
102.87
102.87
107.38
102.87
102.87
102.87

800,001
500,051
400,010
460,412
400,957
750,011
375,013
431,639

102.87
102.87
102.87

800,001
400,010
460,412

P
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S
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Name
(a)
Gibbs

Turner

Skeans

King

Lowings

(1) Amounts in columns (c), (d) and (e) provide the minimum amount, target amount and maximum amount payable as annual
incentive compensation under the Yum Leaders’ Bonus Program based on the Company’s performance and on each
executive’s individual performance during 2020. The actual amount of annual
incentive compensation awards earned are
shown in column (g) of the Summary Compensation Table on page 55. The performance measurements, performance
targets, and target bonus percentages are described in the CD&A beginning on page 35 under the discussion of annual
incentive compensation.

(2) Reflects grants of PSU awards subject to performance-based vesting conditions in 2020. The PSU awards granted
February 10, 2020 vest on December 31, 2022 and PSU award payouts are weighted 50% on the Company’s achievement
of specified relative total shareholder return (“TSR”) rankings against the S&P 500 Consumer Discretionary Index and 50% on
the Company’s Earnings Per Share (“EPS”) during the performance period ending on
compound annual growth of
December 31, 2022. With respect to the 50% weighted on a TSR percentile ranking for the Company, payouts are
determined by comparing the Company’s relative TSR ranking against the S&P 500 Consumer Discretionary Index as
measured at the end of the performance period; if a 50% TSR percentile ranking target is achieved, this factor would provide
for 100% weighting for the PSU payout with respect to this factor; if less than 30% TSR percentile ranking is achieved, this
factor would provide for 0% weighting for the PSU payout with respect to this factor; if the Company’s TSR percentile ranking
is 75% or higher, it would provide for 200% of target weighting for the PSU payout with respect to this factor. With respect to
the 50% weighted on the compound annual growth of the Company’s EPS measured at the end of the performance period, if
EPS growth of 10% is achieved, this factor would provide for 100% weighting for the PSU payout with respect to this factor; if
less than 6% EPS growth is achieved, this factor would provide for 0% weighting for the PSU payout with respect to this
factor; if Company EPS growth of 14% or higher is achieved, it would provide for weighting of 200% of target for the PSU
payout with respect to this factor. The terms of the PSU awards provide that in case of a change in control during the first

YUM! BRANDS, INC. - 2021 Proxy Statement 57

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

PA8710AM100350
14.4.13.0

ADG camep0sw
CLE

EXECUTIVE COMPENSATION

ˆ200197gNZxboa1SMFŠ
6*
2C

39521 TX 58
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26-Mar-2021 23:45 EST

year of the award, shares will be distributed assuming target performance was achieved subject to reduction to reflect the
portion of the performance period following the change in control. In case of a change in control after the first year of the
award, shares will be distributed assuming performance at the greater of target level or projected level at the time of the
change in control subject to reduction to reflect the portion of the performance period following the change in control.

(3) For Ms. Skeans amounts in this column reflect an immediately vested discretionary stock award paid in December 2020,
which is described further in the CD&A at page 44 and a CEO Award RSU grant ($500,051) which becomes 100% vested
on the fourth anniversary of
the grant date. For Mr. Gibbs, amounts in this column reflect an immediately vested
discretionary stock award paid in December 2020, which is described further in the CD&A at page 44.

(4) Amounts in this column reflect the number of SARs granted to executives during the Company’s 2020 fiscal year. SARs
allow the grantee to receive the number of shares of YUM common stock that is equal in value to the appreciation in YUM
common stock with respect to the number of SARs granted from the date of grant to the date of exercise. For each
executive, grants were made on February 10, 2020. These SAR grants become exercisable in equal installments on the first,
second, third and fourth anniversaries of the grant date. The terms of each SAR grant provide that, in case of a change in
control, if an executive is employed on the date of a change in control and is involuntarily terminated on or within two years
following the change in control (other than by the Company for cause) then all outstanding awards become exercisable
immediately. Executives who have attained age 55 with 10 years of service who retire at least one year following the grant
date will continue to vest following retirement through the fourth anniversary of the grant date. The SARs that vest in
retirement must be exercised before the earlier of (i) the five year anniversary of the executive’s retirement or (ii) the expiration
dates of the SARs (generally 10 years from the grant date). Unvested SARs of executives who die will immediately vest and
may be exercised by the executive’s beneficiary before the earlier of (i) the five year anniversary of the executive’s death or
(ii) the expiration dates of the SARs (generally 10 years from the grant date). If an executive’s employment is terminated due
to gross misconduct, the entire award is forfeited. For other employment terminations, all vested or previously exercisable
SARs as of the last day of employment must be exercised within 90 days following termination of employment.
(5) The exercise price of the SARs granted in 2020 equals the closing price of YUM common stock on their grant date.
(6) Amounts in this column reflect the full grant date fair value of the PSU awards shown in column (g) and the SARs shown in
column (j). The grant date fair value is the amount that the Company is expensing in its financial statements over the award’s
vesting schedule. The fair values of PSU awards without market-based conditions are based on the closing price of our
Common Stock on the date of grant. The fair values of PSU awards with market-based conditions have been valued based
on the outcome of a Monte Carlo simulation. For SARs, fair value of $18.46 was calculated using the Black-Scholes method
on the grant date. For additional information regarding valuation assumptions of SARs, see the discussion of stock awards
and option awards contained at Note 16 to the Consolidated Financial Statements in Item 8 of YUM’s Form 10-K for the
fiscal year ended December 31, 2020.

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58 YUM! BRANDS, INC. - 2021 Proxy Statement

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

VDI-W7-PF3-0933
14.4.13.0

ADG manam0sl
CLE

ˆ200197gNZwq&FZ3MzŠ
6*
2C

39521 TX 59
PMT
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EXECUTIVE COMPENSATION

Outstanding Equity Awards at Year-End

The following table shows the number of shares covered by exercisable and unexercisable SARs, and unvested
RSUs and PSUs held by the Company’s NEOs on December 31, 2020.

Option/SAR Awards(1)

Stock Awards

Name
(a)
Gibbs

Grant
Date
(b)
2/4/2011*
2/8/2012*
2/6/2013*
2/6/2013*
2/5/2014*
2/5/2014*
2/6/2015*
2/5/2016*
5/20/2016*
2/10/2017*
2/12/2018*
2/11/2019*
2/10/2020*
2/8/2012**
2/6/2013**
2/6/2013**
2/5/2014**
2/5/2014**
2/6/2015**
2/5/2016**
5/20/2016**

Number of
Securities
Underlying
Unexercised
Options/
SARs (#)
Exercisable
(c)
3,768
24,501
37,398
37,398
40,718
33,932
61,968
77,878
31,838
58,098
41,921
27,994

24,531
37,408
37,408
40,783
33,986
61,988
77,956
31,871

5,647
5,769
6,786
8,455
20,283
10,134
15,652
11,204
—
10,703
—
2,557
13,288

Number of
Securities
Option/
Underlying
Option/
SAR
Unexercised
SAR
Exercise
Options/
Expiration
Price
SARs (#)
Date
($)
Unexercisable
(f)
(d)
(e)
2/4/2021
— $ 35.10
2/8/2022
— $ 45.88
2/6/2023
— $ 44.81
2/6/2023
— $ 44.81
2/5/2024
— $ 50.22
2/5/2024
— $ 50.22
2/6/2025
— $ 52.64
— $ 49.66
2/5/2026
— $ 56.67 5/20/2026
19,367(i) $ 68.00 2/10/2027
41,921(ii) $ 78.07 2/12/2028
83,984(iii) $ 93.26 2/11/2029
189,600(iv) $ 102.87 2/10/2030
2/8/2022
— $ 19.46
2/6/2023
— $ 19.00
2/6/2023
— $ 19.00
2/5/2024
— $ 21.30
2/5/2024
— $ 21.30
2/6/2025
— $ 22.32
— $ 21.06
2/5/2026
— $ 24.03 5/20/2026

54,172(iv) $ 102.87 2/10/2030

— $ 44.81
— $ 50.22
— $ 50.22
— $ 52.64
— $ 49.66
— $ 49.66

2/6/2023
2/5/2024
2/5/2024
2/6/2025
2/5/2026
2/5/2026
6,900(i) $ 68.00 2/10/2027
15,456(ii) $ 78.07 2/12/2028
51,106(v) $ 78.07 2/12/2028
35,713(iii) $ 93.26 2/11/2029
43,337(iv) $ 102.87 2/10/2030
2/5/2026
2/5/2026

— $ 21.06
— $ 21.06

Turner

2/10/2020*

Skeans

2/6/2013*
2/5/2014*
2/5/2014*
2/6/2015*
2/5/2016*
2/5/2016*
2/10/2017*
2/12/2018*
2/12/2018*
2/11/2019*
2/10/2020*
2/5/2016**
2/5/2016**

King

2/10/2020*

—

40,629(iv) $ 102.87 2/10/2030

Lowings

2/8/2012*
2/6/2013*
2/5/2014*
2/5/2014*
2/6/2015*
2/6/2015*
2/5/2016*
2/10/2017*
2/12/2018*
2/11/2019*
2/11/2019*
2/10/2020*

20,935
15,978
19,329
19,329
19,264
19,264
34,288
23,163
12,099
9,436
—
—

— $ 45.88
— $ 44.81
— $ 50.22
— $ 50.22
— $ 52.64
— $ 52.64
— $ 49.66

2/8/2022
2/6/2023
2/5/2024
2/5/2024
2/6/2025
2/6/2025
2/5/2026
7,721(i) $ 68.00 2/10/2027
12,100(ii) $ 78.07 2/12/2028
28,310(iii) $ 93.26 2/11/2029
50,328(vi) $ 93.26 2/11/2029
43,337(iv) $ 102.87 2/10/2030

Equity
incentive
plan
awards:
Number of
unearned
shares,
units
or other
rights
that
have not
vested(4)
(i)

Equity
incentive
plan
awards:
market or
payout
value of
unearned
shares,
units
or other
rights that
have not
vested
(j)

Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)(2)
(g)

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3)
(h)

P
r
o
x
y
S
t
a
t
e
m
e
n
t

55,569

6,032,622

57,883 6,283,778

8,638

937,710

9,722 1,055,420

4,959

538,309

18,500 2,008,360

14,395

1,562,741

7,291

791,511

11,438 1,241,709

YUM! BRANDS, INC. - 2021 Proxy Statement 59

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

PA8710AM100350
14.4.13.0

ADG camep0sw
CLE

EXECUTIVE COMPENSATION

ˆ200197gNZxbolwFtMŠ
8*
2C

39521 TX 60
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200197gNZxbolwFtM

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YUM Awards
YUM China Awards

*
**
(1) The actual vesting dates for unexercisable awards are as follows:

(i) Remainder of unexercisable award will vest on February 10, 2021.
(ii) One-half of the unexercisable award will vest on each of February 12, 2021 and 2022.
(iii) One-third of the unexercisable award will vest on each of February 11, 2021, 2022 and 2023.
(iv) One-fourth of the unexercisable award will vest on each of February 10, 2021, 2022, 2023 and 2024.
(v) Unexercisable award will vest on February 12, 2022
(vi) Unexercisable award will vest on February 11, 2023.

(2) For Messrs. Turner and King this column represents sign-on RSU award grants that vest one-third each year over 3 years.
For Mr. Gibbs, it represents an RSU grant he received in connection with his promotion to Chief Operating Officer that is
subject to five-year cliff vesting. For Ms. Skeans it represents a CEO Award RSU grant that is subject to four-year cliff
vesting.

(3) The market value of the YUM awards are calculated by multiplying the number of shares covered by the award by $108.56,

the closing price of YUM stock on the NYSE on December 31, 2020.

(4) The awards reflected in this column are unvested performance-based PSU awards with three-year performance periods
that are scheduled to vest on December 31, 2021 and 2022 if the performance targets are met. In accordance with SEC
rules, the PSU awards are reported at their target payout value.

Option Exercises and Stock Vested

The table below shows the number of shares of YUM and Yum China common stock acquired during 2020 upon
exercise of stock option and SAR awards and vesting of stock awards in the form of RSUs and PSUs, each
including accumulated dividends and before payment of applicable withholding taxes and broker commissions.

Name
(a)
Gibbs
Turner
Skeans
King
Lowings

Option/SAR Awards
Number
of Shares
Acquired on
Exercise
(#)
(b)
79,150
—
4,577
—
24,809

Value
Realized on
Exercise
($)
(c)
5,333,046
—
447,690
—
2,317,081

Stock Awards

Number
of Shares
Acquired on
Vesting
(#)(1)
(d)

14,838
4,277
6,744
7,130
—

Value
realized on
Vesting
($)
(e)
1,610,813
388,500
732,129
647,591
—

(1) For each of Mr. Gibbs and Ms. Skeans, this amount includes PSUs that vested on December 31, 2020 with respect to the
2018-2020 performance period and were paid out in 2021, as well as the one-time payment of Company common stock
received by Mr. Gibbs and Ms. Skeans which is described at page 44 of the CD&A. For Messrs. Turner and King, this
amount includes the vested portion of their sign-on RSU grants.

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60 YUM! BRANDS, INC. - 2021 Proxy Statement

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

Donnelley Financial
None

VDI-W7-PF3-0073
14.4.13.0

ADG nanay0dc
CLE

ˆ200197gNZwp&qoQtQŠ
7*
2C

39521 TX 61
PMT
PS

200197gNZwp&qoQtQ

CLN

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EXECUTIVE COMPENSATION

Pension Benefits

The table below shows the present value of accumulated benefits payable to each of the NEOs, including the
number of years of service credited to each NEO, under the YUM! Brands Retirement Plan (“Retirement Plan”), and
the YUM! Brands Pension Equalization Plan (“PEP”) determined using interest rate and mortality rate assumptions
consistent with those used in the Company’s financial statements.

Name
(a)
Gibbs

Skeans

Turner

King

Lowings

Plan Name
(b)
Qualified Retirement Plan

PEP

Qualified Retirement Plan

PEP

—

Number of Years of
Credited Service
(#)
(c)
32

Present Value of
Accumulated Benefit
($)
(d)
1,837,905

Payments During
Last Fiscal Year
($)
(e)
—

—

14,965,581

851,332

4,331,427

—

(i) Messrs. Turner and King were hired after September 30, 2001, and are ineligible for the Company’s actuarial pension plans.
Mr. Lowings worked outside of the United States prior to September 30, 2001, and is ineligible for the Company’s actuarial
pension plans. As discussed at page 48, Mr. Lowings participates in the TCN and Messrs. Turner and King participate in
LRP.

(1) YUM! Brands Retirement Plan

The Retirement Plan provides an integrated program
of retirement benefits for salaried employees who were
hired by the Company prior to October 1, 2001. The
Retirement Plan
of
pre-retirement pensionable earnings for all similarly
situated participants. The Retirement Plan is a tax
qualified plan, and it
is designed to provide the
maximum possible portion of this integrated benefit on
a tax qualified and funded basis.

replaces

same

level

the

Benefit Formula

Benefits under the Retirement Plan are based on a
to the
participant’s final average earnings (subject
limits under Internal Revenue Code Section 401(a)(17))
and service under
the plan. Upon termination of
employment, a participant’s monthly normal retirement
benefit from the plan is equal to

3% of Final Average Earnings times Projected Service
up to 10 years of service, plus

1% of Final Average Earnings times Projected Service in
excess of 10 years of service, minus

0.43% of Final Average Earnings up to Social Security
covered compensation multiplied by Projected Service
up to 35 years of service

P
r
o
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y
S
t
a
t
e
m
e
n
t

the result of which is multiplied by a fraction,
the
numerator of which is actual service as of date of
termination, and the denominator of which is the
participant’s Projected Service.

Projected Service is the service that the participant
would have earned if he had remained employed with
the Company until his normal retirement age (generally
age 65).

leaves employment after becoming
If a participant
eligible for early or normal
retirement, benefits are
calculated using the formula above except that actual
service attained at the participant’s retirement date is
used in place of Projected Service.

Final Average Earnings

A participant’s “Final Average Earnings” is determined
based on his or her highest five consecutive years of
pensionable earnings. Pensionable earnings is the sum of
the participant’s base pay and annual
incentive
including amounts
compensation from the Company,
under the Yum Leaders’ Bonus Program. In general,
base pay includes salary, vacation pay, sick pay and
short-term disability payments. Extraordinary bonuses
and lump sum payments made in connection with a
participant’s termination of employment are not included.

YUM! BRANDS, INC. - 2021 Proxy Statement 61

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

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ˆ200197gNZwtP6LZt}Š
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200197gNZwtP6LZt}

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Vesting

Early Retirement Eligibility and Reductions

A participant receives a year of vesting service for
each year of employment with the Company. A
participant is 0% vested until he or she has been
credited with at least five years of vesting service.
Upon attaining five years of vesting service, a
participant becomes 100% vested. All NEOs eligible
for the Retirement Plan are 100% vested.

A participant
is eligible for early retirement upon
reaching age 55 with 10 years of vesting service. A
participant who has met the requirements for early
retirement and who elects to begin receiving payments
from the plan prior to age 62 will receive a reduction of
1/12 of 4% for each month benefits begin before
age 62. Benefits are unreduced at age 62.

Normal Retirement Eligibility

A participant is eligible for normal retirement following
the later of age 65 or 5 years of vesting service.

The table below shows when each of the NEOs becomes eligible for early retirement and the estimated lump sum
value of the benefit each participant would receive from YUM plans (both qualified and non-qualified) if he or she
retired from the Company on December 31, 2020 and received a lump sum payment.

t
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Name
David W. Gibbs

Tracy L. Skeans

(1) The Retirement Plan
(2) PEP

Earliest Retirement
Date

Estimated Lump
Sum from a
Qualified Plan(1)

Estimated Lump
Sum from a Non-
Qualified Plan(2)

January 1, 2021 $

2,049,734 $

16,842,892 $

Total Estimated
Lump Sums
18,892,626

February 1, 2028 $

1,798,791 $

8,648,115 $

10,446,906

The estimated lump sum values in the table above are
calculated assuming no increase in the participant’s
Final Average Earnings. The lump sums are estimated
using the mortality table and interest rate assumptions
in the Retirement Plan for participants who would
actually commence benefits on January 1, 2021.
Actual
lump sums may be higher or lower depending
on the mortality table and interest rate in effect at the
time of distribution and the participant’s Final Average
Earnings at his date of retirement.

Lump Sum Availability

Lump sum payments are available to participants who
meet the requirements for early or normal retirement.
Participants who leave the Company prior to meeting
the requirements for Early or Normal Retirement must
take their benefits in the form of a monthly annuity and
no lump sum is available. When a lump sum is paid
is calculated based on actuarial
from the plan,
it
assumptions for
lump sums required by Internal
Revenue Code Section 417(e)(3).

(2) PEP

The PEP is an unfunded, non-qualified plan that
complements the Retirement Plan by providing benefits
that federal tax law bars providing under the Retirement
Plan. Benefits are generally determined and payable
under the same terms and conditions as the Retirement
Plan (except as noted below) without regard to federal
tax limitations on amounts of includible compensation
and maximum benefits. Benefits paid are reduced by
the value of benefits payable under the Retirement Plan.
Participants who earned at
least $75,000 during
calendar year 1989 are eligible to receive benefits
the Retirement Plan’s pre-1989
calculated under
formula, if this calculation results in a larger benefit from
the PEP. Mr. Gibbs qualifies for benefits under this
formula. This formula is similar to the formula described
above under the Retirement Plan except that part C of
the formula is calculated as follows:

1 2⁄ 3% of an estimated primary Social Security
amount multiplied by Projected Service up to 30
years

PEP retirement distributions are always paid in the
form of a lump sum. In the case of a participant whose
benefits are payable based on the pre-1989 formula,

62 YUM! BRANDS, INC. - 2021 Proxy Statement

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

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the lump sum value is calculated as the actuarial
equivalent to the participant’s 50% Joint and Survivor
Annuity with no reduction for survivor coverage. In all
other cases, lump sums are calculated as the actuarial
the participant’s life only annuity.
equivalent of
Participants who terminate employment prior
to
meeting eligibility for Early or Normal Retirement must
take their benefits from this plan in the form of a
monthly annuity.

EXECUTIVE COMPENSATION

(3) Present Value of Accumulated Benefits

the present value of accumulated
For all plans,
is
benefits (determined as of December 31, 2020)
calculated assuming that each participant is eligible to
receive an unreduced benefit payable in the form of a
single lump sum at age 62. This is consistent with the
accounting
in
methodologies
calculations. In addition, the economic assumptions
for
retirement
mortality, and discount rate are also consistent with
those used in financial accounting calculations at each
measurement date.

the lump sum interest

rate, post

financial

used

Nonqualified Deferred Compensation

Amounts
reflected in the Nonqualified Deferred
Compensation table below are provided for under the
Company’s EID, LRP and TCN plans. These plans are
account-based
unfunded,
compensation plans.
year,
calendar
For
participants are permitted under the EID Program to
defer up to 85% of their base pay and up to 100% of
their annual incentive award.

deferred,
each

unsecured

EID Program

Deferred Investments
the EID Program.
under
Amounts deferred under the EID Program may be
following phantom investment
invested in
alternatives (12-month investment
returns, as of
December 31, 2020, are shown in parentheses):

the

(cid:129) YUM! Stock Fund (7.77%*)

(cid:129) YUM! Matching Stock Fund (7.77%*)

(cid:129) S&P 500 Index Fund (18.30%)

(cid:129) Bond Market Index Fund (7.59%)

(cid:129) Stable Value Fund (2.04%)

that

investments;

All of
the phantom investment alternatives offered
under the EID Program are designed to match the
performance of actual
they
provide market rate returns and do not provide for
preferential earnings. The S&P 500 index fund, bond
market index fund and stable value fund are designed
to track the investment return of
like-named funds
offered under the Company’s 401(k) Plan. The YUM!
Stock Fund and YUM! Matching Stock Fund track the
investment return of the Company’s common stock.

is,

P
r
o
x
y
S
t
a
t
e
m
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n
t

funds

transfer

between

Participants may
the
investment alternatives on a quarterly basis except
(1) funds invested in the YUM! Stock Fund or YUM!
Matching Stock Fund may not be transferred once
invested in these funds and (2) a participant may only
elect to invest into the YUM! Matching Stock Fund at
the time the annual incentive deferral election is made.
In the case of the Matching Stock Fund, participants
who defer their annual
incentive into this fund acquire
additional phantom shares (RSUs) equal to 33% of the
RSUs received with respect to the deferral of their
annual
incentive into the YUM! Matching Stock Fund
(the additional RSUs are referred to as “matching
contributions”). The RSUs attributable to the matching
contributions are allocated on the same day the RSUs
attributable to the annual incentive are allocated, which
is the same day we make our annual stock
appreciation right grants. Eligible amounts attributable
to the matching contribution under the YUM! Matching
Stock Fund are included in column (c) below as
contributions by the Company (and represent amounts
actually credited to the NEO’s account during 2020).

Beginning with their 2009 annual
incentive award,
those who are eligible for PSU awards are no longer
eligible to participate in the Matching Stock Fund.

Fund

Stock

RSUs attributable to annual incentive deferrals into the
YUM! Matching
and matching
contributions vest on the second anniversary of the
grant (or upon a change of control of the Company, if
earlier) and are payable as shares of YUM common
stock pursuant to the participant’s deferral election.
Unvested RSUs held in a participant’s YUM! Matching

* Assumes dividends are reinvested.

YUM! BRANDS, INC. - 2021 Proxy Statement 63

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

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EXECUTIVE COMPENSATION

Stock Fund account are forfeited if
the participant
voluntarily terminates employment with the Company
within two years of the deferral date. If a participant
terminates employment involuntarily, the portion of the
account attributable to the matching contributions is
forfeited and the participant will receive an amount
equal to the amount of the original amount deferred. If
a participant dies or becomes disabled during the
restricted period,
fully vests in the
the participant
RSUs. Dividend equivalents are accrued during the
restricted period but are only paid if the RSUs vest. In
the case of a participant who has attained age 55 with
10 years of service, or age 65 with five years of
service, RSUs attributable to bonus deferrals into the
immediately and
YUM! Matching Stock Fund vest
RSUs attributable to the matching contribution vest on
the second anniversary of the deferral date.

Distributions under EID Program. When participants
elect to defer amounts into the EID Program, they also
select when the amounts ultimately will be distributed
to them. Distributions may either be made in a specific
year – whether or not employment has then ended –
or at a time that begins at or after the executive’s
retirement, separation or termination of employment.
Distributions can be made in a lump sum or quarterly
or annual
Initial
deferrals are subject to a minimum two year deferral.
In general, with respect
to amounts deferred after
2005 or not
fully vested as of January 1, 2005,
participants may change their distribution schedule,
provided the new elections satisfy the requirements of
Section 409A of
In
general, Section 409A requires that:

installments for up to 20 years.

the Internal Revenue Code.

(cid:129) Distribution schedules cannot be accelerated (other

than for a hardship)

(cid:129) To delay a previously scheduled distribution,

– A participant must make an election at least one
year before the distribution otherwise would be
made, and

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– The new distribution cannot begin earlier than five
the

it would have begun without

years after
election to re-defer.

With respect to amounts deferred prior to 2005, to
delay a distribution the new distribution cannot begin
until two years after it would have begun without the
election to re-defer.

Investments in the YUM! Stock Fund and YUM!
Matching Stock Fund are only distributed in shares of
Company stock.

64 YUM! BRANDS, INC. - 2021 Proxy Statement

LRP

LRP Account Returns. The LRP provides an annual
earnings credit to each participant’s account based on
the value of participant’s account at the end of each
year. Under the LRP, Messrs. King and Turner will
receive an annual earnings credit equal to the Moody’s
Aa Corporate Bond Yield Average for maturities 20
years and above (currently 2.47%) of their account
balances. The Company’s contribution (“Employer
Credit”) for 2020 was equal to 4% of salary plus target
bonus for Messrs. Turner and King.

Distributions under LRP. Under the LRP, participants
who became eligible to participate in the plan before
January 1, 2019 and are age 55 or older are entitled to
a lump sum distribution of their account balance in the
quarter
following their separation of employment.
Alternatively, these participants may elect to be paid in
5 or 10-year installments following the attainment of
age 55. If these participants are under age 55 with a
vested LRP benefit
that, combined with any other
deferred compensation benefits covered under Code
Section 409A exceeds $19,500, they will not receive a
distribution until the calendar quarter that follows the
participant’s 55th birthday. Participants who become
eligible to participate in LRP after January 1, 2019
(including Messrs. Turner and King) will receive a lump
sum
from
following
employment.

distribution

separation

TCN

TCN Account Returns. The TCN provides an annual
earnings credit to each participant’s account based on
the value of each participant’s account at the end of
each year. Under the TCN, Mr. Lowings receives an
annual earnings credit equal to 5%. For Mr. Lowings,
the Employer Credit for 2020 was equal to 15% of his
salary plus target bonus.

Distributions under TCN. Under the TCN, participants
age 55 or older with a balance of $19,500 or more,
are entitled to a lump sum distribution of their account
balance in the quarter following their separation of
employment. Participants under age 55 who separate
employment with the Company will receive interest
annually and their account balance will be distributed
in the quarter following their 55th birthday.

YUM! BRANDS, INC.
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Name
(a)
Gibbs

Turner

Skeans

King

Lowings

Executive
Contributions
in Last FY
($)(1)
(b)
—

Registrant
Contributions
in Last FY
($)(2)
(c)
—

—

68,000

—

74,000

—

225,000

Plan
Name

EID

Total

EID

LRP

Total

EID

Total

EID

LRP

Total

EID

TCN

Total

EXECUTIVE COMPENSATION

Aggregate
Earnings in
Last FY
($)(3)
(d)
411,250

411,250

—

651

48,328

—

751

21,708

34,953

56,662

Aggregate
Withdrawals/
Distributions
($)(4)
(e)
—

—

8,393

Aggregate
Balance at
Last FYE
($)(5)
(f)
3,783,871

3,783,871

—

84,251

465,132

—

92,751

260,582

950,628

1,211,210

(1) Amounts in column (b) reflect deferred amounts that were also reported as compensation in our Summary Compensation
Table filed last year or, would have been reported as compensation in our Summary Compensation Table last year if the
executive were a NEO, and deferrals of base salary into the EID Program.

(2) Amounts in column (c) reflect Company contributions for EID, LRP and/or TCN allocation. See footnote 6 of the Summary

Compensation Table for more detail.

(3) Amounts in column (d) reflect earnings during the last fiscal year on deferred amounts. All earnings are based on the
investment alternatives offered under the EID Program or the earnings credit provided under the LRP or the TCN described
in the narrative above this table. The EID Program earnings are market based returns and, therefore, are not reported in the
Summary Compensation Table. For Messrs. Lowings, King and Turner, of their earnings reflected in this column, $23,908,
$466 and $404, respectively, were deemed above market earnings accruing to their accounts under the TCN or LRP. For
above market earnings on nonqualified deferred compensation, see the “Change in Pension Value and Nonqualified Deferred
Compensation Earnings” column of the Summary Compensation Table.

(4) All amounts shown in column (e) were distributed in accordance with the executive’s deferral election, except in the case of
the following amounts distributed to pay payroll taxes due upon their account balance under the EID Program, LRP or TCN
for 2020.

P
r
o
x
y
S
t
a
t
e
m
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t

Gibbs

Turner

Lowings

King

Skeans

—

$8,393

—

(5) Amounts reflected in column (f) are the year-end balances for each executive under the EID Program, TCN and the LRP. As
required under SEC rules, below is the portion of the year-end balance for each executive which has previously been
reported as compensation to the executive in the Company’s Summary Compensation Table for 2020 and prior years.

Gibbs

Turner

Skeans

King

Lowings

—

$ 91,804

—

$104,466

$465,071

YUM! BRANDS, INC. - 2021 Proxy Statement 65

YUM! BRANDS, INC.
AD PRINT - YUM BRAND

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CLE

EXECUTIVE COMPENSATION

ˆ200197gNZxbouhpM]Š
10*
2C

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Potential Payments Upon Termination or Change in Control

The information below describes and quantifies certain
compensation that would become payable under
existing plans and arrangements
the NEO’s
employment had terminated on December 31, 2020,
given the NEO’s compensation and service levels as of
such date and, if applicable, based on the Company’s
closing stock price on that date. These benefits are in
addition to benefits available generally to salaried
distributions
employees,
the
Company’s 401(k) Plan,
retiree medical benefits,
disability benefits and accrued vacation pay.

under

such

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Due to the number of factors that affect the nature and
amount of any benefits provided upon the events
discussed below, any actual amounts paid or
distributed may be different. Factors that could affect
these amounts include the timing during the year of
any such event, the Company’s stock price and the
executive’s age.

for any reason other

If one or more NEOs terminated
SAR Awards.
employment
than retirement,
death, disability or following a change in control as of
December 31, 2020, they could exercise the SARs
that were exercisable on that date as shown at the
Outstanding Equity Awards at Year-End table on
page 59, otherwise all SARs, pursuant to their terms,
would have been forfeited and cancelled after that
date. If the NEO had retired, died or become disabled
as of December 31, 2020, exercisable SARs would
remain exercisable through the term of the award and
unvested shares would continue to vest if the award
was granted at least one year before retirement and
vesting would be accelerated for all SARs granted in
2018, 2019 or 2020 in the event of death. Except in
the case of a change in control or death, no SARs
become exercisable on an accelerated basis. In the
case of an involuntary termination of employment as of
December 31, 2020, each NEO would receive the
Turner
following: Mr. Gibbs
$308,239, Ms. Skeans
$3,657,030, Mr. King
$231,179 and Mr. Lowings $2,131,842.

$4,427,476, Mr.

Executive Income Deferral Program. As described in
more detail beginning at page 63,
the NEOs
participate in the EID Program, which permits the
incentive compensation.
deferral of salary and annual
the Nonqualified Deferred
The last column of
Compensation Table on page 65 includes each NEO’s

66 YUM! BRANDS, INC. - 2021 Proxy Statement

aggregate balance at December 31, 2020. The NEOs
are entitled to receive their vested amount under the
EID Program in case of voluntary termination of
employment. In the case of involuntary termination of
employment, they are entitled to receive their vested
benefit and the amount of the unvested benefit that
In the case of death,
corresponds to their deferral.
their
retirement after age 65,
disability or
beneficiaries are entitled to their entire account balance
as shown in the last column of
the Nonqualified
Deferred Compensation table on page 65.

they or

case of

an involuntary

In the
termination of
employment as of December 31, 2020, each NEO
would receive the following: Mr. Gibbs $3,783,871,
Mr. Turner $0, Ms. Skeans $465,132, Mr. King $0 and
Mr. Lowings $260,582. As discussed at page 66,
these amounts reflect base salary or bonuses
previously deferred by the executive and appreciation
on these deferred amounts (see page 63 for
discussion of
investment alternatives available under
the EID). Thus, these EID account balances represent
deferred base salary or bonuses (earned in prior years)
and appreciation of their accounts based primarily on
the performance of the Company’s stock.

the

Leadership Retirement Plan. Under
LRP,
participants who became eligible to participate in the
plan before January 1, 2019 and are age 55 or older
are entitled to a lump sum distribution of their account
balance in the quarter following their separation of
these participants may
employment. Alternatively,
elect to be paid in 5- or 10-year installments following
If these participants are
the attainment of age 55.
under age 55 with a vested LRP benefit
that,
combined with any other deferred compensation
benefits covered under Code Section 409A exceeds
$19,500, they will not receive a distribution until the
follows the participant’s 55th
calendar quarter that
to
birthday. Participants who become
participate in LRP after January 1, 2019 (including
Messrs. Turner and King) will receive a lump sum
distribution following separation from employment
to be paid in 5 or 10-year
unless they elect
installments after attaining age 54.
In case of
termination of employment as of December 31, 2020,
Mr. Turner would have received $84,251 and Mr. King
would have received $92,751.

eligible

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Third Country National Plan. Under
the TCN,
participants age 55 or older are entitled to a lump sum
their account balance in the quarter
distribution of
following their termination of employment. Participants
under age 55 who terminate will
receive interest
annually and their account balance will be distributed
in the quarter following their 55th birthday. In case of
termination of employment as of December 31, 2020,
Mr. Lowings would have received $950,628.

for any reason other

Performance Share Unit Awards. If one or more NEOs
than
terminated employment
retirement or death or following a change in control
and prior to achievement of the performance criteria
and vesting period, then the award would be cancelled
and forfeited. If the NEO had retired, or died as of
December 31, 2020, the PSU award would be paid
out based on actual performance for the performance
period, subject to a pro rata reduction reflecting the
portion of the performance period not worked by the
NEO.
these payouts had occurred on
December 31, 2020, Messrs. Gibbs, Turner, King and
Lowings and Ms. Skeans would have been entitled to
$3,045,677, $358,872, $269,136, $890,404 and
$1,091,440,
target
performance.

respectively,

If any of

assuming

Pension Benefits. The Pension Benefits Table on
page 61 describes the general terms of each pension
plan in which the NEOs participate,
the years of
credited service and the present value of the annuity
payable to each NEO assuming termination of
employment as of December 31, 2020. The table on
page 62 provides the present value of the lump sum
benefit payable to each NEO when they attain eligibility
for Early Retirement (i.e., age 55 with 10 years of
service) under the plans.

see

insurance plans

life
the NEOs,

the
Life Insurance Benefits. For a description of
that provide
supplemental
coverage
the All Other
to
Compensation Table on page 56. If the NEOs had
died on December 31, 2020, the survivors of Messrs.
Gibbs, Turner, King and Lowings and Ms. Skeans
would have received Company-paid life insurance of
$3,000,000, $1,700,000, $1,500,000, $1,425,000 and
this arrangement.
$1,323,000,
Executives and all other salaried employees can
life insurance benefits up to a
purchase additional
maximum combined company paid and additional
life
insurance of $3.5 million. This additional benefit is not

respectively, under

EXECUTIVE COMPENSATION

paid or subsidized by the Company and, therefore, is
not shown here.

Change in Control. Change in control severance
agreements are in effect between YUM and certain
key executives (including Messrs. Gibbs, Turner, King
and Lowings and Ms. Skeans). These agreements are
general obligations of YUM, and provide, generally,
that if, within two years subsequent to a change in
control of YUM, the employment of the executive is
terminated (other than for cause, or for other limited
reasons specified in the change in control severance
agreements) or the executive terminates employment
for Good Reason (defined in the change in control
severance agreements to include a diminution of
duties and responsibilities or benefits), the executive
will be entitled to receive the following:

(cid:129) a

annual

incentive

proportionate

assuming
achievement of target performance goals under the
bonus plan or,
if higher, assuming continued
achievement of actual Company performance until
date of termination;

(cid:129) a severance payment equal to two times the sum of
the executive’s base salary and the target bonus or,
if higher, the actual bonus for the year preceding the
change in control of the Company; and

(cid:129) outplacement services for up to one year following

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termination.

In March 2013, the Company eliminated excise tax
gross-ups and implemented a best net after-tax
method. See the Company’s CD&A on page 35 for
more detail.

The change in control severance agreements have a
three-year term and are automatically renewable each
January 1 for another three-year term. An executive
whose employment is not terminated within two years
of a change in control will not be entitled to receive any
severance payments under
the change in control
severance agreements.

Generally, pursuant to the agreements, a change in
control is deemed to occur:

(i)

(ii)

if any person acquires 20% or more of
the
Company’s voting securities (other than securities
its
acquired directly
affiliates);

from the Company or

if a majority of the directors as of the date of the
agreement are replaced other
than in specific
circumstances; or

YUM! BRANDS, INC. - 2021 Proxy Statement 67

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(iii) upon the consummation of a merger of

change

the
Company or any subsidiary of the Company other
than (a) a merger where the Company’s directors
control
the
immediately before
constitute a majority of
the
resulting organization, or (b) a merger effected to
implement a recapitalization of the Company in
which no person is or becomes the beneficial
owner of securities of the Company representing
20% or more of the combined voting power of the
Company’s then-outstanding securities.

the directors of

In addition to the payments described above, upon a
change in control:

(cid:129) All outstanding SARs held by the executive and not
otherwise exercisable will fully and immediately vest
following a change in control
the executive is
employed on the date of the change in control of the
Company and is involuntarily terminated (other than
by the Company for cause) on or within two years
following the change in control. See Company’s
CD&A on page 35 for more detail;

(cid:129) RSUs under

the Company’s EID Program or
otherwise held by the executive will automatically
vest; and

(cid:129) Pursuant to the Company’s Performance Share Plan
under the LTIP, all PSU awards awarded in the year
in which the change in control occurs, will be paid
out at target assuming a target level performance
had been achieved for
the entire performance
period, subject to a pro rata reduction to reflect the
portion of the performance period after the change
in control. All PSUs awarded for performance
periods that began before the year in which the
change in control occurs will be paid out assuming
performance achieved for the performance period
was at the greater of target level performance or
projected level of performance at the time of the
change in control, subject to pro rata reduction to
reflect the portion of the performance period after
the change in control. In all cases, executives must
be employed with the Company on the date of the
change in control and involuntarily terminated upon
or following the change in control and during the
performance period. See Company’s CD&A on
page 35 for more detail.

If a change in control and each NEO’s involuntary termination had occurred as of December 31, 2020, the following
payments or other benefits would have been made or become available.

Severance Payment

Annual Incentive

Accelerated Vesting of SARs

Accelerated Vesting of RSUs

Acceleration of PSU
Performance/Vesting

Outplacement

TOTAL

CEO Pay Ratio

Gibbs
$

Lowings
$
7,199,600 3,400,000 3,830,114 3,700,000 4,428,240

Skeans
$

Turner
$

King
$

1,800,000

850,000

675,000

925,000

750,000

4,427,476

308,239 3,657,030

231,179 2,131,842

6,032,622

937,710

538,309 1,562,741

—

3,045,677

358,872 1,091,440

269,136

890,404

25,000

22,530,375 5,879,821 9,816,893 6,713,056 8,225,486

Each year the Company and our franchisees around
the world create thousands of restaurant jobs, which
are part-time, entry-level opportunities to grow careers
at our KFC, Pizza Hut, Taco Bell and The Habit Burger
Grill brands. As evidence of the opportunities these
positions create, approximately 80% of our Company-
owned Restaurant General Managers
(“RGMs”)
located in the U.S. have been promoted from other
positions in our restaurants and such RGMs often earn
competitive pay greater than the average American
household income. In the United States, approximately

85% of our Company-owned restaurant employees
are part-time and at least 45% have been employed
by the Company for less than a year.

As required by Section 953(b) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, and
applicable SEC rules, we are providing the following
information about the relationship of the annual total
compensation of our employees and the annual total
compensation of Mr. Gibbs, our Chief Executive
Officer (our “CEO”).

68 YUM! BRANDS, INC. - 2021 Proxy Statement

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To identify the 2020 median employee, we used the
December 2020 base wages or base
salary
information for all employees who were employed by
us on December 31, 2020, excluding our CEO. We
included all
full-time and part-time employees and
annualized the employees’ base salary or base wages
to reflect their compensation for 2020. We believe the
use of base wages or base salary for all employees is
a consistently applied compensation measure.

As of December 31, 2020, our global workforce used
for determining the pay ratio was approximately
38,000 employees (23,000 in the U.S. and 15,000
internationally).

After calculating employee compensation, our median
employee was identified as a part-time KFC restaurant
employee in the United States. After identifying the
annual
median
compensation in accordance with the requirements of
the Summary Compensation Table.

calculated total

employee, we

EXECUTIVE COMPENSATION

For 2020,
the total compensation of our CEO, as
reported in the Summary Compensation Table at page
55, was $14,631,451. The total compensation of our
median employee was estimated to be $11,377. As a
result, we estimate that our CEO to median employee
pay ratio is 1286:1.

This pay ratio is a reasonable estimate calculated in a
manner consistent with SEC rules based on our payroll
and employment
records and the methodology
described above. The SEC rules for identifying the
median compensated employee and calculating the
pay ratio based on that employee’s annual
total
compensation allow companies to adopt a variety of
to apply certain exclusions, and to
methodologies,
make reasonable estimates and assumptions that
reflect their compensation practices. As such, the pay
ratio reported by other companies may not be
comparable to the pay ratio reported above, as other
companies may have different employment and
compensation practices and may utilize different
methodologies,
and
estimates
assumptions in calculating their own pay ratios.

exclusions,

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YUM! BRANDS, INC. - 2021 Proxy Statement 69

YUM! BRANDS, INC.
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EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes, as of December 31, 2020, the equity compensation plans under which we may
issue shares of stock to our directors, officers, current employees and former employees. Those plans include the
Long Term Incentive Plan (the “LTIP”) and the Restaurant General Manager Stock Option Plan (“RGM Plan”).

Plan Category

Equity compensation plans approved by security
holders

Equity compensation plans not approved by security
holders

TOTAL

Number of
Securities To
be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
(a)

Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
(b)

Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
(c)

7,213,951(1)

74.78(2)

23,669,978(3)

97,175(4)

7,311,126(1)

51.59(2)

74.52(2)

—

23,669,978(3)

Includes 2,065,084 shares issuable in respect of RSUs, performance units and deferred units.

(1)
(2) Weighted average exercise price of outstanding Options and SARs only.
(3)

Includes 11,834,989 shares available for issuance of awards of stock units, restricted stock, restricted stock units and
performance share unit awards under the LTIP Plan.

(4) Awards are made under the RGM Plan.

What are the key features of the LTIP?

The LTIP provides for
the issuance of up to
92,600,000 shares of stock as non-qualified stock
options,
restricted
incentive stock options, SARs,
stock, restricted stock units, performance shares or
performance units. Only our employees and directors
are eligible to receive awards under the LTIP. The
purpose of
the LTIP is to motivate participants to
achieve long range goals, attract and retain eligible
employees, provide incentives competitive with other
similar companies and align the interest of employees
and directors with those of our shareholders. The LTIP

is administered by the Management Planning and
Development Committee of the Board of Directors (the
“Committee”). The exercise price of a stock option grant
or SAR under the LTIP may not be less than the closing
price of our stock on the date of the grant, and no
options or SARs may have a term of more than ten
years. The options and SARs that are currently
outstanding under the LTIP generally vest over a one to
four year period and expire ten years from the date of
the grant. Our shareholders approved the LTIP in 1999,
and the plan as amended in 2003, 2008 and 2016.

What are the key features of the RGM Plan?

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for

the

Effective May 20, 2016, we canceled the remaining
shares available for issuance under the RGM Plan,
shares
approximately
except
necessary to satisfy then outstanding awards. No
future awards will be made under the RGM Plan. The
RGM Plan has provided for the issuance shares of
common stock at a price equal to or greater than the

220,000

closing price of our stock on the date of grant. The
RGM Plan allowed us to award non-qualified stock
options, SARs, restricted stock and RSUs. Employees,
other than executive officers, have been eligible to
receive awards under the RGM Plan. The purpose of
to give restaurant general
the RGM Plan was (i)
to become
managers (“RGMs”)

the opportunity

70 YUM! BRANDS, INC. - 2021 Proxy Statement

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EQUITY COMPENSATION PLAN INFORMATION

owners of stock, (ii) to align the interests of RGMs with
those of YUM’s other shareholders, (iii) to emphasize
that the RGM is YUM’s #1 leader, and (iv) to reward
the performance of RGMs.
the Plan
provides incentives to Area Coaches, Franchise
Business Leaders and other supervisory field operation
positions that support RGMs and have profit and loss
responsibilities within a defined region or area. While all
non-executive officer employees have been eligible to

In addition,

receive awards under
the RGM plan, all awards
granted have been to RGMs or their direct supervisors
in the field. Grants to RGMs generally have four year
vesting and expire after ten years. The RGM Plan is
administered by the Committee, and the Committee
has delegated its responsibilities to the Chief People
the Company. The Board of Directors
Officer of
approved the RGM Plan on January 20, 1998.

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YUM! BRANDS, INC. - 2021 Proxy Statement 71

YUM! BRANDS, INC.
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AUDIT COMMITTEE REPORT

Who serves on the Audit Committee of the Board of Directors?

The members of the Audit Committee (for purposes of
this report, the “Committee”) are Paget L. Alves, Tanya
L. Domier, Lauren R. Hobart, P. Justin Skala, Elane B.
Stock and Annie Young-Scrivner. Mr. Alves serves as
chair of the Committee.

the chair of the Committee, is qualified as an audit
committee financial expert within the meaning of SEC
regulations. The Board has also determined that
Mr. Alves has accounting and related financial
management expertise within the meaning of
the
listing standards of the NYSE and that each member
of
the Committee is financially literate within the
meaning of the NYSE listing standards.

What document governs the activities of the Audit Committee?

The Audit Committee operates under a written charter
adopted by the Board of Directors. The Committee’s
responsibilities are set forth in this charter, which was
amended and restated effective November 22, 2013.
least
The charter

is reviewed by management at

and any

recommended changes

are
annually,
presented to the Audit Committee for
review and
approval. The charter is available on our Web site at
http://investors.yum.com/committee-composition-and-
charters.

What are the responsibilities of the Audit Committee?

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independent

The Audit Committee assists the Board in fulfilling its
responsibilities for general oversight of the integrity of
the Company’s financial statements, the adequacy of
internal controls and
the Company’s system of
procedures and disclosure controls and procedures,
the Company’s risk management,
the Company’s
compliance with legal and regulatory requirements,
and
auditors’
the
independence
the
the
Company’s internal audit function and independent
auditors. The Committee has the authority to obtain
advice and assistance from outside legal, accounting
or other advisors as the Committee deems necessary
to carry out
its duties and receive appropriate
funding, as determined by the Committee, from the
Company for such advice and assistance.

qualifications
of

performance

and

independent

the Company’s

The Committee has sole authority over the selection
of
and
its
manages
independent auditors (who report directly to the
Committee). KPMG LLP has
the
Company’s independent auditors since 1997. Each
the Committee evaluates the performance,
year,

relationship with

served as

auditors

72 YUM! BRANDS, INC. - 2021 Proxy Statement

qualifications and independence of the independent
auditors. The Committee is also involved in the
selection of the lead audit partner. In evaluating the
the Committee
Company’s independent auditors,
considers the quality of the services provided, as well
as the independent auditors’ and lead partner’s
capabilities and technical expertise and knowledge of
the Company’s operations and industry.

The Committee met 8 times during 2020. The
Committee schedules its meetings with a view to
ensuring that it devotes appropriate attention to all of
tasks. The Committee’s meetings generally
its
include private
the Company’s
sessions with
independent auditors and with the Company’s
internal auditors, in each case without the presence
of the Company’s management, as well as executive
sessions consisting of only Committee members. In
addition
senior
management confers with the Committee or its Chair
from time to time, as senior management deems
advisable or appropriate, in connection with issues or
concerns that arise throughout the year.

scheduled meetings,

the

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AUDIT COMMITTEE REPORT

is responsible for

the Company’s
Management
financial reporting process,
including its system of
internal control over financial reporting, and for the
preparation of consolidated financial statements in
accordance with accounting principles generally
accepted in the U.S. The Company’s independent
auditors are responsible for auditing those financial
statements
professional
standards and expressing an opinion as to their
material conformity with U.S. generally accepted
the
accounting
effectiveness of the Company’s internal control over
financial reporting. The Committee’s responsibility is
to monitor and review the Company’s financial
reporting process and discuss management’s report

accordance with

principles

auditing

and

for

is not

verification,

financial
on the Company’s internal control over
reporting.
the Committee’s duty or
responsibility to conduct audits or accounting reviews
or procedures. The Committee has relied, without
independent
management’s
representations that
the financial statements have
been prepared with integrity and objectivity and in
conformity with
accounting principles generally
accepted in the U.S. and that the Company’s internal
reporting is effective. The
control over
financial
independent
Committee has also relied, without
the independent
verification, on the opinion of
auditors included in their
regarding the
Company’s financial statements and effectiveness of
internal control over financial reporting.

report

What matters have members of the Audit Committee discussed with
management and the independent auditors?

and

been

reviewed

prepared

both management

As part of
its oversight of the Company’s financial
statements,
the Committee reviews and discusses
the Company’s
with
independent auditors all annual and quarterly financial
statements prior to their issuance. With respect to
reporting period, management
each 2020 fiscal
financial
advised the Committee that each set of
statements
in
had
accordance with accounting principles generally
accepted in the U.S., and reviewed significant
accounting and disclosure issues with the Committee.
These
the
independent auditors of matters required to be
discussed pursuant to Public Company Accounting
(“PCAOB”) Auditing Standard
Oversight Board
No. 1301 (Communication with Audit Committees),
including the quality (not merely the acceptability) of
the
the
accounting
reasonableness of significant judgments, the clarity of
disclosures in the financial statements and disclosures
related
The
Committee has also discussed with KPMG LLP
including a
matters relating to its independence,
review of audit and non-audit fees and the written

discussions with

Company’s

accounting

principles,

practices.

included

reviews

critical

also

concerning

independence.

considered whether

disclosures and letter
received from KPMG LLP
required by applicable requirements of the PCAOB
regarding KPMG LLP’s communications with the
The
Committee
Committee
non-audit
services provided by the independent auditors are
auditors’
compatible
independence. The Committee also received regular
updates, and written summaries as required by the
PCAOB rules (for
tax and other services), on the
amount of fees and scope of audit, audit-related, tax
and other services provided.

independent

with

the

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programs
of

strengthening
internal

at
aimed
the Company’s

In addition, the Committee reviewed key initiatives
the
and
effectiveness
and
disclosure control structure. As part of this process,
the Committee continued to monitor the scope and
auditing
adequacy of
program, reviewing staffing levels and steps taken to
implement recommended improvements in internal
procedures and controls. The Committee also
reviews and discusses legal and compliance matters
with management, and, as necessary or advisable,
the Company’s independent auditors.

the Company’s

internal

YUM! BRANDS, INC. - 2021 Proxy Statement 73

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Has the Audit Committee made a recommendation regarding the audited
financial statements for fiscal 2020?

the Committee’s

Based
discussions with
management and the independent auditors and the
Committee’s
of
the independent
management and the report of
auditors to the Board of Directors and shareholders,
and subject to the limitations on the Committee’s role

representations

review of

the

and responsibilities referred to above and in the Audit
Committee Charter, the Committee recommended to
the Board of Directors that
include the audited
consolidated financial statements in the Company’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2020 for filing with the SEC.

Who prepared this report?

This report has been furnished by the members of the Audit Committee:

Paget L. Alves, Chairperson
Tanya L. Domier
Lauren R. Hobart
P. Justin Skala
Elane B. Stock
Annie Young-Scrivner

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74 YUM! BRANDS, INC. - 2021 Proxy Statement

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ADDITIONAL INFORMATION

Who pays the expenses incurred in connection with the solicitation of
proxies?

Expenses in connection with the solicitation of proxies
will be paid by the Company. Proxies are being
solicited principally by mail, by telephone and through
In addition, our directors, officers and
the Internet.
regular employees, without additional compensation,

may solicit proxies personally, by e-mail, telephone,
fax or special letter. We will reimburse brokerage firms
and others for
their expenses in forwarding proxy
materials to the beneficial owners of our shares.

How may I elect to receive shareholder materials electronically and
discontinue my receipt of paper copies?

YUM shareholders with shares registered directly in
their name who received shareholder materials in the
mail may elect to receive future annual reports and
proxy statements from us and to vote their shares
through the Internet
receiving copies
through the mail. We are offering this service to
provide shareholders with added convenience,
to
reduce our environmental
impact and to reduce
Annual Report printing and mailing costs.

instead of

To take advantage of this option, shareholders must
subscribe to one of the various commercial services
that offer access to the Internet. Costs normally
associated with electronic access, such as usage and
telephone charges, will be borne by the shareholder.

To elect this option, go to www.computershare.com,
log in and
click on Shareholder Account Access,

locate the option to receive Company mailing via
this option will be
e-mail. Shareholders who elect
notified by mail how to access the proxy materials and
how to vote their shares on the Internet or by phone.

our

by writing

If you consent
to receive future proxy materials
electronically, your consent will remain in effect unless it
is withdrawn
Transfer Agent,
Computershare, Inc., 462 South 4th Street, Suite 1600,
Louisville, Kentucky 40202 or by logging onto our
Transfer Agent’s website at www.computershare.com
and following the applicable instructions. Also, while this
consent is in effect, if you decide you would like to
receive a hard copy of the proxy materials, you may
call, write or e-mail Computershare, Inc.

P
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I share an address with another shareholder and we received only one paper
copy of the proxy materials. How may I obtain an additional copy of the
proxy materials?

The Company has adopted a procedure called
“householding” which has been approved by the SEC.
The Company and some brokers household proxy
materials, delivering a single Notice and, if applicable,
this proxy statement and Annual Report, to multiple
shareholders sharing an address unless contrary
instructions have been received from the affected
shareholders or they participate in electronic delivery of
proxy materials. Shareholders who participate in
householding will continue to access and receive
separate proxy cards. This process will help reduce
our printing and postage fees, as well as save natural

resources.
If at any time you no longer wish to
participate in householding and would prefer to receive
a separate proxy statement, or if you are receiving
multiple copies of the proxy statement and wish to
receive only one, please notify your broker if your
shares are held in a brokerage account or us if you
hold registered shares. You can notify us by sending a
written request
Investor
to YUM! Brands,
Relations, 1441 Gardiner Lane, Louisville, KY 40213 or
by calling Investor Relations at 1 (888) 298-6986 or by
sending an e-mail to yum.investor@yum.com.

Inc.,

YUM! BRANDS, INC. - 2021 Proxy Statement 75

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AD PRINT - YUM BRAND

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May I propose actions for consideration at next year’s Annual Meeting of
Shareholders or nominate individuals to serve as directors?

In addition, our bylaws provide for proxy access for
director nominations by shareholders (as described at
page 20). A shareholder, or group of up to 20
shareholders, owning continuously for at least three
years shares of YUM common stock representing an
aggregate of at least 3% of our outstanding shares,
may nominate, and include in YUM’s proxy materials,
director nominees constituting up to 20% of YUM’s
Board,
and
nominee(s) satisfy the requirements in YUM’s bylaws.
Notice of proxy access director nominees must be
received no earlier than November 2, 2021, and no
later than December 2, 2021.

shareholder(s)

provided

that

the

The Board is not aware of any matters that are
expected to come before the 2021 Annual Meeting
other than those referred to in this proxy statement. If
any other matter should come before the Annual
Meeting, the individuals named on the form of proxy
intend to vote the proxies in accordance with their
best judgment.

The chairperson of the Annual Meeting may refuse to
to
allow the transaction of any business, or
acknowledge the nomination of any person, not made
in compliance with the foregoing procedures.

Bylaw Provisions. You may contact YUM’s Corporate
Secretary at the address mentioned above for a copy
of
regarding the
requirements for making shareholder proposals and
nominating director candidates.

the relevant bylaw provisions

Under the rules of the SEC, if a shareholder wants us
to include a proposal in our proxy statement and proxy
card for presentation at our 2022 Annual Meeting of
Shareholders, the proposal must be received by us at
our principal executive offices at YUM! Brands, Inc.,
1441 Gardiner Lane, Louisville, Kentucky 40213 by
December 2, 2021. The proposal should be sent to
the attention of the Corporate Secretary.

Under our bylaws, certain procedures are provided
that a shareholder must follow to nominate persons for
to introduce an item of
election as directors or
business at an Annual Meeting of Shareholders that is
not included in our proxy statement. These procedures
provide that nominations for director nominees and/or
an item of business to be introduced at an Annual
Meeting of Shareholders must be submitted in writing
to our Corporate Secretary at our principal executive
offices and you must include information set forth in
receive the notice of your
our bylaws. We must
intention to introduce a nomination or to propose an
item of business at our 2022 Annual Meeting no later
than the date specified in our bylaws.
If the 2022
Annual Meeting is not held within 30 days before or
after the anniversary of the date of this year’s Annual
Meeting, then the nomination or item of business must
be received by the tenth day following the earlier of the
date of mailing of the notice of the meeting or the
public disclosure of the date of the meeting. Assuming
that our 2022 Annual Meeting is held within 30 days of
this Annual Meeting, we must
the anniversary of
receive notice of your
intention to introduce a
nomination or other item of business at that meeting
by February 10, 2022.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.)

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

YUM! BRANDS, INC.

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set

forth the amount on which the filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the fiscal year ended December 31, 2020
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number 1-13163

YUM! BRANDS, INC.

(Exact name of registrant as specified in its charter)

aniloraChtroN
)noitazinagroronoitaroprocnifonoitcidsirujrehtoroetatS(

8031593-31
).oNnoitacifitnedIreyolpmE.S.R.I(

ykcutneK,ellivsiuoL,enaLrenidraG1441
)seciffoevitucexelapicnirpfosserddA(

31204
)edoCpiZ(

(502) 874-8300
Registrant’s telephone number, including area code:

ssalChcaEfoeltiT

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
)s(lobmySgnidarT

noegnahcxEhcaEfoemaN
Which Registered

eulavrapon,kcotSnommoC

MUY

egnahcxEkcotSkroYweN

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None

Indicate by check mark

Yes

• if the registrant is aw ell-known seasoned issuer, as defined in Rule 405 of the Securities Act.

• if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

• whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).

• whether the registrant is al arge accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule
12b-2 of the Exchange Act.

Large

Smaller

Emerging

Accelerated Filer:

Non-accelerated Filer:

Reporting Company:

Growth Company:

• If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act.

• whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 5U .S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report.

• whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).

The aggregate market value of the voting stock (which consists solely of shares of Common Stock) held by non-affiliates of the registrant as of
June 30, 2020, computed by reference to the closing price of the registrant’s Common Stock on the New York Stock Exchange Composite Tape on
such date was approximately $26.2 billion. All executive officers and directors of the registrant have been deemed, solely for the purpose of the
foregoing calculation, to be “affiliates” of the registrant. The number of shares outstanding of the registrant’s Common Stock as of February 12,
2021, was 300,055,312 shares.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement furnished to shareholders of the registrant in connection with the annual meeting of shareholders to be held
on May 11, 2021, are incorporated by reference into Part III.

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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Table of Contents

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services

PART I

ITEM 1
ITEM 1A
ITEM 1B
ITEM 2
ITEM 3
ITEM 4

PART II

ITEM 5

ITEM 6
ITEM 7
ITEM 7A
ITEM 8
ITEM 9
ITEM 9A
ITEM 9B

PART III

ITEM 10
ITEM 11
ITEM 12
ITEM 13
ITEM 14

PART IV

ITEM 15

Exhibits and Financial Statement Schedules

2
6
18
18
19
19

20
22
24
44
45
87
87
88

89
89
89
89
89

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Forward-Looking Statements

In this Form 10-K, as well as in other written reports and oral statements, we present “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend all
forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and we are
including this statement for purposes of complying with those safe harbor provisions.

Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-
looking words such as “expect,” “expectation,” “believe,” “anticipate,” “may,” “could,” “intend,” “belief,” “plan,” “estimate,” “target,” “predict,”
“likely,” “seek,” “project,” “model,” “ongoing,” “will,” “should,” “forecast,” “outlook” or similar terminology. Forward-looking statements are based
on our current expectations, estimates, assumptions and/or projections, our perception of historical trends and current conditions, as well as
other factors that we believe are appropriate and reasonable under the circumstances. Forward-looking statements are neither predictions nor
guarantees of
future events, circumstances or performance and are inherently subject to known and unknown risks, uncertainties and
assumptions that could cause our actual results to differ materially from those indicated by those forward-looking statements. There can be no
assurance that our expectations, estimates, assumptions and/or projections will be achieved. Factors that could cause actual results and events
to differ materially from our expectations, estimates, assumptions, projections and/or forward-looking statements include (i) the risks and
uncertainties described in the Risk Factors included in Part I, Item 1A of this Form 10-K and (ii) the factors described in Management’s
Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of this Form 10-K. You should not place
undue reliance on forward-looking statements, which speak only as of the date they are made. The forward-looking statements included in this
Form 10-K are only made as of the date of this Form 10-K and we disclaim any obligation to publicly update any forward-looking statement to
reflect subsequent events or circumstances.

YUM! BRANDS, INC. - 2020 Form 10-K 1

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART I

ITEM 1. Business.

Yum! Brands, Inc. (referred to herein as “YUM”, the “Registrant” or
the “Company”), was incorporated under the laws of the state of
North Carolina in 1997. The principal executive offices of YUM are
located at 1441 Gardiner Lane, Louisville, Kentucky 40213, and the
telephone number at that location is (502) 874-8300. Our website
address is https://www.yum.com.

Overview of Business

YUM, together with its subsidiaries, is referred to in this Form 10-K
annual report (“Form 10-K”) as the Company. The terms “we,” “us”
and “our” are also used in the Form 10-K to refer
to the
Company. Throughout
the terms “restaurants,”
this Form 10-K,
“stores” and “units” are used interchangeably. While YUM does not
directly own or operate any restaurants, throughout this document
we may refer to restaurants that are owned or operated by our
subsidiaries as being Company-owned.

YUM has over 50,000 restaurants in more than 150 countries and territories primarily operating under the four concepts of KFC, Pizza Hut, Taco
Bell and The Habit Burger Grill (the “Concepts”). The Company’s KFC, Pizza Hut and Taco Bell brands are global leaders of the chicken, pizza
and Mexican-style food categories, respectively. The Habit Burger Grill, a concept we acquired on March 18, 2020, is a fast-casual restaurant
concept specializing in made-to-order chargrilled burgers, sandwiches and more. At December 31, 2020, 98% of our units are operated by
independent franchisees or licensees under the terms of franchise or license agreements. The terms franchise or franchisee within this Form
10-K are meant to describe third parties that operate units under either franchise or license agreements.

The following is a summary of our Concepts’ operations and a brief description of each Concept as of and for the year ended December 31,
2020:

K
-
0
1
m
r
o
F

KFC Division

Pizza Hut Division

Taco Bell Division

Habit Burger Grill Division

YUM

Number of
Units

% of Units
International

Number of
Countries and
Territories

%
Franchised

System Sales(a)(b)
(in Millions)

25,000

17,639

7,427

287

50,353

84%

63%

65%

146

110

155

99%

94%

12%

98%

$26,289

11,955

11,745

370

$50,359

(a) Constitutes sales of all restaurants, both Company-owned and franchised. See further discussion of this performance metric within Part II, Item 7 of

this Form 10-K.

(b) System sales of Habit Burger Grill are for the period from March 18, 2020 through December 31, 2020.

KFC

Pizza Hut

the restaurant

(cid:129) KFC was founded in Corbin, Kentucky, by Colonel Harland D.
Sanders, an early developer of the quick service food business and
franchise concept. The Colonel
a pioneer of
perfected his secret blend of 11 herbs and spices for Kentucky
Fried Chicken in 1939 and signed up his first franchisee in 1952.
KFC restaurants across the world offer fried and non-fried chicken
products
strips,
chicken-on-the-bone and other chicken products marketed under
a variety of names.

sandwiches,

chicken

such

(cid:129) The first Pizza Hut restaurant was opened in 1958 in Wichita,
Kansas, and within a year,
franchise unit was
opened. Today, Pizza Hut is the largest restaurant chain in the
world specializing in the sale of ready-to-eat pizza products. Pizza
Hut operates in the delivery, carryout and casual dining segments
around the world.

the first

2 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART I
ITEM 1. Business.

Taco Bell

(cid:129) The first Taco Bell restaurant was opened in 1962 by Glen Bell in
Downey, California, and in 1964, the first Taco Bell franchise was
sold. Taco Bell specializes in Mexican-style food products,
including various types of
tacos, burritos, quesadillas, salads,
nachos and other related items.

Habit Burger Grill

(cid:129) The first Habit Burger Grill restaurant opened in 1969 in Santa
Barbara, California. The Habit Burger Grill restaurant concept is
includes
built around a distinctive and diverse menu that
chargrilled burgers and sandwiches made-to-order over an open
flame and topped with fresh ingredients.

Business Strategy
Through our Recipe for Growth and Good we intend to unlock the
growth potential of our Concepts and YUM, drive increased
collaboration across our Concepts and geographies and consistently
deliver better customer experiences, improved unit economics and
higher rates of growth. Key enablers include accelerated use of
technology and better leverage of our systemwide scale.

Our Recipe for Growth is based on four key drivers:

(cid:129) Unrivaled Culture and Talent: Leverage our culture and people

capability to fuel brand performance and franchise success

(cid:129) Unmatched Operating Capability: Recruit and equip the best
restaurant operators in the world to deliver great customer
experiences

(cid:129) Relevant, Easy and Distinctive Brands: Innovate and elevate iconic

restaurant brands people trust and champion

(cid:129) Bold Restaurant Development: Drive market and franchise

expansion with strong economics and value

Our global citizenship and sustainability strategy, called the Recipe
for Good, reflects our priorities for socially responsible growth, risk
management and sustainable stewardship of our people, food and
planet.

Information about Operating Segments
As of December 31, 2020, YUM consists of
segments:

four operating

(cid:129) The KFC Division which includes our worldwide operations of the

KFC concept

(cid:129) The Pizza Hut Division which includes our worldwide operations of

the Pizza Hut concept

(cid:129) The Taco Bell Division which includes our worldwide operations of

the Taco Bell concept

(cid:129) The Habit Burger Grill Division which includes our worldwide

operations of the Habit Burger Grill concept

Franchise Agreements
The franchise programs of the Company are designed to promote
consistency and quality, and the Company is selective in granting
franchises. The Company is focused on partnering with franchisees
who have the commitment, capability and capitalization to grow our
Concepts. Franchisees can range in size from individuals owning just
one restaurant to large publicly-traded companies. The Company
to our
has franchise relationships that are particularly important

business, such as our relationship with Yum China, our strategic
alliance with Telepizza Group S.A., who is the master franchisee of
Pizza Hut in Latin America (excluding Brazil) and portions of Europe
and our relationship with certain large franchisees, such as Flynn
Restaurant Group, an existing YUM franchisee, which recently
announced its intention to acquire approximately 950 Pizza Hut U.S.
restaurants which would make it the largest operator of Pizza Hut
restaurants in the U.S.

franchise agreements

The Company has successfully increased franchise restaurant
ownership in recent years, and utilizes both store-level franchise and
master franchise programs to grow our businesses. Of our over
49,000 franchised units at December 31, 2020, approximately 30%
operate under our master franchise programs, including over 9,500
units in mainland China. The remainder of our franchise units operate
franchise agreements. Under both types of
under store-level
franchise programs,
franchisees supply capital by purchasing or
leasing the land, building, equipment, signs, seating, inventories and
supplies and, over the longer term, by reinvesting in the business. In
certain historical refranchising transactions the Company may have
retained ownership of land and building and continues to lease them
to the franchisee. Store-level
typically
require payment to the Company of certain upfront fees such as
initial fees paid upon opening of a store, fees paid to renew the term
of the franchise agreement and fees paid in the event the franchise
agreement is transferred to another franchisee. Franchisees also pay
monthly continuing fees based on a percentage of their restaurants’
sales (typically between 4% to 6%) and are required to spend a
certain amount to advertise and promote the brand. Under master
franchise arrangements, the Company enters into agreements that
allow master
franchisees to operate restaurants as well as
sub-franchise restaurants within certain geographic territories. Master
franchisees are typically responsible for overseeing development
within their territories and performing certain other administrative
duties with regard to the oversight of sub-franchisees. In exchange,
master franchisees retain a certain percentage of fees payable by the
sub-franchisees under their franchise agreements and typically pay
lower fees for the restaurants they operate. Our largest master
franchisee, Yum China, pays the Company a continuing fee of 3% on
system sales of our Concepts in mainland China. The use by Yum
China of certain of our material trademarks and service marks is
governed by a master license agreement between Yum Restaurants
Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned
indirect subsidiary of Yum China, and YUM,
through YRI China
Franchising LLC, a subsidiary of YUM, effective from January 1,
2020, and previously through Yum! Restaurants Asia Pte. Ltd.,
another subsidiary of YUM, from October 31, 2016 to December 31,
2019.

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The Company seeks to maintain strong and open relationships with
our franchisees and their representatives. To this end, the Company
invests a significant amount of time working with the franchisee
community and their representative organizations on key aspects of
the
operational
improvements and standards.

equipment,

products,

business,

including

Restaurant Operations
Through its Concepts, YUM develops, operates and franchises a
worldwide system of both traditional and non-traditional Quick
Service Restaurants (“QSR”). Traditional units can feature dine-in,
carryout, drive-thru and delivery services. Non-traditional units
include express units and kiosks that have a more limited menu,
usually generate lower sales volumes and operate in non-traditional
locations like malls, airports, gasoline service stations, train stations,
subways, convenience stores, stadiums, amusement parks and
colleges, where a full-scale traditional outlet would not be practical or
efficient.

YUM! BRANDS, INC. - 2020 Form 10-K 3

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART I
ITEM 1. Business.

Most restaurants in each Concept offer consumers the ability to dine in,
carryout food and/or have the Concepts’ food delivered either through
store-level or third-party delivery services. In addition, Taco Bell and KFC
offer a drive-thru option in many stores. Pizza Hut and Habit Burger Grill
offer a drive-thru option on a much more limited basis.

Our restaurant operations and results were significantly impacted by
in the year ended
a novel strain of coronavirus, COVID-19,
December 31, 2020. This included having a significant number of our
open restaurants subject
to dining room closures and other
limitations on access. In response, we accelerated our deployment of
digital and technology initiatives to enhance the customer experience
and our off-premise capabilities. This included increasing our focus
on driving digital sales where customers utilize ordering interaction
that is primarily facilitated by automated technology. In 2020, our
system restaurants generated digital sales of $17 billion, which
represented an approximate 45% increase over 2019. Additionally,
the number of restaurants that now offer delivery increased to over
35,000 restaurants, which represents over 70% of our global system.

and

local

product

preparation

including food safety and quality,

Restaurant management structure varies by Concept and unit
size. Generally, each restaurant
is led by a restaurant general
manager (“RGM”), together with one or more assistant managers,
depending on the operating complexity and sales volume of the
restaurant. Each Concept issues detailed manuals, which may then
be customized to meet
regulations and customs. These
manuals set forth standards and requirements for all aspects of
food
restaurant operations,
handling
equipment
control
maintenance,
procedures. The restaurant management teams are responsible for
the day-to-day operation of each unit and for ensuring compliance
with operating standards. CHAMPS – which stands for Cleanliness,
Hospitality, Accuracy, Maintenance, Product Quality and Speed of
training,
Service – is our proprietary systemwide program for
measuring and rewarding employee performance against key
customer measures. CHAMPS is intended to align the operating
processes of our entire system around one core set of standards.
RGMs’ efforts,
including CHAMPS performance measures, are
monitored by Area Coaches, where sufficient scale allows. Area
Coaches typically work with approximately six to twelve restaurants.

procedures,

accounting

standards

facility

and

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Supply and Distribution
the Concepts are substantial
The Company and franchisees of
purchasers of a number of food and paper products, equipment and
other restaurant supplies. The principal
items purchased include
chicken, cheese, beef and pork products, paper and packaging
materials. Prices paid for these supplies fluctuate. When prices
increase, the Concepts may attempt to pass on such increases to
their customers, although there is no assurance that this can be
done in practice. The Company does not
typically experience
significant continuous shortages of supplies, and alternative sources
for most of these supplies are generally available.

In the U.S., the Company, along with the representatives of the
Company’s KFC, Pizza Hut and Taco Bell franchisee groups, are
members of Restaurant Supply Chain Solutions, LLC (“RSCS”), a
third party which is responsible for purchasing certain restaurant
products and equipment. Additionally, The Habit Burger Grill entered
into a purchasing agreement with RSCS effective July 31, 2020. The
core mission of RSCS is to provide the lowest possible sustainable
store-delivered prices for restaurant products and equipment. This
arrangement combines the purchasing power of
the Company-
owned and franchisee restaurants, which the Company believes
leverages the system’s scale to drive cost savings and effectiveness
in the purchasing function. The Company also believes that RSCS
fosters closer alignment of interests and a stronger relationship with
our franchisee community.

4 YUM! BRANDS, INC. - 2020 Form 10-K

Most food products, paper and packaging supplies, and equipment
used in restaurant operations are distributed to individual restaurant
units by third-party distribution companies.
In the U.S., McLane
Foodservice, Inc. is the exclusive distributor for the majority of items
used in Company-owned restaurants and for a substantial number of
franchisee restaurants. Outside the U.S., we and our Concepts’
franchisees primarily use decentralized sourcing and distribution
systems involving many different global, regional and local suppliers
and distributors. Our international franchisees generally select and
manage their own third-party suppliers and distributors, subject to
our internal standards. All suppliers and distributors are expected to
provide products and/or services that comply with all applicable
laws, rules and regulations in the state and/or country in which they
operate as well as comply with our internal standards.

their

Advertising and Promotional Programs
Company-owned and franchise restaurants are required to spend a
respective restaurants’ sales on advertising
percentage of
programs with the goal of
increasing sales and enhancing the
reputation of the Concepts. Advertising may be conducted nationally,
regionally and locally. When multiple franchisees operate in the same
country or region, the national and regional advertising spending is
typically conducted by a cooperative to which the franchisees and
Company-owned restaurants,
if any, contribute funds as a
percentage of restaurants’ sales. The contributions are primarily used
to pay for expenses relating to purchasing media for advertising,
market research, commercial production, talent payments and other
support functions for the respective Concepts. We have the right to
control the advertising activities of certain advertising cooperatives,
typically in markets where we have Company-owned restaurants,
through our majority voting rights.

Trademarks and Patents
The Company and its Concepts own numerous registered
trademarks and service marks. The Company believes that many of
these marks, including our Kentucky Fried Chicken®, KFC®, Pizza
Hut®, Taco Bell® and The Habit® marks, have significant value and
importance to our business. The Company’s policy is to
material
pursue registration of
important marks whenever feasible and to
oppose vigorously any infringement of our marks.

these marks by franchisees has been
The use of certain of
authorized in our franchise agreements. Under current law and with
proper use, the Company’s rights in our marks can generally last
indefinitely. The Company also has certain patents on restaurant
equipment which, while valuable, are not currently considered
material to our business.

Working Capital
Information about
is included in
MD&A in Part II, Item 7 and the Consolidated Statements of Cash
Flows in Part II, Item 8.

the Company’s working capital

Seasonal Operations
The Company does not consider its operations to be seasonal to any
material degree.

Competition
The retail food industry, in which our Concepts compete, is made up
of supermarkets, supercenters, warehouse stores, convenience
stores, coffee shops, snack bars, delicatessens and restaurants

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART I
ITEM 1. Business.

restaurant

(including those in the QSR segment), and is intensely competitive
food products, new product
with respect to price and quality of
development, digital engagement, advertising levels and promotional
initiatives, customer service reputation,
location and
attractiveness and maintenance of properties. Competition has also
increased from and been enabled by delivery aggregators and other
food delivery services in recent years, particularly in urbanized areas,
which trend has accelerated following the onset of the COVID-19
pandemic. Our Concepts also face competition as a result of
convergence in grocery, convenience, deli and restaurant services,
including the offering by the grocery industry of convenient meals,
including pizzas and entrees with side dishes. The retail food industry
is often affected by: changes in consumer tastes; national, regional
or local economic conditions; currency fluctuations; demographic
trends; traffic patterns; the type, number and location of competing
food
purchasing
power. Within the retail
food industry, each of our Concepts
competes with international, national and regional chains as well as
locally-owned establishments, not only for customers, but also for
management and hourly personnel, suitable real estate sites and
qualified franchisees. Given the various types and vast number of
competitors, our Concepts do not constitute a significant portion of
the retail food industry in terms of number of system units or system
sales, either on a worldwide or individual country basis.

disposable

products;

retailers

and

Environmental Matters
local
The Company is not aware of any federal, state or
regulations that will materially affect our
environmental
laws or
earnings or competitive position, or
in material capital
expenditures. However, the Company cannot predict the effect on
our operations due to possible future environmental
legislation or
regulations. During 2020, there were no material capital expenditures
for environmental control facilities and no such material expenditures
are anticipated.

result

Government Regulation
U.S. Operations. The Company and its U.S. operations, as well as
our franchisees, are subject to various federal, state and local
laws
affecting our business, including laws and regulations concerning
information security, privacy,
labor and employment, health,
food labeling, competition, public accommodation,
marketing,
sanitation and safety. Each of our and our Concepts’ franchisees’
restaurants in the U.S. must comply with licensing requirements and
regulations promulgated by a number of governmental authorities,
which include health, sanitation, safety, fire and zoning agencies in
the state and/or municipality in which the restaurant is located. In
addition, each Concept must comply with various state and federal
laws that regulate the franchisor/franchisee relationship. To date, the
Company has not been materially adversely affected by such
licensing requirements and regulations or by any difficulty, delay or
failure to obtain required licenses or approvals.

franchisees’
International Operations. Our and our Concepts’
restaurants outside the U.S. are subject to national and local
laws
and regulations which have similarities to those affecting U.S.
restaurants but may differ among jurisdictions. The restaurants
to tariffs and regulations on
outside the U.S. are also subject
laws regulating foreign
imported commodities and equipment,
investment and anti-bribery and anti-corruption laws.

See Item 1A “Risk Factors” of this Form 10-K for a discussion of risks
relating to federal, state, local and international regulation of our
business.

Human Capital Management
Overview

the Company and its subsidiaries
As of December 31, 2020,
employed approximately 38,000 persons,
including approximately
23,000 employees in the U.S. and approximately 15,000 employees
outside the U.S. Approximately 90% and 85% of our U.S. and
international employees, respectively, work in restaurants while the
remainder work in our
In the U.S.,
approximately 85% of our Company-owned restaurant employees
are part-time and at least 45% have been employed by the Company
for less than a year. Some of our International employees are subject
to labor council relationships whose terms vary due to the diverse
countries in which the Company operates.

restaurant-support centers.

In addition to the persons employed by the Company and its
subsidiaries, our approximately 2,000 franchisees around the world
are estimated to employ over 1 million people working in and
supporting the approximately 49,000 restaurants they operate. Each
year YUM and our franchisees around the world create thousands of
restaurant jobs, which are part-time, entry-level opportunities to grow
careers at our KFC, Pizza Hut, Taco Bell and The Habit Burger Grill
brands. As evidence of the opportunities these positions create,
approximately 80% of our Company-owned Restaurant General
Managers (“RGMs”) located in the U.S. have been promoted from
restaurants and such RGMs often earn
other positions in our
competitive pay greater
than the average American household
income.

Human capital management considerations are integral
to our
Recipe for Growth and Good strategy, the drivers of which include
leveraging our culture and people capability
to fuel brand
performance and franchise success, as well as recruiting and
equipping the best restaurant operators in the world to deliver great
customer experiences. Our investment in people includes creating a
culture of engagement that attracts, retains and grows the best
people and creates high performance in our restaurants. We are also
highly focused on building an inclusive culture among our employees,
franchisees, suppliers and partners to reflect the diversity of our
customers and communities. Our commitments and progress
towards executing this strategy are reflected below.

Culture & Talent

We believe that our culture and talent provide us with a competitive
advantage with respect to the performance of our business. Our
areas of focus in this regard include the following:

(cid:129) Measuring YUM employee engagement regularly. For example,
every other year we conduct a global employee engagement
survey of all employees working in our restaurant support centers.
The most recent survey conducted was in 2019 and reflected an
engagement level among our employees significantly exceeding
the average engagement levels of benchmarked companies.

(cid:129) Providing YUM employees with training and development

that
builds world-class leaders and drives business results. We
promote these efforts through initiatives such as our leadership
development program (Heartstyles), our unconscious bias program
(Inclusive Leadership) and training programs with respect to our
including our Code of Conduct. We also
compliance polices,
intend to make available the Heartstyles program to our
franchisees so that their employees may benefit as well.

(cid:129) Enabling a culture that fuels results and cross-brand collaboration
on operational execution, people capability and customer
experience initiatives across our system.

(cid:129) Assessing progress towards lowering turnover and increasing

retention rates, particularly at the restaurant-employee level.

YUM! BRANDS, INC. - 2020 Form 10-K 5

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YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART I
ITEM 1A. Risk Factors.

Equity, Inclusion & Belonging

In connection with our focus on equity, inclusion and belonging, our
areas of focus include the following:

(cid:129) Continually building upon ongoing inclusion efforts to help ensure
our workplaces are environments where all people can be
successful.

(cid:129) Significantly increasing the number of women in our senior
leadership globally, with a goal of achieving gender parity by 2030.
In 2019, approximately 40% of our global
leadership roles were
held by women and approximately half of our global above-
restaurant workforce were women.

(cid:129) Increasing representation of Black and Latinx U.S. associates among
our executive and management ranks, franchisees and suppliers over
the next 10 years to match the combined demographics of those
groups within the U.S. We intend to further this goal through an
increased focus on coaching capability, sponsorship programs and
customized individual development plans. Moreover, we have joined
We Are All Human’s Hispanic Promise, a national pledge to hire,
promote, retain and celebrate Hispanics in the workplace. We also
plan to enhance our relationship with the Consortium for Graduate
Studies in Management, which brings outstanding underrepresented
talent of color and companies like YUM together
to fill critical
organizational roles.

(cid:129) Continuing to roll out Inclusive Leadership training and anti-racism
training across our system. We intend to expand our Inclusive
Leadership training to employees and franchisees around the

Available Information

The Company makes available,
through the Investor Relations
section of its internet website at https://www.yum.com, its annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as
reasonably practicable after electronically filing such material with the
Securities
at
https://www.sec.gov.

Commission

Exchange

(“SEC”)

and

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ITEM 1A. Risk Factors.

factors that could cause our actual

You should carefully review the risks described below as they identify
results to differ
important
materially from our forward-looking statements, expectations and
historical trends. Any of the following risk factors, either by itself or
together with other risk factors, could materially adversely affect our
business, results of operations, cash flows and/or financial condition.

6 YUM! BRANDS, INC. - 2020 Form 10-K

world and have started development of an online module of this
training program to help provide even greater access.

COVID-19 Response

In connection with navigating the COVID-19 pandemic, we have
been heavily focused on the health and safety of the employees,
customers and franchisees of our Concepts. Our response efforts
during the pandemic have included the following:

relief

(cid:129) Supporting impacted employees through establishment of a global
for
medical
team members
Company-owned and franchise
diagnosed with COVID-19 or acting as the primary caregiver for
someone diagnosed with COVID-19.

fund through Yum! Brands Foundation,

restaurant

Inc.

(cid:129) Assisting franchisees through a global

franchise health and
COVID-19 support
team for business continuity and providing
assistance to franchisees who were in good standing and needed
more access to capital, primarily through deferrals of capital
obligations for
remodels and new development. Additionally,
where necessary, we provided grace periods for near-term
payments due to YUM.

(cid:129) Keeping restaurants open safely through increased use of

low
contact options such as delivery, drive-thru and curbside pickup,
providing for contactless delivery,
increased cleaning and
sanitization and providing for personal protective equipment,
temperature checks and counter shields.

Our Corporate Governance Principles and our Code of Conduct are
also located within the Investor Relations section of the Company’s
website. The references to the Company’s website address in this
Form 10-K do not constitute incorporation by reference of
the
information contained on the website and should not be considered
part of this Form 10-K. These documents, as well as our SEC filings,
are available in print free of charge to any shareholder who requests
a copy from our Investor Relations Department.

Risks Related to COVID-19, Health
Epidemics and Food Safety
The novel coronavirus (COVID-19)
global pandemic has had, and is
expected to continue to have, an
adverse effect on our business and
results of operations.
In late 2019, COVID-19 was first detected and in March 2020, the
World Health Organization declared COVID-19 a global pandemic.
During 2020, COVID-19 spread throughout the U.S. and the rest of
the world, and governmental authorities implemented measures to
reduce the spread of COVID-19. These measures include restrictions
on travel outside the home or other limitations on business and other
activities, as well as encouraging social distancing. Moreover,
COVID-19 cases increased in late 2020 and early 2021 in the U.S.

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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and various other regions of the world in which we have operations,
which resulted in some governmental authorities re-imposing
restrictions on business and other activities that were previously lifted
or reduced.

Developments related to COVID-19 have had and are expected to
continue to have an adverse effect on our business and results of
operations. The impacts of COVID-19 have included the ongoing
loss of revenues due to reduced and limited store-level operations,
continued or increased full or partial dining room closures, other
restrictions on our business and operations, continued delays in
reopening, and an increase in the number of permanent restaurant
closures during the year ended December 31, 2020. The impact on
our sales in each of our markets has been dependent on, among
other factors,
the outbreak,
the timing, severity and duration of
measures implemented by government authorities to reduce the
spread of COVID-19, and our reliance on dine-in sales in the market.
Additionally, we and our franchisees have made operational changes
intended to safeguard employees and customers in response to
COVID-19, including increased cleaning and sanitization, installation
of counter screens and purchasing personal protective equipment,
which have increased and may continue to increase restaurant
operating costs and impact restaurant-level margins and return on
invested capital. Our and our franchisees restaurants may experience
interruptions of food and other supplies as well as labor shortages as
a result of COVID-19, thereby disrupting our and our franchisees
operations and impacting same-store sales negatively.

Our success is heavily reliant on our Concepts’ franchisees, and the
COVID-19 pandemic has caused and may continue to cause
financial distress for certain franchisees, particularly those located in
areas most significantly impacted by the COVID-19 pandemic. As a
result of this distress, our franchisees may not be able to meet their
financial obligations to us as they come due, including the payment
of royalties, rent, or other amounts due to the Company. This has led
to, and may continue to lead to, write-offs of amounts we have
currently due from our
franchisees beyond amounts we have
reserved, as well as decreased future collections from franchisees. In
certain instances we offered grace periods to our franchisees, who
were in good standing with the Company and needed greater access
to capital, for certain near-term payments due to us. Offering grace
periods negatively impacts the Company’s cash flows in the short-
term, and if grace periods are necessitated in the future there is no
guarantee that our franchisees will ultimately pay amounts due.
Additionally, our franchisees may not be able to make payments to
landlords, distributors and key suppliers, as well as payments to
service any debt they may have outstanding. Franchisee financial
distress has also led to, and may continue to lead to, permanent
store closures and delayed or reduced new franchisee development,
which may further harm our results and liquidity. Further, in some
cases, we are contingently liable for franchisee lease obligations, and
a failure by a franchisee to perform its obligations under such lease
could result in direct payment obligations for YUM.

We are unable to fully predict the impact that COVID-19 will have on
our and our franchisees’ operations going forward due to various
uncertainties, including the severity and duration of the outbreak, the
timing and availability of effective medical treatments and vaccines,
the timing and effectiveness of the ongoing rollout of vaccines, the
extent to which COVID-19 may cause customers to continue to be
reluctant to return to in-restaurant dining or otherwise change their
consumption patterns (including after the COVID-19 pandemic has
ended), additional actions that may be taken by governmental
authorities, and the length and severity of ongoing negative
economic conditions in the U.S. and globally arising from the
COVID-19 pandemic. Moreover,
if conditions related to the
COVID-19 pandemic result in significant disruptions to capital and
financial markets, or negatively impact our credit ratings, our cost of
borrowing, our ability to access capital on favorable terms and our

PART I
ITEM 1A. Risk Factors.

overall
liquidity and capital structure could be adversely impacted.
Finally, the negative economic conditions arising from the COVID-19
pandemic have resulted in the impairment of the value of certain of
our restaurant assets as well as the goodwill
impairment charge we
incurred with respect to our Habit Burger Grill reporting unit in the
first quarter of 2020.
If such conditions persist and continue to
adversely affect our business, this could give rise to impairment in the
for our
value of other tangible or intangible assets. Conversely,
restaurants that prominently feature drive-thru, carryout and delivery
options, COVID-19 has in many cases contributed to an increase in
sales during 2020. If the impact of COVID-19 recedes, in-person
dining restrictions are lifted or lessened and the restaurant industry in
general returns to more normal operations, the benefits to sales
experienced by certain of our restaurants, including our Pizza Hut
delivery restaurants, could wane and our results could be negatively
impacted.

such as

food safety

Food safety and food-borne illness
concerns may have an adverse effect
on our business.
Food-borne illnesses, such as E. coli, Listeria, Salmonella and
Trichinosis, occur or may occur within our system from time to time.
In addition,
food tampering,
issues
contamination and adulteration occur or may occur within our system
from time to time. Furthermore, due to the COVID-19 pandemic,
there are now stricter health regulations and guidelines and
increased public concern over food safety standards and controls.
Any report or publicity linking us or one of our Concepts’ restaurants,
including restaurants operated by us or our Concepts’ franchisees,
or linking our competitors or the retail food industry generally, to
instances of food-borne illness or food safety issues could adversely
affect our Concepts’ brands and reputations as well as our revenues
and profits, and possibly lead to product liability claims, litigation,
governmental investigations or actions, and damages. If a customer
of one of our Concepts’ restaurants becomes ill from food borne
food safety issues, restaurants in our
illnesses or as a result of
system may be temporarily closed, which could disrupt our
operations and have a material adverse effect on our business,
financial condition and results of operations. In addition, instances or
allegations of
real or
perceived, involving our restaurants, restaurants of competitors, or
our suppliers or distributors (regardless of whether we use or have
used those suppliers or distributors), or otherwise involving the types
of food served at our restaurants, could result in negative publicity
that could adversely affect either our or our Concepts’ franchisees’
revenues and profits. The occurrence of food-borne illnesses or food
safety issues could also adversely affect the price and availability of
affected ingredients, which could result in disruptions in our supply
chain and/or lower margins for us and our Concepts’ franchisees.

food-borne illness or

food safety issues,

Health concerns arising from the
outbreak of a health epidemic or
pandemic may have an adverse effect
on our business.
Our business could be materially and adversely affected by the
outbreak of a widespread health epidemic or pandemic (in addition
to the current COVID-19 pandemic, as discussed above), including
arising from various strains of avian flu or swine flu, such as H1N1,
particularly if located in regions from which we derive a significant
amount of revenue or profit. The occurrence of such an outbreak or
other adverse public health developments could materially disrupt

YUM! BRANDS, INC. - 2020 Form 10-K 7

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YUM BRANDS 2020 FORM

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PART I
ITEM 1A. Risk Factors.

our business and operations. Such events could also significantly
impact our industry and cause a temporary closure of restaurants,
which could severely disrupt our or our franchisees’ operations and
have a material adverse effect on our business, financial condition
and results of operations.

In addition, our operations could be disrupted if any of our
employees or employees of our business partners were suspected of
having the avian flu or swine flu, or other illnesses such as hepatitis A
or norovirus, since this could require us or our business partners to
quarantine some or all of such employees or disinfect our restaurant
facilities. Outbreaks of avian flu occur from time to time around the
world, and such outbreaks have resulted in confirmed human cases.
It is possible that outbreaks could reach pandemic levels. Public
concern over avian flu generally may cause fear about
the
consumption of chicken, eggs and other products derived from
poultry, which could cause customers to consume less poultry and
related products. Because poultry is a menu offering for our
Concepts, this would likely result in lower revenues and profits for us
and our Concepts’
franchisees. Avian flu outbreaks could also
adversely affect the price and availability of poultry, which could
negatively impact profit margins and revenues for us and our
Concepts’ franchisees.

traffic or

restaurant guest

Furthermore, other viruses may be transmitted through human
contact, and the risk of contracting viruses could cause employees
or guests to avoid gathering in public places, which could adversely
affect
the ability to adequately staff
restaurants. We could also be adversely affected if government
authorities impose mandatory closures, seek voluntary closures,
impose restrictions on operations of restaurants, or restrict the import
or export of products, or if suppliers issue mass recalls of products.
Even if such measures are not implemented and a virus or other
disease does not spread significantly, the perceived risk of infection
or health risk may adversely affect our business and operating
results.

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Risks Related to our Business
Strategy and reliance upon
Franchisees
Our operating results and growth
strategies are closely and increasingly
tied to the success of our Concepts’
franchisees.
The vast majority (98%) of our restaurants are operated by our
Concepts’
franchise-owned
restaurants has increased in recent years. Our refranchising efforts
have increased our dependence on the financial success and
cooperation of our Concepts’ franchisees. In addition, our long-term
growth depends on maintaining the pace of our net system unit
growth rate. Nearly all of this unit growth is expected to result from
new unit openings by our Concepts’ franchisees. We also rely on
master franchisees, who have rights to license to sub-franchisees the
right to develop and operate restaurants, to achieve our expectations
for new unit development. If our Concepts’ franchisees and master
franchisees do not meet our expectations for new unit development,
we may not achieve our desired growth.

franchisees, and our percentage of

We have limited control over how our Concepts’
franchisees’
businesses are run, and their inability to operate successfully could
adversely affect our operating results through decreased fees paid to
us for royalties, advertising funds contributions, and other discrete
franchisees
to
services we may

our Concept’s

provide

8 YUM! BRANDS, INC. - 2020 Form 10-K

franchisees

largest Pizza Hut U.S.

in the aggregate become,

(e.g. management of e-commerce platforms).
If our Concepts’
franchisees fail to adequately capitalize their businesses or incur too
much debt, if their operating expenses or commodity prices increase
or if economic or sales trends deteriorate such that they are unable
to operate profitably or repay existing debt, it could result in their
financial distress, including insolvency or bankruptcy, or the inability
to meet development targets or obligations. If a significant franchisee
of one of our Concepts becomes, or a significant number of our
Concepts’
financially
distressed, our operating results could be impacted through reduced
or delayed fee payments that cause us to record bad debt expense,
reduced advertising fund contributions, and reduced new unit
development. For example, NPC International, Inc. (“NPC”), which
had been our
filed voluntary
petitions in July 2020 to restructure under Chapter 11 of the U.S.
Bankruptcy Code.
In connection with this bankruptcy filing, we
consented to the closure of up to 300 mutually selected
underperforming units, primarily dine-in locations. Furthermore, the
COVID-19 pandemic has caused and may continue to cause
financial distress for some portion of our Concepts’ franchisees. In
addition, we are secondarily liable on certain of our Concepts’
franchisees’
lease
agreements that we have guaranteed or assigned to franchisees in
connection with the refranchising of certain Company-owned
restaurants. Our operating results could be impacted by any
increased rent obligations for such leased properties to the extent
our Concepts’
In
addition, the failure of our Concepts’ franchisees to attract and retain
quality personnel or adequately engage in succession planning may
adversely affect their restaurant operations and the development of
new restaurants, which in turn could hurt our business.

franchisees default on such lease agreements.

agreements,

franchisee,

restaurant

including

lease

Our success also depends on the willingness and ability of our
Concepts’ franchisees to implement marketing programs and major
initiatives such as restaurant remodels or equipment or technology
upgrades, which may require financial
investment. Our Concepts
may be unable to successfully implement strategies that we believe
are necessary for
franchisees do not
participate, which in turn may harm the growth prospects and
financial condition of the Company. Additionally, the failure of our
Concepts’
restaurant
franchisees to focus on key elements of
operations, such as quality, service and cleanliness (even if such
failures do not rise to the level of breaching the related franchise
documents) may be attributed by guests to our Concepts’ entire
brand and could have a negative impact on our business.

further growth if

their

Our reliance on master franchise arrangements can decrease our
level of control over our Concepts’ restaurants and increase certain
risks arising from franchise operations. For example, we rely on our
master
sub-franchisee
compliance with our operating standards, and a failure to comply
with such standards could adversely affect our business.

and enforce

to monitor

franchisees

The financial performance of certain of
our Concepts’ franchisees has an
outsized impact on our operating
results.
We have franchise relationships that are particularly important to our
business, such as our relationship with Yum China. In connection
with the spin-off of our China business in 2016 into an independent
publicly-traded company (the “Separation” or “Yum China spin-off”),
we entered into a Master License Agreement pursuant to which Yum
China is the exclusive licensee of the KFC, Pizza Hut and Taco Bell
Concepts and their related marks and other intellectual property
restaurant services in mainland China. Following the
rights for

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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Separation, Yum China became, and continues to be, our largest
franchisee. Our financial results are significantly affected by Yum
China’s results as we are entitled to receive a 3% sales-based royalty
on all Yum China system sales related to our Concepts.

In addition to Yum China, we have other significant relationships on
which our success is dependent, including our strategic alliance with
Telepizza Group S.A., which is the master franchisee of Pizza Hut in
Latin America (excluding Brazil) and portions of Europe, and our
relationship with certain large franchisees, such as Flynn Restaurant
Group, an existing YUM franchisee which recently announced its
intention to acquire approximately 950 Pizza Hut U.S. restaurants
which would make it the largest operator of Pizza Hut restaurants in
the U.S. Any failure to realize the expected benefits of such franchise
relationships may adversely impact our business and operating
results.

We may not achieve our target
development goals, including as the
result of the COVID-19 pandemic,
and new restaurants may not be
profitable.
Our growth strategy depends on our and our Concepts’ franchisees’
ability to increase the number of restaurants around the world.
restaurant openings and greater
However, we had fewer net
permanent restaurant closures during 2020 compared to our recent
history and expectations as the result of the COVID-19 pandemic.
Additionally, we experienced higher closures in the Pizza Hut system
during 2020 as a result of our previously announced efforts to
accelerate the transformation of the Pizza Hut restaurant estate to a
more modern and delivery-based business and other business
model pressures impacting certain Pizza Hut
restaurants. The
successful development of new units depends in large part on the
ability of our Concepts’ franchisees to open new restaurants and to
operate these restaurants profitably. Effectively managing growth can
be challenging, particularly as we expand into new markets
internationally, and we cannot guarantee that we, or our Concepts’
franchisees,
including Yum China, will be able to achieve our
expansion goals or that new restaurants will be operated profitably.
Further, there is no assurance that any new restaurant will produce
operating results similar to those of our existing restaurants. Other
risks that could impact our ability to increase the number of our
restaurants include prevailing economic conditions and trade or
economic policies or sanctions, our ability to attract new franchisees,
construction and development costs of new restaurants, and our, or
franchisees’, ability to obtain suitable restaurant
our Concepts’
locations, negotiate acceptable lease or purchase terms for the
locations, obtain required permits and approvals in a timely manner,
hire and train qualified management teams and restaurant crews,
and meet construction schedules.

Expansion into markets could also be affected by our Concepts’
franchisees’ willingness to invest capital or ability to obtain financing
to construct and open new restaurants. If it becomes more difficult or
more expensive for our Concepts’ franchisees to obtain financing to
develop new restaurants, or if
the perceived return on invested
the expected growth of our
capital
system could slow and our future revenues and operating cash flows
could be adversely impacted.

is not sufficiently attractive,

In addition, the development of new restaurants could impact the
sales of our Concepts’ existing restaurants nearby. There can be no
assurance that sales cannibalization will not occur or become more
significant in the future as we increase our presence in existing
markets.

PART I
ITEM 1A. Risk Factors.

We may not realize the anticipated
benefits from past or potential future
acquisitions, investments or other
strategic transactions.
From time to time we evaluate and may complete mergers,
acquisitions, divestitures,
joint ventures, strategic partnerships,
minority investments (which may include minority investments in third
parties, such as franchisees or master
franchisees) and other
strategic transactions,
including our acquisition of The Habit
Restaurants, Inc. completed in March 2020, our strategic alliance
with Telepizza Group S.A. effectuated in December 2018, and our
acquisition of QuikOrder, LLC completed in December 2018.

Past and potential future strategic transactions may involve various
inherent risks, including, without limitation:

(cid:129) expenses, delays or difficulties in integrating acquired companies,
joint venture operations, strategic partnerships or investments into
our organization, including the failure to realize expected synergies
and/or the inability to retain key personnel;

(cid:129) diversion of management’s attention from other initiatives and/or
day-to-day operations to effectively execute our growth strategy;

(cid:129) inability to generate sufficient revenue, profit, and cash flow from
joint ventures, strategic partnerships or

acquired companies,
investments;

(cid:129) the possibility that we have acquired substantial contingent or
unanticipated liabilities in connection with acquisitions or other
strategic transactions; and

(cid:129) the possibility that

investments we have made may decline
significantly in value, which could lead to the potential impairment
of
the carrying value of goodwill associated with acquired
businesses.

Past and potential future strategic transactions may not ultimately
create value for us and may harm our reputation and materially
adversely affect our business,
financial condition and results of
operations.

Risks Related to Operating a Global
Business
We have significant exposure to the
Chinese market through our largest
franchisee, Yum China, which subjects
us to risks that could negatively affect
our business.
A significant portion of our total business is conducted in mainland
China, particularly with respect to our KFC Concept. Yum China’s
business is exposed to risks in mainland China, which include,
among others, potential political,
instability,
changes in economic conditions (including consumer spending,
unemployment levels and wage and commodity inflation), consumer
preferences, the regulatory environment (including uncertainties with
respect to the interpretation and enforcement of Chinese laws, rules
and regulations), the effect of the COVID-19 pandemic and related
Chinese governmental
restrictions. Further, any significant or
including as the
prolonged deterioration in U.S.–China relations,
result of current U.S.–China tensions, could adversely affect our
Concepts in mainland China. Chinese law regulates Yum China’s

financial or social

YUM! BRANDS, INC. - 2020 Form 10-K 9

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YUM BRANDS 2020 FORM

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PART I
ITEM 1A. Risk Factors.

business conducted within mainland China. Our royalty income from
to numerous
the Yum China business is therefore subject
uncertainties based on the policies of the Chinese government, as
they may change from time to time. If Yum China’s business is
harmed or development of our Concepts’ restaurants is slowed in
mainland China due to any of these factors,
it could negatively
impact the royalty paid by Yum China to us, which would negatively
impact our financial results or our growth prospects.

In addition,

if we are unable to enforce our

Our relationship with Yum China is governed primarily by a Master
License Agreement, which may be terminated upon the occurrence
of certain events, such as the insolvency or bankruptcy of Yum
intellectual
China.
property or contract rights in mainland China, if Yum China is unable
the Master License
or unwilling to satisfy its obligations under
Agreement, or
is otherwise
terminated, it could result in an interruption in the operation of our
brands that have been exclusively licensed to Yum China for use in
mainland China. Such interruption could cause a delay in, or loss of,
royalty income to us, which would negatively impact our financial
results.

the Master License Agreement

Our international operations subject us
to risks that could negatively affect our
business.
A significant portion of our Concepts’ restaurants are operated in
countries and territories outside of the U.S., including in emerging
markets, and we intend to continue expansion of our international
operations. As a result, our business and the businesses of our
Concepts’ franchisees are increasingly exposed to risks inherent in
international operations. These risks, which can vary substantially by
country, include political, financial or social
instability or conditions,
geopolitical events, corruption, anti-American sentiment, social and
ethnic unrest, and terrorism, as well as changes in economic
conditions (including consumer spending, unemployment levels and
wage and commodity inflation), the regulatory environment (including
the risks of operating in developing or emerging markets in which
there are significant uncertainties regarding the interpretation and
enforceability of legal requirements and the enforceability of contract
income and non-income
rights and intellectual property rights),
based tax rates and laws,
restrictions or
regimes (including
foreign exchange control
controls, sanctions,
restrictions on currency conversion), natural disasters, the impact of
labor costs and conditions, consumer preferences and the laws and
policies that govern foreign investment
in countries where our
Concepts’ restaurants are operated. For example, we have been
subject to a regulatory enforcement action in India alleging violation
of foreign exchange laws for failure to satisfy conditions of certain
operating approvals, such as minimum investment and store build
requirements as well as limitations on the remittance of fees outside
of the country (See Note 20). In addition, we and our franchisees do
business in jurisdictions that may be subject to trade or economic
sanction regimes and such sanctions could be expanded. Any failure
to comply with such sanction regimes or other similar laws or
regulations could result
the
imposition of penalties, suspension of business licenses, or a
cessation of operations at our or our franchisees’ businesses, as well
images and
as damage to our and our Concepts’ brands’
reputations, all of which could harm our profitability and growth
prospects.

in the assessment of damages,

the impact of

import

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Foreign currency risks and foreign
exchange controls could adversely
affect our financial results.
Our results of operations and the value of our foreign assets are
affected by fluctuations in currency exchange rates, which may
adversely affect reported earnings. More specifically, an increase in
the value of the U.S. dollar relative to other currencies, such as the
Chinese Renminbi (“RMB”), Australian Dollar, the British Pound and
the Euro, as well as currencies in certain other markets, such as the
Malaysian Ringgit and Russian Ruble, could have an adverse effect
on our reported earnings. Any significant fluctuation in the value of
currencies of countries in which we or our franchisees operate, and
in particular RMB in China, could materially impact the U.S. dollar
value of royalty payments made to us, which could result in lower
revenues. There can be no assurance as to the future effect of any
such changes on our results of operations, financial condition or
cash flows. In addition, the governments in certain countries where
our Concepts operate, including China, restrict the conversion of
local currency into foreign currencies and,
the
remittance of currency out of
the country. Restrictions on the
conversion of RMB to U.S. dollars or further restrictions on the
remittance of currency out of China could result in delays in the
remittance of Yum China’s royalty, which could impact our liquidity.

in certain cases,

customers, employees,

Risks Related to Technology, Data
Privacy and Intellectual Property
Failure to protect the integrity and
security of personal information of our
customers and employees could result
in substantial costs, expose us to
litigation and damage our reputation.
financial and other
We receive and maintain certain personal,
information about our
and
vendors
franchisees. In addition, our vendors and/or franchisees receive and
maintain certain personal, financial and other information about our
employees and customers. The use and handling, including security,
of
this information is regulated by evolving and increasingly
demanding laws and regulations in various jurisdictions, as well as by
certain third-party contracts and industry standards. We have
experienced cyber- attacks and security breaches from time to time.
The number and frequency of these cyber-attacks and/or security
breaches varies between periods but could be exacerbated by an
increase in the use of our digital commerce platforms. If our security
and information systems are compromised as a result of data
corruption or loss, cyber-attack or a network security incident, or if
our employees, franchisees or vendors fail to comply with these laws
and regulations or fail to meet industry standards and this information
is obtained by unauthorized persons or used inappropriately, it could
result in liabilities and penalties and could damage our reputation,
cause interruption of normal business performance, cause us to incur
substantial costs and result in a loss of customer confidence, which
results of operations and financial
could adversely affect our
condition. Additionally, we could be subject
to litigation and
government enforcement actions as a result of any such failure.

Further, data privacy is subject to frequently changing rules and
regulations, which sometimes conflict among the various jurisdictions
and countries where we, our Concepts and our Concepts’
franchisees do business. For example, the General Data Protection

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ITEM 1A. Risk Factors.

Regulation (“GDPR”), which was adopted by the European Union
effective May 2018, requires companies to meet new requirements
regarding the handling of personal data and is subject to changing
requirements, which could increase Company and franchisee
resources necessary to comply. In addition, the State of California
enacted the California Consumer Privacy Act (the “CCPA”), which
became effective January 2020, requiring companies that process
information on California residents to, among other things, provide
new disclosures and options to consumers about data collection,
use and sharing practices. Further, the CCPA has been subject to
revision and amendments, including significant modifications made
by the California Privacy Rights Act (“CPRA”), which was recently
approved by California voters as a ballot initiative in November 2020
and will take effect January 1, 2022. The updates and modifications
to the CCPA, as well as requirements under the GDPR may require
us to modify our data processing practices and policies and to incur
substantial costs and expenses to comply. Moreover, each of the
GDPR and the CCPA confer a private right-of-action on certain
individuals and associations. Our
the failure of our
franchisees to adhere to or successfully implement appropriate
processes to adhere to the requirements of GDPR, CCPA and other
evolving laws and regulations in this area could result in financial
penalties, legal
liability and could damage our and our Concepts’
brands’ reputations.

failure or

In addition, several other states have introduced or passed similar
legislation to the CCPA and CPRA which may impose varying
standards and requirements on our data collection, use and
processing activities. The Federal Trade Commission and many state
attorneys general are also interpreting federal and state consumer
protection laws to impose standards for
the collection, use,
dissemination and security of data. Furthermore, various international
jurisdictions, where our Concepts have operations, have significantly
strengthened their data privacy laws, rules and regulations. If more
restrictive or
requirements are adopted by
international, state and/or federal authorities in the future and/or
regulators’ enforcement priorities shift, compliance costs and
potential liability could increase for the Company and our Concepts’
franchisees, which could cause reputational harm and have an
adverse effect on our business.

inconsistent

legal

Unreliable or inefficient restaurant or
consumer-facing technology or the
failure to successfully implement
technology initiatives in the future
could adversely impact operating
results and the overall consumer
experience.
We and our Concepts’
franchisees rely heavily on information
technology systems in the conduct of our business, some of which
are managed, hosted, provided and/or used by third parties,
including, for example, point-of-sale processing in our restaurants,
management of our supply chain, and various other processes and
procedures. These systems are subject to damage, interruption or
failure due to theft, fire, power outages, telecommunications failure,
computer viruses, security breaches, malicious cyber-attacks or
other catastrophic events. Certain technology systems may also be
unreliable or
inefficient, and technology vendors may limit or
terminate product support and maintenance, which could impact the
If our or our Concepts’
reliability of critical systems’ operations.
franchisees’ information technology systems are damaged or fail to
function properly, we may incur substantial costs to repair or replace
them, and may experience loss of critical data and interruptions or

delays in our ability to manage inventories or process transactions,
employee
which
dissatisfaction, or negative publicity that could adversely impact our
reputation, results of operations and financial condition.

customer or

could result

sales,

lost

the

restaurant

operations

and improve

We and our Concepts’ franchisees rely on technology not only to
efficiently operate our restaurants but also to drive the customer
experience, sales growth and margin improvement. Our continued
growth will be dependent on our initiatives to implement proprietary
and third-party technology solutions and gather and leverage data to
enhance
customer
experience. It may be difficult to recruit and retain qualified individuals
for these efforts due to intense competition for qualified technology
systems’ developers necessary to innovate, develop and implement
new technologies for our growth initiatives, including increasing our
digital relationship with customers. Our strategic technology initiatives
may not be implemented in a timely manner or may not achieve the
desired results. Even if we effectively implement and manage our
technology initiatives, there is no guarantee that this will result in
sales growth or margin improvement. Additionally, developing and
implementing the evolving technology demands of the consumer
may place a significant financial burden on us and our Concepts’
franchisees, and our Concepts’ franchisees may have differing views
on investment priorities. Moreover, our failure to adequately invest in
to technological advancements and
new technology or adapt
industry trends, particularly with respect
to digital commerce
capabilities, could result in a loss of customers and related market
share. If our Concepts’ digital commerce platforms do not meet
customers’ expectations in terms of security, speed, attractiveness
or ease of use, customers may be less inclined to return to such
digital commerce platforms, which could negatively impact our
business.

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There are risks associated with our
increasing dependence on digital
commerce platforms to maintain and
grow sales. Such platforms may
experience disruptions, which could
harm our ability to compete and
conduct our business.
Customers are increasingly using e-commerce websites and apps,
both domestically and internationally, such as pizzahut.com, Pizza
Hut, KFC, Taco Bell and The Habit Burger Grill apps, as well as apps
owned by third-party delivery aggregators and third-party mobile
payment processors, to order and pay for our Concepts’ products.
Moreover, the COVID-19 pandemic has resulted in an increase in the
use of store-level or third-party delivery services by our Concepts,
and many restaurants in each of our Concepts now offer consumers
the ability to have the Concept’s food delivered through third-party
delivery services. As a result, our Concepts and our Concepts’
franchisees are increasingly reliant on digital ordering and payment
as a sales channel. These digital ordering and payment platforms
could be damaged or
technological
failures, user errors, cyber-attacks, other
forms of sabotage,
inclement weather or natural disasters. The digital ordering platforms
relied upon by our Concepts have experienced interruptions and
could experience further interruptions, which could limit or delay
customers’ ability to order
through such platforms or make
customers less inclined to return to such platforms. The rapid
acceleration in growth of digital sales has placed additional stress on
those platforms that are more reliant upon legacy technology, such
as certain platforms used by Pizza Hut, which may result in more
frequent and potentially more severe interruptions. Moreover, our

interrupted by power

loss,

YUM! BRANDS, INC. - 2020 Form 10-K 11

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART I
ITEM 1A. Risk Factors.

reliance on multiple digital commerce platforms to support our global
footprint, multiple Concepts and highly franchised business model
could increase our vulnerability to cyber-attacks and/or security
breaches and could necessitate additional expenditures as we
endeavor to consolidate and standardize such platforms.

largest

Yum China, our
franchisee, utilizes third-party mobile
payment apps such as Alipay and WeChat as a means through
which to generate sales and process payments. Should customers
become unable to access mobile payment apps in China or should
the relationship between Yum China and one or more third-party
mobile payment processors become interrupted, our
results of
In particular, political
operations could be negatively impacted.
tensions between the U.S. and China escalated in 2020, with a
number of actions taken by the U.S. government, such as the Clean
Network program announced on August 5, 2020, to protect U.S.
telecommunication and technology infrastructure, and two executive
orders issued by President Trump on August 6, 2020, to ban, within
to the
45 days of such date, any person or property subject
jurisdiction of the U.S. from any transaction related to WeChat, to the
extent that any such transaction is identified by the Secretary of
Commerce as being subject
to the prohibitions stated in the
executive orders. While the directives issued by the Secretary of
identified
Commerce arising from the executive orders only
prohibited transactions that are limited to the territory of the U.S. and
therefore are not expected to impact Yum China’s operations in
China, we cannot foresee whether and how similar or additional
policy actions taken by the U.S. or Chinese governments will impact
our business and financial performance. If Yum China’s ability to use
WeChat or other third-party mobile payment apps in its operations is
restricted, its business, operations, financial condition and results of
operations could be materially and adversely affected, which could
have a negative impact on the royalty paid to us.

Our inability or failure to recognize,
respond to and effectively manage the
accelerated impact of social media
could adversely impact our business.
In recent years, there has been a marked increase in the use of social
media platforms,
including blogs, chat platforms, social media
websites, and other forms of Internet-based communications which
allow individuals access to a broad audience of consumers and other
interested persons. The rising popularity of social media and other
consumer-oriented technologies has increased the speed and
accessibility of information dissemination and given users the ability
to more effectively organize collective actions such as boycotts and
other brand-damaging behaviors. Many social media platforms
immediately publish the content their subscribers and participants
post, often without filters or checks on accuracy of the content
posted. Information posted on such platforms at any time may be
adverse to our interests and/or may be inaccurate. The dissemination
of information online could harm our business, reputation, financial
condition, and results of operations, regardless of the information’s
accuracy. The damage may be immediate without affording us an
opportunity for redress or correction.

In addition, social media is frequently used by our Concepts to
communicate with their
respective customers and the public in
general. Failure by our Concepts to use social media effectively or
appropriately, particularly as compared to our Concepts’ respective
competitors, could lead to a decline in brand value, customer visits
and revenue. In addition,
laws and regulations, including Federal
Trade Commission enforcement, are rapidly evolving to govern social
media platforms and communications. A failure of us, our employees,
our franchisees or third parties acting at our direction to abide by

12 YUM! BRANDS, INC. - 2020 Form 10-K

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applicable laws and regulations in the use of social media could
adversely impact our Concepts’ brands, our reputation and our
business, or subject us or our franchisees to fines or other penalties.
Other risks associated with the use of social media include improper
disclosure of proprietary information, negative comments about our
Concepts’ brands, exposure of personally identifiable information,
fraud, hoaxes or malicious dissemination of false information. The
inappropriate use of social media by our customers or employees
could increase our costs,
in negative
publicity that could damage our reputation and adversely affect our
results of operations.

lead to litigation or result

Failure to protect our service marks or
other intellectual property could harm
our Concepts’ Brands and overall
business.
We regard our registered service marks (e.g., Yum®, KFC®, Pizza
Hut®, Taco Bell®, and The Habit®), and other service marks and
trademarks related to our restaurant businesses, as having significant
value and being important to our marketing efforts. Our service
marks and trademarks create brand awareness and help build
goodwill among our customers. Thus, we rely on a combination of
legal protections provided by contracts, copyrights, patents,
trademarks, service marks and other common law rights, such as
trade secret and unfair competition laws, to protect our restaurants
infringement. Many of our trademarks
and services from potential
and service marks are registered in the U.S. and/or
foreign
jurisdictions. However, from time to time we become aware of names
and marks identical or confusingly similar to our service marks being
used by other persons or companies. Although our policy is to
oppose any such infringement,
further or unknown unauthorized
uses or other misappropriation of our trademarks or service marks
could diminish the value of our Concepts’ brands and adversely
affect our business and goodwill. In addition, effective intellectual
property protection may not be available in every country in which
our Concepts have, or may in the future open or franchise, a
restaurant and the laws of some foreign countries do not protect
intellectual property rights to the same extent as the laws of the U.S.
There can be no assurance that the steps we have taken to protect
our
the legal protections which may be
available will be adequate, and defending or enforcing our
trademarks, service marks and other intellectual property could result
in the expenditure of significant resources or result in significant harm
financial condition, and overall
to our business,
operations. We may also face claims of
infringement that could
interfere with the use of the proprietary know-how, recipes, or trade
secrets used in our business. Defending against such claims is
costly, and we may be prohibited from using such proprietary
information in the future or forced to pay damages, royalties, or other
fees for using such proprietary information, any of which could
negatively affect our business, reputation, financial condition, and
results of operations.

intellectual property or

reputation,

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YUM BRANDS 2020 FORM

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Risks Related to Our Supply Chain
and Employment
Shortages or interruptions in the
availability and delivery of food and
other supplies may increase costs or
reduce revenues.
The products sold by our Concepts and their
franchisees are
sourced from a wide variety of domestic and international suppliers
although certain products have limited suppliers, which increases our
reliance on those suppliers. We, along with our Concepts’
franchisees, are also dependent upon third parties to make frequent
deliveries of food products and supplies that meet our specifications
at competitive prices. Shortages or interruptions in the supply of food
restaurants have
items and other supplies to our Concepts’
happened from time to time and could adversely affect
the
availability, quality and cost of items we use and the operations of
our restaurants, which in turn could lead to restaurant closures and/
or a decrease in sales. Future shortages or disruptions could be
inclement weather, natural disasters, pandemics
caused by
(including the COVID-19 pandemic),
inaccurate forecasting of
customer demand, problems
in production or distribution,
restrictions on imports or exports including due to trade disputes or
restrictions, the inability of vendors to obtain credit, political instability
in the countries in which the suppliers and distributors are located,
instability of suppliers and distributors, suppliers’ or
the financial
distributors’
requirements,
failure to meet our standards or
transitioning to new suppliers or distributors, product quality issues,
inflation, other factors relating to the suppliers and distributors and
the countries in which they are located, food safety warnings or
advisories or the prospect of such pronouncements, product recalls,
the cancellation of supply or distribution agreements or an inability to
renew such arrangements or to find replacements on commercially
reasonable terms, or other conditions beyond our control or the
control of our Concepts’ franchisees.

In addition, in the U.S., the Company and the Company’s KFC, Pizza
Hut and Taco Bell franchisee groups are members of Restaurant
Supply Chain Solutions, LLC (“RSCS”), which is a third-party
responsible
for purchasing certain restaurant products and
equipment. The Habit Burger Grill entered into a purchasing
agreement with RSCS in 2020. McLane Foodservice, Inc. (“McLane”)
serves as the largest distributor for the Company’s KFC, Pizza Hut
and Taco Bell Concepts in the U.S. Any failure or inability of our
significant suppliers or distributors, including RSCS or McLane to
meet their respective service requirements, could result in shortages
or interruptions in the availability of food and other supplies.

The loss of key personnel, labor
shortages or difficulty finding qualified
employees could slow our growth,
harm our business and reduce our
profitability.
Much of our future success depends on the continued availability
and service of senior management personnel. The loss of any of our
executive officers or other key senior management personnel could
harm our business.

In addition, our restaurant operations are highly service-oriented and
our success depends in part upon our and our Concepts’
franchisees’ ability to attract, retain and motivate a sufficient number

PART I
ITEM 1A. Risk Factors.

of qualified employees, including franchisee management, restaurant
for qualified
managers and other crew members. The market
employees in the retail food industry is very competitive. Our and our
Concepts’
for
franchisees may experience a shortage of
positions in our restaurants, including due to concern over exposure
to COVID-19 and other factors that could decrease the pool of
available qualified employees for key functions.

labor

Any future inability to recruit and retain qualified individuals may delay
our planned use, development or deployment of technology or the
planned openings of new restaurants by us and our Concepts’
franchisees which could have a material adverse impact on the
operation of our Concepts’ existing restaurants. In addition, strikes,
work slowdowns or other job actions may become more common. In
the event of a strike, work slowdown or other labor unrest, the ability
to adequately staff our Concepts’ restaurants could be impaired,
which could result in reduced revenue and customer claims, and
may distract our management from focusing on our business and
strategic priorities.

Changes in labor and other operating
costs could adversely affect our and
our franchisees’ results of operations.
An increase in the costs of employee wages, benefits and insurance
(including workers’ compensation, general
liability, property and
health) as well as other operating costs such as rent and energy
costs could adversely affect our and our franchisees’ operating
results. Such increases in costs could result from general economic
or competitive conditions or from government imposition of higher
minimum wages at the federal, state or local
level, including the
potential increase in the federal minimum wage in the U.S. proposed
by the new presidential administration. Moreover, there may be a
long-term trend toward higher wages in developing markets. Any
increase in such operating expenses could adversely affect our and
our Concepts’ franchisees’ profit margins. In addition, competition for
qualified employees could compel us or our Concepts’ franchisees to
pay higher wages to attract or retain key crew members, which could
result in higher labor costs and decreased profitability.

large quantities of

(including potatoes

An increase in food prices may have an
adverse impact on our and our
Concepts’ franchisees’ profit margins.
Our and our Concepts’ franchisees’ businesses depend on reliable
raw materials such as proteins
sources of
(including poultry, pork, beef and seafood), cheese, oil, flour and
vegetables
and lettuce). Raw materials
purchased for use in our Concepts’ restaurants are subject to price
volatility caused by any fluctuation in aggregate supply and demand,
or other external conditions, such as weather conditions, or natural
events or disasters that affect expected harvests of such raw
materials, taxes and tariffs (including as a result of trade disputes),
industry
recalls,
governmental regulation and other factors, all of which are beyond
our control and in many instances are unpredictable. As a result, the
historical prices of
raw materials used in the operation of our
Concepts’ restaurants have fluctuated. We cannot assure that we or
our Concepts’ franchisees will continue to be able to purchase raw
materials at reasonable prices, or that the cost of raw materials will
In addition, a significant increase in
remain stable in the future.
gasoline prices could result in the imposition of fuel surcharges by
our distributors.

concerns,

demand,

product

safety

food

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Moreover, these types of claims could lead to an increase in the
regulation of the content or marketing of our products, including
legislation or regulation seeking to tax and/or regulate high-fat foods,
foods with high sugar and salt content, or foods otherwise deemed
to be “unhealthy,” which could in turn increase costs of compliance
and remediation to us and our franchisees.

the quality or

reduce brand value

In addition, business or other incidents, whether isolated or recurring,
and whether originating from us, our Concepts’
restaurants,
franchisees, competitors, governments, suppliers or distributors, can
significantly
and consumer perception,
particularly if the incidents receive considerable publicity or result in
litigation or investigations. Moreover, our success depends in large
part upon our ability to maintain our corporate reputation. For
example, the reputation of our Concepts’ brands could be damaged
by claims or perceptions about the quality or safety of our products
or
reputation of our suppliers, distributors or
franchisees or by claims or perceptions that we, founders of our
franchisees or other business partners
Concepts, our Concepts’
have acted or are acting in an unethical, illegal, racially-biased or
socially irresponsible manner or are not fostering an inclusive and
diverse environment,
regardless of whether such claims or
perceptions are true. Our corporate reputation could also suffer from
negative publicity or consumer sentiment regarding Company action
or brand imagery, a real or perceived failure of corporate governance,
or misconduct by any Company officer or any employee or
representative of us or a franchisee. For example, entities in our
supply chain may engage in conduct, including alleged human rights
abuses or environmental wrongdoing, and any such conduct could
damage our or our Concepts’ brands’
reputations. Any such
incidents (even if resulting from actions of a competitor or franchisee)
could cause a decline directly or indirectly in consumer confidence in,
or the perception of, our Concepts’ brands and/or our products and
reduce consumer demand for our products, which would likely result
in lower revenues and profits.

and

authorities,

governmental

nongovernmental

including with respect

There has been an increased public focus, including from U.S. and
foreign
on
environmental sustainability matters, including with respect to climate
change, greenhouse gases, water resources, packaging and waste,
animal health and welfare, deforestation and land use. We endeavor
to conduct our business in a manner which reflects our priority of
sustainable stewardship,
to environmental
sustainability matters, and we are working to manage the risks and
costs to us, our franchisees and our supply chain associated with
these types of environmental sustainability matters. In addition, as
the result of such heightened public focus on environmental
sustainability matters, we may face increased pressure to provide
expanded disclosure, make or expand commitments, set targets, or
establish additional goals and take actions to meet such goals, in
connection with such environmental sustainability matters. These
matters and our efforts to address them could expose us to market,
operational, reputational and execution costs or risks.

PART I
ITEM 1A. Risk Factors.

Because we and our Concepts’ franchisees provide competitively
priced food, we may not have the ability to pass through to our
customers the full amount of any commodity price increases. If we
and our Concepts’ franchisees are unable to manage the cost of raw
materials or to increase the prices of products proportionately, our
and our franchisees’ profit margins and return on invested capital
may be adversely impacted.

Risks Related to our Concepts’
Brands and Reputation
Our Concepts’ brands may be harmed
or diluted through franchisee and third-
party activity.

Although we monitor and regulate franchisee activities through our
Concepts’ franchise agreements, franchisees or other third parties
may refer to or make statements about our Concepts’ brands that do
not make proper use of our trademarks or required designations, that
improperly alter trademarks or branding, or that are critical of our
Concepts’ brands or place our Concepts’ brands in a context that
may tarnish their reputation. This may result in dilution of, or harm to,
our intellectual property or the value of our Concepts’ brands.

engage

in quality

Franchisee noncompliance with the terms and conditions of our
franchise agreements may reduce the overall goodwill of our
Concepts’ brands, whether through the failure to meet health and
safety standards (including with respect
to additional sanitation
in connection with the COVID-19
protocols and guidelines
pandemic),
control or maintain product
consistency, or through the participation in improper or objectionable
business practices. Moreover, unauthorized third parties, including
our Concepts’ current and former
franchisees, may use our
intellectual property to trade on the goodwill of our Concepts’
brands,
resulting in consumer confusion or brand dilution. Any
reduction of our Concepts’ brands’ goodwill, consumer confusion, or
brand dilution is likely to impact sales, and could materially and
adversely impact our business and results of operations.

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Our success depends substantially on
our corporate reputation and on the
value and perception of our brands.
Our success depends in large part upon our ability and our
Concepts’ franchisees’ ability to maintain and enhance our corporate
reputation and the value and perception of our brands. Brand value
is based in part on consumer perceptions on a variety of subjective
qualities. Those perceptions are affected by a variety of
factors,
including the nutritional content and preparation of our food, the
in which we source the
ingredients we use, and the manner
commodities we use. Consumer acceptance of our offerings is
subject to change for a variety of reasons, and some changes can
occur rapidly. For example, nutritional, health and other scientific
studies and conclusions, which constantly evolve and may have
contradictory implications, drive popular opinion,
litigation and
regulation (including initiatives intended to drive consumer behavior)
in ways that may affect perceptions of our Concepts’ brands
the
generally or
restaurant
the
menus and practices of restaurant chains have led to customer
including weight gain and other adverse effects.
health issues,
Publicity about
the quick
these matters (particularly directed at
service and fast-casual segments of the retail food industry) may
harm our Concepts’ reputations and adversely affect our business.

industry globally has been subject

relative to available alternatives.

In addition,
to claims that

14 YUM! BRANDS, INC. - 2020 Form 10-K

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YUM BRANDS 2020 FORM

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tort,

real estate related,

Risks Related to Government
Regulation and Litigation
We could be party to litigation that
could adversely affect us by increasing
our expenses, diverting management
attention or subjecting us to significant
monetary damages and other
remedies.
We are regularly involved in legal proceedings, which include
regulatory claims or disputes, consumer, personal injury, claims from
franchisees employment,
intellectual
property, breach of contract, securities, derivative and other litigation.
legal proceedings in Note 20 to the
See the discussion of
Consolidated Financial Statements included in Item 8 of this Form
10-K. Plaintiffs in these types of lawsuits often seek recovery of very
large or indeterminate amounts, and these types of
lawsuits are
subject to inherent uncertainties (some of which are beyond the
Company’s control). Unfavorable rulings or developments may also
occur. In addition, the restaurant industry globally has been subject
to claims that relate to the nutritional content of food products, as
well as claims that the menus and practices of restaurant chains
have led to customer health issues, including weight gain and other
adverse effects, and we may become subject to such claims in the
future. Moreover, regardless of whether any such lawsuits have
merit, or whether we are ultimately held liable or settle, such litigation
may be expensive to defend, may divert resources and management
attention away from our operations, and may negatively impact our
results of operations. With respect to insured claims, a judgment for
monetary damages in excess of any insurance coverage could
adversely affect our financial condition or results of operations. Any
adverse publicity resulting from these allegations may also adversely
affect our Concepts’ reputations, which in turn could adversely affect
our results of operations.

Changes in, or noncompliance with,
governmental regulations may
adversely affect our business
operations, growth prospects or
financial condition.
The Company, and our Concepts and their franchisees, are subject
to numerous laws and regulations around the world. These laws and
regulations change regularly and are increasingly complex. For
example, we are subject to:

(cid:129) The Americans with Disabilities Act in the U.S. and similar state
laws that provide protection to individuals with disabilities in the
context of employment, public accommodations and other areas.

(cid:129) The U.S. Fair Labor Standards Act, which governs matters such as
minimum wages, and overtime, and the Family and Medical Leave
Act as well as a variety of similar state laws which provide
protected leave rights to employees.

(cid:129) Federal and state employment laws related to workplace health
and safety, non-discrimination, non-harassment, whistleblower
protections, and other terms and conditions of employment.

(cid:129) Laws and regulations in government-mandated health care
benefits such as the Patient Protection and Affordable Care Act in
the U.S.

PART I
ITEM 1A. Risk Factors.

(cid:129) Laws and regulations relating to nutritional content, nutritional
labeling, product safety, product marketing and menu labeling.

(cid:129) Uncertainties and effects of laws and regulations associated with
the implementation of the UK’s withdrawal of membership from
the European Union (referred to as “Brexit”),
including those
relating to tax and trade.

(cid:129) Laws relating to state and local licensing.

(cid:129) Laws relating to the relationship between franchisors and

franchisees.

(cid:129) Laws and regulations relating to health, sanitation, food, workplace
safety, child labor, including laws regulating the use of certain
“hazardous equipment”, building and zoning, and fire safety and
prevention.

(cid:129) Laws and regulations relating to union organizing rights and
activities, such as the proposed Protecting the Right to Organize
Act (the “PRO Act”) in the U.S.

(cid:129) Laws relating to information security, privacy (including the
European Union’s GDPR and California’s CCPA and CPRA),
cashless payments, and consumer protection.

(cid:129) Laws relating to currency conversion or exchange.

(cid:129) Laws relating to international trade and sanctions.

(cid:129) Tax laws and regulations.

(cid:129) Anti-bribery and anti-corruption laws.

(cid:129) Environmental

laws and regulations,

including with respect

climate change.

(cid:129) Federal and state immigration laws and regulations in the U.S.

(cid:129) Regulations, health guidelines and safety protocols related to the

COVID-19 pandemic.

Compliance with new or existing laws and regulations could impact
our or our Concepts’ franchisees’ operations. The compliance costs
associated with these laws and regulations could be substantial. In
addition, if any governmental authority were to adopt and implement
a broader standard for determining when two or more otherwise
unrelated employers may be found to be a joint employer of the
same employees under laws such as the National Labor Relations
Act in a manner that is applied generally to franchise relationships
(which broader standards in the past have been adopted by U.S.
governmental agencies such as the National Labor Relations Board),
this could cause us or our Concepts to be liable or held responsible
for unfair labor practices and other violations and could subject our
Concepts to other liabilities, and/or require our Concepts to conduct
collective bargaining negotiations,
totally
independent employers, most notably our Concepts’
separate,
franchisees. Further, a California law enacted in 2019 adopted an
employment classification test
to be used when determining
employee or independent contractor status which establishes a high
threshold to obtain independent contractor status. The proposed
federal PRO Act under review by Congress in the U.S. could have
similar effects in addition to weakening state “right to work” laws,
which could result in increased labor disputes and costs borne by
our franchisees and us. These laws and any similar laws enacted at
the federal, state or
level, could increase our and our
franchisees’ labor costs and decrease profitability or could cause
employees of our franchisees to be deemed employees of our
Concepts.

regarding employees of

local

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Any failure or alleged failure to comply with applicable laws or
regulations could adversely affect our
international
expansion efforts, growth prospects and financial results or result in,
among other things, litigation, revocation of required licenses, internal
investigations,
proceedings,
fines and civil and criminal
administrative enforcement actions,

governmental

investigations

reputation,

YUM! BRANDS, INC. - 2020 Form 10-K 15

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART I
ITEM 1A. Risk Factors.

liability. Publicity relating to any such noncompliance could also harm
our Concepts’ reputations and adversely affect our revenues.

Failure to comply with anti-bribery or
anti-corruption laws could adversely
affect our business operations.

The U.S. Foreign Corrupt Practices Act, the UK Bribery Act and other
similar applicable laws prohibiting bribery of government officials and
other corrupt practices are the subject of increasing emphasis and
enforcement around the world. There can be no assurance that our
employees, contractors, agents, franchisees or other third parties will
not
take actions in violation of our policies or applicable law,
particularly as we expand our operations in emerging markets and
elsewhere. Any such violations or suspected violations could subject
fines and
us to civil or criminal penalties,
significant investigation costs, and could also materially damage our
reputation, brands,
international expansion efforts and growth
prospects, business and operating results. Publicity relating to any
noncompliance or alleged noncompliance could also harm our
Concepts’ reputations and adversely affect our revenues and results
of operations.

including substantial

Tax matters, including changes in tax
rates or laws, disagreements with
taxing authorities, imposition of new
taxes and our restructurings could
impact our results of operations and
financial condition.
We are subject to income taxes as well as non-income based taxes,
such as payroll, sales, use, value-added, net worth, property,
withholding and franchise taxes in both the U.S. and various foreign
jurisdictions. We are also subject to ongoing and/or regular reviews,
examinations and audits by the U.S. Internal Revenue Service (“IRS”)
and other
to such income and
non-income based taxes inside and outside of the U.S. Our accruals
for tax liabilities are based on past experience, interpretations of
applicable law, and judgments about potential actions by tax
authorities, but such accruals require significant judgment which may
be incorrect and may result in payments greater than the amounts
accrued. If the IRS or another taxing authority disagrees with our tax
positions, we could face additional tax liabilities, including interest
and penalties. Payment of additional amounts upon final settlement
or adjudication of any disputes could have a material impact on our
results of operations and financial position.

taxing authorities with respect

In addition, we are directly and indirectly affected by new tax laws
and regulation and the interpretation of tax laws and regulations
worldwide. Changes in laws, regulation or interpretation of existing
laws and regulations in the U.S. and other jurisdictions where we are
subject to taxation could increase our taxes and have an adverse
effect on our results of operations and financial condition. Changes in
tax laws or regulations may arise as a result of tax policies proposed
by the recently elected U.S. presidential administration. Changes in
tax laws may also arise as a result of tax policy guidance issued by
the Organisation for Economic Co-operation and Development
(“OECD”), a coalition of member nations including the United States.
The OECD guidance, referred to as the Base Erosion and Profit
Shifting (“BEPS”) Action Plan, does not have the force of law, but
certain countries may enact tax legislation, modify tax treaties, and/or
increase audit scrutiny based on the BEPS guidance. To the extent

16 YUM! BRANDS, INC. - 2020 Form 10-K

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BEPS principles are adopted by major jurisdictions in which we or
it could increase our taxes and have a
our Concepts operate,
material adverse impact on our results of operations and financial
position. We have in the past and may in the future adapt our entity
and operating structure in response to and in compliance with
changes in tax laws, regulations, or interpretation of existing laws and
regulations. Such restructurings could result in material
incremental
tax costs associated with restructuring transactions or operations of
the structure. In addition, public perception that we are not paying a
sufficient amount of taxes could damage our Concepts’ reputations,
which could harm our profitability.

Risks Related to the Yum China
Spin-Off
The Yum China spin-off and certain
related transactions could result in
substantial U.S. tax liability.
We received opinions of outside counsel substantially to the effect
that, for U.S. federal
income tax purposes, the Yum China spin-off
and certain related transactions qualified as generally tax-free under
Sections 355 and 361 of the U.S.
Internal Revenue Code. The
opinions relied on various facts and assumptions, as well as certain
representations as to factual matters and undertakings (including
with respect to future conduct) made by Yum China and us. If any of
these facts, assumptions,
representations or undertakings are
incorrect or not satisfied, we may not be able to rely on these
opinions of outside counsel. Accordingly, notwithstanding receipt of
the opinions of outside counsel, the conclusions reached in the tax
opinions may be challenged by the IRS. Because the opinions are
not binding on the IRS or the courts, there can be no assurance that
the IRS or the courts will not prevail in any such challenge.

the Yum China spin-off was taxable,

If, notwithstanding receipt of any opinion, the IRS were to conclude
that
in general, we would
recognize taxable gain as if we had sold the Yum China common
stock in a taxable sale for its fair market value. In addition, each
U.S. holder of our Common Stock who received shares of Yum
China common stock in connection with the spin-off transaction
would generally be treated as having received a taxable distribution
of property in an amount equal to the fair market value of the shares
of Yum China common stock received. That distribution would be
taxable to each such U.S. stockholder as a dividend to the extent of
our current and accumulated earnings and profits. For each such
U.S. stockholder, any amount that exceeded our earnings and profits
would be treated first as a non-taxable return of capital to the extent
of such stockholder’s tax basis in our shares of Common Stock with
any remaining amount being taxed as a capital gain.

The Yum China spin-off may be subject
to China indirect transfer tax.
the Chinese State Administration of Taxation
In February 2015,
(“SAT”) issued the Bulletin on Several
Issues of Enterprise Income
Tax on Income Arising from Indirect Transfers of Property by
Non-resident Enterprises (“Bulletin 7”). Pursuant to Bulletin 7, an
“indirect
including equity
interests in a China resident enterprise (“Chinese interests”), by a
non-resident enterprise, may be recharacterized and treated as a
direct transfer of Chinese taxable assets, if such arrangement does
not have reasonable commercial purpose and the transferor has
avoided payment of Chinese enterprise income tax. Using general
anti-tax avoidance provisions, the SAT may treat an indirect transfer

transfer” of Chinese taxable assets,

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART I
ITEM 1A. Risk Factors.

as a direct transfer of Chinese interests if the transfer has avoided
reasonable
Chinese tax by way of an arrangement without
commercial purpose. As a result, gains derived from such indirect
transfer may be subject to Chinese enterprise income tax, and the
transferee or other person who is obligated to pay for the transfer
would be obligated to withhold the applicable taxes, currently at a
rate of up to 10% of the capital gain in the case of an indirect transfer
of equity interests in a China resident enterprise.

We evaluated the potential applicability of Bulletin 7 in connection
with the Separation in the form of a tax free restructuring and believe
it is more likely than not that Bulletin 7 does not apply. We believe
that the restructuring has reasonable commercial purpose.

are

there

significant uncertainties

However,
regarding what
constitutes a reasonable commercial purpose, how the safe harbor
provisions for group restructurings are to be interpreted and how the
Chinese tax authorities will ultimately view the spin-off. As a result,
our position could be challenged by the Chinese tax authorities
resulting in a tax at a rate of 10% assessed on the difference
between the fair market value and the tax basis of Yum China. As our
tax basis in Yum China was minimal, the amount of such a tax could
be significant and have a material adverse effect on our results of
operations and our financial condition.

Risks Related to Consumer
Discretionary Spending and
Macroeconomic Conditions
Our business may be adversely
impacted by changes in consumer
discretionary spending and economic
conditions in the U.S. and international
markets.
As a restaurant company dependent upon consumer discretionary
spending, we (and our franchisees) are sensitive to changes in or
uncertainty regarding macroeconomic conditions in the U.S. and in
other regions of
the world where our Concepts and Concepts’
franchisees operate. Some of the factors that impact discretionary
consumer spending include unemployment and underemployment
rates, fluctuations in the level of disposable income, the price of
gasoline and other inflationary pressures, stock market performance
and changes in the level of consumer confidence. These and other
macroeconomic factors could have an adverse effect on our or our
franchisees’ sales, profitability or development plans, which could
harm our financial condition and operating results. In this regard, we
and our franchisees have been adversely impacted by, and may
continue
impacted by, ongoing negative
macroeconomic conditions in the U.S. and other regions of the world
where our Concepts and Concepts’ franchisees operate arising from
the COVID-19 pandemic,
including elevated unemployment and
underemployment levels, and decreased consumer spending and
consumer confidence,
In addition, our business in the U.S. and
international regions could be adversely impacted by various factors
including natural disasters,
(which may be beyond our control),
instability,
geopolitical events, terrorism, political, financial or social
terrorism, boycott, social unrest, or other events that
lead to
avoidance of public places or restrictions on public gatherings such
as in our and our franchisees’ restaurants.

adversely

to be

service,

location,

Risks Related to Competition
The retail food industry is highly
competitive.
Our Concepts’ restaurants compete with international, national and
regional restaurant chains as well as locally-owned restaurants, and
the retail
food industry in which our Concepts operate is highly
competitive with respect to price and quality of food products, new
product development, digital engagement, advertising levels and
promotional initiatives (including the frequent use by our competitors
of price discounting, such as through value meal menu options,
coupons and other methods), customer
reputation,
restaurant
and attractiveness and maintenance of
properties. In addition, our Concepts compete within the retail food
industry for management and hourly personnel, suitable real estate
sites, and qualified franchisees. If consumer or dietary preferences
change, if our marketing efforts and/or launch of new products are
unsuccessful, or if our Concepts’ restaurants are unable to compete
successfully with other
food outlets in new and existing
markets, our and our franchisees’ businesses could be adversely
affected. Moreover,
the COVID-19 pandemic has resulted in a
disruption of consumer routines, the implementation of employer
“work-from-home” policies, reduced business and recreational travel
and changes in consumer behavior, and it is difficult to fully assess
the impacts of such developments on us or our Concepts, or the
extent to which any such consumer patterns may continue after the
COVID-19 pandemic has ended. We also face growing competition
as a result of convergence in grocery, convenience, deli and
restaurant services, including the offering by the grocery industry of
convenient meals, including pizzas and entrees with side dishes.
Competition from delivery aggregators and other
food delivery
services has increased in recent years, particularly in urbanized
areas, and this trend, which has accelerated following the onset of
the COVID-19 pandemic,
is expected to continue to increase.
Increased competition could have an adverse effect on sales,
profitability or development plans, which could harm our or our
franchisees’ financial condition and operating results.

retail

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Risks Related to Our Indebtedness
Our substantial indebtedness makes us
more sensitive to adverse economic
conditions, may limit our ability to plan
for or respond to significant changes in
our business, and requires a significant
amount of cash to service our debt
payment obligations that we may be
unable to generate or obtain.
As of December 31, 2020, our
total outstanding short-term
borrowings and long-term debt was approximately $10.8 billion.
Subject to the limits contained in the agreements governing our
outstanding indebtedness, we may incur additional debt from time to
time, which would increase the risks related to our high level of
indebtedness.

Specifically, our high level of
potential consequences, including, but not limited to:

indebtedness could have important

(cid:129) increasing our vulnerability to, and reducing our flexibility to plan for
and respond to, adverse economic and industry conditions and
changes in our business and the competitive environment,

YUM! BRANDS, INC. - 2020 Form 10-K 17

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART I

including ongoing adverse economic conditions arising from the
COVID-19 pandemic;

(cid:129) limiting our ability to borrow additional

funds in the future and

increasing the cost of any such borrowing;

(cid:129) requiring the dedication of a substantial portion of our cash flow
from operations to the payment of principal of, and interest on,
indebtedness, thereby reducing the availability of such cash flow to
fund working capital, capital expenditures, acquisitions, dividends,
share repurchases or other corporate purposes;

(cid:129) increasing our vulnerability to a downgrade of our credit rating,
which could adversely affect our cost of funds, liquidity and access
to capital markets;

(cid:129) restricting us from making strategic acquisitions or causing us to

make non-strategic divestitures;

(cid:129) placing us at a disadvantage compared to other less leveraged
competitors or competitors with comparable debt at more
favorable interest rates;

(cid:129) increasing our exposure to the risk of

increased interest rates
insofar as current and future borrowings are subject to variable
rates of interest;

(cid:129) increasing our exposure to the risk of discontinuance, replacement
or modification of certain reference rates, including as the result of
the upcoming discontinuance of LIBOR, which are used to
calculate applicable interest rates of our indebtedness and certain
derivative instruments that hedge interest rate risk;

(cid:129) making it more difficult for us to repay, refinance or satisfy our

obligations with respect to our debt;

(cid:129) imposing restrictive covenants on our operations as the result of
the terms of our indebtedness, which, if not complied with, could
result in an event of default, which in turn, if not cured or waived,
could result in the acceleration of the applicable debt, and may
result in the acceleration of any other debt to which a cross-
acceleration or cross-default provision applies; and

(cid:129) increasing our exposure to risks related to fluctuations in foreign
currency as we earn profits in a variety of currencies around the
world and our debt is primarily denominated in U.S. dollars.

There is no assurance that we will generate cash flow from
operations or that future debt or equity financings will be available to
us to enable us to pay our indebtedness or to fund other liquidity
needs.
If conditions related to the COVID-19 pandemic result in
significant disruptions to capital and financial markets, our cost of
borrowing, our ability to access capital on favorable terms and our
overall liquidity could be adversely impacted. If our business does not
generate sufficient cash flow from operations or if future borrowings
are not available to us in amounts sufficient to pay our indebtedness
or to fund other liquidity needs, our financial condition and results of
operations may be adversely affected. As a result, we may need to
refinance all or a portion of our indebtedness on or before maturity.
There is no assurance that we will be able to refinance any of our
indebtedness on favorable terms, or at all. Any inability to generate
sufficient cash flow or refinance our indebtedness on favorable terms
could have a material adverse effect on our business and financial
condition.

ITEM 1B. Unresolved Staff Comments.

The Company has received no written comments regarding its periodic or current reports from the staff of the Securities and Exchange
Commission that were issued 180 days or more preceding the end of its 2020 fiscal year and that remain unresolved.

ITEM 2. Properties.

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As of year end 2020, the Company’s Concepts owned land, building
or both for 333 restaurants worldwide in connection with the
operation of our 1,098 Company-owned restaurants. These
restaurants are further detailed as follows:

Company-owned restaurants in the U.S. with leases are generally
leased for initial terms of 10 to 20 years and generally have renewal
options. Company-owned restaurants outside the U.S. with leases
have initial lease terms and renewal options that vary by country.

(cid:129) The KFC Division owned land, building or both for 70 restaurants.

(cid:129) The Pizza Hut Division owned land, building or both for 3

restaurants.

(cid:129) The Taco Bell Division owned land, building or both for 260

restaurants.

The Company currently also owns land, building or both related to
approximately 500 franchise restaurants and leases land, building or
both related to approximately 350 franchise restaurants, not included
in the property counts above,
leases or subleases to
franchisees, principally in the U.S., United Kingdom, Australia and
Germany.

that

The KFC Division and Pizza Hut Division corporate headquarters and
a KFC and Pizza Hut research facility in Plano, Texas are owned by
Pizza Hut. Taco Bell leases its corporate headquarters and research
facility in Irvine, California. The YUM corporate headquarters and a
KFC research facility in Louisville, Kentucky are owned by KFC. The
Habit Burger Grill Division leases its corporate headquarters in Irvine,
information about the Company’s properties is
California. Additional
included in the Consolidated Financial Statements in Part II, Item 8.

The Company believes that
its properties are generally in good
operating condition and are suitable for the purposes for which they
are being used.

18 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART I

ITEM 3. Legal Proceedings.

The Company is subject to various lawsuits covering a variety of
allegations. The Company believes that the ultimate liability, if any, in
excess of amounts already provided for
these matters in the
Consolidated Financial Statements, is not likely to have a material
adverse effect on the Company’s annual
results of operations,
financial condition or cash flows. Matters faced by the Company
include, but are not limited to, claims from franchisees, suppliers,
employees,
related to
franchise, contractual or
operational,
employment issues as well as claims that the Company has infringed

customers, governments
tax,
foreign exchange,

and others

on third-party intellectual property rights. In addition, the Company
brings claims from time-to-time relating to infringement of, or
challenges to, our intellectual property, including registered marks.
Finally, as a publicly-traded company, disputes arise from
time-to-time with our shareholders,
including allegations that the
Company breached federal securities laws or that officers and/or
directors breached fiduciary duties. Descriptions of significant current
specific claims and contingencies appear in Note 20, Contingencies,
to the Consolidated Financial Statements included in Part II, Item 8,
which is incorporated by reference into this item.

ITEM 4. Mine Safety Disclosures.

Not applicable.

Executive Officers of the Registrant.

The executive officers of the Company as of February 19, 2021, and
their ages and current positions as of that date are as follows:

David Gibbs, 57, is Chief Executive Officer of YUM a position he has
held since January 2020. Prior to that, he served as President and
Chief Operating Officer from August 2019 to December 2019, as
President, Chief Financial Officer and Chief Operating Officer from
January 2019 to August 2019 and as President and Chief Financial
Officer from May 2016 to December 2018. Prior to these positions,
he served as Chief Executive Officer of Pizza Hut Division from
January 2015 to April 2016. From January 2014 to December 2014,
Mr. Gibbs served as President of Pizza Hut U.S. Prior to this position,
Mr. Gibbs served as President and Chief Financial Officer of Yum!
Restaurants International,
from May 2012 through
December 2013. Mr. Gibbs served as Chief Financial Officer of YRI
from January 2011 to April 2012. He was Chief Financial Officer of
Pizza Hut U.S. from September 2005 to December 2010.

(“YRI”)

Inc.

Scott Catlett, 44, is Chief Legal and Franchise Officer and Corporate
Secretary of YUM. He has served in this position since July 2020.
Prior to that, he served as General Counsel and Corporate Secretary
of YUM from July 2018 to June 2020 and he served as Vice
President and Deputy General Counsel of YUM from November 2015
to June 2018. From September 2007 to October 2015 Mr. Catlett
held various YUM positions including Vice President & Associate
General Counsel.

Mark King, 61, is Chief Executive Officer of Taco Bell Division, a
position he has held since August 2019. Before joining YUM,
Mr. King served as President, adidas Group North America from
June 2014 to June 2018 and as Chief Executive Officer of
TaylorMade-adidas Golf from 2003 to 2014.

Tony Lowings, 62, is Chief Executive Officer of KFC Division, a
position he has held since January 2019. Prior to that, he served as
President and Chief Operations Officer of KFC Division from August
2018 to December 2018. From November 2016 to July 2018 he
served as Managing Director of Asia-Pacific and from February 2013
to October 2016 as Managing Director of KFC SOPAC (Australia and
New Zealand). Mr. Lowings served in various positions including
Chief Operations Officer of YRI and Managing Director of Latin
America and the Caribbean for KFC, Pizza Hut and Taco Bell and
General Manager of KFC and Pizza Hut in Australia and New Zealand
from January 2010 to January 2013.

David Russell, 51, is Senior Vice President, Finance and Corporate
Controller of YUM. He has served as YUM’s Corporate Controller
since February 2011 and as Senior Vice President, Finance since
February 2017. Prior to serving as Corporate Controller, Mr. Russell
served in various positions at the Vice President level
in the YUM
Finance Department, including Controller-Designate from November
2010 to February 2011 and Vice President, Assistant Controller from
January 2008 to December 2010.

Tracy Skeans, 48,
is Chief Operating Officer and Chief People
Officer of YUM. She has served as Chief Operating Officer since
January 2021 and Chief People Officer since January 2016. She also
served as Chief Transformation Officer from November 2016 to
December 2020. From January 2015 to December 2015, she was
President of Pizza Hut International. Prior to this position, Ms. Skeans
served as Chief People Officer of Pizza Hut Division from December
2013 to December 2014 and Chief People Officer of Pizza Hut U.S.
from October 2011 to November 2013. From July 2009 to
September 2011, she served as Director of Human Resources for
Pizza Hut U.S and was on the Pizza Hut U.S. Finance team from
September 2000 to June 2009.

Arthur Starrs, 44, is Chief Executive Officer of Pizza Hut Division, a
position he has held since August 2019. He served as President of
Pizza Hut U.S.
from May 2016 to July 2019 and he served as
General Manager and Chief Financial Officer of Pizza Hut U.S. from
November 2013 to April 2016.

Christopher Turner, 46, is Chief Financial Officer of YUM, a position
he has held since August 2019. Before joining YUM, he served as
Senior Vice President and General Manager in PepsiCo’s retail and
e-commerce businesses with Walmart in the U.S. and more than 25
countries and across PepsiCo’s brands from December 2017 to July
2019. Prior to leading PepsiCo’s Walmart business, he served in
various positions including Senior Vice President of Transformation
for PepsiCo’s Frito-Lay North America business from July 2017 to
December 2017 and Senior Vice President of Strategy for Frito-Lay
from February 2016 to June 2017. Prior to joining PepsiCo, he was a
partner in the Dallas office of McKinsey & Company, a strategic
management consulting firm.

Executive officers are elected by and serve at the discretion of the
Board of Directors.

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YUM! BRANDS, INC. - 2020 Form 10-K 19

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART II

ITEM 5. Market for the Registrant’s Common

Stock, Related Stockholder Matters and
Issuer Purchases of Equity Securities.

Market Information and Dividend Policy

The Company’s Common Stock trades under the symbol YUM and is listed on the New York Stock Exchange (“NYSE”).

As of February 12, 2021, there were 39,395 registered holders of record of the Company’s Common Stock.

In 2020, the Company declared and paid four cash dividends of $0.47 per share. Future decisions to pay cash dividends continue to be at the
discretion of the Board of Directors and will be dependent on our operating performance, financial condition, capital expenditure requirements
and other factors that the Board of Directors considers relevant.

Issuer Purchases of Equity Securities

The following table provides information as of December 31, 2020, with respect to shares of Common Stock repurchased by the Company
during the quarter then ended.

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Fiscal Periods

10/1/20 – 10/31/20

11/1/20 – 11/30/20

12/1/20 – 12/31/20

Total

Total number
of shares
purchased
(thousands)

160

1,224

1,034

2,418

Average price
paid per share

Total number of shares purchased as
part of publicly announced plans or
programs (thousands)

Approximate dollar value of shares
that may yet be purchased under
the plans or programs (millions)

93.48

$ 101.49

$ 107.10

160

1,224

1,034

2,418

$ 1,985

$ 1,861

$ 1,750

On November 21, 2019, our Board of Directors authorized share repurchases through June 2021 of up to $2 billion (excluding applicable
transaction fees) of our outstanding Common Stock. As of December 31, 2020, we have remaining capacity to repurchase up to $1.75 billion of
Common Stock under this authorization.

20 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II
ITEM 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Stock Performance Graph

This graph compares the cumulative total return of our Common Stock to the cumulative total return of the S&P 500 Index and the S&P 500
Consumer Discretionary Sector Index, a peer group that includes YUM, for the period from December 31, 2015 to December 31, 2020. The
graph assumes that the value of the investment in our Common Stock and each index was $100 at December 31, 2015, and that all cash
dividends were reinvested.

In $

250.00

200.00

150.00

100.00

50.00

2015

YUM

2016

2017

2018

2019

2020

S&P 500

S&P 500 Consumer Discretionary

YUM

S&P 500

S&P Consumer Discretionary

Source of total return data: Bloomberg

12/31/2015

12/30/2016

12/29/2017

12/31/2018

12/31/2019

12/31/2020

$ 100

$ 123

$ 112

$ 106

$ 162

$ 136

$ 130

$ 185

$ 130

$ 131

$ 207

$ 171

$ 168

$ 227

$ 203

$ 224

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YUM! BRANDS, INC. - 2020 Form 10-K 21

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART II

ITEM 6. Selected Financial Data.

SELECTED FINANCIAL DATA

YUM! BRANDS, INC. AND SUBSIDIARIES

(in millions, except per share and unit amounts)

2020

2019

2018

2017

2016

Income Statement Data

Revenues

Company sales

Franchise and property revenues

Franchise contributions for advertising and other services

Total

Refranchising (gain) loss

Operating Profit

Investment (income) expense, net

Other pension (income) expense

Interest expense, net

Income from continuing operations before income taxes

Income from continuing operations

Income from discontinued operations, net of tax

Net Income

Basic earnings per share from continuing operations

Basic earnings per share from discontinued operations

Basic earnings per share

Diluted earnings per share from continuing operations

Diluted earnings per share from discontinued operations

Diluted earnings per share

Diluted earnings per share from continuing operations excluding Special
Items

Cash Flow Data

Provided by operating activities

Capital spending

Proceeds from refranchising of restaurants

Repurchase shares of Common Stock

Dividends paid on Common Stock

Balance Sheet Data

Total assets

Long-term debt

Total debt

Other Data

Number of units at year end

Franchise

Company

System

System net new unit growth

22 YUM! BRANDS, INC. - 2020 Form 10-K

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$ 1,810

$ 1,546

$ 2,000

$ 3,572

$ 4,189

2,510

1,332

5,652

2,660

1,391

5,597

2,482

1,206

5,688

—

5,878

2,306

2,167

(34)

(37)

(540)

(1,083)

1,503

1,930

2,296

2,761

(74)

543

1,020

904

N/A

904

2.99

N/A

2.99

2.94

N/A

2.94

3.62

486

1,373

1,294

N/A

1,294

4.23

N/A

4.23

4.14

N/A

4.14

3.55

(9)

452

1,839

1,542

N/A

1,542

4.80

N/A

4.80

4.69

N/A

4.69

3.17

(5)

445

2,274

1,340

N/A

1,340

3.86

N/A

3.86

3.77

N/A

3.77

2.96

—

6,356

(163)

1,682

(2)

307

1,345

1,018

625

1,643

2.58

1.59

4.17

2.54

1.56

4.10

2.46

$ 1,305

$ 1,315

$ 1,176

$ 1,030

$ 1,248

160

239

566

196

110

815

511

234

825

2,390

462

318

1,773

1,960

416

427

370

5,403

744

$ 5,852

$ 5,231

$ 4,130

$ 5,311

$ 5,453

10,272

10,725

10,131

10,562

9,751

10,072

9,429

9,804

9,059

9,125

49,255

49,257

47,268

43,603

40,834

1,098

913

856

1,481

2,841

50,353

50,170

48,124

45,084

43,675

—%

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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System and same-store sales

KFC Division System sales

System sales growth (decline)

System sales growth, ex FX and 53rd week

Same-store sales growth

Pizza Hut Division System sales

System sales growth (decline)

System sales growth, ex FX and 53rd week

Same-store sales growth (decline)

Taco Bell Division System sales

System sales growth

System sales growth, ex FX and 53rd week

Same-store sales growth

Shares outstanding at year end

PART II
ITEM 6. Selected Financial Data.

2020

2019

2018

2017

2016

$26,289

$27,900

$26,239

$24,515

$23,242

(6)%

(5)%

(9)%

$11,955

$12,900

$12,212

$12,034

$12,019

(7)%

(6)%

—%

(2%)

$11,745

$11,784

$10,786

$10,145

$ 9,660

—%

(1)%

300

306

332

355

Cash dividends declared per common share

1.88

1.68

1.44

0.90

1.73

Market price per share at year end

$108.56

$100.73

$ 91.92

$ 81.61

$ 63.33

The table above reflects the impact of the adoption of new lease
accounting standards in fiscal year 2019 and the impact of the
adoption of new revenue recognition accounting standards in fiscal
year 2018.

System sales growth and unit growth measures in 2020 reflect the
addition of 276 units through our acquisition of The Habit
Restaurants, Inc. in March 2020. System sales growth measures in
the addition of
2019 and System unit growth in 2018 reflect
approximately 1,300 Telepizza units in December 2018. See
additional discussion of the acquisition of The Habit Restaurants, Inc.
and the Telepizza strategic alliance within our MD&A.

Fiscal years for our U.S. and certain international subsidiaries that
operate on a weekly periodic calendar include 52 weeks in 2020,
2018 and 2017 and 53 weeks in 2019 and 2016. Refer to Note 2 in
our Consolidated Financial Statements for additional details related to
our fiscal calendar, including the impact of the 53rd week on our
the 53rd week added $24 million to
results in 2019.
the 53rd week added $28 million to
Operating Profit.
Operating Profit.

In 2019,
In 2016,

Discontinued operations in 2016 reflects the spin-off of our China
business into an independent, publicly-traded company
(the
“Separation”).

The non-GAAP measure of Diluted earnings per share from
continuing operations excluding Special Items is discussed in further
detail in our MD&A within Part II, Item 7.

System sales growth, System sales growth excluding the impacts of
foreign currency translation (“FX”) and 53rd week, Same-store sales
growth and System net new unit growth are performance metrics
and discussed in further detail in our MD&A within Part II, Item 7.

See discussion of our 2020, 2019 and 2018 Special
Items in our
MD&A. Special Items in 2017 positively impacted Operating Profit by
$1,001 million and positively impacted Net Income by $288 million,
primarily due to $1,083 million in Refranchising gains, partially offset
by $31 million in costs associated with the Pizza Hut U.S.
Transformation Agreement, $23 million in costs associated with
YUM’s Strategic Transformation Initiatives, $18 million in share-based
compensation charges related to the Separation, $17 million in costs
associated with the KFC U.S. Acceleration Agreement, $434 million
recognized in our Income tax provision as a result of the Tax Cuts
and Jobs Act of 2017 and a $23 million charge within Other Pension
(income) expense primarily due to an adjustment of certain historical
deferred vested pension liability balances as a result of
the
completion of a pension data review and reconciliation. Special Items
in 2016 positively impacted Operating Profit by $35 million and
positively impacted Net
Income by $33 million, primarily due to
$163 million in Refranchising gains, partially offset by $67 million in
costs associated with YUM’s Strategic Transformation Initiatives,
$30 million in share-based compensation charges related to the
Separation, $26 million in costs associated with the KFC
Acceleration Agreement and $26 million incurred within Other
Pension (income) expense primarily due to a settlement charge
associated with an option for certain employees to voluntarily elect
an early payout of their pension benefits.

Selected financial data for year 2016 have been recast from that
originally presented to present a change in our reporting calendar
and the retroactive adoption of an accounting standard related to the
presentation of net periodic pension cost and net periodic
postretirement benefit cost.

The selected financial data should be read in conjunction with the
Consolidated Financial Statements.

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YUM! BRANDS, INC. - 2020 Form 10-K 23

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II

ITEM 7. Management’s Discussion and Analysis

of Financial Condition and Results of
Operations.

Introduction and Overview

The following Management’s Discussion and Analysis (“MD&A”),
should be read in conjunction with the Consolidated Financial
Statements (“Financial Statements”)
in Item 8 and the Forward-
Looking Statements and the Risk Factors set forth in Item 1A. All
Note references herein refer to the Notes to the Financial Statements.
Tabular amounts are displayed in millions of U.S. dollars except per
share and unit count amounts, or as otherwise specifically identified.
Percentages may not recompute due to rounding.

Yum! Brands, Inc. and its subsidiaries (collectively referred to herein
as the “Company”, “YUM”, “we”, “us” or “our”) franchise or operate a
system of over 50,000 restaurants in more than 150 countries and
territories, primarily under the concepts of KFC, Pizza Hut, Taco Bell
and The Habit Burger Grill
the “Concepts”). The
Company’s KFC, Pizza Hut and Taco Bell brands are global leaders
of
food categories,
respectively. The Habit Burger Grill, a concept we acquired on
March 18, 2020, is a fast-casual restaurant concept specializing in
made-to-order chargrilled burgers, sandwiches and more. Of the
over 50,000 restaurants, 98% are operated by franchisees.

and Mexican-style

chicken, pizza

(collectively,

the

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As of December 31, 2020, YUM consists of four operating segments:

(cid:129) The KFC Division which includes our worldwide operations of the

KFC concept

(cid:129) The Pizza Hut Division which includes our worldwide operations of

the Pizza Hut concept

(cid:129) The Taco Bell Division which includes our worldwide operations of

the Taco Bell concept

(cid:129) The Habit Burger Grill Division which includes our worldwide

operations of the Habit Burger Grill concept

Through our Recipe for Growth and Good we intend to unlock the
growth potential of our Concepts and YUM, drive increased
collaboration across our Concepts and geographies and consistently
deliver better customer experiences, improved unit economics and
higher rates of growth. Key enablers include accelerated use of
technology and better leverage of our systemwide scale.

Our Recipe for Growth is based on four key drivers:

(cid:129) Unrivaled Culture and Talent: Leverage our culture and people

capability to fuel brand performance and franchise success

(cid:129) Unmatched Operating Capability: Recruit and equip the best
restaurant operators in the world to deliver great customer
experiences

(cid:129) Relevant, Easy and Distinctive Brands: Innovate and elevate iconic

restaurant brands people trust and champion

(cid:129) Bold Restaurant Development: Drive market and franchise

expansion with strong economics and value

24 YUM! BRANDS, INC. - 2020 Form 10-K

On October 11, 2016, YUM announced our transformation plans to
drive global expansion of our KFC, Pizza Hut and Taco Bell brands
(“YUM’s Strategic Transformation Initiatives”) following the spin-off of
our China business into an independent publicly-traded company
under the name of Yum China Holdings, Inc. (“Yum China”). At this
time, we established transformation goals to be met by the end of
2019 including becoming:

(cid:129) More Focused. By focusing on four growth drivers similar to those
that make up our Recipe for Growth above we accelerated system
sales growth to 8% in 2019 (excluding the impacts of the 53rd
week and foreign currency translation).

(cid:129) More Franchised. The Company successfully increased franchise

restaurant ownership to 98% as of the end of 2018.

(cid:129) More Efficient. The Company revamped its financial profile,
its organization and cost structure

improving the efficiency of
globally, by:

(cid:129) Reducing

capital

annual

expenditures

associated with
Company-operated restaurant maintenance and other projects
and funded additional capital for new Company units through
the refranchising of existing Company units. Capital spending in
2019 net of refranchising proceeds was $86 million.

(cid:129) Lowering General and administrative expenses (“G&A”) to 1.7%

of system sales in 2019; and

(cid:129) Maintaining an optimized capital structure of ~5.0x Earnings
and Amortization
Taxes, Depreciation

Interest,

Before
(“EBITDA”) net leverage.

From 2017 through 2019, we returned $6.5 billion to shareholders
through share repurchases and cash dividends. We funded these
shareholder returns through a combination of refranchising proceeds,
free cash flow generation and maintenance of our ~5.0x EBITDA
consolidated net
leverage. We generated pre-tax proceeds of
$2.8 billion through our refranchising initiatives to achieve targeted
franchise ownership of 98%. Refer to the Liquidity and Capital
Resources section of this MD&A for additional details.

As a result of the impacts on our business due to the COVID-19
pandemic, certain measures we established as part of our
transformation goals were negatively impacted in 2020. For the full
year 2020, G&A, excluding the impact of Special Items, represented
1.9% of consolidated system sales, primarily due to sales pressures
resulting from the COVID-19 pandemic. While we took certain
austerity measures to reduce G&A spending such as lower travel
related costs and a reduction of our Chief Executive Officer’s salary,
these reductions were offset by accelerated digital and technology
spending to enhance our customer experience and off-premise
capabilities. We expect our G&A as a percentage of consolidated
system sales to move back toward our historical target of 1.7% as
sustained growth resumes. Additionally, during 2020 our EBITDA
was negatively impacted by the impacts of the COVID-19 pandemic,
which increased our consolidated leverage, net of available cash. We
currently estimate we will grow back into our ~5.0x EBITDA
consolidated net leverage by second quarter 2021.

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Going forward, we expect to:

(cid:129) Maintain a capital structure of ~5.0x EBITDA consolidated net

leverage;

(cid:129) Invest capital in a manner consistent with an asset light, franchisor

model; and

(cid:129) Allocate G&A in an efficient manner that provides leverage to
operating profit growth while at the same time opportunistically
investing in strategic growth initiatives.

in understanding our

We intend for this MD&A to provide the reader with information that
will assist
including
performance metrics that management uses to assess the
Company’s performance. Throughout
this MD&A, we commonly
discuss the following performance metrics:

results of operations,

image enhancement,

(cid:129) Same-store sales growth is the estimated percentage change in
system sales of all restaurants that have been open and in the
YUM system for one year or more, including those temporarily
closed. From time-to-time restaurants may be temporarily closed
due to remodeling or
rebuilding, natural
disasters, health epidemic or pandemic, landlord disputes or other
issues. Throughout 2020 we had a significant number of
restaurants that were temporarily closed,
including restaurants
closed due to government and landlord restrictions, as a result of
COVID-19. The system sales of restaurants we deem temporarily
closed remain in our base for purposes of determining same-store
sales growth and the restaurants remain in our unit count (see
below). We believe same-store sales growth is useful to investors
because our results are heavily dependent on the results of our
Concepts’ existing store base. Additionally, same-store sales
growth is reflective of the strength of our Brands, the effectiveness
of our operational and advertising initiatives and local economic
and consumer trends. In 2020, when calculating same-store sales
growth we also included in our prior year base the sales of stores
that were added as a result of our acquisition of The Habit
Restaurants, Inc. on March 18, 2020, and that were open for one
year or more. In 2019, when calculating same-store sales growth
we also included in our prior year base the sales of stores that
were added as a result of
the Telepizza strategic alliance in
December 2018 and that were open for one year or more. See
additional discussion of the acquisition of The Habit Restaurants,
Inc. and Telepizza strategic alliance within this MD&A.

(cid:129) Net new unit growth reflects new unit openings offset by
permanent store closures, by us and our
franchisees. To
determine whether a restaurant meets the definition of a unit we
consider whether the restaurant has operations that are ongoing
from another YUM unit, serves the primary
and independent
product of one of our Concepts, operates under a separate
franchise agreement
(if operated by a franchisee) and has
substantial and sustainable sales. We believe net new unit growth
is useful to investors because we depend on net new units for a
significant portion of our growth. Additionally, net new unit growth
is generally reflective of
the economic returns to us and our
franchisees from opening and operating our Concept restaurants.

(cid:129) System sales, System sales excluding the impacts of

foreign
currency translation (“FX”), and System sales excluding FX and the
impact of the 53rd week in 2019 for our U.S. subsidiaries and
certain international subsidiaries that operate on a weekly period

the results of all

calendar. System sales reflect
restaurants
regardless of ownership, including Company-owned and franchise
restaurants. Sales at
franchise restaurants typically generate
ongoing franchise and license fees for the Company at a rate of
3% to 6% of sales. Increasingly, customers are paying a fee to a
third party to deliver or facilitate the ordering of our Concepts’
products. We also include in System sales any portion of the
amount customers pay these third parties for which the third party
is obligated to pay us a license fee as a percentage of such
amount. Franchise restaurant sales and fees paid by customers to
third parties to deliver or facilitate the ordering of our Concepts’
products are not included in Company sales on the Consolidated
Statements of
Income; however, any resulting franchise and
license fees we receive are included in the Company’s revenues.
We believe System sales growth is useful
to investors as a
significant indicator of the overall strength of our business as it
incorporates our primary revenue drivers, Company and franchise
same-store sales as well as net unit growth.

(cid:129) Company restaurant profit

(“Restaurant profit”)

is defined as
Company sales less expenses incurred directly by our Company-
owned restaurants in generating Company sales. Company
restaurant margin as a percentage of sales is defined as
Restaurant profit divided by Company sales. Restaurant profit is
useful to investors as it provides a measure of profitability for our
Company-owned restaurants.

In addition to the results provided in accordance with Generally
Accepted Accounting Principles in the United States of America
(“GAAP”),
non-GAAP
measurements.

the Company provides

following

the

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(cid:129) Diluted Earnings Per Share excluding Special

Items (as defined

below);

(cid:129) Effective Tax Rate excluding Special Items;

(cid:129) Core Operating Profit and Core Operating Profit excluding the
impact of the 53rd week in 2019. Core Operating Profit excludes
Items and FX and we use Core Operating Profit for the
Special
purposes of evaluating performance internally.

These non-GAAP measurements are not intended to replace the
results in accordance with GAAP.
presentation of our
Rather,
these
the presentation of
non-GAAP measurements provide additional information to investors
to facilitate the comparison of past and present operations.

the Company believes that

financial

Special Items are not included in any of our Division segment results
as the Company does not believe they are indicative of our ongoing
operations due to their size and/or nature. Our chief operating
decision maker does not consider the impact of Special Items when
assessing segment performance.

Certain performance metrics and non-GAAP measurements are
presented excluding the impact of FX. These amounts are derived by
translating current year results at prior year average exchange rates.
We believe the elimination of
the FX impact provides better
year-to-year comparability without the distortion of foreign currency
fluctuations.

For 2019 we provided Core Operating Profit excluding the impact of
the 53rd week and System sales excluding FX and the impact of the
53rd week to further enhance the comparability given the 53rd week
that was part of our fiscal calendar in 2019.

YUM! BRANDS, INC. - 2020 Form 10-K 25

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Summary
All comparisons within this summary are versus the same period a year ago and unless otherwise stated include the impact of a 53rd week in
2019. For discussion of our results of operations for 2019 compared to 2018, refer to the Management’s Discussion and Analysis of Financial
Condition and Results of Operations included in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC
on February 19, 2020.

For 2020, GAAP diluted EPS decreased 29% to $2.94 per share, and diluted EPS, excluding Special Items, increased 2% to $3.62 per share.

2020 financial highlights:

System Sales,
ex FX

Same-Store
Sales

% Change
Net
New Units

GAAP
Operating Profit

Core Operating
Profit

(5)

(7)

Even

(4)

(9)

(6)

(1)

(6)

Even

(12)

(9)

(22)

(12)

(9)

(8)

Results Excluding 53rd Week in 2019 (% Change)
Core Operating Profit
System Sales, ex FX

(5)

(6)

(3)

(11)

(8)

(7)

KFC Division

Pizza Hut Division

Taco Bell Division

Worldwide

KFC Division

Pizza Hut Division

Taco Bell Division

Worldwide

Additionally:

(cid:129) During the year, net units increased by 183 units (including our acquisition of The Habit Burger Grill in the first quarter of 2020).

(cid:129) During the year, we repurchased 2.4 million shares totaling $250 million at an average price of $103.

(cid:129) During the year, we recognized pre-tax investment income of $69 million related to the change in fair value of our investment in Grubhub, Inc.
common stock that we sold in the third quarter of 2020, which added $0.17 to diluted EPS for the year. When coupled with $77 million of
pre-tax investment expense in 2019, which resulted in a negative $0.19 impact to diluted EPS, our Grubhub investment favorably impacted
year-over-year diluted EPS growth by $0.36.

(cid:129) Foreign currency translation impacted Divisional Operating Profit unfavorably for the year by $9 million.

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26 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Worldwide
GAAP Results

Company sales

Franchise and property revenues

Franchise contributions for advertising and other services

Total revenues

Restaurant profit

Restaurant margin %

G&A expenses

Franchise and property expenses

Franchise advertising and other services expense

Refranchising (gain) loss

Other (income) expense

Operating Profit

Investment (income) expense, net

Other pension (income) expense

Interest expense, net

Income tax provision

Net Income

Diluted EPS(a)

Effective tax rate

(a) See Note 4 for the number of shares used in this calculation.

Performance Metrics

Unit Count

Franchise

Company-owned

Total

Same-Store Sales Growth (Decline) %

System Sales Growth (Decline) %, reported

System Sales Growth (Decline) %, excluding FX

System Sales Growth (Decline) %, excluding FX and 53rd week

18.3%

(3.3) ppts.

1.8 ppts.

2020

Amount
2019

2018

$ 1,810

$ 1,546

$ 2,000

2,510

1,332

2,660

1,391

2,482

1,206

$ 5,652

$ 5,597

$ 5,688

304

16.8%

$ 1,064

145

1,314

(34)

154

311

20.1%

917

180

1,368

(37)

366

895

188

1,208

(540)

$ 1,503

$ 1,930

$ 2,296

(74)

543

116

904

486

(9)

452

297

$ 1,294

$ 1,542

2.94

4.14

4.69

% B/(W)

2020

(6)

(4)

(2)

2019

(23)

(2)

(15)

(16)

(9)

(22)

(12)

(48)

(30)

(29)

(2)

(13)

(93)

(16)

(8)

(16)

(12)

11.4%

5.7%

16.2%

(5.7) ppts.

10.5 ppts.

% Increase
(Decrease)

2020

49,255

1,098

50,353

2019

2018

2020

2019

49,257

47,268

913

856

50,170

48,124

—

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2020

2019

2018

(6)

(4)

(3)

N/A

YUM! BRANDS, INC. - 2020 Form 10-K 27

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Our system sales breakdown by Company and franchise sales was as follows:

Consolidated

GAAP Company sales(a)

Franchise sales

System sales

Foreign Currency Impact on System sales(b)

System sales, excluding FX

Impact of 53rd week

2020

Year

2019

2018

1,810

1,546

2,000

48,549

50,359

51,038

52,584

(199)

(1,169)

47,237

49,237

N/A

50,558

53,753

49,237

N/A

454

N/A

System sales, excluding FX and 53rd Week

$ 50,558

$ 53,299

$ 49,237

KFC Division

GAAP Company sales(a)

Franchise sales

System sales

Foreign Currency Impact on System sales(b)

System sales, excluding FX

Impact of 53rd week

506

571

894

25,783

26,289

27,329

27,900

(192)

(898)

25,345

26,239

N/A

26,481

28,798

26,239

N/A

167

N/A

System sales, excluding FX and 53rd Week

$ 26,481

$ 28,631

$ 26,239

Pizza Hut Division

GAAP Company sales(a)

Franchise sales

System sales

Foreign Currency Impact on System sales(b)

System sales, excluding FX

Impact of 53rd week

11,879

11,955

12,846

12,900

(5)

(259)

12,143

12,212

N/A

11,960

13,159

12,212

N/A

103

N/A

System sales, excluding FX and 53rd Week

$ 11,960

$ 13,056

$ 12,212

Taco Bell Division

GAAP Company sales(a)

Franchise sales

System sales

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Foreign Currency Impact on System sales(b)

System sales, excluding FX

Impact of 53rd week

882

921

1,037

10,863

11,745

10,863

11,784

(2)

(12)

9,749

10,786

N/A

11,747

11,796

10,786

N/A

184

N/A

System sales, excluding FX and 53rd Week

$ 11,747

$ 11,612

$ 10,786

Habit Burger Grill Division(c)

GAAP Company sales(a)

Franchise sales

System sales

Foreign Currency Impact on System sales(b)

System sales, excluding FX

346

370

—

370

N/A

(a) Company sales represents sales from our Company-operated stores as presented on our Consolidated Statements of Income.

(b) The foreign currency impact on System sales is presented in relation only to the immediately preceding year presented. When determining applicable
System sales growth percentages, the System sales excluding FX for the current year should be compared to the prior year System sales prior to
adjustment for the prior year FX impact.

28 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Non-GAAP Items

Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, are presented below.

Core Operating Profit Growth %

Core Operating Profit Growth %, excluding 53rd week

Diluted EPS Growth %, excluding Special Items

Effective Tax Rate excluding Special Items

Detail of Special Items

Refranchising gain (loss)(a)

Costs associated with acquisition and integration of Habit Burger Grill (See Note 3)

Impairment of Habit Burger Grill goodwill (See Note 3)

Unlocking Opportunity Initiative contribution (See Note 5)

COVID-19 relief contribution (See Note 5)

Charges associated with resource optimization (See Note 5)

Costs associated with Pizza Hut U.S. Transformation Agreement(b)

YUM’s Strategic Transformation Initiatives(c)

Other Special Items Income (Expense)(d)

Special Items Income (Expense) – Operating Profit

Charges associated with resource optimization – Other Pension Expense (See Note 5)

Interest expense, net(d) (See Note 5)

Special Items Income (Expense) before Income Taxes

Tax Benefit (Expense) on Special Items(e)

Tax Benefit – Intra-entity transfer of intellectual property(f)

Tax Benefit – U.S. Tax Act(g)

Special Items Income (Expense), net of tax

Average diluted shares outstanding

Special Items diluted EPS

2020

2019

2018

(8)

(7)

—

N/A

15.9%

19.8%

20.4%

Year

2020

2019

2018

(9)

(144)

(50)

(25)

(36)

(5)

—

(6)

(267)

(2)

(34)

(303)

—

$ 540

(1)

—

(13)

—

(9)

(11)

—

(2)

(13)

(30)

226

—

(6)

(8)

530

—

530

(96)

—

$ (210)

$ 183

$ 500

307

313

329

$ (0.68)

$ 0.59

$ 1.52

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YUM! BRANDS, INC. - 2020 Form 10-K 29

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Reconciliation of GAAP Operating Profit to Core Operating Profit and Core Operating
Profit, excluding 53rd Week

2020

2019

2018

Year

Consolidated

GAAP Operating Profit

Special Items Income (Expense) – Operating Profit

Foreign Currency Impact on Divisional Operating Profit(h)

Core Operating Profit

Impact of 53rd Week

Core Operating Profit, excluding 53rd Week

KFC Division

GAAP Operating Profit

Foreign Currency Impact on Divisional Operating Profit(h)

Core Operating Profit

Impact of 53rd Week

Core Operating Profit, excluding 53rd Week

Pizza Hut Division

GAAP Operating Profit

Foreign Currency Impact on Divisional Operating Profit(h)

Core Operating Profit

Impact of 53rd Week

Core Operating Profit, excluding 53rd Week

Taco Bell Division

GAAP Operating Profit

Foreign Currency Impact on Divisional Operating Profit(h)

Core Operating Profit

Impact of 53rd Week

Core Operating Profit, excluding 53rd Week

Habit Burger Grill Division

GAAP Operating Profit

Foreign Currency Impact on Divisional Operating Profit(h)

Core Operating Profit

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Reconciliation of Diluted EPS to Diluted EPS excluding Special Items

Diluted EPS

Special Items Diluted EPS

Diluted EPS excluding Special Items

Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate, excluding Special Items

GAAP Effective Tax Rate

Impact on Tax Rate as a result of Special Items(e)(f)(g)

Effective Tax Rate excluding Special Items

$ 1,503

$ 1,930

$ 2,296

(267)

(9)

1,779

N/A

(11)

(46)

1,987

530

N/A

1,766

N/A

$ 1,779

$ 1,963

$ 1,766

922

$ 1,052

(9)

931

N/A

931

335

—

335

N/A

335

696

—

696

N/A

696

(22)

—

(22)

(39)

1,091

$ 1,083

369

(7)

376

373

683

—

683

670

N/A

959

N/A

959

N/A

959

348

N/A

348

N/A

348

633

N/A

633

N/A

633

N/A

2.94

4.14

(0.68)

0.59

3.62

3.55

4.69

1.52

3.17

11.4%

(4.5)%

15.9%

5.7%

(14.1)%

19.8%

16.2%

(4.2)%

20.4%

(a) Due to their size and volatility we have reflected as Special Items those refranchising gains and losses that were recorded in connection with our
previously announced plans to have at least 98% franchise restaurant ownership by the end of 2018. As such, refranchising gains and losses
recorded during 2020 as Special
Items primarily include true-ups to refranchising gains and losses recorded prior to December 31, 2018.
Refranchising gains and losses recorded during 2019 as Special Items primarily include gains or losses associated with sales of underlying real
estate associated with stores that were franchised as of December 31, 2018, or true-ups to refranchising gains and losses recorded prior to
December 31, 2018.

During the years ended December 31, 2020, 2019 and 2018, we recorded net refranchising gains of $8 million, $12 million and $540 million,
respectively, that have been reflected as Special Items.

30 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(b)

(c)

Additionally, during the years ended December 31, 2020, and 2019 we recorded refranchising gains of $26 million and $25 million, respectively, that
have not been reflected as Special Items as such amounts are considered indicative of our expected ongoing refranchising activity. These net gains
relate to the refranchising of restaurants in 2020 and 2019 that were not part of our aforementioned plans to achieve 98% franchise ownership.

In May 2017, we reached an agreement with our Pizza Hut U.S. franchisees that improved brand marketing alignment, accelerated enhancements in
operations and technology and that included a permanent commitment to incremental advertising as well as digital and technology contributions by
franchisees. In connection with this agreement, we recognized charges of $5 million, $13 million and $6 million in the years ended December 31,
2020, 2019 and 2018, respectively, related to operating investments required as part of this agreement. The majority of these costs were recorded
within Franchise and property expenses. Based on their nature and the significance in related spending in 2017, these charges have been reflected
as Special Items.

In October 2016, we announced our strategic transformation plans to drive global expansion of the KFC, Pizza Hut and Taco Bell brands (“YUM’s
Strategic Transformation Initiatives”) following the then anticipated spin-off of our China business (the “Separation”) on October 31, 2016, into an
independent, publicly-traded company under the name of Yum China Holdings, Inc. (“Yum China”). Major features of the Company’s strategic
transformation plans involved being more focused on the development of our three brands, increasing our franchise ownership and creating a leaner,
more efficient cost structure. We incurred charges of $8 million related to our Strategic Transformation Initiatives in the year ended December 31,
2018, primarily recorded in G&A, including contract termination costs and relocation and severance costs for restaurant-support center employees.
Due to the scope of these initiatives as well as the significance in related spending in 2017 and 2016, these charges were recognized as Special
Items.

(d) During the second quarter of 2019, we recorded charges of $8 million and $2 million to Other (income) expense and Interest expense, net,
respectively, related to cash payments in excess of our recorded liability to settle contingent consideration associated with our 2013 acquisition of
the KFC Turkey and Pizza Hut Turkey businesses. Consistent with prior adjustments to the recorded contingent consideration we have reflected this
as a Special Item.

(e) Tax Benefit (Expense) on Special Items was determined based upon the impact of the nature, as well as the jurisdiction of the respective individual
components within Special Items. Additionally, we increased our Income tax provision by $34 million in the fourth quarter of 2019 to record a reserve
against and by $19 million in the second quarter of 2018 to correct an error related to the tax recorded on a prior year divestiture, the effects of
which were previously recorded as a Special Item.

(f)

In the fourth quarter of 2019, we completed intra-entity transfers of certain intellectual property rights. As a result of the transfer of certain of these
rights, largely to subsidiaries in the United Kingdom (“UK”), we received a step-up in tax basis to current fair value under applicable tax law. To the
extent this step-up in tax basis will be amortizable against future taxable income, we recognized one-time deferred tax benefits of $3 million and
Item in the quarters ended December 31, 2020 and December 31, 2019, respectively. During the quarter ended
$226 million as a Special
September 30, 2020, the UK Finance Act 2020 was enacted resulting in an increase in the UK corporate tax rate from 17% to 19%. As a result, in
the quarter ended September 30, 2020, we remeasured the related deferred tax asset originally recorded in the fourth quarter of 2019. This
remeasurement resulted in the recognition of an additional $25 million deferred tax benefit as a Special Item in the quarter ended September 30,
2020.

(g)

In 2018, we recorded a $35 million decrease related to our provisional tax expense recorded in the fourth quarter of 2017 associated with the Tax
Cuts and Jobs Act of 2017 (“Tax Act”) that was reported as a Special Item. We also recorded a Special Items tax benefit of $31 million in 2018
related to 2018 U.S. foreign tax credits that became realizable directly as a result of the impact of deemed repatriation tax expense associated with
the Tax Act.

(h) The foreign currency impact on reported Operating Profit is presented in relation only to the immediately preceding year presented. When
determining applicable Core Operating Profit Growth percentages, the Core Operating Profit for the current year should be compared to the prior
year Operating Profit, prior to adjustment for the prior year FX impact.

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Items Impacting Reported Results and/or Expected to Impact Future Results
The following items impacted reported results in 2020 and/or 2019 and/or are expected to impact future results. See also the Detail of Special
Items section of this M&DA for other items similarly impacting results.

COVID-19
In late 2019, a novel strain of coronavirus, COVID-19, was first detected and in March 2020, the World Health Organization declared COVID-19
a global pandemic. Throughout 2020, COVID-19 has spread throughout the U.S. and the rest of the world and governmental authorities have
implemented measures to reduce the spread of COVID-19. These measures include restrictions on travel outside the home and other limitations
on business and other activities as well as encouraging social distancing. As a result of COVID-19, we and our franchisees have experienced
significant store closures and instances of reduced store-level operations, including reduced operating hours and dining-room closures.

Our results were significantly impacted by the impacts of COVID-19 in the year ended December 31, 2020, as evidenced by our worldwide
same-store sales decline of 6%. The impact on our sales in each of our markets has been dependent on the timing, severity and duration of the
outbreak, measures implemented by government authorities to reduce the spread of COVID-19, as well as our reliance on dine-in sales in the
market. Overall, our sales declines have been primarily driven by temporary store closures, which peaked in early April at about 11,000
restaurants. From that date, temporarily closed restaurants gradually reopened until, as of the end of our third quarter, we had approximately
1,100 units temporarily closed. We continued to see reopenings through the balance of the fourth-quarter; however, due to the second-wave
impacts of COVID-19, including increased government restrictions, temporary closures climbed back to approximately 1,000 as of February 4,
2021. As a result, roughly 98% of our system is currently open in a full or limited capacity. Geographies experiencing temporary closures have
evolved and we are now seeing more closures in Europe, Canada and the Middle East, offset by some re-openings in Latin America and India.
Assets located in malls, transportation centers, airports and other similar locations continue to be pressured, making up many of the temporary
closures. In addition to the loss of sales due to restaurants being temporarily closed, we have also lost sales due to the significant number of our
open restaurants subject to dining room closures or other limitations on access. We have been able to mitigate the loss of sales due to dining
room closures or other limitations on access through the strength of our off-premise channels, aided by increasing consumer access to our
brands via digital channels. Our worldwide same-store sales decline of 1% for the fourth quarter of 2020 represents an improvement from the
same-store sales declines of 7%, 15% and 2% in the respective first, second and third quarters of 2020.

YUM! BRANDS, INC. - 2020 Form 10-K 31

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The COVID-19 situation is ongoing, and its dynamic nature makes it difficult to forecast any impacts on the Company’s 2021 results. The
largely depend on the pace of restaurant reopenings and the continuation of current sales trends, although we
ultimate pace of recovery will
expect continuing adverse impacts from COVID-19. In addition, for our restaurants that prominently feature drive-thru, carryout and delivery
options, COVID-19 has in many cases contributed to an increase in sales during 2020. If the impact of COVID-19 recedes, in-person dining
restrictions are lifted or lessened and the restaurant industry in general returns to more normal operations, the benefits to sales experienced by
certain of our restaurants, including our Pizza Hut delivery restaurants, could wane and our results could be negatively impacted. As 98% of our
restaurants are operated by approximately 2,000 independent franchisees across the world, we are closely monitoring the impact of COVID-19
on our franchisees’ financial condition.

Net New Unit Growth

In addition to the restaurants that have been, or continue to be, temporarily closed during 2020, the uncertainties associated with COVID-19
contributed to fewer new restaurant openings and increased permanent restaurant closures during 2020 versus both our recent history and
expectations. In addition to permanent closures due to the impacts of COVID-19, the Pizza Hut system also experienced increased permanent
closures of certain asset types primarily due to business model pressures as discussed in the following paragraph. For the year ended
December 31, 2020, our Concepts collectively opened 2,423 new units while permanently closing 2,516 units.

While net new unit growth at each of KFC, Taco Bell and The Habit Burger Grill was lower than expected in 2020, each Concept realized
positive net new unit growth for the year. Pizza Hut experienced a net new unit decline of 1,064 restaurants in 2020, largely due to 1,745 global
closures, including 867 closures in the U.S., nearly 300 of which were stores operated by NPC International, Inc. (“NPC”) as discussed in the
following paragraph. These global closures, which were largely underperforming or low volume casual dining-based and license units, have
hastened the transition of the Pizza Hut system to a more delivery-focused and modern estate, which we believe will optimize our ability to grow
the Pizza Hut system going forward. However, these and continued closures within our Pizza Hut Division will present a headwind to the
Division’s net unit and operating profit growth in 2021.

NPC, our largest Pizza Hut U.S. franchisee, filed voluntary petitions on July 1, 2020, to restructure under Chapter 11 of the U.S. Bankruptcy
Code in the U.S. Bankruptcy Court for the Southern District of Texas. In connection with the bankruptcy filing, we consented to up to 300
mutually selected closures of underperforming units, primarily dine-in assets. These units were largely closed during the quarter ended
September 30, 2020. In January 2021, Flynn Restaurant Group, an existing YUM franchisee, announced its intention to acquire NPC’s
approximately 950 remaining Pizza Hut U.S. restaurants.

Investment in Grubhub, Inc. (“Grubhub”)

In April of 2018 we purchased 2.8 million shares of Grubhub common stock for $200 million. In the quarter ended September 30, 2020, we sold
our entire investment in Grubhub and received proceeds of $206 million. While we held our investment in Grubhub common stock we
recognized changes in the fair value in our investment in our Consolidated Statements of Income. For the years ended December 31, 2020,
2019 and 2018, we recognized pre-tax investment income of $69 million, pre-tax investment expense of $77 million and pre-tax investment
income of $14 million, respectively.

The Habit Restaurants, Inc. Acquisition

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On March 18, 2020, we acquired The Habit Restaurants, Inc. for total cash consideration of $408 million, net of cash acquired. We have
reflected the ongoing results of Habit Burger Grill’s operations from March 18, 2020 through December 31, 2020, in our Financial Statements.
These ongoing results had an insignificant impact on our consolidated results of operations. Additionally, we have included the system sales of
Habit Burger Grill for the period from March 18, 2020 through December 31, 2020, in our consolidated system sales and reflected Habit Burger
Grill’s same-store sales results for this same period in our consolidated same-store sales results, as applicable,
for the year ended
December 31, 2020. Consolidated system sales in 2020, excluding the impact of FX and the lapping of the 53rd week in 2019, were positively
impacted by one percentage point due to the inclusion of Habit Burger Grill while consolidated same-store sales results were not impacted.

As a result of the impacts of COVID-19 on the results of Habit Burger Grill’s operations, as well as general market conditions, we recorded an
after-tax impairment charge of $107 million in the first quarter of 2020 related to the goodwill arising from the preliminary purchase price
allocation associated with the acquisition. As we continued to refine our preliminary purchase price allocation for Habit in the quarter ended
September 30, 2020, the after-tax impairment charge was adjusted upward by $4 million. We have reflected this impairment as a Special Item,
resulting in a Special Item EPS charge for the year ended December 31, 2020, of approximately $0.36. See Note 3.

32 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Extra Week in 2019

Fiscal 2019 included a 53rd week for all of our U.S. and certain international subsidiaries that operate on a period calendar. See Note 2 for
additional details related to our fiscal calendar. The following table summarizes the estimated impact of the 53rd week on Revenues and
Operating Profit for the year ended December 31, 2019. The 53rd week in 2019 favorably impacted Diluted EPS by $0.05 per share.

Revenues

Company sales

Franchise and property revenues

Franchise contributions for advertising and other services

Total revenues

Operating Profit

Franchise and property revenues

Franchise contributions for advertising and other services

Restaurant profit

Franchise and property expenses

Franchise advertising and other services expenses

G&A expenses

Operating Profit

KFC
Division

Pizza Hut
Division

Taco Bell
Division

Total

—

(5)

(2)

—

(1)

(5)

(1)

—

(8)

(2)

(1)

(18)

(5)

KFC Division
The KFC Division has 25,000 units, 84% of which are located outside the U.S. Additionally, 99% of the KFC Division units were operated by
franchisees as of the end of 2020.

2020

2019

2018 Reported

Ex FX

Ex FX and
53rd Week
in 2019

Reported

Ex FX

Ex FX and
53rd Week
in 2019

% B/(W)
2020

% B/(W)
2019

System Sales

$ 26,289 $ 27,900 $ 26,239

Same-Store Sales
Growth %

Company sales

506 $

571 $

894

1,295

1,390

1,294

471

530

456

2,272 $

2,491 $

2,644

67 $

87 $

119

(6)

(9)

(11)

(7)

(11)

(9)

(24)

(5)

N/A

(9)

(6)

(10)

(8)

(24)

(5)

N/A

(8)

(5)

(9)

(7)

(22)

(36)

N/A

(33)

(6)

(26)

(2)

(23)

N/A

(34)

(3)

(24)

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13.2%

15.3%

13.3%

(2.1) ppts.

(2.4) ppts.

2.0 ppts.

Franchise and
property revenues

Franchise
contributions for
advertising and
other services

Total revenues

Restaurant profit

Restaurant
margin %

Franchise and
property expenses

Franchise
advertising and
other services
expense

G&A expenses

346 $

350

107

Operating Profit

922 $

1,052 $

465

520

452

959

—

(2)

(12)

(1)

(2)

(12)

(1)

(3)

(11)

(15)

(1)

(20)

(1)

(19)

YUM! BRANDS, INC. - 2020 Form 10-K 33

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Unit Count

Franchise

Company-owned

Total

2020

24,710

290

25,000

2019

23,759

345

24,104

2018

22,297

324

22,621

% Increase
(Decrease)

2020

2019

(16)

Company sales and Restaurant margin percentage

In 2020, the decrease in Company sales, excluding the impacts of foreign currency translation and lapping the 53rd week in 2019, was driven
by refranchising and company same-store sales declines of 6%, partially offset by net new unit growth.

In 2020, the decrease in Restaurant margin percentage was driven by transaction declines and increased restaurant costs, including one-time
bonuses and other costs incurred as a result of COVID-19, partially offset by the favorable impact of higher guest check.

Franchise and property revenues

In 2020, the decrease in Franchise and property revenues, excluding the impacts of foreign currency translation and lapping the 53rd week in
2019, was driven by franchise same-store sales declines of 9%, partially offset by net new unit growth.

G&A

In 2020, the increase in G&A, excluding the impacts of foreign currency translation and lapping the 53rd week in 2019, was driven by higher
professional fees, higher share-based compensation and higher salaries, partially offset by lower travel related costs and lower incentive
compensation.

Operating Profit

In 2020, the decrease in Operating Profit, excluding the impacts of foreign currency translation and lapping the 53rd week in 2019, was driven
by same-store sales declines, partially offset by net new unit growth.

Pizza Hut Division
The Pizza Hut Division has 17,639 units, 63% of which are located outside the U.S. Over 99% of the Pizza Hut Division units were operated by
franchisees as of the end of 2020. The Pizza Hut Division uses multiple distribution channels including delivery, dine-in and express (e.g. airports)
and includes units operating under both the Pizza Hut and Telepizza brands.

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34 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

On December 30, 2018, the Company consummated a strategic alliance with Telepizza Group S.A. (“Telepizza”), to be the master franchisee of
Pizza Hut in Latin America and portions of Europe, which added approximately 1,300 Telepizza units to our Pizza Hut Division unit count on
December 30, 2018. The addition of the Telepizza units positively impacted 2019 Pizza Hut Division system sales growth, excluding the impacts
of foreign currency and 53rd week, by 5 percentage points. The impact to Operating Profit for the year ended December 31, 2019, as a result of
the strategic alliance was not significant.

2020

2019

2018 Reported

Ex FX

Ex FX and
53rd Week
in 2019

Reported

Ex FX

Ex FX and
53rd Week
in 2019

% B/(W)
2020

% B/(W)
2019

G&A expenses

215 $

202 $

197

5.1%

4.2%

(0.1)%

0.9 ppts.

0.7 ppts.

0.8 ppts.

4.3 ppts.

4.2 ppts.

4.1 ppts.

System Sales

$ 11,955 $ 12,900 $ 12,212

Same-Store Sales
Growth (Decline) %

Company sales

76 $

54 $

Franchise and
property revenues

Franchise
contributions for
advertising and
other services

Total revenues

Restaurant profit

Restaurant
margin %

Franchise and
property expenses

Franchise
advertising and
other services
expense

552

597

598

374

376

1,002 $

1,027 $

3 $

321

988

—

365

367

328

348

Operating Profit

335 $

369 $

Unit Count

Franchise

Company-owned

Total

Company sales

(7)

(6)

(8)

(1)

(2)

(7)

N/A

(8)

(1)

(2)

(6)

N/A

(7)

(1)

—

(23)

—

N/A

(21)

N/A

(21)

(7)

—

(9)

(7)

—

(9)

(8)

(1)

(8)

(2)

(12)

(3)

(12)

(2)

(11)

2020

17,559

17,639

2019

18,603

100

18,703

2018

18,369

18,431

% Increase
(Decrease)

2020

2019

(6)

(20)

(6)

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In 2020, the increase in Company sales, excluding the impacts of foreign currency translation and lapping the 53rd week in 2019, was driven by
the acquisition of stores in the UK in the quarter ended September 30, 2019, and company same-store sales growth of 4%.

Franchise and property revenues

G&A

In 2020, the increase in G&A, excluding the impacts of foreign currency translation and lapping the 53rd week in 2019, was driven by higher
share-based compensation, higher professional fees, higher incentive compensation and higher headcount, partially offset by lower travel related
costs.

YUM! BRANDS, INC. - 2020 Form 10-K 35

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Operating Profit

In 2020, the decrease in Operating Profit, excluding the impacts of foreign currency translation and lapping the 53rd week in 2019, was driven
by same-store sales declines, higher G&A, net new unit declines, and the write-off of software no longer being used, partially offset by recoveries
on past due receivables.

Taco Bell Division
The Taco Bell Division has 7,427 units, 92% of which are in the U.S. The Company owned 7% of the Taco Bell units in the U.S. as of the end of
2020.

% B/(W)
2020

% B/(W)
2019

2020

2019

2018 Reported

Ex FX

System Sales

$ 11,745 $ 11,784 $ 10,786

—

Same-Store Sales
Growth %

Company sales

882 $

921 $

1,037

Franchise and
property revenues

Franchise
contributions for
advertising and
other services

Total revenues

Restaurant profit

Restaurant
margin %

Franchise and
property expenses

Franchise
advertising and
other services
expense

662

673

590

487

485

429

2,031 $

2,079 $

2,056

225 $

221 $

244

484

481

428

633

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Operating Profit

696 $

683 $

Unit Count

Franchise

Company-owned

Total

Ex FX and
53rd Week
in 2019

Reported

Ex FX

Ex FX and
53rd Week
in 2019

N/A

(3)

—

(1)

(11)

(9)

N/A

(11)

(9)

N/A

(13)

—

(11)

(1)

(4)

(2)

—

(2)

N/A

(4)

(2)

—

(2)

(1)

(2)

(3)

(33)

(12)

(2)

(32)

(11)

2020

6,952

475

7,427

2019

6,895

468

7,363

2018

6,602

470

7,072

% Increase
(Decrease)

2020

2019

—

25.5%

24.0%

23.5%

1.5 ppts.

1.6 ppts.

0.5 ppts.

0.4 ppts.

G&A expenses

158 $

181 $

177

Company sales and Restaurant margin percentage

In 2020, the decrease in Company Sales, excluding the impact of lapping the 53rd week in 2019, was driven by company same-store sales
declines of 3% and refranchising offset by net new unit growth.

In 2020, the increase in restaurant margin percentage was driven by the favorable impact of higher guest check, lower restaurant operating
costs such as labor and repairs and maintenance costs due to dining room closures as a result of COVID-19 and lower advertising costs,
partially offset by transaction declines and a COVID-19 related bonus for restaurant employees.

Franchise and property revenues

In 2020, Franchise and property revenues were flat for the year, excluding the impacts of foreign currency translation and lapping the 53rd week
in 2019, as net new unit growth was offset by franchise same-store sales declines of 1%.

36 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

G&A

In 2020, the decrease in G&A, excluding the impacts of foreign currency translation and lapping the 53rd week in 2019, was driven by lower
incentive compensation, lower travel related costs, decreased professional fees and decreased salaries, partially offset by higher share-based
compensation.

Operating Profit

In 2020, the increase in Operating Profit, excluding the impacts of foreign currency translation and lapping the 53rd week in 2019, was driven by
lower G&A costs, net new unit growth and lower restaurant operating costs partially offset by same-store sales declines and higher restaurant
asset impairment charges.

Habit Burger Grill Division
The Habit Burger Grill Division has 287 units, the vast majority of which are in the U.S. The Company owned 91% of the Habit Burger Grill units
in the U.S. as of December 31, 2020. From March 18, 2020, the date we acquired The Habit Burger Grill, through December 31, 2020, we
reported a same-store sales decline of 11%. Total revenues and Operating loss were $347 million and $22 million, respectively, for the period
from March 18, 2020 through December 31, 2020. During this period we also opened 14 gross new restaurants.

Corporate & Unallocated

(Expense)/Income

2020

2019

2018

2020

2019

% B/(W)

Corporate and unallocated G&A

(312)

(188)

(171)

Unallocated Company restaurant expenses

Unallocated Franchise and property expenses

Unallocated Refranchising gain (loss) (See Note 5)

Unallocated Other income (expense)

Investment income (expense), net (See Note 5)

Other pension income (expense) (See Note 15)

Interest expense, net

Income tax provision (See Note 18)

Effective tax rate (See Note 18)

Corporate and unallocated G&A

—

(4)

(146)

(14)

(543)

(116)

11.4%

—

(14)

(9)

(67)

(4)

(486)

(79)

5.7%

(8)

540

(8)

(14)

(452)

(297)

(66)

(9)

(12)

(48)

(10)

(95)

(72)

(93)

(8)

16.2%

(5.7) ppts.

10.5 ppts.

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In 2020, the increase in Corporate and unallocated G&A expense was driven by charitable contributions of $50 million related to our “Unlocking
Opportunity Initiative” and $25 million related to COVID-19 relief (see Note 5). The increase was also driven by costs associated with a voluntary
early retirement program offered to our U.S. based employees and a related worldwide severance program (see Note 5), higher professional fees
including costs associated with the acquisition of The Habit Burger Grill and higher share-based compensation, partially offset by lower
expenses related to our incentive and deferred compensation programs.

Unallocated Franchise and property expenses

Unallocated Franchise and property expenses reflect charges related to the Pizza Hut U.S. Transformation Agreement and/or the KFC U.S.
Acceleration Agreement.

Unallocated Other income (expense)

Unallocated Other income (expense) for the year ended December 31, 2020, includes a charge of $144 million related to the impairment of Habit
Burger Grill goodwill (see Note 3). The year ended December 31, 2019, includes a settlement of contingent consideration charge of $8 million
associated with our 2013 acquisition of the KFC Turkey and Pizza Hut Turkey businesses (see Note 8).

Interest expense, net

The increase in Interest expense, net for 2020 was driven by increased outstanding borrowings and $34 million of premiums paid and other
costs associated with extinguishment of debt (see Note 5), partially offset by a decrease in the rate on our floating rate debt.

YUM! BRANDS, INC. - 2020 Form 10-K 37

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Consolidated Cash Flows

Net cash provided by operating activities was $1,305 million
in 2020 compared to $1,315 million in 2019. The decrease was
largely driven by a decrease in Operating Profit before Special Items
and higher charitable contributions reflected as Special
Items,
partially offset by lower advertising spending.

Net cash used in investing activities was $335 million in 2020
compared to $88 million in 2019. The increase was primarily driven

by the acquisition of The Habit Restaurants,
Inc. and lower
refranchising proceeds in the current year, partially offset by
proceeds from the sale of our investment in Grubhub, Inc. common
stock and lower capital spending.

Net cash used in financing activities was $738 million in 2020
compared to $938 million in 2019. The decrease was primarily driven
by lower share repurchases, partially offset by lower net borrowings.

Consolidated Financial Condition

Our Consolidated Balance Sheet was impacted by the acquisition of The Habit Restaurants, Inc. (See Note 3).

Directors previously authorized repurchases of up to $2 billion of
the Company’s common stock through June 30, 2021, (the “Share
Repurchase Program”). Commensurate with the performance of
the business, health of our balance sheet and liquidity position,
including our
remaining borrowings under our
Revolving Facility during the quarter ended September 30, 2020,
and our confidence that we will grow back into our ~5.0x EBITDA
consolidated net
leverage target by second-quarter 2021, we
resumed share repurchases in the fourth quarter of 2020.

repayment of

(cid:129) On March 24, 2020, Pizza Hut Holdings, LLC, KFC Holding Co.
and Taco Bell of America, LLC (collectively, the “Borrowers”), each
Inc., borrowed
a wholly-owned subsidiary of Yum! Brands,
$525 million under our existing Revolving Facility. This borrowing,
together with $425 million borrowed under the Revolving Facility
on March 18, 2020,
to fund amounts associated with the
acquisition of The Habit Restaurants, Inc., resulted in an aggregate
of $950 million outstanding under the Revolving Facility as of
March 31, 2020. In the second and third quarters of 2020 we
made repayments of $375 million and $575 million, respectively,
and as of both December 31, 2020 and September 30, 2020, our
Revolving Facility was undrawn. The current
rate for
borrowings under the Revolving Facility is LIBOR plus 1.50%.

interest

(cid:129) On April 1, 2020, Yum! Brands, Inc. issued $600 million aggregate
principal amount of 7.75% YUM Senior Unsecured Notes due
April 1, 2025. See Note 11 for more detail.

(cid:129) On September 25, 2020, Yum! Brands, Inc. issued $1,050 million
aggregate principal amount of 3.625% YUM Senior Unsecured
Notes due March 15, 2031. The net proceeds from the issuance,
together with cash on hand, were used to repay $1,050 million
aggregate principal amount of Subsidiary Senior Unsecured Notes
due in 2024. See Note 11 for more detail.

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Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand, cash generated by
operations and our revolving facilities. As of December 31, 2020, we
had Cash and cash equivalents of $730 million. We have historically
generated substantial cash flows from our extensive franchise
operations, which require a limited YUM investment, and from the
operations of our Company-owned stores. Our annual operating
cash flows have historically been in excess of $1 billion. Decreases in
operating cash flows from the operation of fewer Company-owned
stores in recent years due to refranchising have been offset, and are
expected to continue to be offset, with savings generated from
decreased capital investment and G&A required to support company
operations.

the next

repayment obligations over

We believe that our existing cash on hand, cash from operations and
availability under our Revolving Facility (as defined below), will be
sufficient to fund our operations, anticipated capital expenditures and
debt
twelve months. Our
balance sheet often reflects a working capital deficit, which is not
uncommon in our industry and is also historically common for YUM.
Our royalty receivables from franchisees are generally due within 30
days of the period in which the related sales occur and Company
sales are paid in cash or by credit card (which is quickly converted
into cash). Substantial amounts of cash received have historically
been either returned to shareholders or invested in new restaurant
assets which are non-current in nature. As part of our working capital
strategy, we negotiate favorable credit terms with vendors and, as a
result, our on-hand inventory turns faster than the related short-term
liabilities. Accordingly, it is not unusual for current liabilities to exceed
current assets. We believe such a deficit has no significant impact on
our liquidity or operations.

During 2020 net cash provided by operating activities was negatively
impacted by lower Operating Profit due in large part to the impacts of
the COVID-19 pandemic. In light of the impacts on our business from
the COVID-19 pandemic, the Company took the following steps to
bolster our cash balance and increase our liquidity position during
2020.

(cid:129) During the first quarter of 2020, we suspended our share
repurchase program, pursuant to which the Company’s Board of

38 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Debt Instruments
As of December 31, 2020, approximately 93%, including the impact
of interest rate swaps, of our $10.7 billion of total debt outstanding,
excluding finance leases and debt issuance costs and discounts, is
fixed with an effective overall interest rate of approximately 4.7%. We
are currently managing towards a capital structure which reflects
consolidated leverage, net of available cash, in-line with our target of

~5.0x EBITDA and which we believe provides an attractive balance
between optimized interest
rates, duration and flexibility with
diversified sources of liquidity and maturities spread over multiple
years. We have credit
ratings of BB (Standard & Poor’s)/Ba2
(Moody’s) with a balance sheet consistent with highly-levered peer
restaurant franchise companies.

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and
discounts, as of December 31, 2020.

2021

2022

2023

2024

2025

2026

2027

2028

2030

2031

2037

2043

Total

Securitization
Notes

$ 29

$ 29 $ 1,281

$ 16

$ 16 $ 921

$ 6

$ 571

Credit Agreement

395

1,836

1,050

750

Subsidiary Senior
Unsecured Notes

YUM Senior
Unsecured Notes

$ 2,869

2,347

1,800

350

325

600

800

1,050

325

275

3,725

Total

$ 455

$ 424 $ 1,626

$ 36 $ 2,452

$ 1,971

$ 756

$ 571

$ 800

$ 1,050

$ 325

$ 275

$ 10,741

Securitization Notes include four senior secured notes issued by
Taco Bell Funding, LLC (the “Issuer”) totaling $2.9 billion with fixed
interest rates ranging from 4.318% to 4.970%. The Securitization
Notes are secured by substantially all of the assets of the Issuer and
the Issuer’s special purpose, wholly-owned subsidiaries (collectively
with the Issuer, the “Securitization Entities”), and include a lien on all
existing and future U.S. Taco Bell franchise and license agreements
and the royalties payable thereunder, existing and future U.S. Taco
intellectual property, certain transaction accounts and a pledge
Bell
of the equity interests in asset-owning Securitization Entities. The
Securitization Notes contain cross-default provisions whereby the
failure to pay principal on any outstanding Securitization Notes will
constitute an event of default under any other Securitization Notes.

Credit Agreement includes senior secured credit facilities consisting
of a $431 million Term Loan A facility (the “Term Loan A Facility”), a
$1.9 billion Term Loan B facility (the “Term Loan B Facility”) and a
$1.0 billion revolving facility (the “Revolving Facility”) issued by the
Borrowers. Our Revolving Facility was undrawn as of December 31,
2020. The interest rates applicable to the Term Loan A Facility and
Revolving Facility range from 1.25% to 1.75% plus LIBOR or from
0.25% to 0.75% plus the Base Rate, at the Borrowers’ election,
based upon the total net leverage ratio of the Borrowers and the
Specified Guarantors (as defined in the Credit Agreement). The
interest rates applicable to the Term Loan B Facility are 1.75% plus
LIBOR or 0.75% plus the Base Rate, at the Borrowers’ election. Our
Term Loan A Facility and Term Loan B Facility contain cross-default
provisions whereby the failure to pay principal of or otherwise

perform any agreement or condition under indebtedness of certain
subsidiaries with a principal amount in excess of $100 million will
constitute an event of default under the Credit Agreement.

Subsidiary Senior Unsecured Notes include $1,050 million aggregate
principal amount of 5.25% Subsidiary Senior Unsecured Notes due
2026 and $750 million aggregate principal amount of 4.75%
Subsidiary Senior Unsecured Notes due 2027. Our Subsidiary Senior
Unsecured Notes contain cross-default provisions whereby the
acceleration of
the indebtedness of certain
subsidiaries with a principal amount in excess of $100 million or the
failure to pay principal of such indebtedness will constitute an event
of default under the Subsidiary Senior Unsecured Notes.

the maturity of

YUM Senior Unsecured Notes include seven series of senior
unsecured notes issued by Yum! Brands, Inc. totaling $3.7 billion
with fixed interest rates ranging from 3.625% to 7.75%. Our YUM
Senior Unsecured Notes contain cross-default provisions whereby
the acceleration of the maturity of any of our indebtedness or the
failure to pay principal of such indebtedness above certain thresholds
will constitute an event of default under the YUM Senior Unsecured
Notes unless such indebtedness is discharged, or the acceleration of
the maturity of that indebtedness is annulled, within 30 days after
notice.

the Credit
See Note 11 for details on the Securitization Notes,
Agreement, Subsidiary Senior Unsecured Notes and YUM Senior
Unsecured Notes.

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YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Contractual Obligations
Our significant contractual obligations and payments as of December 31, 2020, included:

Long-term debt obligations(a)

$ 14,037

945

$ 2,993

$ 3,249

$ 6,850

Total

Less than
1 Year

1-3 Years

3-5 Years

More than
5 Years

Finance leases(b)

Operating leases(b)

Purchase obligations(c)

Benefit plans and other(d)

Total contractual obligations

102

1,225

473

197

128

230

256

141

218

623

$ 16,034

$ 1,341

$ 3,445

$ 3,584

$ 7,664

(a) Amounts include maturities of debt outstanding as of December 31, 2020, and expected interest payments on those outstanding amounts on a
nominal basis. The estimated interest payments related to the variable rate portion of our debt are based on current LIBOR interest rates. See
Note 11.

(b) These obligations, which are shown on a nominal basis and represent the non-cancellable term of the lease, relate primarily to approximately

800 Company-owned restaurants and 350 units that we sublease land, building or both to our franchisees. See Note 12.

(c) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant
terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the
transaction. We have excluded agreements that are cancellable without penalty. Purchase obligations relate primarily to marketing, information
technology and supply agreements.
Includes actuarially-determined timing of payments from our most significant unfunded pension plan as well as scheduled payments from our
deferred compensation plan and other unfunded benefit plans where payment dates are determinable. This table excludes $37 million of future
benefit payments for deferred compensation and other unfunded benefit plans to be paid upon separation of employee’s service or retirement from
the company, as we cannot reasonably estimate the dates of these future cash payments.

(d)

We sponsor noncontributory defined benefit pension plans covering
certain salaried and hourly employees, the most significant of which
are in the U.S. and UK. The most significant of the U.S. plans, the
YUM Retirement Plan (the “Plan”), is funded while benefits from our
other significant U.S. plan are paid by the Company as incurred (see
footnote (d) above). Our funding policy for the Plan is to contribute
the minimum amounts
annually amounts that will at least equal
required to
of
comply with
2006. However, additional voluntary contributions are made from
time-to-time to improve the Plan’s funded status. At December 31,
2020, the Plan was in a net underfunded position of $20 million. The
UK pension plans were in a net overfunded position of $78 million at
our 2020 measurement date.

the Pension Protection Act

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We do not anticipate making any significant contributions to the Plan
in 2021. Investment performance and corporate bond rates have a
significant effect on our net funding position as they drive our asset
balances and discount
rate assumptions. Future changes in
investment performance and corporate bond rates could impact our
funded status and the timing and amounts of required contributions
in 2021 and beyond.

Our post-retirement health care plan in the U.S. is not required to be
funded in advance, but is pay as you go. We made post-retirement
benefit payments of $3 million in 2020 and no future funding
amounts are included in the contractual obligations table. See
Note 15.

We have excluded from the contractual obligations table payments
we may make for exposures for which we are self-insured, including

workers’ compensation, employment practices liability, general
liability, automobile liability, product
liability and property losses
(collectively “property and casualty losses”) and employee healthcare
and long-term disability claims. The majority of our recorded liability
for self-insured property and casualty losses and employee
healthcare and long-term disability claims represents estimated
reserves for incurred claims that have yet to be filed or settled. See
Note 20.

We have not included in the contractual obligations table $64 million
of
liabilities for unrecognized tax benefits relating to various tax
positions we have taken. These liabilities may increase or decrease
over time as a result of tax examinations, and given the status of the
examinations, we cannot reliably estimate the period of any cash
settlement with the respective taxing authorities.

As discussed further in Note 20, on January 29, 2020, we received
an order from the Special Director of the Directorate of Enforcement
in India imposing a penalty on Yum! Restaurants India Private Limited
of approximately
Indian Rupee 11 billion, or approximately
$150 million, primarily relating to alleged violations of operating
conditions imposed in 1993 and 1994. We have been advised by
external counsel that the order is flawed and have filed a writ petition
with the Delhi High Court, which granted an interim stay of the
penalty order on March 5, 2020. The stay order remains in effect,
and the next hearing is scheduled for March 24, 2021. We deny
liability and intend to continue vigorously defending this matter. We
do not consider the risk of any significant loss arising from this order
to be probable.

Off-Balance Sheet Arrangements

See the Lease Guarantees section of Note 20 for discussion of our off-balance sheet arrangements.

40 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

New Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued guidance related to reference rate
reform. The pronouncement provides temporary optional expedients
and exceptions to the current guidance on contract modifications
and hedge accounting to ease the financial reporting burdens related
to the expected market transition from LIBOR and other interbank
offered rates to alternative reference rates. The guidance was
effective upon issuance and generally can be applied to applicable
contract modifications through December 31, 2022. We are currently

evaluating the impact of the transition from LIBOR to alternative
reference rates, including the impact on our interest rate swaps. As
of December 30, 2020, our interest rate swaps expiring in July 2021
had notional amounts of $1.55 billion and our interest rate swaps
expiring in March 2025 had notional amounts of $1.5 billion. These
interest rate swaps are designated cash flow hedges. We do not
anticipate the impact of adopting this standard will be material to our
Financial Statements.

Critical Accounting Policies and Estimates

Our reported results are impacted by the application of certain
accounting policies that require us to make subjective or complex
judgments. These judgments involve estimations of the effect of
matters that are inherently uncertain and may significantly impact our
financial condition.
results of operations or
quarterly or annual

Changes in the estimates and judgments could significantly affect our
results of operations and financial condition and cash flows in future
years. A description of what we consider to be our most significant
critical accounting policies follows.

Business Combinations
The acquisition of The Habit Restaurants, Inc. was accounted for
using the acquisition method of accounting, or acquisition
accounting, in accordance with Accounting Standards Codification
(“ASC”) Topic 805, Business Combinations. The acquisition method
of accounting involves the allocation of the purchase price to the
estimated fair values of the assets acquired and liabilities assumed.
This allocation process involves the use of estimates and
assumptions to derive fair values and to complete the allocation.
Acquisition accounting allows for up to one year to obtain the
information necessary to finalize the fair value of all assets acquired
and liabilities assumed at March 18, 2020. We will continue to obtain
information to assist
in determining the fair value of net assets
acquired during the remaining measurement period.

As discussed below, during the year ended December 31, 2020, we
recorded an impairment charge related to Habit Burger Grill reporting
unit goodwill resulting from the impacts of COVID-19 on substantially
In the event that actual results
all Habit Burger grill restaurants.
further vary from any of
the estimates or assumptions used in
applying the acquisition method of accounting, we may be required
impairment charge or an increase in
to record an additional
depreciation or amortization in future periods, or both.

See Note 3 for additional
acquisition of The Habit Restaurants, Inc.

information about accounting for the

Impairment or Disposal of Long-Lived
Assets
We review long-lived assets of restaurants we intend to continue
right-of-use
operating as Company restaurants (primarily PP&E,
operating lease assets and allocated intangible assets subject to
amortization) annually for impairment, or whenever events or changes
in circumstances indicate that the carrying amount of a restaurant
may not be recoverable. We evaluate recoverability based on the
restaurant’s forecasted undiscounted cash flows, which incorporate
our best estimate of sales growth and margin improvement based
upon our plans for
results at comparable
the unit and actual
restaurants. For
restaurant assets that are deemed to not be
recoverable, we write-down the impaired restaurant to its estimated
fair value. Key assumptions in the determination of fair value are the
future after-tax cash flows of the restaurant, which are reduced by
future royalties a franchisee would pay, and a discount rate. The
after-tax cash flows incorporate reasonable sales growth and margin

improvement assumptions that would be used by a franchisee in the
determination of a purchase price for the restaurant. Estimates of
future cash flows are highly subjective judgments and can be
significantly impacted by changes in the business or economic
conditions.

In each of the years ended December 31, 2019 and 2018 our
primary indicator of potential
impairment for our restaurant assets
was two consecutive years of operating losses. For the year ended
December 31, 2020, as a result of the impacts of the COVID-19
pandemic this indicator was expanded to include restaurants that
were open less than two years with operating losses as of our annual
impairment test. This expanded impairment indicator resulted in an
increase in the number of store assets reviewed for potential
impairment. As a result of our annual
review, we
recognized store impairment charges of $12 million, which is
presented within Other
(income) expense in our Consolidated
Statement of Income. The magnitude of the charges recorded during
the year ended December 31, 2020, was not particularly sensitive to
variations in fair value input as, in most situations, the fair value of the
store assets, except the value of any right-of-use lease asset, if
applicable, was fully impaired. Fair value estimates of right-of-use
lease assets in such instances included an estimate of sublease
income from a non-franchisee that could be reasonably obtained,
which typically resulted in a partial
impairment of the right-of-use
lease assets.

impairment

We perform an impairment evaluation at a restaurant group level
when it is more likely than not that we will refranchise restaurants as
a group. Expected net sales proceeds are generally based on actual
if available, or anticipated bids given the
bids from the buyer,
discounted projected after-tax cash flows for
the group of
restaurants. Historically, these anticipated bids have been reasonably
the proceeds ultimately received. The
accurate estimations of
after-tax cash flows used in determining the anticipated bids
incorporate reasonable assumptions we believe a franchisee would
make such as sales growth and margin improvement as well as
expectations as to the useful
lives of the restaurant assets. These
after-tax cash flows also include a deduction for the anticipated,
future royalties we would receive under a franchise agreement with
terms substantially at market entered into simultaneously with the
refranchising transaction.

The discount rate used in the fair value calculations is our estimate of
the required rate of return that a franchisee would expect to receive
when purchasing a similar restaurant or groups of restaurants and
the related long-lived assets. The discount rate incorporates rates of

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YUM BRANDS 2020 FORM

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

returns for historical
commensurate with the risks and uncertainty inherent
forecasted cash flows.

refranchising market

transactions and is
in the

We evaluate indefinite-lived intangible assets for impairment on an
annual basis as of the beginning of our fourth quarter or more often if
an event occurs or circumstances change that indicates impairment
might exist. Fair value is an estimate of the price a willing buyer
would pay for the intangible asset and is generally estimated by
discounting the expected future after-tax cash flows associated with
the intangible asset. Our most significant indefinite-lived intangible
asset is our Habit Burger Grill brand asset with a book value of
$96 million at December 31, 2020. As of our fourth quarter 2020
annual
impairment testing date, the Habit Burger Grill’s forecasted
results have improved from those used in determining the brand
asset value as part of the initial valuation at the date of the acquisition
and we determined that it was not more likely than not that the Habit
Burger Grill brand asset was impaired.

Impairment of Goodwill
We evaluate goodwill for impairment on an annual basis as of the
beginning of our fourth quarter or more often if an event occurs or
circumstances change that
indicates impairment might exist.
Goodwill is evaluated for impairment by determining whether the fair
value of our
reporting units exceed their carrying values. Our
reporting units are our business units (which are aligned based on
geography) in our KFC, Pizza Hut, Taco Bell and Habit Burger Grill
Divisions. Fair value is the price a willing buyer would pay for the
reporting unit, and is generally estimated using discounted expected
future after-tax cash flows from franchise royalties and Company-
owned restaurant operations, if any. Future cash flow estimates and
the discount rate are the key assumptions when estimating the fair
value of a reporting unit.

Future cash flows are based on growth expectations relative to
recent historical performance and incorporate sales growth (from net
new units or same-store sales growth) and margin improvement (for
those reporting units which include Company-owned restaurant
operations) assumptions that we believe a third-party buyer would
the reporting
assume when determining a purchase price for
unit. Any margin improvement assumptions that
into the
discounted cash flows are highly correlated with sales growth as
cash flow growth can be achieved through various interrelated
strategies such as product pricing and restaurant productivity
initiatives. The discount rate is our estimate of the required rate of
return that a third-party buyer would expect
to receive when
purchasing a business from us that constitutes a reporting unit. We
rate is commensurate with the risks and
believe the discount
uncertainty inherent in the forecasted cash flows.

factor

Other than the Habit Burger Grill reporting unit, the fair values of all
our
reporting units with goodwill balances were substantially in
excess of their respective carrying values as of the 2020 goodwill
testing date. During the first quarter of 2020, the operations of
substantially all Habit Burger Grill restaurants were impacted by
COVID-19. As a result, we performed an interim impairment test of
the Habit Burger Grill reporting unit goodwill as of March 31, 2020.
This test of impairment included comparing the estimated fair value
of the Habit Burger Grill reporting unit to its carrying value, including
goodwill, as originally determined through our preliminary purchase
price allocation performed through application of
the acquisition
method of accounting. The fair value estimate of the Habit Burger
Grill reporting unit was based on the estimated price a willing buyer
would pay for the reporting unit and was determined using an
income approach through a discounted cash flow analysis using

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42 YUM! BRANDS, INC. - 2020 Form 10-K

the carrying value of our Habit Burger Grill

unobservable inputs (Level 3). The most impactful of these inputs
included future average unit volumes of Habit Burger Grill restaurants
as well as restaurant unit counts. The fair value was determined
based upon a probability-weighted average of three scenarios, which
included assumed recovery of Habit Burger Grill average unit
volumes to a pre—COVID-19 level over periods ranging from the
beginning of 2021 to the end of 2022. Factors impacting restaurant
unit counts were near-term unit closures as the result of COVID-19
as well as the pace of expected new unit development. Unit counts
assumed were correlated with the expected recoveries in average
unit volumes. Based upon this fair value estimate, we determined
that
reporting unit
exceeded its fair value. As a result, during the first quarter of 2020 we
recorded a goodwill
impairment charge of $139 million to Other
(income) expense and a corresponding income tax benefit of
$32 million. As we continued to refine our preliminary purchase price
allocation in the quarter ended September 30, 2020, the impairment
charge was adjusted upward by $5 million, which resulted in a
corresponding income tax benefit of $1 million. The amount of the
goodwill
impairment charge and related tax benefit could change
again as we finalize the purchase price allocation associated with the
acquisition. As of the beginning of our fourth quarter, the date of our
annual goodwill
impairment assessment, Habit’s forecasted results
have improved from those relied upon in our March 31, 2020, interim
impairment test and we determined that it was not more likely than
not that the fair value of the Habit Burger Grill reporting unit was less
than its carrying value.

the portion of

the reporting unit disposed of

When we refranchise restaurants, we include goodwill in the carrying
amount of the restaurants disposed of based on the relative fair
values of
in the
refranchising versus the portion of the reporting unit that will be
retained. The fair value of the portion of the reporting unit disposed of
in a refranchising is determined by reference to the discounted value
of the future cash flows expected to be generated by the restaurant
and retained by the franchisee, which include a deduction for the
anticipated, future royalties the franchisee will pay us associated with
the franchise agreement entered into simultaneously with the
refranchising transaction. Appropriate adjustments are made to the
fair value determinations if such franchise agreement is determined to
not be at prevailing market rates. When determining whether such
franchise agreement
rates our primary
is at prevailing market
consideration is consistency with the terms of our current franchise
agreements both within the country that the restaurants are being
refranchised in and around the world. The Company believes
consistency in royalty rates as a percentage of sales is appropriate
as the Company and franchisee share in the impact of near-term
fluctuations in sales results with the acknowledgment that over the
long-term the royalty rate represents an appropriate rate for both
parties.

The discounted value of
the future cash flows expected to be
generated by the restaurant and retained by the franchisee is
reduced by future royalties the franchisee will pay the Company. The
Company thus considers the fair value of
future royalties to be
received under the franchise agreement as fair value retained in its
determination
off when
refranchising. Others may consider the fair value of these future
royalties as fair value disposed of and thus would conclude that a
larger percentage of a reporting unit’s fair value is disposed of in a
refranchising transaction.

be written

goodwill

the

During 2020, refranchising activity completed by the Company was
limited and the write-off of goodwill associated with these
transactions was less than $1 million.

See Note 2 for a further discussion of our policies regarding goodwill.

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Pension Plans
Certain of our employees are covered under defined benefit pension
plans. Our two most significant plans are in the U.S. and combined
had a projected benefit obligation (“PBO”) of $1,133 million and a fair
value of plan assets of $1,014 million at December 31, 2020.

that consists of a hypothetical portfolio of

The PBO reflects the actuarial present value of all benefits earned to
date by employees and incorporates assumptions as to future
compensation levels. Due to the relatively long time frame over which
benefits earned to date are expected to be paid, our PBOs are highly
sensitive to changes in discount rates. For our U.S. plans, we
measured our PBOs using a discount rate of 2.80% at December 31,
2020. The primary basis for this discount rate determination is a
model
ten or more
corporate debt
instruments rated Aa or higher by Moody’s or
Standard & Poor’s (“S&P”) with cash flows that mirror our expected
benefit payment cash flows under the plans. We exclude from the
model those corporate debt instruments flagged by Moody’s or S&P
for a potential downgrade (if the potential downgrade would result in
a rating below Aa by both Moody’s and S&P) and bonds with yields
that were two standard deviations or more above the mean.
In
considering possible bond portfolios, the model allows the bond
cash flows for a particular year to exceed the expected benefit
payment cash flows for that year. Such excesses are assumed to be
reinvested at appropriate one-year forward rates and used to meet
the benefit payment cash flows in a future year. The weighted-
average yield of this hypothetical portfolio was used to arrive at an
rate. We also ensure that changes in the
appropriate discount
discount rate as compared to the prior year are consistent with the
overall change in prevailing market rates and make adjustments as
necessary. A 50 basis-point increase in this discount rate would have
decreased these U.S. plans’ PBOs by approximately $71 million at
our measurement date. Conversely, a 50 basis-point decrease in this
rate would have increased our U.S. plans’ PBOs by
discount
approximately $79 million at our measurement date.

The net periodic benefit cost we will record in 2021 is also impacted
by the discount rate, as well as the long-term rates of return on plan
assets and mortality assumptions we selected at our measurement
date. We expect net periodic benefit cost plus expected pension
settlement charges for our U.S. plans to increase approximately
$4 million in 2021. A 50 basis-point change in our discount rate
assumption at our 2020 measurement date would impact our 2021
U.S. net periodic benefit cost by approximately $8 million. The
impacts of changes in net periodic benefit costs are reflected
primarily in Other pension (income) expense.

Our estimated long-term rate of return on U.S. plan assets is based
upon the weighted-average of historical and expected future returns
for each asset category. Our expected long-term rate of return on
U.S. plan assets,
for purposes of determining 2021 pension
expense, at December 31, 2020, was 5.25%, net of administrative
and investment fees paid from plan assets. We believe this rate is
appropriate given the composition of our plan assets and historical
market returns thereon. A 100 basis point change in our expected
long-term rate of return on plan assets assumption would impact our
2021 U.S. net periodic benefit cost by approximately $8 million.

Additionally, every 100 basis point variation in actual return on plan
impact our
assets versus our expected return of 5.25% will
unrecognized pre-tax actuarial net loss by approximately $8 million.

A decrease in discount rates over time has largely contributed to an
unrecognized pre-tax actuarial net loss of $96 million included in
AOCI for these U.S. plans at December 31, 2020. We will recognize
approximately $22 million of such loss in net periodic benefit cost in
2021 versus $14 million recognized in 2020. See Note 15.

Income Taxes
At December 31, 2020, we had valuation allowances of
approximately $789 million to reduce our $1,636 million of deferred
tax assets to amounts that are more likely than not to be realized.
The net deferred tax assets primarily relate to temporary differences
in profitable U.S.
federal, state and foreign jurisdictions and net
operating losses in certain foreign jurisdictions, the majority of which
do not expire. In evaluating our ability to recover our deferred tax
assets, we consider future taxable income in the various jurisdictions
as well as carryforward periods and restrictions on usage. The
estimation of future taxable income in these jurisdictions and our
resulting ability to utilize deferred tax assets can significantly change
based on future events, including our determinations as to feasibility
of certain tax planning strategies and refranchising plans. Thus,
recorded valuation allowances may be subject to material
future
changes.

As a matter of course, we are regularly audited by federal, state and
foreign tax authorities. We recognize the benefit of positions taken or
expected to be taken in our tax returns in our Income tax provision
when it is more likely than not that the position would be sustained
upon examination by these tax authorities. A recognized tax position
is then measured at the largest amount of benefit that is greater than
fifty percent likely of being realized upon settlement. At December 31,
2020, we had $175 million of unrecognized tax benefits, $132 million
of which would impact
the effective tax rate if recognized. We
evaluate unrecognized tax benefits, including interest thereon, on a
quarterly basis to ensure that they have been appropriately adjusted
for events,
including audit settlements, which may impact our
ultimate payment for such exposures.

The 2017 Tax Cuts and Jobs Act included a mandatory deemed
repatriation tax on accumulated earnings of foreign subsidiaries, and
as a result, previously unremitted earnings for which no U.S. deferred
tax liability had been provided have now been subject to U.S. tax.
Repatriation of earnings generated after December 31, 2017, will
generally be eligible for the 100% dividends received deduction or
considered a distribution of previously taxed income and, therefore,
exempt from U.S. federal tax. Undistributed foreign earnings may still
be subject to certain state and foreign income and withholding taxes
upon repatriation. Our cash currently held overseas is primarily
limited to that necessary to fund working capital requirements. Thus,
we have not provided taxes on our foreign unremitted earnings,
including U.S. state income and foreign withholding taxes, as we
believe they are indefinitely reinvested. See Note 18 for a further
discussion of our Income taxes.

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YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART II
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.

ITEM 7A. Quantitative and Qualitative Disclosures

About Market Risk.

The Company is exposed to financial market risks associated with interest rates, foreign currency exchange rates and commodity prices. In the
normal course of business and in accordance with our policies, we manage these risks through a variety of strategies, which may include the
use of financial and commodity derivative instruments to hedge our underlying exposures. Our policies prohibit the use of derivative instruments
for trading purposes, and we have processes in place to monitor and control their use.

Interest Rate Risk

risk exposure to changes in interest

We have a market
rates,
principally in the U.S. Our outstanding total debt, excluding finance
issuance costs and discounts, of $10.7 billion
leases and debt
includes 78% fixed-rate debt and 22% variable-rate debt. We have
attempted to minimize the interest rate risk from variable-rate debt
through the use of interest rate swaps that, as of December 31,
2020, result in a fixed interest rate on $1.55 billion of our variable-rate
debt. As a result, approximately 93% of our $10.7 billion of
outstanding debt at December 31, 2020,
is effectively fixed-rate
debt. See Note 11 for details on our outstanding debt and Note 13
for details related to interest rate swaps.

As of both December 31, 2020 and December 31, 2019, a
hypothetical 100 basis-point increase in short-term interest rates
the following twelve-month period after
would result, over
in an
consideration of

the aforementioned interest

rate swaps,

Foreign Currency Exchange Rate Risk

Changes in foreign currency exchange rates impact the translation of
our reported foreign currency denominated earnings, cash flows and
net investments in foreign operations and the fair value of our foreign
instruments. Historically, we have
currency denominated financial
chosen not to hedge foreign currency risks related to our foreign
currency denominated earnings and cash flows through the use of
financial
to minimize the
exposure
related to foreign currency denominated financial
instruments by purchasing goods and services from third parties in
local currencies when practical. Consequently,
foreign currency
denominated financial
instruments consist primarily of intercompany
receivables and payables. At times, we utilize forward contracts and
cross-currency swaps to reduce our exposure related to these
intercompany receivables and payables. The notional amount and

In addition, we attempt

instruments.

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increase of approximately $8 million in Interest expense, net within
our Consolidated Statement of Income. These estimated amounts
are based upon the current level of variable-rate debt that has not
been swapped to fixed and assume no changes in the volume or
composition of
from interest
income related to cash and cash equivalents.

that debt and exclude any impact

The fair value of our cumulative fixed-rate debt of $8.4 billion as of
December 31, 2020, would decrease approximately $475 million as
a result of
increase. At
the same hypothetical 100 basis-point
December 31, 2020, a hypothetical 100 basis-point decrease in
short-term interest rates would increase the liability associated with
the fair value of our interest rate swaps by approximately $24 million.
Fair value was determined based on the present value of expected
future cash flows considering the risks involved and using discount
rates appropriate for the durations.

maturity dates of these contracts match those of the underlying
receivables or payables such that our foreign currency exchange risk
related to these instruments is minimized.

The Company’s foreign currency net asset exposure (defined as
foreign currency assets less foreign currency liabilities)
totaled
approximately $1.3 billion as of December 31, 2020. Operating in
international markets exposes the Company to movements in foreign
currency exchange rates. The Company’s primary exposures result
from our operations in Asia-Pacific, Europe and the Americas. For
the fiscal year ended December 31, 2020, Operating Profit would
have decreased approximately $115 million if all foreign currencies
had uniformly weakened 10% relative to the U.S. dollar. This
estimated reduction assumes no changes in sales volumes, local
currency sales or input prices.

Commodity Price Risk

We are subject to volatility in food costs as a result of market risk
associated with commodity prices. Our ability to recover increased
costs through higher pricing is, at times, limited by the competitive

environment in which we operate. We manage our exposure to this
risk primarily through pricing agreements with our vendors.

44 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II
ITEM 8. Financial Statements and Supplementary Data.

ITEM 8. Financial Statements

and Supplementary Data.

Index to Financial Information

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Cash Flows

Consolidated Balance Sheets

Consolidated Statements of Shareholders’ Deficit

Notes to Consolidated Financial Statements

Financial Statement Schedules

Page
Reference

No schedules are required because either the required information is not present or not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the above-listed financial statements or notes thereto.

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YUM! BRANDS, INC. - 2020 Form 10-K 45

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II
ITEM 8. Financial Statements and Supplementary Data.

Report of Independent Registered Public
Accounting Firm

To the Shareholders and Board of Directors
Yum! Brands, Inc.:

Opinions on the Consolidated Financial Statements
and Internal Control Over Financial Reporting

for each of

Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of
Yum! Brands,
(the Company) as of
December 31, 2020 and 2019, the related consolidated statements
income, comprehensive income, cash flows and shareholders’
of
the years in the three-year period ended
deficit
December 31, 2020, and the related notes (collectively,
the
consolidated financial statements). We also have audited the
Company’s
of
December 31, 2020, based on criteria established in Internal Control
issued by the Committee of
—Integrated Framework (2013)
Sponsoring Organizations of the Treadway Commission.

reporting as

control over

financial

internal

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In our opinion,
the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
the Company as of December 31, 2020 and 2019, and the results of
its operations and its cash flows for each of the years in the three-
year period ended December 31, 2020,
in conformity with U.S.
generally accepted accounting principles. Also in our opinion, the
Company maintained,
respects, effective internal
control over financial reporting as of December 31, 2020 based on
criteria established in Internal Control—Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.

in all material

The Company acquired The Habit Restaurants,
Inc. and its
subsidiaries (Habit Burger Grill) during 2020, and management
excluded from its assessment of the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2020,
Habit Burger Grill’s internal control over financial reporting associated
with approximately 9% of total assets and 6% of total revenues
included in the consolidated financial statements of the Company as
of and for the year ended December 31, 2020. Our audit of internal
control over financial reporting of the Company also excluded an
evaluation of the internal control over financial reporting of Habit
Burger Grill.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the
Company changed its method of accounting for leases in fiscal year
2019 due to the adoption of Topic 842, Leases.

Basis for Opinions

The Company’s management is responsible for these consolidated
financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting in
the accompanying Item 9A. Our
responsibility is to express an
opinion on the Company’s consolidated financial statements and an
opinion on the Company’s internal control over financial reporting
based on our audits. We are a public accounting firm registered with
the Public Company Accounting Oversight Board (United States)

46 YUM! BRANDS, INC. - 2020 Form 10-K

(PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of
the Securities and Exchange
Commission and the PCAOB.

We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the
audits
the
consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control
over financial reporting was maintained in all material respects.

to obtain reasonable assurance about whether

Our audits of
the consolidated financial statements included
performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding
the amounts and disclosures
in the consolidated financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
the consolidated
well as evaluating the overall presentation of
financial statements. Our audit of
financial
reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a reasonable
basis for our opinions.

internal control over

Definition and Limitations of Internal Control Over
Financial Reporting

A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of
financial statements for
external purposes in accordance with generally accepted accounting
reporting
financial
principles. A company’s internal control over
includes those policies and procedures that
(1) pertain to the
maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect
on the financial statements.

limitations,

its inherent

Because of
internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising
from the current period audit of the consolidated financial statements

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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that were communicated or required to be communicated to the
audit committee and that: (1) relate to accounts or disclosures that
are material to the consolidated financial statements and (2) involved
our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.

Evaluation of unrecognized tax benefits

As discussed in Note 18 to the consolidated financial statements, the
Company has recorded unrecognized tax benefits, excluding
associated interest, of $175 million. Tax laws are complex and often
subject to different interpretations by tax payers and the respective
taxing authorities.

We identified the evaluation of the Company’s unrecognized tax
benefits as a critical audit matter. Subjective and complex auditor
judgment was required to evaluate tax law and regulations, court
rulings and audit settlements in the related taxing jurisdiction to
determine the population of significant uncertain tax positions
identified by the Company arising from tax planning strategies.

The following are the primary procedures we performed to address
this critical audit matter. We evaluated the design and tested the
operating effectiveness of certain internal controls over
the
Company’s identification of uncertain tax positions process. This
included controls related to (1) identifying tax planning strategies that
create significant uncertain tax positions, (2) evaluating interpretations
of tax laws and court rulings, and (3) assessing which tax positions
may not be sustained upon examination by a taxing authority. We
involved tax professionals with specialized skills and knowledge who
assisted in:

(cid:129) Obtaining an understanding of

the Company’s tax planning

strategies;

(cid:129) Identifying tax positions created by tax planning strategies and
comparing the results to the Company’s identification of uncertain
tax positions;

(cid:129) Evaluating the Company’s interpretation of tax laws and court

rulings by developing an independent assessment; and

(cid:129) Performing an independent assessment to identify tax positions
that may not be sustained upon examination by the respective
taxing authority and comparing the results to the Company’s
assessment.

Acquisition-date fair value of the brand and subsequent
assessment of goodwill impairment—Habit Burger Grill

As discussed in Note 3 to the consolidated financial statements, the
Company completed the acquisition of The Habit Restaurants, Inc.
(Habit Burger Grill) during fiscal year 2020 for total cash consideration
of $408 million. The acquisition was accounted for as a business
combination using the acquisition method of accounting. As a result
of the transaction, the Company acquired certain intangible assets,
including the Habit Burger Grill brand (the brand). The acquisition-
date fair value for the brand was $96 million. The Company performs
impairment testing on an annual basis and whenever
its goodwill
events or circumstances indicate that
the carrying value of a
reporting unit likely exceeds it fair value. As a result of the impact of
restaurants’
COVID-19 on substantially all of Habit Burger Grill
operations during the first quarter of 2020, the Company performed

PART II
ITEM 8. Financial Statements and Supplementary Data.

an interim impairment test of the Habit Burger Grill reporting unit (the
impairment charge of
reporting unit) and recorded a goodwill
$139 million and a corresponding income tax benefit of $32 million.

We identified the evaluation of the acquisition-date fair value of the
brand, and the subsequent fair value estimate of the reporting unit for
the subsequent goodwill
impairment assessment as a critical audit
matter. Subjective and complex auditor judgment was required to
evaluate the acquisition-date fair value of the brand and subsequent
fair value of the reporting unit. The fair value estimates used the
following significant assumptions for which there was limited
observable market information: projected cash flows, including the
projected growth in restaurant unit counts and average unit volumes,
royalty rate, and discount rates. The determined fair values of the
brand and the reporting unit, which directly impacted the goodwill
impairment charge, were subjective determinations and sensitive to
variation. Changes in those assumptions could have had a significant
effect on acquisition-date fair value of the brand and subsequent fair
value of the reporting unit. In addition, due to the economic impact of
the COVID-19 pandemic on the Company’s business, there was
significant uncertainty associated with these inputs.

(cid:129) the development of

the projected cash flows including the
projected growth in restaurant unit counts and average unit
volumes used to determine the acquisition-date brand fair value
and subsequent fair value of the reporting unit

(cid:129) the assumed royalty rate used to determine the acquisition-date

fair value of the brand; and

(cid:129) the assumed discount rates used to determine the acquisition-
date brand fair value and subsequent fair value of the reporting unit

We compared the Company’s projected cash flows including the
projected growth in restaurant unit counts and average unit volumes
used in the valuations to the underlying business strategies and
growth plans for the acquisition. We compared the Company’s
projected cash flows to Habit Burger Grill’s historical results. We
involved valuation professionals with specialized skills and knowledge
who assisted in:

(cid:129) evaluating the projected cash flows by comparing them to peer
companies used in both the acquisition-date brand fair value and
subsequent fair value of the reporting unit

(cid:129) analyzing the assumed royalty rate by benchmarking against other

acquisitions of peer companies; and

(cid:129) evaluating the discount rates used in the valuations, by comparing
them to discount rate ranges that were independently developed
using publicly available market data for comparable entities.

/s/ KPMG LLP

We have served as the Company’s auditor since 1997.

Louisville, Kentucky

February 19, 2021

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YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART II
ITEM 8. Financial Statements and Supplementary Data.

Consolidated Statements of Income

Yum! Brands, Inc. and Subsidiaries

Fiscal years ended December 31, 2020, 2019 and 2018

(in millions, except per share data)

2020

2019

2018

Revenues

Company sales

Franchise and property revenues

Franchise contributions for advertising and other services

Total revenues

Costs and Expenses, Net

Company restaurant expenses

General and administrative expenses

Franchise and property expenses

Franchise advertising and other services expense

Refranchising (gain) loss

Other (income) expense

Total costs and expenses, net

Operating Profit

Investment (income) expense, net

Other pension (income) expense

Interest expense, net

Income before income taxes

Income tax provision

Net Income

Basic Earnings Per Common Share

Diluted Earnings Per Common Share

Dividends Declared Per Common Share

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See accompanying Notes to Consolidated Financial Statements.

$ 1,810

$ 1,546

$2,000

2,510

1,332

5,652

1,506

1,064

145

1,314

(34)

154

4,149

1,503

(74)

543

1,020

116

904

2.99

2.94

1.88

2,660

1,391

5,597

2,482

1,206

5,688

1,235

1,634

917

180

1,368

(37)

3,667

1,930

486

1,373

$ 1,294

4.23

4.14

1.68

895

188

1,208

(540)

3,392

2,296

(9)

452

1,839

297

$1,542

$ 4.80

$ 4.69

$ 1.44

48 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II
ITEM 8. Financial Statements and Supplementary Data.

Consolidated Statements of Comprehensive Income

Yum! Brands, Inc. and Subsidiaries

Fiscal years ended December 31, 2020, 2019 and 2018

(in millions)

Net Income

Other comprehensive income (loss), net of tax:

Translation adjustments and gains (losses) from intra-entity transactions of a long-term
investment nature

Adjustments and gains (losses) arising during the year

Reclassifications of adjustments and (gains) losses into Net Income

Tax (expense) benefit

Changes in pension and post-retirement benefits

Unrealized gains (losses) arising during the year

Reclassification of (gains) losses into Net Income

Tax (expense) benefit

Changes in derivative instruments

Unrealized gains (losses) arising during the year

Reclassification of (gains) losses into Net Income

Tax (expense) benefit

Other comprehensive income (loss), net of tax

Comprehensive Income

See accompanying Notes to Consolidated Financial Statements.

2020

2019

2018

904

1,294

1,542

—

(8)

(2)

(99)

(93)

(70)

(23)

—

(4)

(39)

(29)

(22)

(51)

(25)

(76)

(56)

(54)

(94)

(4)

(98)

(92)

(13)

(39)

(20)

(14)

(65)

881

1,240

1,477

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YUM! BRANDS, INC. - 2020 Form 10-K 49

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II
ITEM 8. Financial Statements and Supplementary Data.

Consolidated Statements of Cash Flows

2020

2019

2018

1,294

1,542

Yum! Brands, Inc. and Subsidiaries

Fiscal years ended December 31, 2020, 2019 and 2018

(in millions)

Cash Flows – Operating Activities

Net Income

Depreciation and amortization

Impairment and closure expense

Refranchising (gain) loss

Investment (income) expense, net

Contributions to defined benefit pension plans

Deferred income taxes

Share-based compensation expense

Changes in accounts and notes receivable

Changes in prepaid expenses and other current assets

Changes in accounts payable and other current liabilities

Changes in income taxes payable

Other, net

Net Cash Provided by Operating Activities

Cash Flows – Investing Activities

Capital spending

QuikOrder acquisition, net of cash acquired

Acquisition of The Habit Restaurants, Inc., net of cash acquired

Proceeds from sale/(purchase) of investment in Grubhub, Inc. common stock

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Proceeds from refranchising of restaurants

Other, net

Net Cash Provided by (Used in) Investing Activities

Cash Flows – Financing Activities

Proceeds from long-term debt

Repayments of long-term debt

Revolving credit facilities, three months or less, net

Short-term borrowings, by original maturity

More than three months – proceeds

More than three months – payments

Three months or less, net

Repurchase shares of Common Stock

Dividends paid on Common Stock

Debt issuance costs

Other, net

Net Cash Used in Financing Activities

Effect of Exchange Rate on Cash and Cash Equivalents

Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash
Equivalents

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents – Beginning of Year

904

146

172

(34)

(74)

(6)

(65)

128

(110)

1,305

(160)

—

(408)

206

(335)

1,650

(1,517)

—

(100)

—

(239)

(566)

(20)

(41)

(738)

256

768

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents – End of Year

$ 1,024

See accompanying Notes to Consolidated Financial Statements.

50 YUM! BRANDS, INC. - 2020 Form 10-K

112

(37)

(15)

(232)

(56)

(8)

(36)

139

1,315

(196)

—

110

(2)

(88)

800

(331)

—

130

(126)

—

(815)

(511)

(10)

(75)

(938)

294

474

768

137

(540)

(9)

(16)

(11)

(66)

—

(68)

1,176

(234)

(66)

—

(200)

825

(12)

313

1,556

(1,264)

—

(59)

—

(2,390)

(462)

(13)

(47)

(2,620)

(63)

(1,194)

1,668

474

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II
ITEM 8. Financial Statements and Supplementary Data.

Consolidated Balance Sheets

Yum! Brands, Inc. and Subsidiaries

December 31, 2020 and 2019

(in millions)

ASSETS

Current Assets

Cash and cash equivalents

Accounts and notes receivable, net

Prepaid expenses and other current assets

Total Current Assets

Property, plant and equipment, net

Goodwill

Intangible assets, net

Other assets

Deferred income taxes

Total Assets

LIABILITIES AND SHAREHOLDERS’ DEFICIT

Current Liabilities

Accounts payable and other current liabilities

Income taxes payable

Short-term borrowings

Total Current Liabilities

Long-term debt

Other liabilities and deferred credits

Total Liabilities

Shareholders’ Deficit

Common Stock, no par value, 750 shares authorized; 300 shares issued in 2020 and 2019

Accumulated deficit

Accumulated other comprehensive loss

Total Shareholders’ Deficit

Total Liabilities and Shareholders’ Deficit

See accompanying Notes to Consolidated Financial Statements.

2020

2019

730

534

425

1,689

1,235

597

343

1,435

553

605

584

338

1,527

1,170

530

244

1,313

447

5,852

5,231

1,189

453

1,675

10,272

1,796

13,743

—

(7,480)

(411)

960

150

431

1,541

10,131

1,575

13,247

—

(7,628)

(388)

(7,891)

(8,016)

5,852

5,231

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YUM! BRANDS, INC. - 2020 Form 10-K 51

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART II
ITEM 8. Financial Statements and Supplementary Data.

Consolidated Statements of Shareholders’ Deficit

Yum! Brands, Inc. and Subsidiaries

Fiscal years ended December 31, 2020, 2019 and 2018

(in millions)

Balance at December 31, 2017

Net Income

Translation adjustments and gains (losses) from intra-entity transactions of a long-
term investment nature (net of tax impact of $6 million)

Reclassification of translation adjustments into income

Pension and post-retirement benefit plans (net of tax impact of $13 million)

Net loss on derivative instruments (net of tax impact of $6 million)

Comprehensive Income

Dividends declared

Repurchase of shares of Common Stock

Employee share-based award exercises

Share-based compensation events

Adoption of accounting standards

Balance at December 31, 2018

Net Income

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Translation adjustments and gains (losses) from intra-entity transactions of a long-
term investment nature (net of tax impact of $4 million)

Pension and post-retirement benefit plans (net of tax impact of $7 million)

Net loss on derivative instruments (net of tax impact of $20 million)

Comprehensive Income

Dividends declared

Repurchase of shares of Common Stock

Employee share-based award exercises

Share-based compensation events

Adoption of accounting standards

Balance at December 31, 2019

Net Income

Translation adjustments and gains (losses) from intra-entity transactions of a long-
term investment nature

Pension and post-retirement benefit plans (net of tax impact of $2 million)

Net loss on derivative instruments (net of tax impact of $23 million)

Comprehensive Income

Dividends declared

Repurchase of shares of Common Stock

Employee share-based award exercises

Share-based compensation events

Adoption of accounting standards

Balance at December 31, 2020

See accompanying Notes to Consolidated Financial Statements.

Issued Common
Stock
Shares Amount

Accumulated
Deficit

Accumulated Other
Comprehensive
Income(Loss)

Total
Shareholders’
Deficit

332

$ —

$ (6,063)

$ (271)

$ (6,334)

1,542

(464)

(2,356)

(88)

(4)

(14)

(251)

1,542

(88)

(4)

(14)

1,477

(464)

(2,394)

(41)

(249)

(28)

(38)

(41)

306

$ —

$ (7,592)

$ (334)

$ (7,926)

1,294

(514)

(796)

(18)

(2)

(8)

(14)

(57)

(22)

(56)

1,294

(22)

(56)

1,240

(514)

(810)

(75)

(2)

300

$ —

$ (7,628)

$ (388)

$ (8,016)

904

(569)

(179)

(8)

(70)

904

(70)

881

(569)

(250)

(41)

112

(8)

(2)

(71)

(41)

112

300

$ —

$ (7,480)

$ (411)

$ (7,891)

52 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART II
ITEM 8. Financial Statements and Supplementary Data.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share data)

NOTE 1 – Description of Business

Yum! Brands, Inc. and its Subsidiaries (collectively referred to herein
as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a
system of over 50,000 restaurants in more than 150 countries and
territories primarily under the concepts of KFC, Pizza Hut, Taco Bell
and The Habit Burger Grill
the “Concepts”). The
Company’s KFC, Pizza Hut and Taco Bell brands are global leaders
of the chicken, pizza and Mexican-style food categories. The Habit
Burger Grill, a concept we acquired on March 18, 2020, is a fast-
casual restaurant concept specializing in made-to-order chargrilled
burgers, sandwiches and more. At December 31, 2020, 98% of our
restaurants were owned and operated by franchisees.

(collectively,

Through our widely-recognized Concepts, we develop, operate or
franchise a system of both traditional and non-traditional restaurants.
The terms “franchise” or “franchisee” within these Consolidated
Financial Statements are meant to describe third parties that operate
units under either franchise or license agreements. Our traditional
restaurants feature dine-in, carryout and, in some instances, drive-
thru service. Non-traditional units include express units and kiosks
which have a more limited menu and operate in non-traditional
locations like malls, airports, gasoline service stations, train stations,

subways, convenience stores, stadiums, amusement parks and
colleges, where a full-scale traditional outlet would not be practical or
efficient. As of December 31, 2020, over 35,000 of our restaurants
are also currently offering delivery. We also operate or franchise
multibrand units, where two or more of our Concepts are operated in
a single unit.

As of December 31, 2020, YUM consisted of
segments:

four operating

(cid:129) The KFC Division which includes our worldwide operations of the

KFC concept

(cid:129) The Pizza Hut Division which includes our worldwide operations of

the Pizza Hut concept

(cid:129) The Taco Bell Division which includes our worldwide operations of

the Taco Bell concept

(cid:129) The Habit Burger Grill Division which includes our worldwide

operations of the Habit Burger Grill concept

NOTE 2 – Summary of Significant Accounting Policies

Our preparation of
the accompanying Consolidated Financial
Statements in conformity with Generally Accepted Accounting
Principles in the United States of America (“GAAP”) requires us to
make estimates and assumptions that affect reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at
the date of the Consolidated Financial Statements, and the reported
amounts of
reporting
period. Actual results could differ from these estimates.

and expenses during the

revenues

Principles of Consolidation
and Basis of Preparation.
Intercompany accounts and transactions have been eliminated in
consolidation. We consolidate entities in which we have a controlling
financial
interest, the usual condition of which is ownership of a
majority voting interest. We also consider for consolidation an entity,
in which we have certain interests, where the controlling financial
interest may be achieved through arrangements that do not involve
voting interests. Such an entity, known as a variable interest entity
(“VIE”), is required to be consolidated by its primary beneficiary. The
primary beneficiary is the entity that possesses the power to direct
the activities of the VIE that most significantly impact its economic
performance and has the obligation to absorb losses or the right to
receive benefits from the VIE that are significant to it.

our

under

Concepts’

restaurants

typically provide significant

Our most significant variable interests are in certain entities that
franchise
operate
arrangements. We do not
financial
support such as loans or guarantees to our franchisees. Thus, our
most significant variable interests in franchisees result
from real
estate lease arrangements to which we are a party. At the end of
2020, YUM has future lease payments due from certain franchisees,
on a nominal basis, of approximately $1 billion, and we are
secondarily liable on certain other lease agreements that have been

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assigned to certain franchisees. See the Lease Guarantees section in
Note 20. As our franchise arrangements provide our franchisee
entities the power to direct the activities that most significantly impact
their economic performance, we do not consider ourselves the
primary beneficiary of any such entity that might otherwise be
considered a VIE.

We do not have an equity interest in any of our franchisee businesses
except for a minority interest in an entity that owns our KFC Brazil
and Pizza Hut Brazil master franchisee rights and a minority interest
in an entity that operates KFC and Pizza Hut franchised units in India.
These minority interests do not give us the ability to significantly
influence these entities and we account for our investment in these
entities as equity securities. When the fair value of these equity
securities is readily determinable we record changes in fair value in
Investment (income) expense, net. When the fair value of these equity
securities is not readily determinable we apply the measurement
alternative in accordance with ASC Topic 321 and, when applicable,
record fair value changes from observable prices as well as
impairment in Investment (income) expense, net.

We participate in various advertising cooperatives with our
franchisees, typically within a country where we have both Company-
owned restaurants and franchise restaurants, established to collect
and administer
funds contributed for use in advertising and
promotional programs designed to increase sales and enhance the
reputation of the Company and our Concepts. Contributions to the
advertising cooperatives are required for both Company-owned and
franchise restaurants and are generally based on a percentage of
restaurant sales. We maintain certain variable interests in these
cooperatives. As the cooperatives are required to spend all funds
collected on advertising and promotional programs, total equity at

YUM! BRANDS, INC. - 2020 Form 10-K 53

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YUM BRANDS 2020 FORM

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PART II
ITEM 8. Financial Statements and Supplementary Data.

to permit

risk is not sufficient
the cooperatives to finance their
activities without additional subordinated financial support. Therefore,
these cooperatives are VIEs. As a result of our voting rights, we
consolidate certain of
these cooperatives for which we are the
primary beneficiary.

Fiscal Year. YUM’s fiscal year begins on January 1 and ends
December 31 of each year, with each quarter comprised of three
months. The majority of our U.S. subsidiaries and certain
international subsidiaries operate on a weekly periodic calendar
where the first three quarters of each fiscal year consists of 12 weeks
and the fourth quarter consists of 16 weeks in fiscal years with
52 weeks and 17 weeks in fiscal years with 53 weeks. Our Habit
Burger Grill subsidiaries, which we acquired on March 18, 2020,
operate on a weekly periodic calendar where each quarter consists
of 13 weeks, except in fiscal years with 53 weeks when the fourth
quarter consists of 14 weeks. Our
remaining international
subsidiaries operate on a monthly calendar similar to that on which
YUM operates.

The majority of our
foreign currency net asset exposure is in
countries where we have Company-owned restaurants. As we
manage and share resources at the individual brand level within a
country, cumulative translation adjustments are recorded and
tracked at the foreign-entity level that represents the operations of
our individual brands within that country. Translation adjustments
recorded in AOCI are subsequently recognized as income or
expense generally only upon sale of the related investment in a
foreign entity, or upon a sale of assets and liabilities within a foreign
entity that represents a complete or substantially complete liquidation
of that foreign entity. For purposes of determining whether a sale or
complete or substantially complete liquidation of an investment in a
foreign entity has occurred, we consider those same foreign entities
for which we record and track cumulative translation adjustments.

Gains and losses arising from the impact of
foreign currency
exchange rate fluctuations on transactions in foreign currency are
included in Other (income) expense in our Consolidated Statements
of Income.

Fiscal year 2019 included 53 weeks for our U.S. businesses and for
our international subsidiaries that reported on a period calendar. The
53rd week added $66 million to Total revenues, $24 million to
Income in our 2019
Operating Profit and $17 million to Net
Consolidated Statement of Income.

Reclassifications. We have reclassified certain items in the
Consolidated Financial Statements
to be
comparable with the classification for
the fiscal year ended
December 31, 2020. These reclassifications had no effect on
previously reported Net Income.

for prior periods

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Our next fiscal year scheduled to include a 53rd week is 2024.

Foreign Currency. The functional currency of our foreign entities is
the currency of the primary economic environment in which the entity
operates. Functional currency determinations are made based upon
a number of economic factors, including but not limited to cash flows
and financing transactions. The operations, assets and liabilities of
our entities outside the U.S. are initially measured using the functional
currency of
Income and expense accounts for our
operations of these foreign entities are then translated into U.S.
dollars at the average exchange rates prevailing during the period.
Assets and liabilities of these foreign entities are then translated into
U.S. dollars at exchange rates in effect at the balance sheet date. As
of December 31, 2020, net cumulative translation adjustment losses
of $182 million are recorded in Accumulated other comprehensive
income (“AOCI”) in the Consolidated Balance Sheet.

that entity.

Company Sales

Revenue Recognition. Below is a discussion of how our revenues
are earned, our accounting policies pertaining to revenue recognition
subsequent to the adoption of the Financial Accounting Standards
(“ASU”)
Board’s
No. 2014-09, Revenue from Contracts with Customers (“Topic 606”)
and other required disclosures.

Accounting

Standards

(“FASB”)

Update

the beginning of

We adopted Topic 606 at
the year ended
December 31, 2018, using the modified retrospective method. Topic
606 was applied to all contracts with customers as of January 1,
2018, and the cumulative effect of this transition was recorded as an
increase to Accumulated deficit of $240 million as of this date.

Taxes assessed by a governmental authority that are both imposed
on and concurrent with a specific revenue transaction and collected
from a customer are excluded from revenue.

food items by Company-owned
Revenues from the sale of
restaurants are recognized as Company sales when a customer

purchases the food, which is when our obligation to perform is
satisfied.

Franchise and Property Revenues

Franchise Revenues

Our most significant source of revenues arises from the operation of
our Concepts’ stores by our franchisees. Franchise rights may be
franchise agreement or through a
granted through a store-level
the terms of our
that sets out
franchise agreement
master
arrangement with the franchisee. Our franchise agreements require
that the franchisee remit continuing fees to us as a percentage of the
applicable restaurant’s sales in exchange for the license of
the
intellectual property associated with our Concepts’ brands (the
“franchise right”). Our franchise agreements also typically require
certain, less significant, upfront franchise fees such as initial fees paid
upon opening of a store, fees paid to renew the term of the franchise
right and fees paid in the event the franchise agreement is transferred
to another franchisee.

fees

the
Continuing
consideration we
agreements.
Continuing fees are typically billed and paid monthly and are usually

substantial majority of
franchise

the
under our

represent
receive

franchise agreements. Master

franchise
4%-6% for store-level
agreements allow master franchisees to operate restaurants as well
as sub-franchise restaurants within certain geographic territories. The
percentage of sales that we receive for
restaurants owned or
sub-franchised by our master franchisees as a continuing fee is
restaurants
typically less than the percentage we receive for
operating under a store-level
franchise agreement. Based on the
application of the sales-based royalty exception within Topic 606
continuing fees are recognized as the related restaurant sales occur.

transferred to another

Upfront franchise fees are typically billed and paid when a new
franchise or sub-franchise agreement becomes effective or when an
existing agreement
franchisee or
sub-franchisee. We have determined that the services we provide in
exchange for upfront
franchise fees, which primarily relate to
pre-opening support, are highly interrelated with the franchise right
and are not individually distinct from the ongoing services we provide
to our franchisees. As a result, upfront franchise fees are recognized
the term of each respective franchise or
as revenue over

54 YUM! BRANDS, INC. - 2020 Form 10-K

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YUM BRANDS 2020 FORM

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ITEM 8. Financial Statements and Supplementary Data.

Property Revenues

restaurant

the lease or sublease of

From time to time, we enter into rental agreements with franchisees
for
locations. These rental
agreements typically originate from refranchising transactions and
revenues related to the agreements are recognized as they are
earned. Amounts owed under the rental agreements are typically
billed and paid on a monthly basis. Revenues from rental agreements
with franchisees are presented within Franchise and property
revenues within our Consolidated Statements of
Income. Related
expenses are presented as Franchise and property expenses within
our Consolidated Statements of
Income and primarily include
depreciation or, in the case of a sublease, rental expense.

sub-franchise agreement. Revenues for these upfront franchise fees
are recognized on a straight-line basis, which is consistent with the
franchisee’s or sub-franchisee’s right to use and benefit from the
intellectual property. Revenues from continuing fees and upfront
franchise fees are presented within Franchise and property revenues
in our Consolidated Statements of Income.

provide

from time-to-time we

non-refundable
Additionally,
consideration to franchisees in the form of cash or other incentives
(e.g. cash payments to incent new unit openings, free or subsidized
equipment, etc.). The Company’s
in providing such
consideration is to drive new unit development or same-store sales
growth that will result in higher future revenues for the Company.
Such payments are capitalized and presented within Prepaid
expense and other current assets or Other assets. These assets are
being amortized as a reduction in Franchise and property revenues
over
the period of expected cash flows from the franchise
agreements to which the payment relates.

intent

Franchise Contributions for Advertising and Other Services

Advertising Cooperatives

We have determined we act as a principal in the transactions entered
into by the advertising cooperatives we are required to consolidate
based on our responsibility to define the nature of the goods or
services provided and/or our commitment to pay for advertising
services in advance of
the related franchisee contributions.
Additionally, we have determined the advertising services provided to
franchisees are highly interrelated with the franchise right and
to these consolidated
therefore not distinct. Franchisees remit
advertising cooperatives a percentage of
restaurant sales as
consideration for providing the advertising services. As a result,
revenues for advertising services are recognized when the related
restaurant sales occur based on the application of the sales-based
royalty exception within Topic 606. Revenues for these services are
typically billed and received on a monthly basis. These revenues are
presented as Franchise contributions for advertising and other
services.

Other Goods or Services

On a much more limited basis, we provide goods or services to
certain franchisees that are individually distinct from the franchise
right because they do not require integration with other goods or
services we provide. Such arrangements typically relate to supply
chain, quality assurance and information technology services.
In
instances where we rely on third parties to provide goods or services
to franchisees at our direction, we have determined we act as a
principal in these transactions. The extent to which we provide such
goods or services varies by brand, geographic region and, in some
instances, franchisee. Similar to advertising services, receipts related
to these other services are presented as Franchise contributions for
advertising and other services within our Consolidated Statements of
Income. These revenues are recognized as the goods or services are
transferred to the franchisee.

Franchise Support Costs. The internal costs we incur to provide
support services to our franchisees for which we do not receive a
reimbursement are charged to General and administrative expenses
(“G&A”) as incurred. Certain direct costs of our franchise operations
are charged to Franchise and property expenses. These costs
include provisions for estimated uncollectible upfront and continuing
fees, rent or depreciation expense associated with restaurants we
lease or sublease to franchisees, marketing funding on behalf of
franchisees, amortization expense for
franchise-related intangible
assets, value added taxes on royalties and certain other direct
incremental franchise support costs.

Expenses related to the provisioning of goods or services for which
we receive reimbursement or other payment from a franchisee are
recorded in Franchise advertising and other services expense (the
associated revenue is recorded within Franchise contributions for
advertising and other services as described above). The majority of
these expenses relate to advertising and are incurred on behalf of
franchisees by the advertising cooperatives we are required to
consolidate. These expenses are accounted for as described in the
Advertising Costs policy below. For such expenses that do not relate
to advertising the expenses are recognized as incurred.

Advertising Costs. To the extent we participate in advertising
cooperatives, we, like our participating franchisees, are required to
make contributions. Our contributions are based on a percentage of
sales of our participating Company restaurants. These contributions
as well as direct marketing costs we may incur outside of a
cooperative related to Company restaurants are recorded within
Company restaurant expenses. Advertising expense included in
Company restaurant expenses totaled $68 million, $73 million and
$96 million in 2020, 2019 and 2018, respectively.

To the extent we consolidate advertising cooperatives, we incur
advertising expense as a result of our obligation to spend franchisee
contributions to those cooperatives (see above for our accounting for
these contributions). Such advertising expense is recorded in
Franchise advertising and other services expense and totaled
$1,079 million, $1,133 million and $1,035 million in 2020, 2019 and
2018,
the end of each fiscal year additional
advertising costs are accrued to the extent advertising revenues
exceed the related advertising expense to date, as we are obligated
to expend such amounts on advertising.

respectively. At

From time to time, we may make the decision to incur discretionary
advertising expenditures on behalf of franchised restaurants. Such
amounts are recorded within Franchise and property expenses and
totaled $10 million, $10 million and $35 million in 2020, 2019 and
2018, respectively.

To the extent
the advertising cooperatives we are required to
consolidate are unable to collect amounts due from franchisees they
incur bad debt expense. In 2020 and 2019 we recorded $7 million in
net recoveries and $19 million in net provisions, respectively, within
Franchise advertising and other services expense related to
recoveries on and provisions for uncollectible franchisee receivables.
To the extent our consolidated advertising cooperatives have a
provision or
the cooperative’s
advertising spend obligation is adjusted such that there is no net
impact within our Financial Statements.

recovery for bad debt expense,

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YUM BRANDS 2020 FORM

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PART II
ITEM 8. Financial Statements and Supplementary Data.

is recognized over

Share-Based Employee Compensation. We recognize ongoing
share-based payments to employees, including grants of employee
stock options and stock appreciation rights (“SARs”),
in the
Consolidated Financial Statements as compensation cost over the
service period based on their fair value on the date of grant. This
compensation cost
the service period on a
straight-line basis, net of an assumed forfeiture rate, for awards that
actually vest. Forfeiture rates are estimated at grant date based on
is adjusted in
historical experience and compensation cost
subsequent periods for differences in actual
forfeitures from the
previous estimates. We present this compensation cost consistent
with the other compensation costs for the employee recipient in
either Company restaurant expenses or G&A. See Note 16 for further
discussion of our share-based compensation plans.

Legal Costs. Settlement costs are accrued when they are deemed
probable and reasonably estimable. Anticipated legal fees related to
self-insured workers’ compensation, employment practices liability,
liability and property
general
losses (collectively, “property and casualty losses”) are accrued when
deemed probable and reasonably estimable. Legal fees not related
to self-insured property and casualty losses are recognized as
incurred. See Note 20 for further discussion of our legal proceedings.

liability, automobile liability, product

Impairment or Disposal of Long-Lived Assets. Long-lived assets,
(“PP&E”) as well as
including Property, plant and equipment
impairment
right-of-use operating lease assets are tested for
whenever events or changes in circumstances indicate that
the
carrying value of the assets may not be recoverable. The assets are
not recoverable if their carrying value is less than the undiscounted
cash flows we expect to generate from such assets. If the assets are
not deemed to be recoverable, impairment is measured based on
the excess of their carrying value over their fair value.

restaurant

testing of

is the lowest

impairment testing for our restaurants, we have
For purposes of
concluded that an individual
level of
independent cash flows unless it is more likely than not that we will
refranchise restaurants as a group. We review our long-lived assets
of such individual restaurants (primarily PP&E, right-of-use operating
lease assets and allocated intangible assets subject to amortization)
that we intend to continue operating as Company restaurants
annually for
impairment, or whenever events or changes in
circumstances indicate that the carrying amount of a restaurant may
not be recoverable. We use two consecutive years of operating
losses as our primary indicator of potential impairment for our annual
these restaurant assets. We evaluate the
impairment
recoverability of these restaurant assets by comparing the estimated
undiscounted future cash flows, which are based on our entity-
specific assumptions,
to the carrying value of such assets. For
restaurant assets that are not deemed to be recoverable, we write-
to its estimated fair value, which
down an impaired restaurant
becomes its new cost basis. Fair value is an estimate of the price a
franchisee would pay for
the restaurant and its related assets,
including any right-of-use assets, and is determined by discounting
the estimated future after-tax cash flows of the restaurant, which
include a deduction for royalties we would receive under a franchise
agreement with terms substantially at market. The after-tax cash
flows incorporate reasonable assumptions we believe a franchisee
would make such as sales growth and margin improvement. The
discount rate used in the fair value calculation is our estimate of the
required rate of return that a franchisee would expect to receive
restaurant and the related long-lived
when purchasing a similar
assets. The discount rate incorporates rates of returns for historical
refranchising market transactions and is commensurate with the risks
Individual
and uncertainty inherent
restaurant-level
(income)
expense. Any right-of-use asset may alternatively be valued at the
amount we could receive for such right-of-use asset from a third-
party that is not a franchisee through a sublease if doing so would
result in less overall impairment of the restaurant assets in total.

in the forecasted cash flows.
is recorded within Other

impairment

56 YUM! BRANDS, INC. - 2020 Form 10-K

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to the carrying value of

In executing our refranchising initiatives, we most often offer groups
of restaurants for sale. When we believe it is more likely than not a
restaurant or groups of restaurants will be refranchised for a price
less than their carrying value, but do not believe the restaurant(s)
have met the criteria to be classified as held for sale, we review the
restaurants for impairment. We evaluate the recoverability of these
restaurant assets by comparing estimated sales proceeds plus
the
if any,
holding period cash flows,
restaurant or group of restaurants. For restaurant assets that are not
deemed to be recoverable, we recognize impairment for any excess
of carrying value over the fair value of the restaurants, which is based
on the expected net sales proceeds. To the extent ongoing
agreements to be entered into with the franchisee simultaneous with
the refranchising are expected to contain terms, such as royalty rates
or rental payments, not at prevailing market rates, we consider the
off-market terms in our impairment evaluation. We recognize any
such impairment charges in Refranchising (gain) loss. We recognize
gains on restaurant refranchisings when the sale transaction closes
and control of the restaurant operations have transferred to the
franchisee.

When we decide to close a restaurant, it is reviewed for impairment,
which includes an estimate of sublease income that could be
reasonably obtained, if any, in relation to the right-of-use operating
lease asset. Additionally, depreciable lives are adjusted based on the
expected disposal date. Other costs incurred when closing a
restaurant such as costs of disposing of the assets as well as other
facility-related expenses from previously closed stores are generally
expensed as incurred. Any costs recorded upon store closure as well
as any subsequent adjustments to liabilities for remaining lease
obligations as a result of lease termination or changes in estimates of
sublease income are recorded in Other (income) expense. To the
extent we sell assets, primarily land, associated with a closed store,
any gain or loss upon that sale is also recorded in Other (income)
expense.

Management judgment is necessary to estimate future cash flows,
including cash flows from continuing use, terminal value, sublease
income and refranchising proceeds. Accordingly, actual results could
vary significantly from our estimates.

Guarantees. We recognize, at inception of a guarantee, a liability for
the fair value of certain obligations undertaken. Additionally, effective
January 1, 2020, we adopted ASU No. 2016-13 which required that
we also recognize as a liability the expected credit losses over the life
of such guarantees. As a result of the adoption of ASU No. 2016-13,
we recorded a cumulative adjustment
to Accumulated deficit of
$8 million to establish such expected credit loss liability for our
outstanding guarantees.

The majority of our guarantees are issued as a result of assigning our
interest in obligations under operating leases as a condition to the
refranchising of certain Company restaurants. We recognize a liability
for such lease guarantees upon refranchising and upon subsequent
renewals of such leases when we remain secondarily liable. The
related expense and any subsequent changes are included in
Refranchising (gain) loss. Any expense and subsequent changes in
the guarantees for other franchise support guarantees not associated
with a refranchising transaction are included in Franchise and
property expenses.

Income Taxes. We record deferred tax assets and liabilities for the
future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases as well as operating loss,
capital
loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those differences or
carryforwards are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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recognized in our Income tax provision in the period that includes the
enactment date. Additionally, in determining the need for recording a
valuation allowance against
the carrying amount of deferred tax
assets, we consider the amount of taxable income and periods over
which it must be earned, actual
levels of past taxable income and
known trends and events or transactions that are expected to affect
future levels of taxable income. Where we determine that it is more
likely than not that all or a portion of an asset will not be realized, we
record a valuation allowance.

We recognize the benefit of positions taken or expected to be taken
in our tax returns in our Income tax provision when it is more likely
than not (i.e., a likelihood of more than fifty percent) that the position
would be sustained upon examination by tax authorities. A
recognized tax position is then measured at the largest amount of
benefit that is greater than fifty percent likely of being realized upon
settlement with the taxing authorities. We evaluate these amounts on
a quarterly basis to ensure that
they have been appropriately
adjusted for audit settlements and other events we believe may
impact the outcome. Changes in judgment that result in subsequent
recognition, derecognition or a change in measurement of a tax
position taken in a prior annual period (including any related interest
and penalties) are recognized as a discrete item in the interim period
in which the change occurs. We recognize accrued interest and
penalties related to unrecognized tax benefits as components of our
Income tax provision.

We do not record a deferred tax liability for unremitted earnings of
our foreign subsidiaries to the extent that the earnings meet the
indefinite reversal criteria. This criteria is met if the foreign subsidiary
has invested, or will invest, the earnings indefinitely. The decision as
to the amount of unremitted earnings that we intend to maintain in
non-U.S. subsidiaries considers items including, but not limited to,
forecasts and budgets of financial needs of cash for working capital,
liquidity plans and expected cash requirements in the U.S.

See Note 18 for a further discussion of our income taxes.

Fair Value Measurements. Fair value is the price we would receive
to sell an asset or pay to transfer a liability (exit price) in an orderly
those assets and
transaction between market participants. For
liabilities we record or disclose at fair value, we determine fair value
based upon the quoted market price, if available. If a quoted market
price is not available for identical assets, we determine fair value
based upon the quoted market price of similar assets or the present
value of expected future cash flows considering the risks involved,
including counterparty performance risk if appropriate, and using
discount
the duration. The fair values are
assigned a level within the fair value hierarchy, depending on the
source of the inputs into the calculation.

rates appropriate for

Level 1

Level 2

Inputs based upon quoted prices in active markets for
identical assets.

Inputs other than quoted prices included within Level 1
that are observable for the asset, either directly or
indirectly.

Level 3

Inputs that are unobservable for the asset.

Cash and Cash Equivalents. Cash equivalents represent funds we
have temporarily invested (with original maturities not exceeding
three months),
including short-term, highly liquid debt securities.
Cash and overdraft balances that meet the criteria for right of setoff
are presented net on our Consolidated Balance Sheet.

Receivables. The Company’s receivables are primarily generated
from ongoing business relationships with our franchisees as a result
of franchise agreements, including contributions due to advertising
cooperatives we consolidate. These receivables from franchisees are
generally due within 30 days of
the period in which the
corresponding sales occur and are classified as Accounts and notes

PART II
ITEM 8. Financial Statements and Supplementary Data.

receivable, net on our Consolidated Balance Sheet. Effective with the
adoption of ASU No. 2016-13 on January 1, 2020, our receivables
are now stated net of expected credit losses. The impact to our net
receivables as a result of adopting the standard was not significant.
Expected credit
losses for uncollectible franchisee receivable
balances consider both current conditions and reasonable and
supportable forecasts of
future conditions. Current conditions we
consider include pre-defined aging criteria as well as specified events
that indicate we may not collect the balance due. Reasonable and
supportable forecasts used in determining the probability of future
collection consider publicly
available data regarding default
probability. While we use the best information available in making our
recorded receivables is
determination,
dependent upon future economic events and other conditions that
may be beyond our control. Receivables that are ultimately deemed
to be uncollectible, and for which collection efforts have been
exhausted, are written off against
the allowance for doubtful
accounts.

the ultimate recovery of

We recorded $12 million, $24 million and $11 million in net provisions
within Franchise and property expenses in 2020, 2019 and 2018,
respectively, related to uncollectible continuing fees, initial fees and
rent receivables from our franchisees.

Accounts and notes receivable as well as the Allowance for doubtful
accounts,
including balances attributable to our consolidated
advertising cooperatives, as of December 31, 2020 and 2019,
respectively, are as follows:

2020

2019

Accounts and notes receivable

$ 579

$ 656

Allowance for doubtful accounts

(45)

(72)

Accounts and notes receivable, net

$ 534

$ 584

Our financing receivables primarily consist of notes receivables and
direct financing leases with franchisees which we enter into from
time-to-time. As these receivables primarily relate to our ongoing
business agreements with franchisees, we consider such receivables
risk characteristics and evaluate them as one
to have similar
collective portfolio segment and class for determining the allowance
for doubtful accounts. Balances of notes receivable and direct
financing leases due within one year are included in Accounts and
notes receivable, net while amounts due beyond one year are
included in Other assets. Amounts included in Other assets totaled
$72 million (net of an allowance of $5 million) and $68 million (net of
an allowance of less than $1 million) at December 31, 2020, and
December 31, 2019, respectively. Financing receivables that are
ultimately deemed to be uncollectible, and for which collection efforts
have been exhausted, are written off against
the allowance for
doubtful accounts. Interest income recorded on financing receivables
has historically been insignificant.

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depreciation

Property, Plant and Equipment. PP&E is carried net of
calculate
accumulated
and
the
depreciation and amortization on a straight-line basis over
estimated useful
lives of the assets as follows: 5 to 25 years for
buildings and leasehold improvements and 3 to 20 years for
machinery
and
amortization on assets that are held for sale.

and equipment. We

suspend depreciation

amortization. We

Leases and Leasehold Improvements. We adopted ASU
No. 2016-02, Leases (“Topic 842”) as of the beginning of the year
ended December 31 ,2019, using a modified retrospective transition
approach for leases existing at, or entered into after, the beginning of
2019. The cumulative effect of this transition was recorded as an
increase to Accumulated deficit of $2 million as of this date. We lease
land, buildings or both for certain of our Company-operated
restaurants and restaurant support centers worldwide. Rental
expense for leased Company-operated restaurants is presented in

YUM! BRANDS, INC. - 2020 Form 10-K 57

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II
ITEM 8. Financial Statements and Supplementary Data.

our Consolidated Statements of Income within Company restaurant
restaurant support centers is
expenses and rental expense for
presented within G&A. The length of our lease terms, which vary by
country and often include renewal options, are an important factor in
determining the appropriate accounting for leases including the initial
classification of the lease as finance or operating as well as the timing
of recognition of rent expense over the duration of the lease. We
include renewal option periods in determining the term of our leases
when failure to renew the lease would impose a penalty on the
Company in such an amount
that a renewal appears to be
reasonably certain at the commencement of the lease. The primary
penalty to which we are subject
is the economic detriment
associated with the existence of leasehold improvements that might
be impaired if we choose not to continue the use of the leased
property. Leasehold improvements are amortized over the shorter of
their estimated useful
lives or the lease term. We generally do not
receive leasehold improvement incentives upon opening a store that
is subject to a lease. We expense rent associated with leased land or
buildings while a restaurant is being constructed whether rent is paid
or we are subject to a rent holiday. Our leasing activity for other
assets, including equipment, is not significant.

Right-of-use assets and liabilities are recognized upon lease
for operating and finance leases based on the
commencement
present value of lease payments over the lease term. Right-of-use
assets represent our right to use an underlying asset for the lease
term and lease liabilities represent our obligation to make lease
payments arising from the lease. Subsequent amortization of the
right-of-use asset and accretion of the lease liability for an operating
lease is recognized as a single lease cost, on a straight-line basis,
over the lease term. For finance leases, the right-of-use asset is
depreciated on a straight-line basis over the lesser of the useful life of
the leased asset or lease term. Interest on each finance lease liability
is determined as the amount that results in a constant periodic
discount rate on the remaining balance of the liability. As most of our
leases do not provide an implicit discount
rate, we use our
incremental secured borrowing rate based on the information
available at commencement date,
including the lease term and
currency, in determining the present value of lease payments for both
term of 12
operating and finance leases. Leases with an initial
months or less are not recorded in the Consolidated Balance Sheet;
we recognize lease expense for these leases on a straight-line basis
over the lease term.

Right-of-use assets are assessed for impairment in accordance with
our long-lived asset impairment policy, which is performed annually
for
restaurant-level assets or whenever events or changes in
circumstances indicate that the carrying amount of a restaurant may
not be recoverable. We reassess lease classification and remeasure
right-of-use assets and lease liabilities when a lease is modified and
that modification is not accounted for as a separate new lease or
upon certain other events that require reassessment. The difference
between operating lease rental expense recognized in our
Consolidated Statements of
Income and cash payments for
operating leases is recognized within Other, net within Net Cash
Provided by Operating Activities in our Consolidated Statements of
Cash Flows.

In certain instances, we lease or sublease certain restaurants to
franchisees. Our lessor and sublease portfolio primarily consists of
to
stores that have been leased to franchisees subsequent
refranchising transactions. Our most significant leases with lease and
non-lease components are leases with our franchisees that include
both the right
the
intellectual property associated with our Concepts’ brands. For these
leases, which are primarily classified as operating leases, we account
for the lease and non-lease components separately. Revenues from
rental agreements with franchisees are presented within Franchise
and property revenues in our Consolidated Statements of Income

to use a restaurant as well as a license of

58 YUM! BRANDS, INC. - 2020 Form 10-K

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and related expenses (e.g. depreciation and rent expense) are
presented within Franchise and property expenses.

Goodwill and Intangible Assets. From time-to-time, the Company
acquires restaurants from one of our Concept’s franchisees or
acquires another business. Goodwill
from these acquisitions
represents the excess of the cost of a business acquired over the net
of the amounts assigned to assets acquired, including identifiable
intangible assets and liabilities assumed. Goodwill
is not amortized
and has been assigned to reporting units for purposes of impairment
testing. Our reporting units are our business units (which are aligned
based on geography) in our KFC, Pizza Hut, Taco Bell and Habit
Burger Grill Divisions.

We evaluate goodwill for impairment on an annual basis or more
often if an event occurs or circumstances change that
indicate
impairment might exist. We have selected the beginning of our fourth
quarter as the date on which to perform our ongoing annual
impairment test for goodwill. We may elect to perform a qualitative
assessment for our reporting units to determine whether it is more
likely than not that the fair value of the reporting unit is greater than
its carrying value. If a qualitative assessment is not performed, or if as
a result of a qualitative assessment it is not more likely than not that
the fair value of a reporting unit exceeds its carrying value, then the
reporting unit’s fair value is compared to its carrying value. Fair value
is the price a willing buyer would pay for a reporting unit, and is
generally estimated using discounted expected future after-tax cash
flows from Company-owned restaurant operations,
if any, and
franchise royalties. The discount rate is our estimate of the required
rate of return that a third-party buyer would expect to receive when
purchasing a business from us that constitutes a reporting unit. We
believe the discount
rate is commensurate with the risks and
uncertainty inherent in the forecasted cash flows. At the beginning of
the quarter ended March 31, 2020, we adopted ASU No. 2017-04,
which eliminated the requirement to calculate the implied fair value of
goodwill
Instead, an
impairment charge is recognized based on the excess of a reporting
unit’s carrying amount over its fair value. This standard required
prospective application, beginning with the quarter ended March 31,
impairment charge related to our
2020. As a result, the goodwill
Habit Burger Grill reporting unit (see Note 3) was measured as the
excess of the reporting unit’s carrying value over its fair value.

to measure a goodwill

impairment charge.

the reporting unit

to its acquisition, we include goodwill

If we record goodwill upon acquisition of a restaurant(s)
from a
franchisee and such restaurant(s) is then sold within two years of
acquisition, the goodwill associated with the acquired restaurant(s) is
written off in its entirety. If the restaurant is refranchised two years or
more subsequent
in the
carrying amount of the restaurants disposed of based on the relative
fair values of the portion of the reporting unit disposed of in the
that will be
refranchising and the portion of
retained. The fair value of the portion of the reporting unit disposed of
in a refranchising is determined by reference to the discounted value
of the future cash flows expected to be generated by the restaurant
and retained by the franchisee, which includes a deduction for the
anticipated, future royalties the franchisee will pay us associated with
the franchise agreement entered into simultaneously with the
refranchising transition. The fair value of the reporting unit retained is
based on the price a willing buyer would pay for the reporting unit
and includes the value of
franchise agreements. Appropriate
adjustments are made if a franchise agreement includes terms that
are determined to not be at prevailing market rates. As such, the fair
value of the reporting unit retained can include expected cash flows
from future royalties from those restaurants currently being
refranchised, future royalties from existing franchise businesses and
company restaurant operations. As a result, the percentage of a
in a refranchising
reporting unit’s goodwill that will be written off
transaction will be less than the percentage of the reporting unit’s

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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Company-owned restaurants that are refranchised in that transaction
and goodwill can be allocated to a reporting unit with only franchise
restaurants.

We evaluate the remaining useful life of an intangible asset that is not
being amortized each reporting period to determine whether events
and circumstances continue to support an indefinite useful life. If an
is not being amortized is subsequently
intangible asset
determined to have a finite useful
life, we amortize the intangible
asset prospectively over its estimated remaining useful life. Intangible
assets that are deemed to have a definite life are amortized on a
straight-line basis to their residual value.

that

We evaluate our indefinite-lived intangible assets for impairment on
an annual basis or more often if an event occurs or circumstances
change that indicate impairments might exist. We perform our annual
test for impairment of our indefinite-lived intangible assets at the
beginning of our fourth quarter. We may elect to perform a qualitative
assessment to determine whether it is more likely than not that the
fair value of an indefinite-lived intangible asset is greater than its
carrying value. If a qualitative assessment is not performed, or if as a
result of a qualitative assessment it is not more likely than not that the
fair value of an indefinite-lived intangible asset exceeds its carrying
value, then the asset’s fair value is compared to its carrying value.
Fair value is an estimate of the price a willing buyer would pay for the
intangible asset and is estimated by discounting the expected future
after-tax cash flows associated with the intangible asset.

Our definite-lived intangible assets that are not allocated to an
individual restaurant are evaluated for impairment whenever events or
changes in circumstances indicate that the carrying amount of the
intangible asset may not be recoverable. An intangible asset that is
deemed not recoverable on an undiscounted basis is written down to
its estimated fair value, which is our estimate of the price a willing
the intangible asset based on discounted
buyer would pay for
expected future after-tax cash flows. For purposes of our impairment
analysis, we update the cash flows that were initially used to value
the definite-lived intangible asset to reflect our current estimates and
assumptions over the asset’s future remaining life.

Capitalized Software. We state capitalized software at cost less
accumulated amortization within Intangible assets, net on our
Consolidated Balance Sheets. We calculate amortization on a
straight line basis over the estimated useful life of the software which
ranges from 3 to 7 years upon initial capitalization.

Derivative Financial Instruments. We use derivative instruments
primarily to hedge interest rate and foreign currency risks. These
derivative contracts are entered into with financial institutions. We do
not use derivative instruments for trading purposes and we have
procedures in place to monitor and control their use.

We record all derivative instruments on our Consolidated Balance
Sheet at fair value. For derivative instruments that are designated and
qualify as a cash flow hedge, gain or loss on the derivative instrument
is reported as a component of AOCI and reclassified into earnings in
the same period or periods during which the hedged transaction
affects earnings. For derivative instruments not designated as
hedging instruments, the gain or loss is recognized in the results of
operations immediately.

the counterparties will

into contracts with carefully selected major

As a result of the use of derivative instruments, the Company is
their
exposed to risk that
contractual obligations. To mitigate the counterparty credit risk, we
only enter
financial
institutions based upon their credit ratings and other factors, and
continually assess the creditworthiness of counterparties. At
the
December 31, 2020 and December 31, 2019, all of
counterparties to our
rate swaps and foreign currency
forwards had investment grade ratings according to the three major

to meet

interest

fail

PART II
ITEM 8. Financial Statements and Supplementary Data.

ratings agencies. To date, all counterparties have performed in
accordance with their contractual obligations.

Common Stock Share Repurchases. From time-to-time, we
repurchase shares of our Common Stock under share repurchase
programs authorized by our Board of Directors. Shares repurchased
constitute authorized, but unissued shares under the North Carolina
laws under which we are incorporated. Additionally, our Common
Stock has no par or stated value. Accordingly, we record the full
value of share repurchases, or other deductions to Common Stock
such as shares cancelled upon employee share-based award
exercises, upon the trade date, against Common Stock on our
Consolidated Balance Sheet except when to do so would result in a
negative balance in such Common Stock account. In such instances,
on a period basis, we record the cost of any further share
repurchases, or other deductions to Common Stock as an addition
to Accumulated deficit. Due to the large number of share
repurchases of our stock over the past several years, our Common
any
Stock
period. Accordingly, $179 million, $796 million and $2,356 million in
share repurchases in 2020, 2019 and 2018, respectively, were
recorded as an addition to Accumulated deficit. Additionally,
$18 million related to shares cancelled upon employee share-based
award exercises in 2019 were recorded as an addition to
Accumulated deficit. See Note 17 for additional
information on our
share repurchases.

frequently

balance

zero

end

the

Pension and Post-retirement Medical Benefits. We measure and
recognize the overfunded or underfunded status of our pension and
post-retirement plans as an asset or liability in our Consolidated
Balance Sheet as of our
fiscal year end. The funded status
represents the difference between the projected benefit obligations
and the fair value of plan assets, which is calculated on a
plan-by-plan basis. The projected benefit obligation and related
funded status are determined using assumptions as of the end of
each year. The projected benefit obligation is the present value of
benefits earned to date by plan participants, including the effect of
future salary increases, as applicable. The difference between the
projected benefit obligations and the fair value of plan assets that has
not previously been recognized in our Consolidated Statement of
Income is recorded as a component of AOCI.

The net periodic benefit costs associated with the Company’s
defined benefit pension and post-retirement medical plans are
determined using assumptions regarding the projected benefit
obligation and, for funded plans, the market-related value of plan
assets as of the beginning of each year, or remeasurement period, if
applicable. We record the service cost component of net periodic
benefit costs in G&A. Non-service cost components are recorded in
Other pension (income) expense. We have elected to use a market-
related value of plan assets to calculate the expected return on
assets, net of administrative and investment fees paid from plan
assets, in net periodic benefit costs. For each individual plan we
amortize into pension expense the net amounts in AOCI, as adjusted
for the difference between the fair value and market-related value of
plan assets, to the extent that such amounts exceed 10% of the
greater of a plan’s projected benefit obligation or market-related
value of assets, over
the remaining service period of active
participants in the plan or, for plans with no active participants, over
the expected average life expectancy of the inactive participants in
the plan. The market-related value of plan assets is the fair value of
plan assets as of the beginning of each year adjusted for variances
between actual returns and expected returns. We attribute such
variances to the market-related value of plan assets evenly over
five years.

We record a curtailment when an event occurs that significantly
reduces the expected years of future service or eliminates the accrual
of defined benefits for the future services of a significant number of

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YUM! BRANDS, INC. - 2020 Form 10-K 59

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART II
ITEM 8. Financial Statements and Supplementary Data.

employees. We record a curtailment gain when the employees who
are entitled to the benefits terminate their employment; we record a
curtailment loss when it becomes probable a loss will occur. We

recognize settlement gains or losses only when we have determined
that the cost of all settlements in a year will exceed the sum of the
service and interest costs within an individual plan.

NOTE 3 – Habit Burger Grill Acquisition

On March 18, 2020, we completed the acquisition of all of the issued
and outstanding common shares of The Habit Restaurants, Inc. As
of the date of acquisition, The Habit Restaurants, Inc. operated 245
company-owned and 31 franchised Habit Burger Grill restaurants
across the U.S. and in China, offering a flavor-forward variety of
made-to-order items chargrilled over an open flame. We expect
Habit Burger Grill to benefit from the global scale and resources of
YUM and that the acquisition will accelerate and diversify YUM’s
growth.

Total cash consideration paid in connection with the acquisition was
$408 million, net of acquired cash of $20 million. This included
the settlement of existing share-based awards
$9 million for
previously issued to The Habit Restaurants,
Inc. employees and
$53 million associated with an obligation to former shareholders of
The Habit Restaurants, Inc. related to a tax receivable agreement
entered into in connection with its initial public offering in 2014. The
acquisition was accounted for as a business combination using the
acquisition method of accounting.

During the quarter ended December 31, 2020, we adjusted our preliminary estimate of the fair value of net assets acquired. The components of
the preliminary purchase price allocation upon the March 18, 2020, acquisition, subsequent to the adjustments to the allocation through the year
ended December 31, 2020, were as follows:

Total Current Assets

Property, plant and equipment, net

Habit Burger Grill brand (included in Intangible assets, net)

Operating lease right-of-use assets (included in Other assets)

Other assets

Total Assets

Total Current Liabilities

Operating lease liabilities (included in Other liabilities and deferred credits)

Other liabilities

Total Liabilities

Total identifiable net assets

Goodwill

Net consideration transferred

111

196

442

(69)

(170)

(1)

(240)

202

206

$ 408

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The adjustments to the preliminary estimate of identifiable net assets acquired resulted in a corresponding $13 million decrease in estimated
goodwill due to the following changes to the preliminary purchase price allocation.

Change in

Total Current Assets

Property, plant and equipment, net

Habit Burger Grill brand (included in Intangible assets, net)

Operating lease right-of-use assets (included in Other assets)

Other assets

Total Current Liabilities

Operating lease liabilities (included in Other liabilities and deferred credits)

Other liabilities

Total decrease in goodwill

Increase (Decrease) in Goodwill

(33)

(6)

(1)

$ (13)

the purchase price was based on
The preliminary allocation of
management’s analysis as of March 18, 2020. We will continue to
obtain information to assist in determining the fair value of net assets
acquired during the remaining measurement period.

therefore, will not be amortized. The brand asset will be tested for
impairment on an annual basis as of the beginning of our fourth
quarter or more often if an event occurs or circumstances change
that indicate impairment might exist.

The Habit Burger Grill brand, which includes the related trademarks,
was valued by applying the income approach through a relief from
royalty analysis and it has been assigned an indefinite life and,

The excess of the purchase price over the preliminary estimated fair
value of
identifiable assets acquired was recorded as
goodwill. The factors contributing to the recognition of goodwill were

the net,

60 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

several strategic and synergistic benefits that are expected to be
realized by Habit Burger Grill from the acquisition. These benefits
include leveraging YUM’s scale and resources in unit development,
primarily through franchising, supply chain and global brand-building.
Goodwill determined through the purchase price allocation will be
entirely allocated to the Habit Burger Grill Division and goodwill of
approximately $200 million is expected to be deductible for tax
purposes.

The pro forma impact on our results of operations if the acquisition
had been completed as of the beginning of 2019 would not have
been significant.

During the first quarter of 2020, the operations of substantially all
Habit Burger Grill restaurants were impacted by COVID-19. As a
result, we performed an interim impairment test of the Habit Burger
Grill reporting unit goodwill as of March 31, 2020. This test of
impairment included comparing the estimated fair value of the Habit
Burger Grill reporting unit to its carrying value, including goodwill, as
originally determined through our preliminary purchase price
allocation. The fair value estimate of the Habit Burger Grill reporting
unit was based on the estimated price a willing buyer would pay for
the reporting unit and was determined using an income approach
through a discounted cash flow analysis using unobservable inputs
(Level 3). The most impactful of these inputs included future average
unit volumes of Habit Burger Grill restaurants as well as restaurant
unit counts. The fair value was determined based upon a probability-

weighted average of
three scenarios, which included assumed
recovery of Habit Burger Grill average unit volumes to a pre –
COVID-19 level over periods ranging from the beginning of 2021 to
the end of 2022. Factors impacting restaurant unit counts were near-
term unit closures as the result of COVID-19 as well as the pace of
expected new unit development. Unit counts assumed were
correlated with the expected recoveries in average unit volumes.
Based upon this fair value estimate, we determined that the carrying
value of our Habit Burger Grill reporting unit exceeded its fair value.
As a result, during the first quarter of 2020 we recorded a goodwill
impairment charge of $139 million to Other (income) expense and a
corresponding income tax benefit of $32 million. As we continued to
refine our preliminary purchase price allocation in the quarter ended
September 30, 2020, the impairment charge was adjusted upward
by $5 million, which resulted in a corresponding income tax benefit of
$1 million. The amount of the goodwill impairment charge and related
tax benefit could change again as we finalize the purchase price
allocation associated with the acquisition.

During the fourth quarter of 2020, in accordance with our policy on
evaluating goodwill and indefinite-lived intangible assets annually for
impairment, we performed an impairment test of the Habit Burger
Grill reporting unit goodwill and Habit Burger Grill brand asset. The
the reporting unit goodwill and brand asset were
fair values of
determined to be in excess of their respective carrying values and no
further impairment charges were recorded.

NOTE 4 – Earnings Per Common Share (“EPS”)

Net Income

Weighted-average common shares outstanding (for basic calculation)

Effect of dilutive share-based employee compensation

Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)

Basic EPS

Diluted EPS

2020

2019

2018

$ 904

$ 1,294

$ 1,542

302

307

$ 2.99

$ 2.94

306

313

4.23

4.14

322

329

4.80

4.69

Unexercised employee stock options and stock appreciation rights (in millions) excluded from the diluted
EPS computation(a)

4.8

2.0

(a) These unexercised employee stock options and stock appreciation rights were not included in the computation of diluted EPS because to do so

would have been antidilutive for the periods presented.

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NOTE 5 – Items Affecting Comparability of Net Income and Cash Flows

Refranchising (Gain) Loss

The Refranchising (gain) loss by our Divisional reportable segments is
presented below. Given the size and volatility of
refranchising
initiatives, our chief operating decision maker (“CODM”) does not
consider the impact of Refranchising (gain)
loss when assessing
Divisional segment performance. As such, we do not allocate such
gains and losses to our Divisional segments for performance
reporting purposes.

During the years ended December 31, 2020, 2019 and 2018, we
refranchised 97, 25 and 660 restaurants, respectively. Additionally,
during the years ended December 31, 2020 and 2019, we sold

respectively.

certain restaurant assets associated with existing franchise
restaurants to the franchisee. We received $19 million, $110 million
and $825 million in pre-tax cash refranchising proceeds in 2020,
2019 and 2018,
In 2020, we also received as
refranchising proceeds minority interests in an entity that operates
KFC and Pizza Hut franchised units in India. At the time of the
refranchisings, these minority interests had fair values of $31 million.
In 2019, we also received as refranchising proceeds a minority
interest in an entity that owns our KFC Brazil and Pizza Hut Brazil
master franchisee rights. At the time of refranchising, this minority
interest had a fair value of $6 million.

YUM! BRANDS, INC. - 2020 Form 10-K 61

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

A summary of Refranchising (gain) loss is as follows:

KFC Division

Pizza Hut Division

Taco Bell Division

Worldwide

five years to fight

the Yum! Brands,

Unlocking Opportunity Initiative
On June 24, 2020,
Inc. Board of Directors
approved the establishment of the Company’s new global “Unlocking
Opportunity Initiative” including a $100 million investment over the
inequality by unlocking opportunities for
next
employees,
team members and communities. The
Company contributed $50 million in the second quarter of 2020 to
Yum! Brands Foundation,
(a stand-alone, not-for-profit
organization that is not consolidated in the Company’s results) as
part of these efforts and investment. As a result of the size and
specific nature of this contribution it was not allocated to any of our
segment operating results for performance reporting purposes.

restaurant

Inc.

COVID-19 Relief
During the year ended December 31, 2020, we recorded a charge of
$25 million related to a contribution made to Yum! Brands
Foundation, Inc. expected to fund past and anticipated payments for
COVID-19 relief provided to restaurant-level employees within the
YUM system diagnosed with COVID-19 or acting as the primary
caregiver for someone diagnosed with COVID-19. As a result of the
size and specific nature of this contribution it was not allocated to
any of our segment operating results for performance reporting
purposes.

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Resource Optimization
During the year ended December 31, 2020, we recorded charges of
$36 million and $2 million to G&A expenses and Other pension
(income) expense, respectively, associated with a voluntary early
retirement program offered to our U.S. based employees and a
worldwide severance program. These programs were part of our
efforts to optimize our resources, reallocating them toward critical
areas of the business that will drive future growth. These critical
areas include accelerating our digital,
technology and innovation
capabilities to deliver a modern, world-class team member and
customer experience and improve unit economics. Due to their
scope and size,
these costs were not allocated to any of our
segment operating results for performance reporting purposes.

Redemption of Subsidiary Senior
Unsecured Notes
During the quarter ended September 30, 2020, certain subsidiaries
of the Company issued a notice of redemption for $1,050 million
aggregate principal amount of 5.00% Subsidiary Senior Unsecured

62 YUM! BRANDS, INC. - 2020 Form 10-K

Refranchising (gain) loss

2020

$ (33)

(2)

2019

(6)

—

(31)

2018

$ (240)

(313)

$ (34)

$ (37)

$ (540)

Notes due in 2024. The redemption amount included a $26 million
call premium plus accrued and unpaid interest
to the date of
redemption of October 9, 2020. We recorded the call premium,
$6 million of unamortized debt issuance costs associated with the
notes and $2 million of accrued and unpaid interest associated with
the period of time from prepayment of the notes with the trustee on
September 25, 2020,
redemption date within Interest
expense, net. See Note 11.

to their

Investment in Grubhub, Inc. (“Grubhub”)
In April of 2018 we purchased 2.8 million shares of Grubhub
common stock for $200 million. In the quarter ended September 30,
2020, we sold our entire investment
in Grubhub and received
proceeds of $206 million. While we held our investment in Grubhub
common stock we recognized changes in the fair value in our
investment in our Consolidated Statements of Income. For the years
ended December 31, 2020, 2019 and 2018, we recognized pre-tax
investment income of $69 million, pre-tax investment expense of
$77 million and pre-tax investment
income of $14 million,
respectively.

Income Tax Matters
In the fourth quarter of 2019, we completed intra-entity transfers of
certain intellectual property rights. As a result of the transfer of certain
of these rights, largely to subsidiaries in the United Kingdom (“UK”),
we received a step-up in tax basis to current
fair value under
applicable tax law. To the extent this step-up in tax basis will be
amortizable against future taxable income, we recognized one-time
deferred tax benefits of $3 million and $226 million in the quarters
ended December 31, 2020 and December 31, 2019, respectively.
During the quarter ended September 30, 2020, the UK Finance Act
2020 was enacted resulting in an increase in the UK corporate tax
rate from 17% to 19%. As a result,
in the quarter ended
September 30, 2020, we remeasured the related deferred tax asset
originally recorded in the fourth quarter of 2019. This remeasurement
resulted in the recognition of an additional $25 million deferred tax
benefit in the quarter ended September 30, 2020.

During the year ended December 31, 2018, we recorded a
$35 million decrease related to our provisional tax expense recorded
in the fourth quarter of 2017 associated with the Tax Cuts and Jobs
Act of 2017 (“Tax Act”).

See Note 18.

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

NOTE 6 – Revenue Recognition

Disaggregation of Total Revenues

The following tables disaggregate revenue by Concept, for our two most significant markets based on Operating Profit and for all other markets.
We believe this disaggregation best reflects the extent to which the nature, amount, timing and uncertainty of our revenues and cash flows are
impacted by economic factors.

U.S.

Company sales

Franchise revenues

Property revenues

Franchise contributions for advertising and other services

China

Franchise revenues

Other

Company sales

Franchise revenues

Property revenues

Franchise contributions for advertising and other services

U.S.

Company sales

Franchise revenues

Property revenues

Franchise contributions for advertising and other services

China

Franchise revenues

Other

Company sales

Franchise revenues

Property revenues

Franchise contributions for advertising and other services

KFC
Division

Pizza Hut
Division

2020
Taco Bell
Division

Habit Burger
Grill Division

Total

184

204

446

833

453

272

317

222

882

593

483

—

$ 346 $ 1,309

—

1,050

818

255

501

1,080

514

$ 2,272

$ 1,002

$ 2,031

$ 347 $ 5,652

2019

KFC
Division

Pizza Hut
Division

Taco Bell
Division

Total

919 $ 1,014

175

214

497

912

520

282

318

246

602

483

—

1,059

811

274

532

1,185

580

$ 2,491

$ 1,027

$ 2,079 $ 5,597

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YUM! BRANDS, INC. - 2020 Form 10-K 63

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

Contract Liabilities

Our contract liabilities are comprised of unamortized upfront fees received from franchisees. A summary of significant changes to the contract
liability balance during 2020 and 2019 is presented below.

Deferred
Franchise Fees

$ 414

Balance at December 31, 2018

Revenue recognized that was included in unamortized upfront fees received from franchisees at the beginning of the
period

Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as
revenue during the period

Other(a)

Balance at December 31, 2019

Revenue recognized that was included in unamortized upfront fees received from franchisees at the beginning of the
period

Increase for upfront fees associated with contracts that became effective during the period, net of amounts recognized as
revenue during the period

Other(a)

Balance at December 31, 2020

(a)

Includes impact of foreign currency translation.

We expect to recognize contract liabilities as revenue over the remaining term of the associated franchise agreement as follows:

Less than 1 year

1 - 2 years

2 - 3 years

3 - 4 years

4 - 5 years

Thereafter

Total

(70)

$ 441

(76)

(3)

$ 415

142

$ 415

We have applied the optional exemption, as provided for under Topic 606, which allows us to not disclose the transaction price allocated to
unsatisfied performance obligations when the transaction price is a sales-based royalty.

NOTE 7 – Supplemental Cash Flow Data

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2020

2019

2018

Cash Paid For:

Interest

Income taxes

Significant Non-Cash Investing and Financing Activities:

Finance lease obligations incurred

Finance lease and other debt obligations transferred through refranchising

Non-cash refranchising proceeds(c)

Reconciliation of Cash and cash equivalents to Consolidated Statements of Cash Flows:

480

497

328

283

(1)

Cash and cash equivalents as presented in Consolidated Balance Sheets

730

605

Restricted cash included in Prepaid expenses and other current assets(a)

Restricted cash and restricted cash equivalents included in Other assets(b)

258

138

455

279

(24)

—

292

151

Cash, Cash Equivalents and Restricted Cash as presented in Consolidated Statements of Cash Flows

1,024

768

474

(a) Restricted cash within Prepaid expenses and other current assets reflects cash related to advertising cooperatives that we consolidate that can only

be used to settle obligations of the respective cooperatives and Taco Bell Securitization interest reserves (See Note 11).

(b) Primarily trust accounts related to our self-insurance program.

64 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART II
ITEM 8. Financial Statements and Supplementary Data.

(c)

In 2020 we received as refranchising consideration a minority interest in an entity that operates KFC and Pizza Hut franchised units in India and in
2019 we received as refranchising consideration a minority interest in an entity that owns our KFC Brazil and Pizza Hut Brazil master franchisee
rights, respectively (See Note 5).

NOTE 8 – Other (Income) Expense

Foreign exchange net (gain) loss and other(a)

Impairment and closure expense(b)

Other (income) expense

2020

2019

2018

(18)

$ (1)

$ 1

172

$ 154

$ 4

$ 7

(a) The year ended December 31, 2019, includes a charge of $8 million for the settlement of contingent consideration associated with our 2013

acquisition of the KFC Turkey and Pizza Hut Turkey businesses.

(b) The year ended December 31, 2020, includes a charge of $144 million related to the impairment of Habit Burger Grill goodwill. The year ended
December 31, 2020, also includes charges of $12 million related to the impairment of restaurant-level assets and charges of $11 million related to
the write-off of software no longer being used.

The years ended December 31, 2019 and 2018 primarily included impairment of restaurant-level assets and store closure expenses,
respectively.

NOTE 9 – Supplemental Balance Sheet Information

Prepaid Expenses and Other Current Assets

2020

2019

Income tax receivable

Restricted cash

Assets held for sale(a)

Other prepaid expenses and current assets

Prepaid expenses and other current assets

Property, Plant and Equipment

Land

Buildings and improvements

Finance leases, primarily buildings

Machinery, equipment and other

Property, plant and equipment, gross

Accumulated depreciation and amortization

Property, plant and equipment, net

258

125

425

2020

428

1,423

543

2,465

(1,230)

138

136

338

2019

408

1,325

505

2,306

(1,136)

1,235

1,170

Depreciation and amortization expense related to PP&E was $132 million, $114 million and $146 million in 2020, 2019 and 2018, respectively.

Other Assets

Operating lease right-of-use assets

Investment in Grubhub common stock(b)

Franchise incentives

Other

Other assets

Accounts Payable and Other Current Liabilities

Accounts payable

Accrued compensation and benefits

Accrued advertising

Operating lease liabilities

Accrued taxes, other than income taxes

Other current liabilities

Accounts payable and other current liabilities

2020

2019

851

—

163

421

642

137

174

360

1,435

1,313

2020

215

225

196

420

1,189

2019

173

223

349

960

YUM! BRANDS, INC. - 2020 Form 10-K 65

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YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART II
ITEM 8. Financial Statements and Supplementary Data.

(a) Reflects the carrying value of restaurants we have offered for sale to franchisees and excess properties that we do not intend to use for restaurant

operations in the future.
In the third quarter of 2020 we sold our entire investment in Grubhub, Inc. common stock and received proceeds of $206 million.

(b)

NOTE 10 – Goodwill and Intangible Assets

The changes in the carrying amount of goodwill are as follows:

KFC Pizza Hut

Taco Bell Habit Burger Grill Worldwide

Goodwill, net as of December 31, 2018(a)

Disposal and other, net(b)

Goodwill, net as of December 31, 2019(a)

Disposal and other, net(b)

Habit Burger Grill acquisition and impairment (See Note 3)

230

233

—

196

199

—

Goodwill, net as of December 31, 2020(a)

235

202

(1)

—

$ —

—

$ —

—

525

530

597

(a) Goodwill, net includes $144 million of accumulated impairment loss recorded in the year ended December 31, 2020, related to our Habit Burger Grill

segment and $17 million of accumulated impairment losses for each year presented related to our Pizza Hut segment.

(b) Disposals and other, net

includes the impact of

foreign currency translation on existing balances and goodwill write-offs associated with

refranchising.

Intangible assets, net for the years ended 2020 and 2019 are as follows:

Definite-lived intangible assets

Capitalized software costs

Reacquired franchise rights

Franchise contract rights

Lease tenancy rights

Other

Indefinite-lived intangible assets

KFC trademark

Habit Burger Grill brand asset

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2020

2019

Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
Amortization

335

(160)

306

(130)

(33)

(85)

(1)

(32)

(311)

100

527

127

(32)

(83)

(1)

(28)

(274)

100

487

—

Amortization expense for all definite-lived intangible assets was $63 million in 2020, $52 million in 2019 and $37 million in 2018. Amortization
expense for definite-lived intangible assets is expected to approximate $70 million in 2021, $52 million in 2022, $41 million in 2023, $24 million in
2024 and $15 million in 2025.

66 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
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PART II
ITEM 8. Financial Statements and Supplementary Data.

NOTE 11 – Short-term Borrowings and Long-term Debt

Short-term Borrowings

Current maturities of long-term debt

Other

Less current portion of debt issuance costs and discounts

Short-term borrowings

Long-term Debt

Securitization Notes

Subsidiary Senior Unsecured Notes

Term Loan A Facility

Term Loan B Facility

YUM Senior Unsecured Notes

Finance lease obligations (See Note 12)

Less debt issuance costs and discounts

Less current maturities of long-term debt

Long-term debt

2020

2019

463

—

463

(10)

453

2,869

1,800

431

1,916

3,725

437

441

(10)

431

2,898

2,850

463

1,935

2,425

10,813

10,648

(78)

(463)

(80)

(437)

10,272

10,131

Securitization Notes
Taco Bell Funding, LLC (the “Issuer”), a special purpose limited liability company and a direct, wholly-owned subsidiary of Taco Bell Corp.
(“TBC”) through a series of securitization transactions has issued fixed rate senior secured notes collectively referred to as the “Securitization
Notes”. The following table summarizes Securitization Notes outstanding at December 31, 2020:

Issuance Date

May 2016

November 2018

Anticipated Repayment
Date(a)

Outstanding Principal
(in millions)

May 2023

May 2026

November 2023

November 2028

$ 483

$ 965

$ 808

$ 613

Interest Rate

Stated

4.377%

4.970%

4.318%

4.940%

Effective(b)

4.59%

5.14%

4.53%

5.06%

(a) The legal final maturity dates of the Securitization Notes issued in 2016 and 2018 are May 2046 and November 2048, respectively. If the Issuer has
not repaid or refinanced a series of Securitization Notes prior to its respective Anticipated Repayment Dates, rapid amortization of principal on all
Securitization Notes will occur and additional interest will accrue on the Securitization Notes.
Includes the effects of the amortization of any discount and debt issuance costs.

(b)

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the “Securitization Entities”)

The Securitization Notes were issued in transactions pursuant to
which certain of TBC’s domestic assets, consisting principally of
franchise-related agreements and domestic intellectual property,
were contributed to the Issuer and the Issuer’s special purpose,
wholly-owned subsidiaries (the “Guarantors”, and collectively with the
Issuer,
to secure the Securitization
Notes. The Securitization Notes are secured by substantially all of the
assets of the Securitization Entities, and include a lien on all existing
and future U.S. Taco Bell franchise and license agreements and the
royalties payable thereunder, existing and future U.S. Taco Bell
intellectual property, certain transaction accounts and a pledge of the
equity interests in asset owning Securitization Entities. The remaining
U.S. Taco Bell assets that were excluded from the transfers to the
Securitization Entities continue to be held by Taco Bell of America,
LLC (“TBA”) and TBC. The Securitization Notes are not guaranteed
by the remaining U.S. Taco Bell assets, the Company, or any other
subsidiary of the Company.

Payments of interest and principal on the Securitization Notes are
made from the continuing fees paid pursuant to the franchise and
license agreements with all U.S. Taco Bell restaurants, including both
company and franchise operated restaurants.
Interest on and
principal payments of the Securitization Notes are due on a quarterly
basis. In general, no amortization of principal of the Securitization
Notes is required prior to their anticipated repayment dates unless as
of any quarterly measurement date the consolidated leverage ratio
(the ratio of total debt to Net Cash Flow (as defined in the related
the
indenture))
Company and its subsidiaries or the Issuer and its subsidiaries
exceeds 5.0:1, in which case amortization payments of 1% per year
of the outstanding principal as of the closing of the Securitization
Notes are required. As of the most recent quarterly measurement
date the consolidated leverage ratio for both the Company and its
subsidiaries as well as the Issuer and its subsidiaries exceeded 5.0:1
and, as a result, amortization payments are required.

fiscal quarters of either

the preceding four

for

YUM! BRANDS, INC. - 2020 Form 10-K 67

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART II
ITEM 8. Financial Statements and Supplementary Data.

The Securitization Notes are subject to a series of covenants and
restrictions customary for transactions of this type, including (i) that
the Issuer maintains specified reserve accounts to be available to
make required interest payments in respect of the Securitization
Notes, (ii) provisions relating to optional and mandatory prepayments
and the related payment of specified amounts, including specified
make-whole payments in the case of the Securitization Notes under
certain circumstances, (iii) certain indemnification payments relating
to taxes, enforcement costs and other customary items and
(iv) covenants relating to recordkeeping, access to information and
similar matters. The Securitization Notes are also subject to rapid
amortization events provided for in the indenture, including events
tied to failure to maintain a stated debt service coverage ratio (as
defined in the related indenture) of at least 1.1:1, gross domestic
sales for U.S. Taco Bell restaurants being below certain levels on
certain measurement dates, a manager termination event, an event
of default and the failure to repay or refinance the Securitization
Notes on the Anticipated Repayment Date (subject to limited cure
rights). The Securitization Notes are also subject to certain customary
events of default,
including events relating to non-payment of
required interest or principal due on the Securitization Notes, failure
to comply with covenants within certain time frames, certain
bankruptcy events, breaches of specified representations and
failure of security interests to be effective, certain
warranties,
judgments and failure of the Securitization Entities to maintain a

stated debt service coverage ratio. As of December 31, 2020, we
were in compliance with all of our debt covenant requirements and
were not subject to any rapid amortization events.

In accordance with the indenture, certain cash accounts have been
established with the indenture trustee for the benefit of the note
holders, and are restricted in their use. The indenture requires a
certain amount of securitization cash flow collections to be allocated
on a weekly basis and maintained in a cash reserve account. As of
December 31, 2020, the Company had restricted cash of $85 million
primarily related to required interest reserves included in Prepaid
expenses and other current assets on the Consolidated Balance
Sheets. Once the required obligations are satisfied, there are no
further restrictions, including payment of dividends, on the cash flows
of the Securitization Entities.

Additional cash reserves are required if any of the rapid amortization
events occur, as noted above, or in the event that as of any quarterly
measurement date the Securitization Entities fail to maintain a debt
service coverage ratio (or the ratio of Net Cash Flow to all debt
service payments for the preceding four fiscal quarters) of at least
1.75:1. The amount of weekly securitization cash flow collections that
exceed the required weekly allocations is generally remitted to the
Company. During the most recent quarter ended December 31,
2020, the Securitization Entities maintained a debt service coverage
ratio significantly in excess of the 1.75:1 requirement.

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Term Loan Facilities, Revolving Facility and Subsidiary Senior Unsecured Notes
KFC Holding Co., Pizza Hut Holdings, LLC, and TBA, each of which
is a wholly-owned subsidiary of the Company, as co-borrowers (the
“Borrowers”) have entered into a credit agreement providing for
senior secured credit facilities and a $1.0 billion revolving facility (the
Revolving Facility”). The senior secured credit facilities, which include
a Term Loan A Facility and a Term Loan B Facility, and the Revolving
Facility are collectively referred to as the “Credit Agreement”.
Additionally, the Borrowers through a series of transactions have
issued Subsidiary Senior Unsecured Notes (collectively referred to as
the “Subsidiary Senior Unsecured Notes”).

issuance of the 2031 Notes (defined below) and cash on hand the
Company prepaid the 2024 Notes and deposited sufficient funds
with The Bank of New York Mellon Trust Company, N.A., as trustee
under the related indenture, to redeem the 2024 Notes at their
aggregate redemption price and the indenture with respect to the
2024 Notes was discharged.

to the date of

redeemed,

to 102.50% of the principal
The redemption amount was equal
reflecting a $26 million “call premium”, plus
amount
accrued and unpaid interest
redemption. We
recognized the call premium, $6 million of unamortized debt issuance
costs associated with the 2024 Notes and $2 million of accrued and
unpaid interest associated with the period of time from prepayment
of the notes with the trustee to their redemption date within Interest
expense, net.

On September 9, 2020, the Borrowers issued a notice of redemption
for October 9, 2020, for $1,050 million aggregate principal amount of
5.00% Subsidiary Senior Unsecured Notes due in 2024 (the “2024
Notes”). On September 25, 2020, using the net proceeds from the

The following table summarizes borrowings outstanding under the Credit Agreement as well as our Subsidiary Senior Unsecured Notes as of
December 31, 2020. There are no outstanding borrowings under the Revolving Facility and $1.3 million of letters of credit outstanding as of
December 31, 2020.

Issuance Date

Maturity Date

Outstanding Principal
(in millions)

Interest Rate

Stated

Effective(b)

Term Loan A Facility

Term Loan B Facility

Senior Note Due 2026

Senior Note Due 2027

June 2016

June 2017

June 2022

April 2025

June 2026

June 2027

431

$ 1,916

$ 1,050

750

(a)

5.25%

4.75%

3.22%

3.53%

5.39%

4.90%

(a) The interest rates applicable to the Term Loan A Facility as well as the Revolving Facility range from 1.25% to 1.75% plus LIBOR or from 0.25% to
0.75% plus the Base Rate (as defined in the Credit Agreement), at the Borrowers’ election, based upon the total net leverage ratio of the Borrowers
and the Specified Guarantors (as defined in the Credit Agreement). As of December 31, 2020, the interest rate spreads on the LIBOR and Base Rate
applicable to our Term Loan A Facility were 1.25% and 0.25%, respectively.
The interest rates applicable to the Term Loan B Facility are 1.75% plus LIBOR or 0.75% plus the Base Rate, at the Borrowers’ election.
Includes the effects of the amortization of any discount and debt issuance costs as well as the impact of the interest rate swaps on the Term Loan B
Facility (See Note 13). The effective rates related to our Term Loan A and B Facilities are based on LIBOR-based interest rates through
December 31, 2020.

(b)

68 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

VDI-W7-PF3-0770
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PMT
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10*
2C

PART II
ITEM 8. Financial Statements and Supplementary Data.

The Term Loan A Facility is currently subject to quarterly amortization
the initial principal
payments in an amount equal
amount of the facility. These amortization payments will
increase to
an amount equal to 3.75% of the initial principal amount of the facility
beginning with our payment in the third quarter of 2021, with the
balance payable at maturity on June 7, 2022.

to 1.875% of

to quarterly amortization
The Term Loan B Facility is subject
payments in an amount equal to 0.25% of the initial principal amount
of the facility, with the balance payable at maturity on April 3, 2025.

The Credit Agreement is unconditionally guaranteed by the Company
and certain of the Borrowers’ principal domestic subsidiaries and
excludes Taco Bell Funding LLC and its special purpose, wholly-
is also
owned subsidiaries (see above). The Credit Agreement
secured by first priority liens on substantially all assets of
the
Borrowers and each subsidiary guarantor, excluding the stock of
certain subsidiaries and certain real property, and subject to other
customary exceptions.

The Credit Agreement is subject to certain mandatory prepayments,
including an amount equal to 50% of excess cash flow (as defined in
the Credit Agreement) on an annual basis and the proceeds of
certain asset sales, casualty events and issuances of indebtedness,
subject to customary exceptions and reinvestment rights.

The Credit Agreement includes two financial maintenance covenants
leverage ratio
which require the Borrowers to maintain a total
(defined as the ratio of Consolidated Total Debt to Consolidated
EBITDA (as these terms are defined in the Credit Agreement)) of
5.0:1 or less and a fixed charge coverage ratio (defined as the ratio of
EBITDA minus capital expenditures to fixed charges (inclusive of
rental expense and scheduled amortization)) of at least 1.5:1, each
as of the last day of each fiscal quarter. The Credit Agreement
includes other affirmative and negative covenants and events of
this type. The Credit
default
Agreement contains, among other
limitations on certain
additional
indebtedness and liens, and certain other transactions
specified in the agreement. We were in compliance with all debt
covenants as of December 31, 2020.

that are customary for facilities of
things,

The Subsidiary Senior Unsecured Notes are guaranteed on a senior
unsecured basis by (i) the Company, (ii) the Specified Guarantors and
(iii) by each of
the Borrower’s and the Specified Guarantors’
domestic subsidiaries that guarantees the Borrower’s obligations
under the Credit Agreement, except for any of the Company’s foreign
subsidiaries. The indenture governing the Subsidiary Senior
Unsecured Notes contains covenants and events of default that are
customary for debt securities of this type. We were in compliance
with all debt covenants as of December 31, 2020.

YUM Senior Unsecured Notes
The majority of our remaining long-term debt primarily comprises YUM Senior Unsecured Notes. The following table summarizes all YUM Senior
Unsecured Notes issued that remain outstanding at December 31, 2020:

Issuance Date

October 2007

August 2011

October 2013

September 2019

April 2020

September 2020

Maturity Date

November 2037

November 2021

November 2023

November 2043

January 2030

April 2025

March 2031

Principal Amount
(in millions)

Interest Rate

Stated

Effective(a)

325

350

325

275

800

600

$ 1,050

6.88%

3.75%

3.88%

5.35%

4.75%

7.75%

3.63%

7.45%

3.88%

4.01%

5.42%

4.90%

8.05%

3.77%

(a)

Includes the effects of the amortization of any (1) premium or discount; (2) debt issuance costs; and (3) gain or loss upon settlement of related
treasury locks and forward starting interest rate swaps utilized to hedge the interest rate risk prior to debt issuance.

On April 1, 2020, Yum! Brands, Inc. issued $600 million aggregate
principal amount of 7.75% YUM Senior Unsecured Notes due April 1,
2025, (the “2025 Notes”). The net proceeds from the issuance were
used to pay the fees and expenses of the offering with remaining
amounts used for general corporate purposes. Interest on the 2025
Notes is payable semi-annually in arrears on April 1 and October 1 of
each year, beginning on October 1, 2020. On September 25, 2020,
Yum! Brands, Inc. issued $1,050 million aggregate principal amount
of 3.625% YUM Senior Unsecured Notes due March 15, 2031, (the
“2031 Notes”). Interest on the 2031 Notes is payable semi-annually
in arrears on March 15 and September 15 of each year, beginning on
March 15, 2021. The Company paid debt
issuance costs of
$7 million and $13 million in connection with the 2025 Notes and

2031 Notes, respectively. These debt
issuance costs are being
amortized to Interest expense, net over the life of the notes using the
effective interest rate method.

The YUM Senior Unsecured Notes represent senior, unsecured
obligations and rank equally in right of payment with all of our existing
and future unsecured unsubordinated indebtedness. Our YUM
Senior Unsecured Notes contain cross-default provisions whereby
the acceleration of the maturity of any of our indebtedness in a
principal amount in excess of $50 million ($100 million or more in the
case of the 2025 Notes, the 2030 Notes and the 2031 Notes) will
constitute a default under the YUM Senior Unsecured Notes unless
such indebtedness is discharged, or the acceleration of the maturity
of that indebtedness is annulled, within 30 days after notice.

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YUM! BRANDS, INC. - 2020 Form 10-K 69

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

The annual maturities of all Short-term borrowings and Long-term debt as of December 31, 2020, excluding finance lease obligations of
$72 million and debt issuance costs and discounts of $88 million are as follows:

Year ended:

2021

2022

2023

2024

2025

Thereafter

Total

455

424

1,626

2,452

5,748

10,741

Interest expense on Short-term borrowings and Long-term debt was $558 million, $519 million and $496 million in 2020, 2019 and 2018,
respectively.

NOTE 12 – Lease Accounting

Components of Lease Expense

Operating lease cost

Finance lease cost

Amortization of right-of-use assets

Interest on lease liabilities

Total finance lease cost

Sublease income

Rental expense related to operating leases was $151 million for the year ended December 31, 2018.

Supplemental Cash Flow Information

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Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

Right-of-use assets obtained in exchange for lease obligations

Operating leases(a)

Finance leases

2020

2019

137

115

(60)

(69)

2020

2019

133

104

296

(a) The year ended December 31, 2020, includes right-of-use assets acquired as part of the acquisition of Habit Burger Grill of $196 million (See

Note 3).

70 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

Supplemental Balance Sheet Information

2020

2019

Consolidated Balance Sheet

Assets

Operating lease right-of-use assets

Finance lease right-of-use assets

Total right-of-use assets(a)

Liabilities

Current

Operating

Finance

Non-current

Operating

Finance

851

891

823

642

684

640

Other assets

Property, plant and equipment, net

Accounts payable and other current liabilities

Short-term borrowings

Other liabilities and deferred credits

Long-term debt

Total lease liabilities(a)

992

784

Weighted-average Remaining Lease Term (in years)

Operating leases

Finance leases

Weighted-average Discount Rate

Operating leases

Finance leases

11.1

12.2

12.3

12.7

5.1%

6.5%

5.6%

6.6%

(a) U.S. operating lease right-of-use assets and liabilities totaled $499 million and $556 million, respectively, as of December 31, 2020, and $283 million
and $337 million, respectively, as of December 31, 2019. These amounts primarily related to Taco Bell U.S. and the Habit Burger Grill
including
leases related to Company-operated restaurants, leases related to franchise-operated restaurants we sublease and the Taco Bell restaurant support
center.

Maturity of Lease Payments and Receivables
Future minimum lease payments, including rental payments for lease renewal options we are reasonably certain to exercise, and amounts to be
received as lessor or sublessor as of December 31, 2020, were as follows:

2021

2022

2023

2024

2025

Thereafter

Total lease payments/receipts

Less imputed interest/unearned income

Total lease liabilities/receivables

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Commitments

Lease Receivables

Finance

Operating Direct Financing Operating

102

(30)

128

133

123

115

103

623

1,225

(305)

599

988

(18)

920

As of December 31, 2020, we have executed real estate leases that have not yet commenced with estimated future nominal lease payments of
approximately $100 million, which are not included in the tables above. These leases are expected to commence in 2021 and 2022 with lease
terms of up to 20 years.

YUM! BRANDS, INC. - 2020 Form 10-K 71

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

VDI-W7-PF3-0770
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CLN

57285 TX 72
PMT
PS

9*
2C

PART II
ITEM 8. Financial Statements and Supplementary Data.

NOTE 13 – Derivative Instruments

We use derivative instruments to manage certain of our market risks related to fluctuations in interest rates and foreign currency exchange rates.

Interest Rate Swaps
We have entered into interest rate swaps with the objective of
reducing our exposure to interest rate risk for a portion of our
variable-rate debt interest payments. On July 25, 2016, we agreed
with multiple counterparties to swap the variable LIBOR-based
the interest payments related to $1.55 billion of
component of
borrowings under our Term Loan B Facility. These interest rate
swaps will expire in July 2021. Further, on May 14, 2018, we entered
into forward-starting interest rate swaps to fix the interest rate on
$1.5 billion of borrowings under our Term Loan B Facility from the
date the July 2016 swaps expire through March 2025. The interest
rate swaps executed in May 2018 will result in a fixed rate of 4.81%
on the swapped portion of the Term Loan B Facility from July 2021
through March 2025. These interest rate swaps are designated cash
flow hedges as the changes in the future cash flows of the swaps are
expected to offset changes in expected future interest payments on
the related variable-rate debt. There were no other interest rate
swaps outstanding as of December 31, 2020.

losses on the interest

Gains or
rate swaps are reported as a
component of AOCI and reclassified into Interest expense, net in our
Consolidated Statements of Income in the same period or periods
during which the related hedged interest payments affect earnings.
Through December 31, 2020, the swaps were highly effective cash
flow hedges.

Foreign Currency Contracts
We have entered into foreign currency forward and swap contracts
with the objective of reducing our exposure to earnings volatility
arising from foreign currency fluctuations associated with certain
receivables and
foreign currency denominated intercompany

payables. The notional amount, maturity date, and currency of these
contracts match those of the underlying intercompany receivables or
payables. Our foreign currency contracts are designated cash flow
hedges as the future cash flows of the contracts are expected to
offset changes in intercompany receivables and payables due to
foreign currency exchange rate fluctuations.

foreign currency transaction gains or

Gains or losses on the foreign currency contracts are reported as a
component of AOCI. Amounts are reclassified from AOCI each
quarter
losses
to offset
recorded within Other
(income) expense when the related
intercompany receivables and payables affect earnings due to their
functional currency remeasurements. Through December 31, 2020,
all
foreign currency contracts related to intercompany receivables
and payables were highly effective cash flow hedges.

As of December 31, 2020 and 2019, foreign currency contracts
outstanding related to intercompany receivables and payables had
total notional amounts of $39 million and $20 million, respectively.
Our foreign currency forward contracts all have durations that expire
in 2021.

fail

to meet

As a result of the use of interest rate swaps and foreign currency
contracts, the Company is exposed to risk that the counterparties
will
their contractual obligations. To mitigate the
counterparty credit risk, we only enter into contracts with major
financial institutions carefully selected based upon their credit ratings
and other factors, and continually assess the creditworthiness of
counterparties. At December 31, 2020, all of the counterparties to
rate swaps and foreign currency contracts had
our
investment grade ratings according to the three major
ratings
agencies. To date, all counterparties have performed in accordance
with their contractual obligations.

interest

Gains and losses on derivative instruments designated as cash flow hedges recognized in OCI and reclassifications from AOCI into Net Income:

K
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Interest rate swaps

Foreign currency contracts

Income tax benefit/(expense)

Gains/(Losses)
Recognized in
OCI
2019

2020

2018

(Gains)/Losses
Reclassified from
AOCI into Net
Income
2019

2020

2018

$ (103) $

(71) $

(3) $

$ (17) $ (19)

(4)

(1)

(8)

(20)

As of December 31, 2020, the estimated net loss included in AOCI related to our cash flow hedges that will be reclassified into earnings in the
next 12 months is $28 million, based on current LIBOR interest rates.

See Note 14 for the fair value of our derivative assets and liabilities.

72 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

NOTE 14 – Fair Value Disclosures

As of December 31, 2020, the carrying values of cash and cash equivalents, restricted cash, short-term investments, accounts receivable,
short-term borrowings and accounts payable approximated their fair values because of the short-term nature of these instruments. The fair value
of notes receivable net of allowances and lease guarantees less subsequent amortization approximates their carrying value. The following table
presents the carrying value and estimated fair value of the Company’s debt obligations:

Securitization Notes(a)

Subsidiary Senior Unsecured Notes(b)

Term Loan A Facility(b)

Term Loan B Facility(b)

YUM Senior Unsecured Notes(b)

2020

2019

Carrying
Value

Fair Value
(Level 2)

Carrying
Value

Fair Value
(Level 2)

2,869

3,015

2,898

3,040

1,800

431

1,916

3,725

1,890

428

1,907

4,094

2,850

463

1,935

2,425

3,004

464

1,949

2,572

(a) We estimated the fair value of the Securitization Notes using market quotes and calculations. The markets in which the Securitization Notes trade are

not considered active markets.

(b) We estimated the fair value of the YUM and Subsidiary Senior Unsecured Notes, Term Loan A Facility, and Term Loan B Facility using market quotes

and calculations based on market rates.

Recurring Fair Value Measurements
The Company has interest rate swaps, foreign currency contracts and other investments, all of which are required to be measured at fair value
on a recurring basis (See Note 13 for discussion regarding derivative instruments). The following table presents fair values for those assets and
liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall.

Consolidated Balance Sheet

Level

2020

2019

Fair Value

Assets

Interest Rate Swaps

Prepaid expenses and other current assets

Foreign Currency Contracts

Prepaid expenses and other current assets

Interest Rate Swaps

Other assets

Investment in Grubhub, Inc. Common Stock

Other assets

Other Investments

Liabilities

Interest Rate Swaps

Other assets

Accounts Payable and other current liabilities

Other liabilities and deferred credits

$ — $

—

127

—

137

—

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The fair value of the Company’s foreign currency contracts and interest rate swaps were determined based on the present value of expected
future cash flows considering the risks involved, including nonperformance risk, and using discount rates appropriate for the duration based on
observable inputs. The fair value of our investment in 2.8 million shares of Grubhub, Inc. common stock at December 31, 2019, was determined
primarily based on closing market prices for the shares. In the third quarter of 2020 we sold our entire investment in Grubhub, Inc. common
stock (See Note 5). The other investments primarily include investments in mutual funds, which are used to offset fluctuations for a portion of our
deferred compensation liabilities and whose fair values were determined based on the closing market prices of the respective mutual funds as of
December 31, 2020 and December 31, 2019.

Non-Recurring Fair Value Measurements
During the year ended December 31, 2019, we recognized non-recurring fair value measurements of $7 million related to refranchising related
impairment. Refranchising related impairment results from writing down the assets of restaurants or restaurant groups offered for refranchising,
including certain instances where a decision has been made to refranchise restaurants that are deemed to be impaired. The fair value
measurements used in our impairment evaluation were based on actual bids received from potential buyers (Level 2). The remaining net book
value of these restaurants at December 31, 2020, is insignificant.

During the years ended December 31, 2020 and 2019, we recognized non-recurring fair value measurements of $12 million and $4 million,
respectively, related to restaurant-level impairment. Restaurant-level impairment charges are recorded in Other (income) expense and resulted
primarily from our impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had
not been offered for refranchising. The fair value measurements used in these impairment evaluations were based on discounted cash flow
estimates using unobservable inputs (Level 3). These amounts exclude fair value measurements made for assets that were subsequently

YUM! BRANDS, INC. - 2020 Form 10-K 73

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

disposed of prior to those respective year end dates. The remaining net book value of restaurant assets measured at fair value during the year
ended December 31, 2020, is $11 million and is insignificant for assets measured at fair value during the year ended December 31, 2019.
During the year ended December 31, 2020, we also recognized impairment charges related to our Habit Burger Grill reporting unit. See Note 3.

NOTE 15 – Pension, Retiree Medical and Retiree Savings Plans

U.S. Pension Plans
We sponsor qualified and supplemental (non-qualified) noncontributory defined benefit plans covering certain full-time salaried and hourly U.S.
employees. The qualified plan meets the requirements of certain sections of the Internal Revenue Code and provides benefits to a broad group
of employees with restrictions on discriminating in favor of highly compensated employees with regard to coverage, benefits and contributions.
The supplemental plans provides additional benefits to certain employees. We fund our supplemental plans as benefits are paid.

The most significant of our U.S. plans is the YUM Retirement Plan (the “Plan”), which is a qualified plan. Our funding policy with respect to the
Plan is to contribute amounts necessary to satisfy minimum pension funding requirements, including requirements of the Pension Protection Act
of 2006, plus additional amounts from time-to-time as are determined to be necessary to improve the Plan’s funded status. We do not expect to
make any significant contributions to the Plan in 2021. Our two significant U.S. plans, including the Plan and a supplemental plan, were
previously amended such that any salaried employee hired or rehired by YUM after September 30, 2001, is not eligible to participate in those
plans.

We do not anticipate any plan assets being returned to the Company during 2021 for any U.S. plans.

Obligation and Funded Status at Measurement Date:

The following chart summarizes the balance sheet impact, as well as benefit obligations, assets, and funded status associated with our two
significant U.S. pension plans. The actuarial valuations for all plans reflect measurement dates coinciding with our fiscal year end.

Change in benefit obligation:

Benefit obligation at beginning of year

Service cost

Interest cost

Plan amendments

Special termination benefits

Benefits paid

Settlement payments

Actuarial (gain) loss

Benefit obligation at end of year

2020

2019

$ 1,015 $

873

(46)

—

118

—

(57)

(1)

153

$ 1,133 $ 1,015

A significant component of the overall
increase in the Company’s benefit obligation for the year ended December 31, 2020, was due to an
actuarial loss, which was primarily due to a decrease in the discount rate used to measure our benefit obligation from 3.50% at December 31,
2019, to 2.80% at December 31, 2020. A significant component of the overall increase in the Company’s benefit obligation for the year ended
December 31, 2019, was due to an actuarial
loss, which was primarily due to a decrease in the discount rate used to measure our benefit
obligation from 4.60% at December 31, 2018, to 3.50% at December 31, 2019.

K
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Change in plan assets:

Fair value of plan assets at beginning of year

Actual return on plan assets

Employer contributions

Benefits paid

Fair value of plan assets at end of year

Funded status at end of year

Amounts recognized in the Consolidated Balance Sheet:

Accrued benefit liability—current

Accrued benefit liability—non-current

74 YUM! BRANDS, INC. - 2020 Form 10-K

886 $

755

168

176

(46)

(57)

$ 1,014 $

886

(119) $ (129)

2020

2019

(9) $

(4)

(110)

(125)

$ (119) $ (129)

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

The accumulated benefit obligation was $1,111 million and $984 million at December 31, 2020 and December 31, 2019, respectively.

The table below provides information for pension plans with an accumulated benefit obligation in excess of plan assets. These pension plans
also have a projected benefit obligation in excess of plan assets.

Projected benefit obligation

Accumulated benefit obligation

Fair value of plan assets

Components of net periodic benefit cost:

Service cost

Interest cost

Amortization of prior service cost(a)

Expected return on plan assets

Amortization of net loss

Net periodic benefit cost

Additional (gain) loss recognized due to:
Settlement charges(b)

Special termination benefits

2020

2019

$ 1,133

$ 1,015

1,111

1,014

984

886

2020

2019

2018

(43)

$ 19

$ — $

(44)

$ 23

$ —

$ — $

(a) Prior service costs are amortized on a straight-line basis over the average remaining service period of employees expected to receive benefits.
(b) Settlement losses result when benefit payments exceed the sum of the service cost and interest cost within a plan during the year. These losses

were recorded in Other pension (income) expense.

Pension gains (losses) in AOCI:

Beginning of year

Net actuarial gain (loss)

Curtailments

Amortization of net loss

Amortization of prior service cost

Prior service cost

Settlement charges

End of year

Accumulated pre-tax losses recognized within AOCI:

Actuarial net loss

Prior service cost

Weighted-average assumptions used to determine benefit obligations at the measurement dates:

Discount rate

Rate of compensation increase

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2020

2019

$ (136)

$ (123)

(2)

—

(22)

—

(2)

$ (111)

$ (136)

2020

2019

$ (96)

$ (118)

(15)

(18)

$ (111)

$ (136)

2020

2.80%

3.00%

2019

3.50%

3.00%

YUM! BRANDS, INC. - 2020 Form 10-K 75

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

Weighted-average assumptions used to determine the net periodic benefit cost for fiscal years:

Discount rate

Long-term rate of return on plan assets

Rate of compensation increase

2020

3.50%

5.50%

3.00%

2019

4.60%

5.75%

3.00%

2018

3.90%

5.65%

3.75%

Our estimated long-term rate of return on plan assets represents the weighted-average of expected future returns on the asset categories
included in our target investment allocation based primarily on the historical returns for each asset category and future growth expectations.

Plan Assets

The fair values of our pension plan assets at December 31, 2020 and December 31, 2019, by asset category and level within the fair value
hierarchy are as follows:

Level 1:

Cash

Cash Equivalents(a)

Fixed Income Securities—U.S. Corporate(b)

Equity Securities—U.S. Large cap(b)

Equity Securities—U.S. Mid cap(b)

Equity Securities—U.S. Small cap(b)

Equity Securities—Non-U.S.(b)

Level 2:

Fixed Income Securities—U.S. Corporate(c)

Fixed Income Securities—U.S. Government and Government Agencies(d)

Fixed Income Securities—Other(d)

Total fair value of plan assets(e)

(a) Short-term investments in money market funds.
(b) Securities held in common trusts.
(c)
(d)
(e) 2020 and 2019 exclude net unsettled trade payables of $212 million and $169 million, respectively.

Investments held directly by the Plan.
Includes securities held in common trusts and investments held directly by the Plan.

2020

2019

164

306

102

148

354

161

268

120

274

$ 1,226

$ 1,055

Our primary objectives regarding the investment strategy for the Plan’s assets are to reduce interest rate and market risk and to provide
adequate liquidity to meet immediate and future payment requirements. To achieve these objectives, we are using a combination of active and
passive investment strategies. The Plan’s equity securities, currently targeted to be 50% of our investment mix, consist primarily of low-cost
index funds focused on achieving long-term capital appreciation. The Plan diversifies its equity risk by investing in several different U.S. and
foreign market index funds. Investing in these index funds provides the Plan with the adequate liquidity required to fund benefit payments and
plan expenses. The fixed income asset allocation, currently targeted to be 50% of our mix, is actively managed and consists of long-duration
fixed income securities that help to reduce exposure to interest rate variation and to better correlate asset maturities with obligations. The fair
values of all pension plan assets are determined based on closing market prices or net asset values.

A mutual fund held as an investment by the Plan includes shares of Common Stock valued at $0.3 million at both December 31, 2020 and 2019
(less than 1% of total plan assets in each instance).

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76 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

Benefit Payments

The benefits expected to be paid in each of the next five years and in the aggregate for the five years thereafter are set forth below:

Year ended:

2021

2022

2023

2024

2025

2026 - 2030

299

Expected benefit payments are estimated based on the same assumptions used to measure our benefit obligation on the measurement date
and include benefits attributable to estimated future employee service.

International Pension Plans
We also sponsor various defined benefit plans covering certain of our
non-U.S. employees, the most significant of which are in the UK.
Both of our UK plans have previously been frozen such that they are
closed to new participants and existing participants can no longer
earn future service credits.

At the end of 2020 and 2019, the projected benefit obligations of
these UK plans totaled $362 million and $290 million, respectively
and plan assets totaled $440 million and $372 million, respectively.
These plans were both in a net overfunded position at the end of
2020 and 2019. Total actuarial pre-tax losses related to the UK plans
of $18 million and $25 million were recognized in AOCI at the end of
2020 and 2019, respectively. The total net periodic benefit income
recorded was less than $1 million in 2020, $2 million in 2019 and
$4 million in 2018.

The funding rules for our pension plans outside of the U.S. vary from
country to country and depend on many factors including discount
rates, performance of plan assets, local laws and regulations. We do
not plan to make significant contributions to either of our UK plans in
2021.

Retiree Medical Benefits

Our post-retirement plan provides health care benefits, principally to
U.S. salaried retirees and their dependents, and includes retiree cost-
sharing provisions and a cap on our liability. This plan was previously
amended such that any salaried employee hired or rehired by YUM
after September 30, 2001,
is not eligible to participate in this
plan. Employees hired prior to September 30, 2001, are eligible for

benefits if they meet age and service requirements and qualify for
retirement benefits. We fund our post-retirement plan as benefits are
paid.

and

was

obligation

$46 million

At the end of 2020 and 2019, the accumulated post-retirement
$44 million,
benefit
respectively. Actuarial pre-tax gains of $4 million and $9 million were
recognized in AOCI at the end of 2020 and 2019, respectively. The
net periodic benefit cost recorded was $1 million in 2020, $1 million
in 2019 and $2 million in 2018, the majority of which is interest cost
on the accumulated post-retirement benefit obligation. The
weighted-average assumptions used to determine benefit obligations
and net periodic benefit cost for the post-retirement medical plan are
identical to those as shown for the U.S. pension plans.

The benefits expected to be paid in each of the next five years are
approximately $4 million and in aggregate for the five years thereafter
are $14 million.

for

Plan”)

eligible

U.S. Retiree Savings Plan
We sponsor a contributory plan to provide retirement benefits under
the provisions of Section 401(k) of the Internal Revenue Code (the
“401(k)
hourly
employees. Participants are able to elect to contribute up to 75% of
eligible compensation on a pre-tax basis. Participants may allocate
their contributions to one or any combination of multiple investment
options or a self-managed account within the 401(k) Plan. We match
100% of the participant’s contribution to the 401(k) Plan up to 6% of
eligible compensation. We recognized as compensation expense our
total matching contribution of $10 million in 2020, $11 million in 2019
and $12 million in 2018.

salaried

U.S.

and

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NOTE 16 – Share-based and Deferred Compensation Plans

Overview

At year end 2020, we had one stock award plan in effect: the Yum!
Brands, Inc. Long-Term Incentive Plan (the “LTIP”). Potential awards
to employees and non-employee directors under the LTIP include
restricted stock,
incentive stock options, SARs,
stock options,
restricted stock units (“RSUs”), performance restricted stock units,
performance share units (“PSUs”) and performance units. We have
issued only stock options, SARs, RSUs and PSUs under the LTIP.
Under the LTIP,
the exercise price of stock options and SARs
granted must be equal to or greater than the average market price or
the ending market price of the Company’s stock on the date of
the LTIP can have varying vesting
grant. While awards under

provisions and exercise periods, outstanding awards under the LTIP
vest in periods ranging from immediate to five years. Stock options
and SARs generally expire ten years after grant. At year end 2020,
approximately 24 million shares were available for future share-based
compensation grants under the LTIP.

Our Executive Income Deferral
(“EID”) Plan allows participants to
defer receipt of a portion of their annual salary and all or a portion of
their incentive compensation. As defined by the EID Plan, we credit
the amounts deferred with earnings based on the investment options
selected by the participants. These investment options are limited to
cash, phantom shares of our Common Stock, phantom shares of a
Stock Index Fund and phantom shares of a Bond Index
Fund. Investments in cash and phantom shares of both index funds

YUM! BRANDS, INC. - 2020 Form 10-K 77

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

will be distributed in cash at a date as elected by the employee and
therefore are classified as a liability on our Consolidated Balance
Sheets. We recognize compensation expense for the appreciation or
the depreciation, if any, of investments in cash and both of the index
funds. Deferrals into the phantom shares of our Common Stock will
be distributed in shares of our Common Stock, under the LTIP, at a
date as elected by the employee and therefore are classified in
Common Stock on our Consolidated Balance Sheets. We do not
recognize compensation expense for
the
depreciation,
investments in phantom shares of our
if any, of
Common Stock. Our EID plan also allows certain participants to
defer incentive compensation to purchase phantom shares of our
Common Stock and receive a 33% Company match on the amount
deferred. Deferrals receiving a match are similar to an RSU award in
that participants will generally forfeit both the match and incentive
compensation amounts deferred if they voluntarily separate from
employment during a vesting period that is two years from the date
of deferral. We expense the intrinsic value of the match and the
incentive compensation amount over the requisite service period
which includes the vesting period.

the appreciation or

Historically,
the Company has repurchased shares on the open
market in excess of the amount necessary to satisfy award exercises
and expects to continue to do so in 2021.

In connection with the 2016 spin-off of our China business into an
independent, publicly-traded company under
the name of Yum
China Holdings, Inc. (“Yum China”), under the provisions of our LTIP,
employee stock options, SARs, RSUs and PSUs outstanding at that
time were adjusted to maintain the pre-spin intrinsic value of the
awards. Depending on the tax laws of the country of employment,
awards were modified using either the shareholder method or the
employer method. Share-based compensation as recorded in Net
Income is based on the amortization of the fair value for both YUM
and Yum China awards held by YUM employees. The fair value of
Yum China awards held by YUM employees became fully amortized
in the year ended December 31, 2020. Share issuances for Yum
China awards held by YUM employees will be satisfied by Yum
China. Share issuances for YUM awards held by Yum China
employees are being satisfied by YUM.

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Award Activity

Stock Options and SARs

Award Valuation
We estimated the fair value of each stock option and SAR award as
of the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions:

Risk-free interest rate

Expected term

Expected volatility

2020

1.0%

2019

2.5%

2018

2.5%

5.8 years

6.5 years

24.0%

22.0%

Expected dividend yield

1.9%

1.8%

We believe it is appropriate to group our stock option and SAR
awards into two homogeneous groups when estimating expected
term. These groups typically consist of grants made primarily to
restaurant-level employees, which cliff-vest after
four years and
expire ten years after grant, and grants made to executives, which
typically have a graded vesting schedule of 25% per year over four
years and expire ten years after grant. We use a single weighted-
average term for our awards that have a graded vesting
schedule. Based on analysis of our historical exercise and post-
vesting termination behavior, we have determined that our
restaurant-level employees and our executives exercised the awards
on average after 5 years and 6.5 years, respectively. Additionally,
during 2020, we granted stock option and SAR awards to certain
executives that vested immediately. For these immediately vested
the
awards,
contractual term of 10 years. We utilized this simplified method as we
do not have sufficient historical exercise data to provide a reasonable
basis upon which to estimate the expected term for immediately
vested awards.

the expected term was estimated as one-half

When determining expected volatility, we consider both historical
volatility of our stock as well as implied volatility associated with our
publicly-traded options. The expected dividend yield is based on the
annual dividend yield at the time of grant.

The fair values of PSU awards without market-based conditions and
RSU awards are based on the closing price of our Common Stock
on the date of grant. The fair values of PSU awards with market-
based conditions have been valued based on the outcome of a
Monte Carlo simulation.

Shares
(in thousands)

Weighted-Average
Exercise
Price

Weighted-Average
Remaining
Contractual Term
(years)

Aggregate
Intrinsic Value
(in millions)

Outstanding at the beginning of the year

Granted

Exercised

Forfeited or expired

Outstanding at the end of the year

Exercisable at the end of the year

14,864

4,358

(3,137)

(523)

15,562(a)

10,108

60.76

101.42

44.41

88.29

74.52

65.64

6.39

5.43

$ 530

$ 434

(a) Outstanding awards include 601 options and 14,960 SARs with weighted average exercise prices of $66.89 and $74.83, respectively. Outstanding

awards represent YUM awards held by employees of both YUM and Yum China.

78 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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The weighted-average grant-date fair value of stock options and
SARs granted during 2020, 2019 and 2018 was $18.83, $19.82 and
$16.45, respectively. The total
intrinsic value of stock options and
SARs exercised during the years ended December 31, 2020,
December 31, 2019 and December 31, 2018, was $170 million,
$204 million and $195 million, respectively.

As of December 31, 2020, $50 million of unrecognized
compensation cost related to unvested stock options and SARs,
which will be reduced by any forfeitures that occur, is expected to be
recognized
of
approximately 1.7 years. The total fair value at grant date of awards

remaining weighted-average

period

over

PART II
ITEM 8. Financial Statements and Supplementary Data.

for both YUM and Yum China awards held by YUM employees that
vested during 2020, 2019 and 2018 was $70 million, $31 million and
$28 million, respectively.

RSUs and PSUs

As of December 31, 2020, there was $28 million of unrecognized
compensation cost related to 1.0 million unvested RSUs and PSUs,
none of which related to Yum China common stock. The total fair
value at grant date of awards that vested during 2020, 2019 and
2018 was $15 million, $14 million and $16 million, respectively.

Impact on Net Income
The components of share-based compensation expense and the related income tax benefits are shown in the following table:

Options and SARs

Restricted Stock Units

Performance Share Units

Total Share-based Compensation Expense

Deferred Tax Benefit recognized

EID compensation expense not share-based

2020

$ 75

$ 97

$ 18

2019

$ 39

$ 59

$ 17

2018

$ 37

$ 50

(2)

Cash received from stock option exercises for 2020, 2019 and 2018 was $10 million, $1 million and $6 million, respectively. Tax benefits
realized on our tax returns from tax deductions associated with share-based compensation for 2020, 2019 and 2018 totaled $58 million,
$66 million and $60 million, respectively.

NOTE 17 – Shareholders’ Deficit

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during 2020, 2019 and 2018. All amounts exclude
applicable transaction fees.

Authorization Date

November 2019

August 2018

November 2017

Total

Shares Repurchased
(thousands)
2019

2020

2018

Dollar Value of Shares
Repurchased
2019

2018

2020

2,419

—

— $ 250

$ — $

—

7,788

10,003

—

18,240

—

810

—

894

1,500

2,419(a)

7,788(b)

28,243(b)

$ 250(a)

$ 810(b) $ 2,394(b)

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(a) 2020 amount includes the effect of $11 million in share repurchases (0.1 million shares) with trade dates on, or prior to, December 31, 2020, but

settlement dates subsequent to December 31, 2020.

(b) 2019 amount excludes and 2018 amount includes the effect of $5 million in share repurchases (0.1 million shares) with trade dates on, or prior to,

December 31, 2018, but settlement dates subsequent to December 31, 2018.

YUM! BRANDS, INC. - 2020 Form 10-K 79

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

Changes in AOCI are presented below.

Balance at December 31, 2018, net of tax

(245)

(82)

(7) $

(334)

Translation Adjustments
and Gains (Losses) From
Intra-Entity Transactions
of a Long-Term Nature

Pension and
Post-Retirement Benefits(a)

Derivative
Instruments(b)

Total

OCI, net of tax

Gains (losses) arising during the year classified
into AOCI, net of tax

(Gains) losses reclassified from AOCI, net of tax

—

(30)

(22)

(35)

(21)

(56)

(41)

(13)

(54)

Balance at December 31, 2019, net of tax

(221)

(104)

(63) $

(388)

OCI, net of tax

Gains (losses) arising during the year classified
into AOCI, net of tax

(Gains) losses reclassified from AOCI, net of tax

—

(6)

(75)

(70)

(42)

(23)

Balance at December 31, 2020, net of tax

(182)

(96)

$ (133) $

(411)

(a) Amounts reclassified from AOCI for pension and post-retirement benefit plans losses during 2020 include amortization of net losses of $14 million,
amortization of prior service cost of $4 million and related income tax benefit of $4 million. Amounts reclassified from AOCI for pension and post-
retirement benefit plans losses during 2019 include amortization of net losses of $2 million, amortization of prior service cost of $5 million, settlement
charges of $3 million and related income tax benefit of $2 million. See Note 15.

(b) See Note 13 for details on amounts reclassified from AOCI.

NOTE 18 – Income Taxes

U.S. and foreign income before taxes are set forth below:

U.S.

Foreign

The details of our income tax provision (benefit) are set forth below:

Current:

Deferred:

Federal

Foreign

State

Federal

Foreign

State

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80 YUM! BRANDS, INC. - 2020 Form 10-K

2020

2019

2018

684

466

726

336

907

1,113

$ 1,020

$ 1,373

$ 1,839

2020

2019

2018

37 $

129 $

121

166

102

181

181 $

311 $

308

(21) $

(16) $

(24)

(29)

(15)

(213)

(3)

(65) $

(232) $

(11)

116 $

79 $

297

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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The reconciliation of income taxes calculated at the U.S. federal statutory rate to our effective tax rate is set forth below:

PART II
ITEM 8. Financial Statements and Supplementary Data.

U.S. federal statutory rate

State income tax, net of federal tax

Statutory rate differential attributable to foreign operations

Adjustments to reserves and prior years

Excess tax benefits from stock-based awards

Change in valuation allowances

Intercompany restructuring

Impact of Tax Law Changes

Other, net

Effective income tax rate

Statutory rate differential attributable to foreign operations. This item
includes local country taxes, withholding taxes, and shareholder-level
taxes, net of foreign tax credits. In 2020, this item was favorably
impacted by the ongoing effects of
the fourth quarter 2019
intercompany restructuring that resulted in the transfer of certain
intellectual property rights from wholly owned foreign subsidiaries to
the United States (U.S.) and the United Kingdom (UK). In 2019, this
item was unfavorably impacted by the full year impact of the global
intangible low-taxed income (GILTI) and Foreign Derived Intangible
Income (FDII) provisions of the Tax Cuts and Jobs Act of 2017. In
2018, this item was not significantly impacted by the GILTI or FDII
provisions.

tax returns,

Adjustments to reserves and prior years. This item includes:
(1) changes in tax reserves, including interest thereon, established for
potential exposure we may incur if a taxing authority takes a position
on a matter contrary to our position; and (2) the effects of reconciling
income tax amounts recorded in our Consolidated Statements of
Income to amounts reflected on our
including any
adjustments to the Consolidated Balance Sheets. In 2020, this item
was favorably impacted by $11 million of adjustments made to
current and deferred tax accounts in various jurisdictions to align with
balances supported by 2019 and prior tax filings. Additionally, in
2020 this item was favorably impacted by a $6 million tax benefit
associated with a state settlement.
this item was
unfavorably impacted by $34 million in reserves related to taxes
recorded associated with a prior year divestiture and $18 million of
tax expense related to the establishment of reserves associated with
the inclusion of stock based compensation in cost sharing
arrangements as well as other matters. This unfavorable impact was
partially offset by the reversal of a $20 million reserve established in
2018 due to the favorable resolution of an income tax rate dispute in
a foreign jurisdiction. In 2018, this item was unfavorably impacted by
the aforementioned $20 million reserve and a $19 million charge for
the correction of an error associated with the tax recorded on a prior
year divestiture.

In 2019,

Excess tax benefits from stock-based awards. 2020, 2019 and 2018
includes $35 million, $49 million and $44 million, respectively, of
excess federal tax benefit related to share-based compensation.

Change in valuation allowances. This item relates to changes for
deferred tax assets generated or utilized during the current year and
changes in our judgment regarding the likelihood of using deferred
tax assets that existed at the beginning of the year. In 2020, this item
was favorably impacted by $22 million of tax benefit associated with
a valuation allowance release in a foreign jurisdiction resulting from a
change in management’s judgement as to realizability of indefinite
lived tax loss carryforward in that jurisdiction.

2020

2019

2018

21.0%

1.0

(0.9)

(1.7)

(3.4)

(2.5)

(0.3)

(2.5)

0.7

0.9

2.3

(3.6)

(0.6)

0.8

(4.6)

2.8

(2.4)

0.7

(16.6)

—

1.4

(1.9)

(0.2)

11.4%

5.7%

16.2%

In December 2019,

Intercompany Restructuring.
the Company
completed an intercompany restructuring that resulted in the transfer
of certain intellectual property rights held by wholly owned foreign
subsidiaries primarily to the U.S. and the UK. The intellectual property
rights transferred to the UK resulted in a step up in the tax basis for
UK tax purposes resulting in a deferred tax asset of $586 million. The
deferred tax asset was analyzed for realizability and a valuation
allowance of $366 million was established representing the portion of
the deferred tax asset not likely to be realized. The recognized tax
benefit of $220 million is amortizable for UK tax purposes over a
twenty-year period. The transfer of certain intellectual property rights
to other non-UK jurisdictions in 2019 resulted in the recording of
deferred tax assets of $13 million and related valuation allowances of
$7 million for deferred tax assets that are not likely to be realized, for
a net tax benefit of $6 million.

Impact of Significant Tax Law Changes.
UK Tax Rate Change – On July 22, 2020, the UK Finance Act 2020
was enacted resulting in an increase in the UK corporate tax rate
from 17% to 19%. As such, the Company recognized a $25 million
tax benefit in 2020 associated with remeasuring its deferred tax
assets in the UK from 17% to 19%. These deferred tax assets were
primarily related to the step-up in tax basis associated with the
Intercompany Restructuring.

U.S. Tax Reform – On December 22, 2017, the U.S. government
enacted comprehensive Federal tax legislation commonly referred to
as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act
significantly modified the U.S. corporate income tax system by,
among other things, reducing the federal income tax rate from 35%
to 21%, limiting certain deductions, including limiting the deductibility
of interest expense to 30% of U.S. Earnings Before Interest, Taxes,
Depreciation and Amortization,
imposed a mandatory one-time
deemed repatriation tax on accumulated foreign earnings and
changed the manner in which foreign earnings are subject to U.S.
tax.

On December 22, 2017,
issued Staff Accounting
the SEC staff
Bulletin 118 which allowed us to record provisional amounts related
to the impacts of the Tax Act during a measurement period not to
extend beyond one year of the enactment date. As a result, we
recorded a $434 million provisional estimate of the effect of the Tax
Act in 2017. This expense was comprised of an estimate of our
deemed repatriation tax, the remeasurement of net deferred tax
assets resulting from the permanent reduction in the U.S. tax rate to
21%, and establishment of a valuation allowance on foreign tax
credit carryforwards which were unlikely to be realized under revised
U.S tax law.

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YUM! BRANDS, INC. - 2020 Form 10-K 81

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

Donnelley Financial
None

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PART II
ITEM 8. Financial Statements and Supplementary Data.

In 2018, we completed the accounting for the tax effects of the
enactment of the Tax Act. As a result of the Tax Act, we recorded
cumulative net tax expense of $399 million ($35 million benefit in
2018 and $434 million expense in 2017). This net expense was
comprised of $241 million for our deemed repatriation tax liability,
$47 million related to the remeasurement of our net deferred tax
assets to the 21% U.S. tax rate and $111 million to establish a
valuation allowance on foreign tax credits that are unlikely to be
realized under revised U.S. tax law.

Other. This item primarily includes the net impact of permanent
differences related to current year earnings, U.S. tax credits, and
other individually insignificant items impacting income tax expense.

to the Global

Companies subject
Intangible Low-Taxed Income
provision (GILTI) have the option to account for the GILTI tax as a
period cost if and when incurred, or to recognize deferred taxes for
outside basis temporary differences expected to reverse as GILTI.
The Company has elected to account for GILTI as a period cost.

The details of 2020 and 2019 deferred tax assets (liabilities) are set forth below:

Operating losses and interest deduction carryforwards

Capital losses

Tax credit carryforwards

Employee benefits

Share-based compensation

Lease-related liabilities

Accrued liabilities and other

Derivative instruments

Intangible assets

Property, plant and equipment

Deferred income

Gross deferred tax assets

Deferred tax asset valuation allowances

Net deferred tax assets

Intangible assets, including goodwill

Property, plant and equipment

Operating lease right-of-use assets

Other

Gross deferred tax liabilities

Net deferred tax assets (liabilities)

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The details of the 2020 valuation allowance activity are set forth below:

Beginning of Year

Increases

Decreases

Other Adjustments

End of Year

2020

2019

181

176

226

199

678

230

199

602

1,636

(789)

1,505

(787)

847

718

(1) $

(75)

(161)

(57)

(40)

(44)

(156)

(31)

(294) $

(271)

553

447

2020

2019

(787) $

(454)

(64)

(384)

(6)

(789) $

(787)

Net deferred tax assets (liabilities) for 2020 and 2019 are reported in our Consolidated Balance Sheets as Deferred income taxes.

As of December 31, 2020, we had approximately $3.9 billion of
unremitted foreign retained earnings. The Tax Act imposed U.S.
federal tax on all post-1986 foreign Earnings and Profits accumulated
through December 31, 2017. Repatriation of earnings generated
after December 31, 2017, will generally be eligible for the 100%
dividends received deduction or considered a distribution of
previously taxed income and,
tax.
Undistributed foreign earnings may still be subject to certain foreign
income and withholding taxes upon repatriation. Subject to limited
is to indefinitely reinvest our unremitted
exceptions, our

therefore, exempt

from U.S.

intent

foreign income, or

earnings outside the U.S., and our current plans do not demonstrate
a need to repatriate these amounts to fund our U.S. operations.
Thus, we have not provided taxes, including U.S. federal and state
income,
the
unremitted earnings that we believe are permanently invested.
However, if these funds were repatriated in taxable transactions, we
would be required to accrue and pay applicable income taxes (if any)
and foreign withholding taxes. A determination of the deferred tax
liability on this amount is not practicable due to the complexities,
variables and assumptions inherent in the hypothetical calculations.

foreign withholding taxes,

for

82 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
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Details of tax loss, credit carryforwards, and expiration dates along with valuation allowances as of December 31, 2020, are as follows:

PART II
ITEM 8. Financial Statements and Supplementary Data.

Federal net operating losses

Federal net operating losses – Indefinite

Foreign net operating losses

Foreign net operating losses – Indefinite

State net operating losses

Foreign capital loss carryforward – Indefinite

Foreign tax credits

State tax credits

State interest deduction carryforward – Indefinite

Gross
Amount

Deferred
Tax Asset

Valuation
Allowance Expiration

253

1,268

220

361

220

— 2035-2036

—

None

(10) 2021-2030

(51)

None

(48) 2021-2039

(3)

None

(220) 2023-2030

(5)

(15)

2023

None

$ 2,242

$ 410

$ (352)

We recognize the benefit of positions taken or expected to be taken
in tax returns in the Consolidated Financial Statements when it is
more likely than not that the position would be sustained upon
examination by tax authorities. A recognized tax position is measured
at the largest amount of benefit that is greater than fifty percent likely
of being realized upon settlement.

At December 31, 2020, the Company had $175 million of gross
unrecognized tax benefits, $132 million of which would impact the
effective income tax rate if
the
beginning and ending unrecognized tax benefits follows:

recognized. A reconciliation of

Beginning of Year

Additions on tax positions – current year

Additions for tax positions – prior years

Reductions for tax positions – prior years

Reductions for settlements

Reductions due to statute expiration

Foreign currency translation adjustment

End of Year

The Company believes it is reasonably possible that its unrecognized
tax benefits as of December 31, 2020, may decrease by
approximately $30 million in the next 12 months due to settlements
or statute of limitations expirations.

During 2020, 2019, and 2018 the Company recognized $2 million of
net expense, $13 million of net expense, and $2 million of net benefit,
respectively,
in our Consolidated
interest and penalties
Statements of Income as components of its Income tax provision.

for

At December 31, 2020 and December 31, 2019, the Company has
recorded $1 million of net tax receivables and $26 million of net tax
payables, respectively, associated with interest and penalties.

2020

2019

$ 188

$ 113

(22)

(30)

—

(30)

(31)

(2)

—

$ 175

$ 188

The Company’s income tax returns are subject to examination in the
U.S.
jurisdiction and numerous U.S. state and foreign
federal
jurisdictions.

The Company has settled audits with the IRS through fiscal year
2012 and is currently under IRS examination for 2013-2015. Our
operations
to
examination for tax years as far back as 2006, some of which years
are currently under audit by local tax authorities.

in certain foreign jurisdictions

remain subject

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PART II
ITEM 8. Financial Statements and Supplementary Data.

NOTE 19 – Reportable Operating Segments

See Note 1 for a description of our operating segments.

KFC Division(a)

Pizza Hut Division(a)

Taco Bell Division(a)

Habit Burger Grill Division(a)

KFC Division

Pizza Hut Division

Taco Bell Division

Habit Burger Grill Division

Corporate and unallocated G&A expenses(b)(c)

Unallocated Company restaurant expenses(b)(d)

Unallocated Franchise and property expenses(b)(e)

Unallocated Refranchising gain (loss)(b)

Unallocated Other income (expense)(b)(f)

Operating Profit

Investment income (expense), net(b)

Other pension income (expense)(b)

Interest expense, net(b)

Income before income taxes

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KFC Division

Pizza Hut Division

Taco Bell Division

Habit Burger Grill Division

Corporate

KFC Division

Pizza Hut Division

Taco Bell Division

Habit Burger Grill Division

Corporate

84 YUM! BRANDS, INC. - 2020 Form 10-K

2020

Revenues
2019

2018

2,272

2,491

2,644

1,002

2,031

347

1,027

2,079

—

988

2,056

—

5,652

5,597

5,688

Operating Profit

2020

2019

2018

922

335

696

(22)

(312)

—

(4)

(146)

1,503

(14)

(543)

1,052

369

683

—

(188)

—

(14)

(9)

959

348

633

—

(171)

(8)

540

(8)

1,930

2,296

(67)

(4)

(486)

(14)

(452)

1,020

1,373

1,839

Depreciation and Amortization
2018

2020

2019

30 $

—

146

112 $

137

Capital Spending

2020

2019

2018

81 $

105

—

160

196 $

234

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PART II
ITEM 8. Financial Statements and Supplementary Data.

KFC Division

Pizza Hut Division

Taco Bell Division

Habit Burger Grill Division

Corporate(g)

KFC Division

Pizza Hut Division

Taco Bell Division

Habit Burger Grill Division

Corporate

Identifiable Assets(h)

2020

2019

2,011

2,042

804

1,387

537

1,113

801

1,330

—

1,058

5,852

5,231

Long-Lived Assets(i)

2020

2019

1,160

1,179

415

925

458

427

938

—

3,026

2,586

(a) U.S. revenues included in the combined KFC, Pizza Hut, Taco Bell and Habit Burger Grill Divisions totaled $3.2 billion in 2020, $3.0 billion in 2019

and $2.9 billion in 2018.

(b) Amounts have not been allocated to any segment for performance reporting purposes.
(c) Amounts in 2020 include charitable contributions to Yum! Brands Foundation, Inc. of $50 million and $25 million related to our Unlocking Opportunity
Initiative and COVID-19 employee relief, respectively. Additionally, 2020 includes $36 million for charges associated with resource optimization (See
Note 5) and $9 million in costs associated with our acquisition and integration of Habit Burger Grill (See Note 3).

(d) Represents depreciation reductions arising primarily from KFC restaurants that were held for sale.
(e) Represents costs related to an agreement executed in 2015 with our KFC U.S. franchisees that gave us control of brand marketing execution as well
as an accelerated path to expanded menu offerings, improved assets and enhanced customer experience (the “KFC U.S. Acceleration Agreement”).
Also represents costs related to an agreement executed in May 2017 with our Pizza Hut U.S. franchisees to improve brand marketing alignment,
accelerate enhancements in operations and technology and that included a permanent commitment to incremental advertising as well as digital and
technology contributions by franchisees (the “Pizza Hut U.S. Transformation Agreement”).

(f) Unallocated Other income (expense) in 2020 includes a charge of $144 million related to the impairment of Habit Burger Grill goodwill. See Note 5.
(g) Primarily includes cash, deferred tax assets and, in 2019, our Grubhub investment.
(h) U.S. identifiable assets included in the combined Corporate and KFC, Pizza Hut, Taco Bell and Habit Burger Grill Divisions totaled $3.0 billion and

$2.7 billion in 2020 and 2019, respectively.
Includes PP&E, goodwill, intangible assets, net and Operating lease right-of-use assets.

(i)

NOTE 20 – Contingencies

Lease Guarantees
As a result of having assigned our interest in obligations under real
estate leases as a condition to the refranchising of certain Company-
owned restaurants, and guaranteeing certain other leases, we are
frequently secondarily liable on lease agreements. These leases have
varying terms,
the latest of which expires in 2065. As of
December 31, 2020, the potential amount of undiscounted payments
we could be required to make in the event of non-payment by the
primary lessee was approximately $425 million. The present value of
these potential payments discounted at our pre-tax cost of debt at
December 31, 2020, was approximately $375 million. Our
franchisees are the primary lessees under the vast majority of these
leases. We generally have cross-default provisions with these
franchisees that would put
franchise
agreement in the event of non-payment under the lease. We believe
these cross-default provisions significantly reduce the risk that we will

them in default of

their

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be required to make payments under these leases. Accordingly, the
liability recorded for our expected exposure under such leases at
December 31, 2020, and December 31, 2019, was not material.

Insurance Programs
We are self-insured for a substantial portion of our current and prior
years’ coverage including property and casualty losses. To mitigate
the cost of our exposures for certain property and casualty losses, we
self-insure the risks of loss up to defined maximum per occurrence
retentions on a line-by-line basis. The Company then purchases
insurance coverage, up to a certain limit, for losses that exceed the
self-insurance per occurrence retention. The insurers’ maximum
aggregate loss limits are significantly above our actuarially determined
probable losses;
losses
exceeding the insurers’ maximum aggregate loss limits is remote.

therefore, we believe the likelihood of

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PART II
ITEM 8. Financial Statements and Supplementary Data.

The following table summarizes the 2020 and 2019 activity related to our net self-insured property and casualty reserves as of December 31,
2020.

2020 Activity

2019 Activity

Beginning Balance Habit Acquisition(a) Expense Payments Ending Balance

$ 54

$ 66

—

(23)

(21)

$ 50

$ 54

(a) Represents self-insurance liabilities assumed as part of our acquisition of Habit Burger Grill. See Note 3.

Due to the inherent volatility of actuarially determined property and
casualty loss estimates,
is reasonably possible that we could
experience changes in estimated losses which could be material to
our growth in quarterly and annual Net Income. We believe that we
have recorded reserves for property and casualty losses at a level
which has substantially mitigated the potential negative impact of
adverse developments and/or volatility.

In the U.S. and in certain other countries, we are also self-insured for
healthcare claims and long-term disability for eligible participating
employees subject to certain deductibles and limitations. We have
accounted for our retained liabilities for property and casualty losses,
healthcare and long-term disability claims, including reported and
incurred but not reported claims, based on information provided by
independent actuaries.

Legal Proceedings
to various claims and contingencies related to
We are subject
lawsuits, real estate, environmental and other matters arising in the
normal course of business. An accrual
is recorded with respect to
claims or contingencies for which a loss is determined to be probable
and reasonably estimable.

Yum! Restaurants India Private Limited (“YRIPL”), a YUM subsidiary
that operates KFC and Pizza Hut restaurants in India, is the subject
of a regulatory enforcement action in India (the “Action”). The Action
alleges, among other things, that KFC International Holdings, Inc.
and Pizza Hut
failed to satisfy certain conditions
imposed by the Secretariat for Industrial Approval in 1993 and 1994
when those companies were granted permission for
foreign
investment and operation in India. The conditions at issue include an

International

alleged minimum investment
and store build
requirements as well as limitations on the remittance of fees outside
of India.

commitment

The Action originated with a complaint and show cause notice filed in
2009 against YRIPL by the Deputy Director of the Directorate of
Enforcement (“DOE”) of the Indian Ministry of Finance following an
income tax audit for the years 2002 and 2003. The matter was
argued at various hearings in 2015, but no order was issued.
Following a change in the incumbent official holding the position of
Special Director of DOE (the “Special Director”), the matter resumed
in 2018 and several additional hearings were conducted.

On January 29, 2020, the Special Director issued an order imposing
a penalty on YRIPL and certain former directors of approximately
Indian Rupee 11 billion, or approximately $150 million. Of
this
amount, $145 million relates to the alleged failure to invest a total of
$80 million in India within an initial seven-year period. We have been
advised by external counsel that the order is flawed and have filed a
writ petition with the Delhi High Court, which granted an interim stay
of the penalty order on March 5, 2020. The stay order remains in
effect, and the next hearing is scheduled for March 24, 2021. We
deny liability and intend to continue vigorously defending this matter.
We do not consider the risk of any significant loss arising from this
order to be probable.

We are currently engaged in various other legal proceedings and
have certain unresolved claims pending,
the ultimate liability for
which, if any, cannot be determined at this time. However, based
upon consultation with legal counsel, we are of the opinion that such
proceedings and claims are not expected to have a material adverse
effect, individually or in the aggregate, on our Consolidated Financial
Statements.

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NOTE 21 – Selected Quarterly Financial Data (Unaudited)

Revenues:

Company sales

Franchise and property revenues

Franchise contributions for advertising and other
services

Total revenues

Restaurant profit

Operating Profit

Net Income

Basic earnings per common share

Diluted earnings per common share

Dividends declared per common share

First Quarter Second Quarter

Third Quarter

Fourth Quarter

Total

2020

355

596

312

1,263

250

0.28

0.27

0.47

403

525

270

1,198

300

206

0.68

0.67

0.47

486

639

323

1,448

471

283

0.94

0.92

0.47

566 $

1,810

750

2,510

427

1,743

106

482

332

1.10

1.08

0.47

1,332

5,652

304

1,503

904

2.99

2.94

1.88

86 YUM! BRANDS, INC. - 2020 Form 10-K

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YUM BRANDS 2020 FORM

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PART II
ITEM 8. Financial Statements and Supplementary Data.

Revenues:

Company sales

Franchise and property revenues

Franchise contributions for advertising and other
services

Total revenues

Restaurant profit

Operating Profit

Net Income

Basic earnings per common share

Diluted earnings per common share

Dividends declared per common share

First Quarter Second Quarter

Third Quarter

Fourth Quarter

Total

2019

333

612

309

1,254

433

262

0.85

0.83

0.42

359

633

318

1,310

471

289

0.94

0.92

0.42

364

645

330

1,339

480

255

0.83

0.81

0.42

490 $

1,546

770

2,660

434

1,694

105

546

488

1.61

1.58

0.42

1,391

5,597

311

1,930

1,294

4.23

4.14

1.68

ITEM 9. Changes In and Disagreements

with Accountants on Accounting
and Financial Disclosure.

None.

ITEM 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company has evaluated the effectiveness of the design and
operation of its disclosure controls and procedures pursuant to Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
as of the end of the period covered by this report. Based on the
supervision and with the
the
evaluation, performed under

participation of the Company’s management,
including the Chief
Executive Officer (the “CEO”) and the Chief Financial Officer (the
“CFO”), the Company’s management, including the CEO and CFO,
concluded that the Company’s disclosure controls and procedures
were effective as of the end of the period covered by this report.

Management’s Report on Internal Control Over Financial Reporting

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is responsible for establishing and maintaining
Our management
adequate internal control over financial reporting, as such term is
defined in Rules 13a-15(f) under the Securities Exchange Act of
1934. Under
the supervision and with the participation of our
management, including our principal executive officer and principal
financial officer, we conducted an evaluation of the effectiveness of
our internal control over financial reporting based on the framework in
issued by the
Internal Control – Integrated Framework (2013)
Committee
Treadway
the
Commission. Based on our evaluation under
the framework in
Internal Control – Integrated Framework (2013), our management
reporting was
concluded that our
effective as of December 31, 2020.

of Sponsoring Organizations

internal control over

financial

We have excluded from the scope of management’s assessment of
the effectiveness of our internal control over financial reporting as of
December 31, 2020, the operations and related assets of The Habit
Restaurants, Inc. and its subsidiaries (“The Habit Burger Grill”), which
we acquired on March 18, 2020. The Habit Burger Grill’s total assets
and total revenues represented approximately 9% and 6% of the
Company’s respective consolidated total assets and total revenues
as of and for the year ended December 31, 2020.

KPMG LLP, an independent registered public accounting firm, has
audited the Consolidated Financial Statements included in this
Annual Report on Form 10-K and the effectiveness of our internal
control over financial reporting and has issued their report, included
herein.

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PART II
ITEM 9A. Controls and Procedures.

Changes in Internal Control

There were no changes with respect to the Company’s internal
control over financial reporting or in other factors that materially
affected, or are reasonably likely to materially affect, internal control

over financial reporting during the quarter ended December 31,
2020.

ITEM 9B. Other Information.

None.

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YUM BRANDS 2020 FORM

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PART III

ITEM 10.

Directors, Executive Officers and Corporate Governance.

Information regarding Section 16(a) compliance, the Audit Committee and the Audit Committee financial expert, the Company’s code of ethics
and background of the directors appearing under the captions “Stock Ownership Information,” “Governance of the Company,” “Executive
Compensation” and “Item 1: Election of Directors and Director biographies” is incorporated by reference from the Company’s definitive proxy
statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2020.

Information regarding executive officers of the Company is included in Part I.

ITEM 11.

Executive Compensation.

Information regarding executive and director compensation and the Management Planning and Development Committee appearing under the
captions “Governance of the Company” and “Executive Compensation” is incorporated by reference from the Company’s definitive proxy
statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2020.

ITEM 12.

Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.

Information regarding equity compensation plans and security ownership of certain beneficial owners and management appearing under the
captions “Executive Compensation” and “Stock Ownership Information” is incorporated by reference from the Company’s definitive proxy
statement which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2020.

ITEM 13.

Certain Relationships and Related Transactions, and Director
Independence.

Information regarding certain relationships and related transactions and information regarding director independence appearing under the
caption “Governance of the Company” is incorporated by reference from the Company’s definitive proxy statement which will be filed with the
Securities and Exchange Commission no later than 120 days after December 31, 2020.

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ITEM 14.

Principal Accountant Fees and Services.

Information regarding principal accountant fees and services and audit committee pre-approval policies and procedures appearing under the
caption “Item 2: Ratification of Independent Auditors” is incorporated by reference from the Company’s definitive proxy statement which will be
filed with the Securities and Exchange Commission no later than 120 days after December 31, 2020.

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PART IV

ITEM 15.

Exhibits and Financial Statement Schedules.

(a)

(1)

(2)

(3)

Financial Statements: Consolidated Financial Statements filed as part of this report are listed under Part II, Item 8 of this Form 10-K.

Financial Statement Schedules: No schedules are required because either the required information is not present or not present in
amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated
Financial Statements thereto filed as a part of this Form 10-K.

Exhibits: The exhibits listed in the accompanying Exhibit Index are filed as part of this Form 10-K. The Index to Exhibits specifically
identifies each management contract or compensatory plan required to be filed as an exhibit to this Form 10-K.

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YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART IV

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-K
annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:

February 19, 2021

YUM! BRANDS, INC.
By:

/s/ David W. Gibbs

Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed on February 19, 2021, by the following
persons on behalf of the registrant and in the capacities indicated.

Signature

Title

/s/ David W. Gibbs
David W. Gibbs

/s/ Chris Turner
Chris Turner

/s/ David E. Russell
David E. Russell

/s/ Paget L. Alves
Paget L. Alves

/s/ Keith Barr
Keith Barr

Chief Executive Officer (principal executive officer)

Chief Financial Officer (principal financial officer)

Senior Vice President, Finance and Corporate Controller (principal accounting officer)

Director

/s/ Christopher M. Connor
Christopher M. Connor

Director

/s/ Brian C. Cornell
Brian C. Cornell

/s/ Tanya L. Domier
Tanya L. Domier

Director

/s/ Mirian M. Graddick-Weir
Mirian M. Graddick-Weir

Director

/s/ Lauren R. Hobart
Lauren R. Hobart

/s/ Thomas C. Nelson
Thomas C. Nelson

/s/ P. Justin Skala
P. Justin Skala

/s/ Elane B. Stock
Elane B. Stock

/s/ Annie Young-Scrivner
Annie Young-Scrivner

Director

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YUM BRANDS 2020 FORM

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PART IV

Yum! Brands, Inc.
Exhibit Index (Item 15)

Exhibit
Number

Description of Exhibits

2.1

3.1

3.2

4.1

Separation and Distribution Agreement, dated as of October 31, 2016, by and among YUM, Yum Restaurants Consulting
(Shanghai) Company Limited and Yum China Holdings, Inc., which is incorporated herein by reference from Exhibit 2.1 to YUM’s
Report on Form 8-K filed on November 3, 2016.

Restated Articles of Incorporation of YUM, effective May 26, 2011, which is incorporated herein by reference from Exhibit 3.1 to
YUM’s Report on Form 8-K filed on May 31, 2011.

Amended and restated Bylaws of YUM, effective July 15, 2016, which are incorporated herein by reference from Exhibit 3.1 to
YUM’s Report on Form 8-K filed on July 19, 2016.

Indenture, dated as of May 1, 1998, between YUM and The Bank of New York Mellon Trust Company, N.A., successor in
interest to The First National Bank of Chicago, which is incorporated herein by reference from Exhibit 4.1 to YUM’s Report on
Form 8-K filed on May 13, 1998.

(i)

(ii)

(iii)

(iv)

66.875% Senior Notes due November 15, 2037, issued under the forgoing May 1, 1998, indenture, which notes are
incorporated by reference from Exhibit 4.3 (included in Exhibit 4.1) to YUM’s Report on Form 8-K filed on October 22,
2007.

3.750% Senior Notes due November 1, 2021, issued under the forgoing May 1, 1998, indenture, which notes are
incorporated by reference from Exhibit 4.2 (included in Exhibit 4.1) to YUM’s Report on Form 8-K filed August 29, 2011.

3.875% Senior Notes due November 1, 2023, issued under the forgoing May 1, 1998, indenture, which notes are
incorporated by reference from Exhibit 4.2 (included in Exhibit 4.1) to YUM’s Report on Form 8-K filed October 31,
2013.

5.350% Senior Notes due November 1, 2043, issued under the forgoing May 1, 1998, indenture, which notes are
incorporated by reference from Exhibit 4.3 (included in Exhibit 4.1) to YUM’s Report on Form 8-K filed October 31,
2013.

Indenture, dated as of September 25, 2020 by and between YUM and U.S. Bank National Association, as Trustee, which is
incorporated herein by reference from Exhibit 4.1 to YUM’s Report on Form 8-K filed on September 25, 2020.

First Supplemental Indenture, dated as of September 25, 2020 by and between YUM and U.S. Bank National Association, as
Trustee, relating to the 3.625% Notes due 2031, which is incorporated herein by reference from Exhibit 4.2 to YUM’s Report on
Form 8-K filed on September 25, 2020.

Description of Securities registered under Section 12 of the Securities Exchange Act of 1934 (Common Stock), which is
incorporated herein by reference from Exhibit 4.2 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 31,
2019.

Credit Agreement, dated as of June 16, 2016, by and among Pizza Hut Holdings, LLC, KFC Holding Co., and Taco Bell of
America, LLC, as the borrowers, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral
Agent, JPMorgan Chase Bank, N.A., Goldman Sachs Bank USA, Wells Fargo Securities, LLC, Citigroup Global Markets Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley Senior Funding, Inc., Fifth Third Bank and The Bank of
Tokyo-Mitsubishi UFJ, Ltd., as Joint Lead Arrangers and Joint Bookrunners, Barclays Bank PLC, The Bank of Nova Scotia,
Cooperatieve Rabobank U.A., New York Branch, and Industrial and Commercial Bank of China Limited, New York Branch, as
Co-Documentation Agents and Co-Managers, which is incorporated herein by reference from Exhibit 4.1 to YUM’s Quarterly
Report on Form 10-Q for the quarter ended June 11, 2016.

Refinancing Amendment, dated as of March 21, 2017, to Credit Agreement dated as of June 16, 2016, among Pizza Hut
Holdings, LLC, KFC Holding Co. and Taco Bell of America, LLC, as borrowers, the Lenders from time to time party thereto and
JPMorgan Chase Bank, N.A., as Collateral Agent, Swing Line Lender, an L/C Issuer and Administrative Agent for the Lenders,
which is incorporated herein by reference from Exhibit 10.1 to YUM’s Report on Form 8-K as filed on March 23, 2017.

Refinancing Amendment No. 2, dated as of June 7, 2017, to Credit Agreement dated as of June 16, 2016, as amended,
among Pizza Hut Holdings, LLC, KFC Holding Co. and Taco Bell of America, LLC, as borrowers, the Lenders from time to time
party thereto and JPMorgan Chase Bank, N.A., as Collateral Agent, Swing Line Lender, an L/C Issuer and Administrative Agent
for the Lenders, which is incorporated herein by reference from Exhibit 10.1 to YUM’s Report on Form 8-K as filed on June 8,
2017.

Refinancing Amendment, dated as of April 3, 2018, to Credit Agreement dated as of June 16, 2016, among Pizza Hut
Holdings, LLC, KFC Holding Co. and Taco Bell of America, LLC, as borrowers, the Lenders from time to time party thereto and
JPMorgan Chase Bank, N.A., as Collateral Agent, Swing Line Lender, an L/C Issuer and Administrative Agent for the Lenders,
which is incorporated herein by reference from Exhibit 10.1 to YUM’s Report on Form 8-K as filed on April 9, 2018.

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4.2.1

4.3

10.1

10.1.1

10.1.2

10.1.3

92 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART IV
ITEM 15 Exhibit Index

Exhibit
Number

10.2†

10.2.1†

10.3†

10.4†

10.4.1†

10.5†

10.5.1†

10.6†

10.7†

10.8†

10.9†

10.10†

10.11†

Description of Exhibits

YUM Director Deferred Compensation Plan, as effective October 7, 1997, which is incorporated herein by reference from
Exhibit 10.7 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 27, 1997.

YUM Director Deferred Compensation Plan, Plan Document for the 409A Program, as effective January 1, 2005, and as
Amended through November 14, 2008, which is incorporated by reference from Exhibit 10.7.1 to YUM’s Quarterly Report on
Form 10-Q for the quarter ended June 13, 2009.

YUM Executive Incentive Compensation Plan, as effective May 20, 2004, and as Amended through the Second Amendment,
as effective May 21, 2009, which is incorporated herein by reference from Exhibit A of YUM’s Definitive Proxy Statement on
Form DEF 14A for the Annual Meeting of Shareholders held on May 21, 2009.

YUM Executive Income Deferral Program, as effective October 7, 1997, and as amended through May 16, 2002, which is
incorporated herein by reference from Exhibit 10.10 to YUM’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2005.

YUM! Brands Executive Income Deferral Program, Plan Document for the 409A Program, as effective January 1, 2005, and as
Amended through June 30, 2009, which is incorporated by reference from Exhibit 10.10.1 to YUM’s Quarterly Report on
Form 10-Q for the quarter ended June 13, 2009.

YUM! Brands Pension Equalization Plan, Plan Document for the Pre-409A Program, as effective January 1, 2005, and as
Amended through December 31, 2010, which is incorporated by reference from Exhibit 10.7 to Yum’s Quarterly Report on
Form 10-Q for the quarter ended March 19, 2011.

The Yum! Brands, Inc. Pension Equalization Plan, Restated Plan Document for the 409A Program effective January 1, 2005, as
amended through January 1, 2017, which is incorporated by reference from Exhibit 10.5.1 to YUM’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2018.

Form of Directors’ Indemnification Agreement, which is incorporated herein by reference from Exhibit 10.17 to YUM’s Annual
Report on Form 10-K for the fiscal year ended December 27, 1997.

Form of Yum! Brands, Inc. Change in Control Severance Agreement, which is incorporated herein by reference from
Exhibit 10.1 to Yum’s Report on Form 8-K filed on March 21, 2013.

YUM! Long Term Incentive Plan, as Amended and Restated effective as of May 20, 2016, as incorporated by reference from
Form DEF 14A filed on April 8, 2016.

YUM SharePower Plan, as effective October 7, 1997, and as amended through June 23, 2003, which is incorporated herein by
reference from Exhibit 10.23 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

Form of YUM Director Stock Option Award Agreement, which is incorporated herein by reference from Exhibit 10.25 to YUM’s
Quarterly Report on Form 10-Q for the quarter ended September 4, 2004.

Form of YUM 1999 Long Term Incentive Plan Award Agreement, which is incorporated herein by reference from Exhibit 10.26 to
YUM’s Quarterly Report on Form 10-Q for the quarter ended September 4, 2004.

10.11.1†

Form of YUM 1999 Long Term Incentive Plan Award Agreement (2013) (Stock Options), which is incorporated herein by
reference from Exhibit 10.15.1 to YUM’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2013.

10.11.2†

Form of YUM 1999 Long Term Incentive Plan Award Agreement (2015) (Stock Options), which is incorporated herein by
reference from Exhibit 10.15.2 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 27, 2014.

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10.11.3†

Form of YUM Long Term Incentive Plan Global YUM! Non-Qualified Stock Option Agreement (2019), which is incorporated
herein by reference from Exhibit 10.11.3 to YUM’s Report on Form 10-Q filed on May 8, 2019.

10.12†

10.13†

Yum! Brands, Inc. International Retirement Plan, as in effect January 1, 2005, which is incorporated herein by reference from
Exhibit 10.27 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 25, 2004.

Form of 1999 Long Term Incentive Plan Award Agreement (Stock Appreciation Rights) which is incorporated by reference from
Exhibit 99.1 to YUM’s Report on Form 8-K as filed on January 30, 2006.

10.13.1†

Form of YUM 1999 Long Term Incentive Plan Award Agreement (2013) (Stock Appreciation Rights), which is incorporated by
reference from Exhibit 10.18.1 to YUM’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2013.

10.13.2†

Form of YUM 1999 Long Term Incentive Plan Award Agreement (2015) (Stock Appreciation Rights), which is incorporated herein
by reference from Exhibit 10.18.2 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 27, 2014.

10.13.3†

Yum! Brands, Inc. Long Term Incentive Plan Form of Global YUM! Stock Appreciation Rights Agreement (2019), which is
incorporated herein by reference from Exhibit 10.13.3 to YUM’s Report on Form 10-Q filed on May 8, 2019.

10.13.4†

Yum! Brands, Inc. Long Term Incentive Plan Form of Global Restricted Stock Unit Agreement (2019), which is incorporated
herein by reference from Exhibit 10.20 to YUM’s Report on Form 10-Q filed on May 8, 2019.

10.14†

YUM! Brands Leadership Retirement Plan, as in effect January 1, 2005, which is incorporated herein by reference from
Exhibit 10.32 to YUM’s Quarterly Report on Form 10-Q for the quarter ended March 24, 2007.

YUM! BRANDS, INC. - 2020 Form 10-K 93

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART IV
ITEM 15 Exhibit Index

Exhibit
Number

10.14.1†

10.15†

10.16†

10.17†

10.18†

10.19

10.20

10.21

10.21.1

10.21.2

10.21.3

10.21.4

10.22

10.23

10.23.1

10.23.2

10.24

10.25

10.26

Description of Exhibits

YUM! Brands Leadership Retirement Plan, Plan Document for the 409A Program, as effective January 1, 2005, and as
Amended through December, 2009, which is incorporated by reference from Exhibit 10.21.1 to YUM’s Annual Report on
Form 10-K for the fiscal year ended December 26, 2009.

YUM! Performance Share Plan, as amended and restated January 1, 2013, which is incorporated by reference from Exhibit 10.1
to YUM’s Quarterly Report on Form 10-Q for the quarter ended June 13, 2015.

YUM! Brands Third Country National Retirement Plan, as effective January 1, 2009, which is incorporated by reference from
Exhibit 10.25 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 26, 2009.

2010 YUM! Brands Supplemental Long Term Disability Coverage Summary, as effective January 1, 2010, which is incorporated
by reference from Exhibit 10.26 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 26, 2009.

Yum! Brands, Inc. Compensation Recovery Policy, Amended and Restated January 1, 2015, which is incorporated herein by
reference from Exhibit 10.28 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 27, 2014.

Indenture, dated as of June 16, 2016, by and among KFC Holding Co., Pizza Hut Holdings, LLC and Taco Bell of America, LLC,
as issuers, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, which is
incorporated herein by reference from Exhibit 4.1 to YUM’s Report on Form 8-K filed on June 21, 2016.

Indenture, dated as of June 15, 2017, by and among KFC Holding Co., Pizza Hut Holdings, LLC and Taco Bell of America, LLC,
as issuers, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, which is
incorporated herein by reference from Exhibit 4.1 to YUM’s Report on Form 8-K filed on June 16, 2017.

Base Indenture, dated as of May 11, 2016, between Taco Bell Funding, LLC, as issuer and Citibank, N.A., as trustee and
securities intermediary, which is incorporated herein by reference from Exhibit 4.1 to YUM’s Report on Form 8-K filed on
May 16, 2016.

Series 2016-1 Supplement to Base Indenture dated as of May 11, 2016, by and between Taco Bell Funding, LLC, as issuer and
Citibank, N.A. as Trustee and Series 2016-1 securities intermediary, which is incorporated herein by reference from Exhibit 4.2
to YUM’s Report on Form 8-K filed on May 16, 2016.

Series 2018-1 Supplement to Base Indenture, dated as of November 28, 2018, by and between the Issuer and Citibank, N.A.
as Trustee and Series 2018-1 securities intermediary, which is incorporated herein by reference from Exhibit 10.1 to YUM’s
Report on Form 8-K filed on December 3, 2018.

Amendment No. 1 to Base Indenture, dated as of August 23, 2016, by and between the Issuer and Citibank, N.A. as Trustee
and Series 2016-1 securities intermediary, which is incorporated herein by reference from Exhibit 10.22.3 to YUM’s Annual
Report on Form 10-K for fiscal year ended December 31, 2018.

Amendment No. 2 to Base Indenture, dated as of November 28, 2018, by and between the Issuer and Citibank, N.A. as Trustee
and the Series 2018-1 securities intermediary, which is incorporated herein by reference from Exhibit 10.2 to YUM’s Report on
Form 8-K filed on December 3, 2018.

Guarantee and Collateral Agreement, dated as of May 11, 2016, by Taco Bell Franchise Holder 1, LLC, Taco Bell Franchisor,
LLC, Taco Bell IP Holder, LLC and Taco Bell Franchisor Holdings, LLC in favor of Citibank, N.A., which is incorporated herein by
reference from Exhibit 10.2 to YUM’s Report on Form 8-K filed on May 16, 2016.

Management Agreement, dated as of May 11, 2016, among Taco Bell Funding, LLC, as issuer, Taco Bell Franchise Holder 1,
LLC, Taco Bell Franchisor, LLC, Taco Bell IP Holder, LLC, Taco Bell Franchisor Holdings, LLC, Citibank, N.A. and Taco Bell
Corp., as manager, which is incorporated herein by reference from Exhibit 10.3 to YUM’s Report on Form 8-K filed on May 16,
2016.

Amendment No.1 to Management Agreement, dated as of August 24, 2016, among Taco Bell Funding, LLC, as issuer, Taco
Bell Franchise Holder 1, LLC, Taco Bell Franchisor, LLC, Taco Bell IP Holder, LLC, Taco Bell Franchisor Holdings, LLC and Taco
Bell Corp., as manager, which is incorporated herein by reference from Exhibit 10.25.1 to YUM’s Annual Report on Form 10-K
for fiscal year ended December 31, 2018.

Amendment No. 2 to Management Agreement, dated as of November 28, 2018, among Taco Bell Funding, LLC, as issuer,
Taco Bell Franchise Holder 1, LLC, Taco Bell Franchisor, LLC, Taco Bell IP Holder, LLC, Taco Bell Franchisor Holdings, LLC,
Citibank, N.A. and Taco Bell Corp., as manager, which is incorporated herein by reference from Exhibit 10.25.2 to YUM’s
Annual Report on Form 10-K for fiscal year ended December 31, 2018.

Indenture, dated as of September 11, 2019, by and between Yum and The Bank of New York Mellon Trust Company, N.A., as
trustee, which is incorporated herein by reference from Exhibit 4.1 to YUM’s Report on Form 8-K filed on September 16, 2019.

Indenture, dated as of April 1, 2020 by and between Yum and the Bank of New York Mellon Trust Company, N.A, as Trustee,
which is incorporated herein by reference from Exhibit 4.1 to YUM’s Report on Form 8-K filed on April 6, 2020.

Master License Agreement, dated as of October 31, 2016, by and between Yum! Restaurants Asia Pte. Ltd. and Yum
Restaurants Consulting (Shanghai) Company Limited, which is incorporated herein by reference from Exhibit 10.1 to YUM’s
Report on Form 8-K filed on November 3, 2016.

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94 YUM! BRANDS, INC. - 2020 Form 10-K

YUM! BRANDS, INC.
YUM BRANDS 2020 FORM

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PART IV
ITEM 15 Exhibit Index

Exhibit
Number

10.26.1

10.27

10.28†

10.29†

21.1

23.1

31.1

31.2

32.1

32.2

Description of Exhibits

Confirmatory License Agreement, dated as of January 1, 2020, by and between YRI China Franchising, LLC and Yum
Restaurants Consulting (Shanghai) Company Limited, as attached herein.

Tax Matters Agreement, dated as of October 31, 2016, by and among YUM, Yum China Holdings, Inc. and Yum Restaurants
Consulting (Shanghai) Company Limited, which is incorporated herein by reference from Exhibit 10.2 to YUM’s Report on
Form 8-K filed on November 3, 2016.

Offer Letter dated June 19, 2019, between the Company and Christopher Turner, which is incorporated herein by reference
from Exhibit 10.28 to YUM’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.

Offer Letter dated July 16, 2019, between the Company and Mark King, which is incorporated herein by reference from
Exhibit 4.2 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Active Subsidiaries of YUM.

Consent of KPMG LLP.

Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

101.INS

Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded
within the Inline XBRL document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

†

Indicates a management contract or compensatory plan.

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YUM! BRANDS, INC. - 2020 Form 10-K 95

Cautionary Language
Regarding Forward-Looking Statements

Forward-Looking Statements. This report may contain “for-
ward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Secu-
rities Exchange Act of 1934. We intend all forward-looking
statements to be covered by the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-look-
ing statements generally can be identified by the fact that they
do not relate strictly to historical or current facts and by the
use of forward-looking words such as “expect,” “expectation,”
“believe,” “anticipate,” “may,” “could,” “intend,” “belief,” “plan,”
“estimate,” “target,” “predict,” “likely,” “seek,” “project,” “model,”
“ongoing,” “will,” “should,” “forecast,” “outlook” or similar termi-
nology. These statements are based on and reflect our current
expectations, estimates, assumptions and/or projections, our
perception of historical trends and current conditions, as well
as other factors that we believe are appropriate and reason-
able under the circumstances. Forward-looking statements are
neither predictions nor guarantees of future events, circum-
stances or performance and are inherently subject to known and
unknown risks, uncertainties and assumptions that could cause
our actual results to differ materially from those indicated by
those statements. There can be no assurance that our expec-
tations, estimates, assumptions and/or projections, including
with respect to the future earnings and performance or capital
structure of Yum! Brands, will prove to be correct or that any
of our expectations, estimates or projections will be achieved.

Numerous factors could cause our actual results and events
to differ materially from those expressed or implied by for-
ward-looking statements, including, without limitation: the
severity and duration of the COVID-19 pandemic; food safety
and food borne-illness issues; health concerns arising from out-
breaks of a significant health epidemic; the success of our fran-
chisees and licensees; our significant exposure to the Chinese
market; changes in economic and political conditions in coun-
tries and territories outside of the U.S. where we operate; our
ability to protect the integrity and security of personal information
of our customers and employees; our ability to successfully
implement technology initiatives; our increasing dependence on
multiple digital commerce platforms; the impact of social media;
our ability to secure and maintain distribution and adequate
supply to our restaurants; the loss of key personnel, or labor
shortages or difficulty finding qualified employees; the success
of our development strategy in emerging markets; changes in
commodity, labor and other operating costs; harm or dilution to
our brands caused by franchisee and third-party activity; pend-
ing or future litigation and legal claims or proceedings; changes
in or noncompliance with government regulations, including
labor standards and anti-bribery or anti-corruption laws; tax

matters, including changes in tax laws or disagreements with
taxing authorities; consumer preferences and perceptions of
our brands; failure to protect our service marks or other intel-
lectual property; changes in consumer discretionary spending
and general economic conditions; competition within the retail
food industry; not realizing the anticipated benefits from past or
potential future acquisitions, investments or other strategic trans-
actions; and risks relating to our significant amount of indebt-
edness. In addition, other risks and uncertainties not presently
known to us or that we currently believe to be immaterial could
affect the accuracy of any such forward-looking statements.
All forward-looking statements should be evaluated with the
understanding of their inherent uncertainty. The forward-looking
statements included in this report are only made as of the date
of this report and we disclaim any obligation to publicly update
any forward-looking statement to reflect subsequent events or
circumstances. You should consult our filings with the Securi-
ties and Exchange Commission (including the information set
forth under the captions “Risk Factors” and “Forward-Looking
Statements” in our most recently filed Annual Report on Form
10-K and Quarterly Report on Form 10-Q) for additional detail
about factors that could affect our financial and other results.

Trademarks and Brands. We use “Yum! Brands” and the
Yum! logo as our trademarks, among others. Product
names and services appearing in this report are trade-
marks of Yum! Brands, Inc. or its subsidiaries. This report
also may refer to brand names, trademarks, service marks
and trade names of other companies and organizations,
and these brand names, trademarks, service marks and
trade names are the property of their respective owners.

Market and Industry Data. Unless we indicate otherwise, we
base the information concerning our industry contained in this
report on our general knowledge of and expectations con-
cerning the industry. Our market position and market share
is based on our estimates using data from various industry
sources and assumptions that we believe to be reasonable
based on our knowledge of the industry. We have not inde-
pendently verified the data obtained from these sources and
cannot assure you of the data’s accuracy or completeness.

Non-GAAP Measures. This report includes certain non-GAAP
financial measures. Reconciliation of these non-GAAP financial
measures to the most directly comparable GAAP measures
are included on our website at http://www.investors.yum.com
Investors are urged to consider carefully the com-
parable GAAP measures and reconciliations.

Shareholder Information

Inquiries Regarding Your YUM Holdings

REGISTERED SHAREHOLDERS (those who hold YUM shares in
their own names) should address communications concerning
statements, address changes, lost certificates and other
administrative matters to:

BENEFICIAL SHAREHOLDERS (those who hold YUM shares in
the name of a bank or broker) should direct communications about
all administrative matters related to their accounts to their
stockbroker.

Computershare, Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
Phone: (888) 439-4986
International: 1+ (781) 575-3100
www.computershare.com

In all correspondence or phone inquiries, please provide your name
and your YUM account number if you know it.

REGISTERED SHAREHOLDERS can access their accounts and
complete the following functions online at the website of
Computershare, Inc. (“Computershare”): www.computershare.com

(cid:129) Access account balance and other general account information
(cid:129) Change an account’s mailing address
(cid:129) View a detailed list of holdings represented by certificates and

the identifying certificate numbers

(cid:129) Request a certificate for shares held at Computershare
(cid:129) Replace a lost or stolen certificate
(cid:129) Retrieve a duplicate Form 1099-B, Form 1099-DIV
(cid:129) Purchase shares of YUM through the Company’s Direct Stock

Purchase Plan

(cid:129) Sell shares held at Computershare
Access accounts online at the following URL:
https://www-us.computershare.com/Investor. Your account number
and social security number are required.
If you do not know
your account number, please call Computershare at (888) 439-4986.

INCENTIVE PLAN

LONG TERM
(LTIP) PARTICIPANTS
employees with rights to LTIP and YUMBUCKS stock appreciation
rights grants) should address all questions regarding their
accounts, outstanding stock appreciation rights grants or shares
received through stock appreciation right exercises to:

Merrill Lynch
Equity Award Services
1400 American Blvd.
Mail Stop # NJ2-140-03-40
Pennington, NJ 08534
Phone: (888) 986-4321 (U.S., Puerto Rico and Canada)

(609) 818-8156 (all other locations)

In all correspondence, please provide the last 4 digits of your
account number, your address, your telephone number and
indicate that your inquiry relates to YUM holdings. For telephone
inquiries, please have a copy of your most recent statement
available.

EMPLOYEE BENEFIT PLAN PARTICIPANTS
Capital Stock Purchase Program (888) 439-4986

YUM Savings Center (888) 875-4015
YUM Savings Center (904) 791-2005 (outside U.S.)

P.O. Box 5166
Boston, MA 02206-5166

Please have a copy of your most recent statement available when
calling. Press 0#0# for a customer service representative and give
the representative the name of the plan.

INDEPENDENT AUDITORS

KPMG, LLC
400 West Market Street, Suite 2600
Louisville, Kentucky 40202
Phone: (502) 587-0535

STOCK TRADING SYMBOL – YUM

The New York Stock Exchange is the principal market for YUM
Common Stock, which trades under the symbol YUM.

Shareholder Services

DIRECT STOCK PURCHASE PLAN

A prospectus and a brochure explaining this convenient plan are
available from our transfer agent:

Computershare, Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40202
Phone: (888) 439-4986
International: 1+ (781) 575-3100

FINANCIAL AND OTHER INFORMATION

Securities analysts, portfolio managers, representatives of financial
institutions and other individuals with questions regarding YUM’s
performance are invited to contact:

Mr. Keith Siegner
Vice President, Investor Relations,
Corporate Strategy & Treasurer
Yum! Brands, Inc.
1900 Colonel Sanders Lane
Louisville, KY 40213
Phone: (888) 298-6986

Franchise Inquiries

ONLINE FRANCHISE INFORMATION

Information about potential franchise opportunities is available at
www.yumfranchises.com

YUM’s Annual Report contains many of the valuable trademarks
owned and used by YUM and its subsidiaries and affiliates in the
United States and worldwide.

BOARD OF DIRECTORS

SENIOR OFFICERS

David W. Gibbs 58
Chief Executive Officer,
Yum! Brands, Inc.

Scott A. Catlett 45
Chief Legal and Franchise Officer
and Corporate Secretary,
Yum! Brands, Inc.

Mark King 61
Chief Executive Officer,
Taco Bell Division

Tony Lowings 62
Chief Executive Officer,
KFC Division

David E. Russell 51
Senior Vice President,
Finance and Corporate Controller,
Yum! Brands, Inc.

Keith Siegner 46
Vice President, Investor Relations,
Corporate Strategy and Treasurer,
Yum! Brands, Inc.

Tracy Skeans 48
Chief Operating Officer
and Chief People Officer,
Yum! Brands, Inc.

Christopher Turner 46
Chief Financial Officer,
Yum! Brands, Inc.

Paget L. Alves 66
Former Chief Sales Officer,
Sprint Corporation

Keith Barr 50
Chief Executive Officer,
Intercontinental Hotels Group PLC

Christopher M. Connor 65
Former Chairman and Chief Executive Officer,
Sherwin-Williams Company

Brian C. Cornell 62
Chairman and Chief Executive Officer,
Target Corporation

Tanya L. Domier 55
Chief Executive Officer,
Advantage Solutions, Inc.

David W. Gibbs 58
Chief Executive Officer,
Yum! Brands, Inc.

Mirian M. Graddick-Weir 66
Retired Executive Vice President Human Resources,
Merck & Co., Inc.

Lauren Hobart 52
President and Chief Executive Officer,
DICK’S Sporting Goods

Thomas C. Nelson 58
Chairman, Chief Executive Officer and President,
National Gypsum Company

P. Justin Skala 61
Chief Executive Officer,
BMI Group

Elane B. Stock 56
Chief Executive Officer,
ServiceMaster Brands, LLC

Annie Young-Scrivner 52
Chief Executive Officer,
Wella Company

Unlocking opportunity for

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Yum! Brands, Inc., trades under the symbol YUM and is proud to meet the listing requirements of the NYSE, the world’s leading equities market.

YUM! BRANDS 2020 ANNUAL REPORT