Good day and welcome to the Yum! Brands 2020 First Quarter Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, today’s event is being recorded. I would now like to turn the conference over to Keith Siegner, Vice President, Investor Relations, M&A and Treasurer. Please go ahead.

Thanks, operator. Good morning, everyone, and thank you for joining us. On our call today are David Gibbs, our CEO; Chris Turner, our Chief Financial Officer; and Dave Russell, our Senior Vice President and Corporate Controller. Following remarks from David and Chris, we will open the call to questions. Before we get started, I would like to remind you that this conference call includes Forward-Looking Statements. Forward-looking statements are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. We are going to do our best to provide our current thinking about the impact of the COVID-19 pandemic on our business. But obviously this situation is completely unprecedented and evolving. So any forward-looking remarks should be considered in light of the uncertainty regarding the severity and duration of the pandemic and variables that will be impacted as a result. All forward-looking statements are made only as of the date of this announcement and should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the SEC. In addition, please refer to our earnings releases and relevant sections of our filings with the SEC to find disclosures and reconciliations of non-GAAP financial measures that may be used on today's call. Please note the following regarding our basis of presentation. First, all system sales results exclude the impact of foreign currency. Second, core operating profit growth figures exclude the impact of foreign currency and special items. For more information on our reporting calendar for each market, please visit the Financial Reports section of our website. We are broadcasting this conference call via our website. This call is also being recorded and will be available for playback. Please be advised that if you ask a question, it will be included in both our live conference and in any future use of the recording. We would like to make you aware of upcoming Yum! investor events and the following. First, disclosures pertaining to outstanding debt in our restricted group capital structure will be provided at the time of the Form 10-Q filing. Second, second quarter earnings will be released on July 30, 2020, with the conference call on the same day. Now, I would like to turn the call over to David Gibbs.

Thank you, Keith. And good morning, everyone. Before we begin, I would like to take a moment to acknowledge the unprecedented challenges that we are all experiencing and say a heartfelt thank you to our team members and franchisees around the world. It has been amazing to see our entire system band together and take action to confront these challenges with unbelievable speed. And while many of us are working to play our part, the brave healthcare workers on the front lines have the most critical role, and our positive thoughts are with them and everyone affected by COVID-19. Our goal today is to be transparent and give you timely information about the state of our business. I will start with an overall review of first quarter and the current state of the business and use a few examples to illustrate the power of our unrivaled culture and talent and unmatched operating capability. I will also highlight how our brands are adapting the RED framework to be relevant, easy, and distinctive in this environment. Then Chris will share more details of our Q1 results and current state. How we are adjusting our business model and supporting franchisees and their healthy liquidity position. For Q1 results, we were encouraged by our momentum early in the quarter driven by the underlying strength of our brand. However, as we signaled in our 8-K on March 24th, the quarter was heavily impacted by COVID-19, which was the primary reason core operating profit declined 6%. Overall Yum! system sales declined 3% as our same-store sales decline of 7% was partially offset by 4% net new unit growth. The impact on our sales in each market is dependent upon the timing, severity, and duration of the outbreak as well as each market's reliance on dine-in sales. Importantly, we have seen early signs of recovery in markets that were first impacted by COVID-19 and stabilization in others. As one example, at the time of our 8-K filing, approximately 7,000 of our global stores were completely closed, driven largely by government shutdowns. As various stores closed and reopened, given changing mandates, this figure increased to about 11,000. Since then, stores have been slowly and consistently reopening with approximately 1,000 reopens from the trial. Chris will talk more about recent sales trends in a few minutes. Since the onset of this pandemic, the safety and support of our employees, restaurant team members, customers, and franchisees has been our top priority. First, we moved quickly to reinforce and strengthen our already stringent protocols emphasizing hygiene, cleaning, and sanitation. Next, we leveraged the best practices of contactless delivery and carryout pioneered by Yum! China, which accelerated our execution of off-premise services. Simultaneously, we moved to suspend our dining room operations in many markets. Our brands also continue to expand protective measures for frontline restaurant team members, including protective facial coverings, increased usage of single-use disposable gloves, temperature checks, and physical distancing measures where possible. We will continue refining our practices based on consumer feedback and the latest Public Health and Government guidelines. At our 1,200 Company-owned restaurants around the world, we are paying scheduled hours to team members who are required to stay at home due to COVID-19. Recognizing the vital role our restaurant general managers continue to play in these 1,200 stores, we have provided $1,000 one-time bonuses to our RGMs in addition to committing to pay their second quarter bonuses even if their restaurant's sales performance would not normally qualify. Also in June, we will pay one-time bonuses to the majority of team members working in our 1,200 Company-owned restaurants. Our franchisees are also taking steps to support restaurant team members during this critical time. Finally, we created a Global Employee Medical Relief Fund to provide financial support for restaurant employees as well as company and franchise-owned restaurants for employees diagnosed with or who are caring for someone diagnosed with COVID-19. I would also like to share some of the steps we are taking to help our franchisees bridge to the other side of this crisis. As a 98% franchise system, we are a business comprised of many independent and small businesses and entrepreneurs, and our franchisees are our lifeblood. Going into this crisis, we reassured our franchisees we will do everything in our power within the constraints we are all facing to help them and their team. We have set up a global franchise health and COVID-19 support team chaired by Chris Turner and our General Counsel, Scott Catlett, to help our franchise partners navigate business continuity in the system with access to all available sources of economic support, including, but not limited to Yum! provided sources. To help our franchise partners, we are providing assistance to those who are in good standing and need more access to capital, including grace periods for certain near-term payments, and deferring certain asset obligations, which Chris will talk more about. Now moving on to our core RED brands. Each brand has listened intently to customer needs and quickly pivoted to adjust in response to the crisis. We have partnered with our entire global franchise system on a shared mission to provide affordable, convenient food in a safe, low-contact environment with drive-thru, curbside carryout, contactless delivery, and mobile payments, all enabled by our digital and technology capabilities. In many ways, COVID-19 is accelerating trends we were already addressing in our business. Let’s start with KFC division results. This division reported a Q1 system sales decline of 2% as an 8% same-store sales decline was partially offset by 6% net new unit growth. Given COVID-19 impact details were already provided by Yum! China on their earnings call. Let’s take a minute to walk through the KFC global business excluding China. Outside of China, we had great momentum in the beginning of the quarter with 6% same-store sales growth in January and 4% same-store sales growth in February. In particular, we want to highlight the UK and the Middle East were having a very strong start to the year. As COVID-19 restrictions became more prevalent around the world in March, the full quarter ended down 2% for the KFC divisions excluding China. As part of our COVID-19 pivots, contactless services are now available in 90% of KFC markets, and we are doubling down on digital and expanding delivery globally. The digital mix increased through Q1, driven by delivery and click-and-collect with particular strength in Thailand and Australia. In the current trend sustain, KFC globally could end the year with more than a quarter of its sales through digital channels. KFC U.S. is a perfect example of how our off-premise and digital capabilities, along with family-friendly affordable meal options are competitive advantages in the current environment. KFC U.S. has made major strides in staying RED by offering multiple variations of family-style meals that customers can customize. We now have a $30 fill up offer which includes 12 tenders as an add-on to the $20 fill up. Truly incredible value with enough food to feed a family for multiple meals in some cases. We have seen a change in how people are accessing buckets of original recipe with digital sales increasing to approximately 10% today. This is up from low-single digits just a month ago. And importantly, about 40% of digital sales are going through KFC.com, which was launched late last year. Moving on to the Pizza division. System sales declined 9% with the same-store sales decline of 11% and flat net new unit growth. Excluding China, Pizza Hut division same-store sales were down 5% in Q1. Globally, Pizza Hut has seen a mass shift in brand messaging, focusing on contactless services, food safety, team members' safety, and giving back to the community. In partnership with our franchisees, we were able to quickly develop appropriate protocols and training materials to support the rollout of contactless delivery, carryout, and curbside pickup, now available in over 90 countries. During the first quarter of Pizza Hut U.S., we pivoted towards more targeted and higher margin QSR value constructs and leaned into core products while offering limited-time promotional value on premium products such as our specialty meat lovers pizza and the Big Dipper. We are now starting to see the benefits from the marketing and innovation changes led by Kevin Hoffman, who is serving as Interim Pizza Hut President, and the early returns are reasons for increased optimism about the Pizza Hut brand's ability to succeed in a world where off-premise and contactless are more important than ever. Recent gains in off-premise have helped offset the impact of closing our dining room. The vast majority of our Express units represented 5% of our overall system sales in 2019. At Pizza Hut International, same-store sales declined 4% excluding China. Our heavy delivery and carryout focused markets that have continued to be able to trade without significant restrictions have typically fared well through the crisis thus far. However, many countries across Europe, Latin America, and the Middle East have been significantly impacted by COVID-19 related closures and operating restrictions. While some of the dining declines have been offset by an increase in delivery and carryout demand, such as in the UK, the net impact has been a headwind. Historically, for all of Pizza Hut International, off-premise sales have been 50% of sales. This quarter, off-premise sales increased to 70%. To put this into context, our off-premise channel generated a positive 12% same-store sales growth in Q1. In certain Asia markets, Japan, Taiwan, and Hong Kong in particular, we saw off-premise sales growth which more than offset dining declines to deliver positive overall same-store sales during the quarter. Turning to Taco Bell, Q1 system sales grew 4% with 1% same-store sales growth and 4% net new unit growth. Importantly, excluding the last two weeks of the quarter, same-store sales growth in the U.S. was trending toward an impressive 6%. The year started with a value offering at a power price point with the $1 Double Stacked Tacos. This was followed by Buffalo Chicken Fries, a very successful program with total sales makes about 9%. Like all of our brands, Taco Bell responded quickly across all fronts to adapt to COVID-19. Taco Bell advertising is highlighting off-premise options and offering free delivery on orders over $12 through Grubhub. In the U.S., delivery and drive-through sales pre-COVID represented about 75% of sales. Now this is nearly 100% of Taco Bell’s sales with digital representing approximately 10%. We have also maintained our below four-minute drive-through times, while simultaneously achieving an all-time low in customer dissatisfaction. This is remarkable considering how quickly the landscape has changed. Finally, our Taco Bell restaurants have the option to pause offering breakfast and adjust hours of operations as appropriate to best optimize the business model. Also, during the first quarter, we completed our acquisition of the Habit Burger Grill. We knew all along that Russ Bendel and the whole Habit team were very strong operators, and we have already seen this in action. In fact, with just 50 drive-through units, the Habit team adapted quickly to the new environment by rolling out many different order modes for carryout, such as park-in order, pop-up drive-through, and outdoor self-order. Additionally, Habit digital marketing shifted to focus on value and family bundles accessible through carryout delivery. Combined, the operational and marketing adjustments have fueled our growth in digital ordering, which is now about 40% of sales, up from 10% versus pre-COVID-19 levels. We couldn’t be more excited about what the future holds for Habit and believe our acquisition of this trend-forward brand will prove to be a long-term win. Before I pass it over to Chris, I want to offer a few thoughts on Yum’s position as we contemplate the future and move toward a new normal. As I see it, we have four distinct advantages. First, our unrivaled culture and talent. Our brand builders and operators at Yum! are partnering in a way and at a pace we have never seen before, acting urgently on solutions that address the changing needs of our consumers, employees, and franchisees. Second, our iconic brands, each of which have endured many challenges for over half a century. We will recover from this challenge and become even more relevant, easy, and distinct as a result. Our brands consistently stand for valuing convenience and normalcy, all of which are highly sought after in these uncertain times and beyond. Third, our business model. Our diversification across 290+ brand-country combinations enables us to withstand sustained adversity. Fourth, and finally, our strength in the off-premise segment will position us well for recovery and growth. COVID-19 is a stark reminder of just how globally connected we all are. By working together, we can limit the spread of COVID-19 and support our frontlines and communities while doing our part to offer convenient, affordable food in a safe environment. With that, I will hand it over to our CFO, Chris Turner.

Thank you, David, and good morning everyone. Today I will discuss our first quarter results, April highlights, 2020 guidance, and our capital strategy. To begin our first quarter results, as David mentioned, in Q1, we reported a system sales decline of 3%, same-store sales decline of 7%, and net new unit growth of 4%. On the development front, we opened 515 gross new restaurants or 65 restaurants on a net new basis and added 276 Habit Restaurants for an aggregate increase of 341 during the quarter. Core operating profit declined 6%, EPS excluding special items was $0.64, which included a $0.06 headwind owing to the change in fair value of our investments in Grubhub. As we signaled in our recent 8-K, COVID-19 weighed heavily on our Q1 results and is having a much more significant impact on Q2. As COVID and related government restrictions became more prevalent across the system, especially in Western Europe and the U.S., our overall same-store sales deteriorated through the month of March before starting to trend better in April. To illustrate these recent trends, I will share our latest rough approximation of recent same-store sales growth. As a reminder, our methodology has always been that temporary closures remain in our base for determining same-store sales growth. In the first week of March, our global same-store sales growth was approximately flat. We then saw a rapid decline in the following week seeing same-store sales drop to approximately negative 10%. The decline continued with Yum’s global same-store sales falling to beyond negative 30% on average, across the second half of March and in April. This includes the impact of approximately 20% of our stores being closed. Pizza Hut global same-store sales in that timeframe were down to between negative 20% and negative 25%, negatively impacted by significant dine-in declines in most parts of the globe and closures in the U.S. express business but bolstered by strength in carryout and delivery. Taco Bell was a little worse, with declines to almost negative 30% on average over this time period. Finally, KFC same-store sales declines were approximately 35% during that period driven in large part by full closures of more than 20% of KFC restaurants. Since that time period and in recent weeks, we have seen global sales trends improve significantly across all brands in restaurants that are opened and operating. Keep in mind, we still have approximately 10,000 stores closed. So as we look to Q2 same-store sales growth, we know that improvement will mostly depend on the pace of reopening and continuation of the current trends in Asia and the U.S. Given the changed environment and results for our business, we have active programs to assess and refine our plans for non-essential expenses in capital spend. As an example, and for the safety of our team members, we moved clearly and quickly to eliminate most travel and in-person meetings until at least September. We also implemented a hiring freeze. To be clear, we have not made any drastic reductions in corporate headcount as our recently completed strategic transformation appropriately right sized our business. However, we have teams working on identifying longer-term opportunities to increase efficiency and to reallocate resources for the growth opportunities that should best leverage our scale to drive sustainable competitive advantages for our franchisees. We will have more to talk about in the future. But these areas could include drive-through, curbside carryout, contactless delivery, digital capabilities, and other areas relevant in an off-premise low contact environment. We are working with franchisees in impacted markets to help navigate business continuity in the safest manner possible. We are also working with franchisees who are in good standing and need more access to capital to provide assistance, including grace periods for certain near-term payments where necessary. These grace periods provide those franchisees with cash flow constraints an additional 60 days to pay two of their royalty payments and to provide additional breathing room we have also deferred 2020 capital obligations for remodels and new development up to a year in the U.S. and in select international markets. Next, our outlook for the business. There are many factors that give us confidence in the long-term, including the strong 2019 and early 2020 momentum. Each of our brands has a strong track record and culture of pivoting to meet rapidly evolving customer needs. We remain steadfast that Yum! has been and will remain a high growth company generating strong returns for all stakeholders over the long term. That said, the unprecedented global nature of COVID-19 and the uncertainty around the timing and shape of various recoveries make it difficult to say when we will settle back into this outgrowth and we are withdrawing guidance as a result. Now for our balance sheet and liquidity position. We entered 2020 with a strong balance sheet with cash and cash equivalents of over $600 million, which excludes restricted cash and with nothing drawn on our $1 billion revolver. Knowing that we would fund the acquisition of the Habit in March and out of an abundance of caution, we took steps to bolster our cash balance and increase our liquidity position. First, in order to further enhance our liquidity given uncertainties in the macro outlook, we suspended our share repurchase program. We have not repurchased any shares under our $2 billion share repurchase authorization, which was authorized in 2019 and runs through the middle of 2021. Second, we drew down $950 million of our $1 billion revolving credit facility. While a portion of this draw along with cash on hand was used to fund the acquisition of the Habit Burger Grill, the majority of the proceeds were kept in cash. Third, we issued a $600 million five-year Yum! Brands Incorporated Holding Company bond; the coupon of 7.75% is reflective of the market conditions at that time, as well as our preference to preserve a high level of flexibility given the uncertain nature of the issuance. In order to preserve future flexibility, the bond contains a call feature, allowing us to call a bond after two years subject to a modest prepayment premium. Also, increasing flexibility was our decision to issue the bond at the holding company level rather than issue from our restricted group subsidiaries, which I will explain in a few moments. Bonds issued at the holding company carry a higher cost but preserve the most flexibility as they are outside of our subsidiaries, which are subject to financial maintenance and debt covenants. Please note that we received the cash from this issuance on April 1st, so it is not reflected in our Q1 balance sheet. This debt issuance is especially notable because it reopened a high yield market that has gone nearly a month without issuance. This signals the strength of Yum! Brands credit in the minds of investors and lenders. We are very encouraged by the fact that we were able to raise capital in such a difficult environment. The net result of these actions was an increase in our cash and cash equivalents balance to over $1.1 billion, excluding restricted cash at quarter end or over $1.7 billion pro forma for the debt issuance cash we received on April 1st. Next, I would like to provide some additional context on our capital structure and debt covenants. We evaluate our optimal capital structure, including our five times leverage target, on a continual basis. We are also very thoughtful in how we construct our debt structure within the context of five times leverage. Our debt structure is designed to balance costs, duration, refinancing risk and flexibility over time. We source capital from various financial markets, including high yield bonds, leveraged loans, and the asset-backed securitization market. Each market has its own unique investor base and characteristics. We like participating in each of these markets as participating in multiple markets provides access to a broader base of investors. We issue debt primarily from three distinct groups of entities, each subject to different financial covenants, including the Yum! Brands Incorporated Holding Company our restricted group entities and our Taco Bell Securitization entity. Outstanding debt issued at our holding company consists of unsecured bonds issued under investment grade life indentures, which include no maintenance or current covenants. Approximately $3 billion of our gross debt is issued as this hold-co level pro forma for our April 2020 issuance. Loans and bonds issued from our restricted group are subject to covenants that are typical in high yield indentures with various maintenance and incurrence covenants, including maximum leverage ratios and minimum coverage ratios. Approximately $6 billion of our gross debt is issued out of our restricted group. Please note, we provide restricted group financials on our website each quarter. Lastly, notes issued from our Taco Bell Securitization entity are typical in investment-grade asset-backed security issuances with various maintenance and incurrence covenants, including maximum leverage ratios and minimum coverage ratios. Approximately $3 billion of our gross debt is issued out of our Taco Bell Securitization entity. Excluding on our outstanding revolver balance and pro forma for April’s issuance, our debt is approximately 92% fixed rate with an average duration of approximately six years and an average rate of approximately 4.5% and minimum maturity through the end of 2021. We ended Q1 with significant cushion to all of the major covenants in both our restricted group and Taco Bell Securitization entities. We will continue to monitor covenants going forward in light of the COVID situation. Now, the team and I are happy to take your questions.

Thank you. We will now begin the question and answer session. Today’s first question comes from David Palmer at Evercore ISI. Please go ahead.

Thanks. And good morning. I believe in your prepared remarks, you talked about where things bottomed in the second half of March and into early April in each of the global brands. Could you speak to the pace of recovery that you have seen in recent weeks and where things are lately? And if there is anything unusual about that, are those things that are causing those weekly numbers to be weird or somehow unsustainable? We would love to hear about that. And then separately on the franchisee health, I know that is a big topic these days. Could you talk to what you are seeing out there from your biggest franchisees? Are there any major issues or things that are causing your franchise revenue to be in arrears or anything there we should be aware of? Thanks.

Thanks, David. As far as the comments about bottoming, I think we called out that the number of units that were closed at any one point looked like it bottomed at 11,000. And then we have opened back at least 1,000 of those, if not a few more, and we are opening more every day. So we think from a unit count standpoint that we are past the trough on that and back into the business of reopening. In fact, there is just an announcement that just came out that KFC UK is going to have up to about 100 of their stores reopened by next week. They are having success reopening stores primarily through offering delivery from the reopened stores. As far as the sales trends, we are really not going to comment in great detail beyond the comments that we made that trends have improved significantly as we have moved through April. That is owing to a number of factors. Certain markets have really figured out how to operate in this environment. Just to give you another example, the Pizza Hut Japan business looks like it is going to be up well over 50% in the month of April, so that is a business that has figured out how to market with value and in low contact options in this environment. Certainly, KFC, Australia is doing well. KFC UK, as I mentioned, is reopening stores. In the U.S., the stimulus impact on consumers is obviously helping our business and helping build momentum there as well. But I think you heard last night from Yum! China that what they have learned as they have gone through the recovery isn’t that it has been a little bit uneven makes it very difficult to forecast where bottoms are and exact trends, but certainly look forward to sharing more details on sales when we get to the Q2 results. I will let Chris talk a little bit more about the franchise health question that you asked in some of those issues.

Yes. Good question on franchisee health, David. I will provide a little bit of context on that. I would say first and foremost, I have had a chance to work along with several folks at Yum! with our franchisees through this crisis. It has just been amazing to see the great leaders that the men and women who lead these franchise organizations. How great their leadership has been during this time of crisis. They have been so focused on protecting and enhancing the safety of their team members, other customers, and continuing to operate where the stores are open throughout the crisis. I think we are going to emerge from this with an even stronger bond with our franchisees. On the specific topic of franchisee health, we typically evaluate franchisee financial strengths as new franchisees enter our system. In some cases, we have contractual arrangements or policies and provisions in our arrangements with franchisees related to their financial health. Of course, with 2,000 franchisees across our 290+ brand-country combinations, it is really hard to paint the franchisee base or our arrangements with them with a broad brush. Just to give you a feel for that in the U.S., about 60% of our franchisees operate one to three stores, and many of them are feeling the same stress that small businesses across the country are feeling through this crisis. Of course, when we go around the globe, we have many larger franchisees. In fact, about 80% of our international restaurants are operated by franchisees with 100 or more units. While these larger franchisees are generally strong and resilient, many of them are feeling the same financial pressures that other large companies and other industries are feeling as a result of the crisis. So with over 2,000 franchisees, we did have a small number that were struggling before the crisis hit. In a few cases, the sales impact of the crisis has accelerated to financial distress and we are working with those partners to address their health and their role in our system. But overall, we are fortunate that the vast majority of our franchisees came into this situation in solid shape. While we expect the vast majority to be able to weather the storm, the challenges they are facing are real. In many situations, franchisees are going to need a range of support, including not only assistance from Yum!, which we have offered in the form of the royalty grace periods and capital deferrals, but also from their other partners, their lenders, landlords, suppliers, distributors, and many others, including government programs and support. It really is an all-hands-on-deck situation, and we appreciate all the support that all of the partners to our franchisees are providing. Again, we appreciate the hard work that our franchisee leaders are putting in. Last thing I will mention is that we are fielding some inbound requests from outside capital partners who would like to put money to work in our system. So when you think about that, that really gives us a multi-layered approach to bolstering the health of our store network. It starts with the primary focus on working with our existing franchisees, particularly those who are suffering the most distress. But we do have backup plans with partners who could step in if needed in certain parts of the globe. So hopefully that gives you a feel for the current franchisee health landscape.

Thanks. Operator, next question.

Yes sir. Next question comes from Sara Senatore with Bernstein. Please go ahead.

Just a clarification and then a question. On the franchisee support, I was wondering, and I apologize if I missed this, if you could just talk about the franchisee expense. I think that was the one line item that was a bit higher than we had expected versus very tight control on some of the other operating service lines. So just a little bit more color on that and the extent to which it reflected the support that you have provided. And then after the peak out, you said you are starting to see the benefits of the new marketing approach. Could you just talk about maybe what that looks like? How you are measuring it? Is it customer satisfaction scores or something more tangible? I recognize that in this environment, there is a lot of puts and takes, but just wanted to get a little more color on that. Thank you.

Great. So this is Chris. I will start with your question around the bad debt expense, and then I will turn it over to David for the second part of your question. So on the bad debt expense, you just noted in the release this morning that that was a driver in both Pizza Hut and KFC. For Q1, it continues to be a story of a small number of accounts. I will try to give you some context around it. In Q1, we had $28.5 million of bad debt expense, which is up about $22 million year-over-year versus Q1 last year. Historically on bad debt expense, our approach has been to book allowances for specific doubtful accounts. In general, we include 100% of the balances for any franchisee that gets over 60 days in arrears. This quarter, one of the things that happened is, as I’m sure you are aware of the implementation of the new GAAP standards on current expected credit losses. Given the implementation of that standard, we, of course, reflected on the COVID crisis and the disruption that it is causing, and we thought it was appropriate to book some additional allowance in Q1. That represented about $5.5 million of the $22 million increase year-over-year. That leaves about a $17 million increase versus Q1 last year that was in franchisees' specific situations, that was primarily driven by a few KFC accounts, mostly in Europe and Latin America, and a handful of Pizza Hut U.S. accounts. If I take this from a different lens, just to give you a sense of this being an issue around a small number of accounts in Q1, if I take our total balance for allowance for doubtful accounts on a global basis, if you took the top 20 franchisees that we have reserved, which is 1% of our 2,000 franchisees around the globe, that represents about 70% of the total franchisees specific reserves. About half of it is driven by Pizza Hut U.S., and again, is driven by a handful of accounts. There are eight Pizza Hut U.S. accounts that drive 80% to 90% of that balance. We have discussed those handful of situations in the past. This is just a snapshot of where we are in the first quarter. As Keith mentioned when we were opening up this call, it is a really unprecedented situation and the pandemic is causing strain on our franchisees, particularly in markets where stores have been closed. We are working hard with them to help bridge to the other side.

And Sara, as far as your question on Pizza Hut, we are very excited about the impact that Kevin Hochman is having on that business and his new team. You have probably seen that we have repositioned the brand’s tagline from "Our Hut to Yours" that was done before the impact on our business from COVID-19, but really reinforces our credentials as a delivery player. There has been all sorts of work on the operation side in terms of our delivery capabilities. You have seen us rollout contactless carryout in addition to contactless delivery. As a reminder, both of those things were invented by our Pizza Hut China business, and Joey Wat and her great team is being very innovative in reacting to the challenges of this environment. They have rolled across our business all around the world and have also rolled across the industry as it is a great idea to meet the needs of consumers at this time. This focus on contactless, the repositioning of the brand and focusing on the delivery and carryout component actually led to - recently we set a digital sales record in the Pizza Hut U.S. business, doing more sales on a typical Friday than we did on either of the last two Super Bowls, which held our previous record. It gives you a sense that the brand is going through some rapid changes, things that have been on our roadmap. What I would like to say is this three month period we are in right now is basically going to have three years' worth of changes to our businesses. It is accelerating the plan that we had for Pizza Hut and getting us to be truly this digital delivery carryout business. Another major benefit to the Pizza brand, which Kevin and the team are leveraging, is just the trust that consumers have with the brand given its long operating history and being part of the fabric of the community. Pizza Hut is a trusted restaurant brand. In times like this, I think consumers are turning to those kinds of brands.

Next question, operator.

Our next question comes from Dennis Geiger, UBS. Please go ahead.

Thanks and hope you are all doing well. Just wondering, if you could talk a bit more about the longer-term unit growth and potential impacts exiting the COVID situation. Understanding it is difficult to determine when you settle back into that algorithm. Could you help us think a little bit about the puts and takes to unit development over the next couple of years, maybe how the current situation could broadly impact franchisee demand or ability to open units based on access to capital, etc.? Any kind of puts and takes, any thoughts would be great. Thank you.

Obviously, we are excited about the unit growth that we delivered in 2019 with over 2,000 net new units, and that was obviously up from 2018, which was up from 2017. We have had sequential improvement in unit development and expected that to continue into 2020. This new environment changes a lot of the variables. But we still think long-term that the ability to grow our unit count will be there, it may be slightly different. Obviously, with off-premise being a bigger part of the equation, our assets may be a little more designed for off-premise than they are today. In terms of the variables, Dennis, as you think about this, there could be an opportunity from a real estate standpoint. I think Yum! China talked about this last night on their call. There could be an opportunity for locations that might not have previously been available. Brands that are doing well in this environment should have an opportunity to expand their footprint. Of course, the challenges in the short-term, our capital availability to our franchisees. And that is something that we will look for them to get through. But we have obviously withdrawn our guidance. So I’m not going to give you exact numbers about what we think about the future. But there is no reason to think that our business in any way, shape, or form is not going to be a growth business long-term, and unit development is a big part of that.

Thank you. Next question.

Our next question comes from David Tarantino with Baird. Please go ahead.

Hi, good morning. Hope everyone is doing well. Chris, my question is about the level of cash that you might need to consume here in the short run to assist franchisees. I was wondering if you could help frame up that dynamic. And then as you think about bad debt expense heading into the second half of the year, I guess how are you thinking about the risks of allowing some of the weaker performing franchisees to defer payments? What that might look like as the year unfolds here?

Yes. Thanks, David. Good questions. Obviously, I think for all companies right now managing liquidity through the crisis is top of the list. We feel really, like we are in a really strong position given the moves that we made that I mentioned earlier around starting last year, hitting pause on share purchases, and then making the bond offering right at the beginning of April that short up our cash position. We think that gives us plenty of liquidity and plenty of cushion to work with our franchisees as we move through the next quarter. So you think about these grace periods, it is only a subset of franchisees. We will be making those available to franchisees who need the access to capital. If you think about our cash burn over the next few months, the number one factor is what is happening to the overall sales rate. As we see franchisees take advantage of the grace periods, we will see a couple of months there where we will have fewer royalties coming in the door. But then as we collect on the back end of that, that will shore back up. We have got plenty of cushion, we feel with our current cash position. In terms of franchisee health, you know, as we mentioned one of the qualifications for being able to take advantage of those grace periods for the franchisees who need it is that they are in good standing. Our brand teams have worked closely with the franchisees to manage eligibility into that program. So that is something that we have been managing carefully as we go through this. But as I mentioned earlier, this is just one leg of the stool. There are so many other components starting with the great leadership of our franchisees and what they are doing to drive sales, what they are doing to drive the performance of their own businesses, plus all of the assistance they are getting from their other partners, in certain cases. It is the collection of those that gives us confidence about how our franchisees come out on the backside even stronger.

Thank you. Next question, operator.

Our next question comes from John Glass with Morgan Stanley. Please go ahead.

Thanks very much. I appreciate the visibility on unit openings is unclear at this point. Do you expect though, an uptick in the number of permanent closures in the system? And if so, what do you think that is. Could you specifically inside of that talk about the Pizza Hut situation in the U.S.? I think there was already some anticipated closures. Does that accelerate that process? And then finally, you talk about franchisee assistance and relief on royalties? Are there other options on the table, or do you draw the line there, I’m thinking about either fund contribution top-ups from the company or even direct capital injections into certain franchisees if those are considered options or not?

Thanks, John. I guess on your first question on unit development, you are right, it is unclear just because of the variables that I mentioned earlier. Certainly when you have 50,000 restaurants around the world, we are naturally closing a certain number of them every year. That is why we open a growth number of units and have net new openings. That was what we talked about. To the extent that there may be some situations that we wanted to get out of with units, this would be an opportunity to take advantage of them if they are closed now. However, we are not anticipating a massive number of permanent closures coming out of this. As far as the Pizza Hut business goes, in the U.S., as I mentioned, Kevin Hochman and franchisees are working really closely together to take the brand to new heights and become the modern delivery player in the category. That involves the asset base, and they are working together on that. So there may be opportunities there. But again, capital and there are other constraints that will play into that. As far as the relief that we are providing for the franchisees, as Chris has described it as a grace period, and the money is coming back to us at the other end of the grace period, there really haven’t been discussions about other items like advertising or anything like that and we think the franchisees are working closely with us and we are getting through this. As far as other options for things that we might do, there may be a couple of specific situations where we will have to do something beyond different than what we have described. But there is no wholesale other program without the launch to address any of that.

Thank you, operator. Next question, please.

Our next question comes from Andrew Charles with Cowen. Please go ahead.

Great, thanks. One clarification question. Within Taco Bell’s 30% sales decline at the March, can you contextualize how much of that is attributable to those lack of breakfast both in terms of sales and the store counts? And then my question was really just in the comment on the outside capital available to assist here. Just curious what that means for what options are on the table. Is this a willingness to take on more debt, or could this perhaps even, you know, pipe in the business? Just your thoughts and what kind of is in the range of play there. Thanks.

Thanks, Andrew. As far as Taco Bell specifically, I do want to just give a shout out to Mark King and the Taco Bell team who put up a great year in 2019. As we mentioned in the script, we are targeting along at 6% same-store sales growth until the impact of COVID-19. I have been really proud of how the Taco Bell team has reacted to this. As you mentioned, many ways, their business has had the most impact because they have a breakfast business, which our other businesses don’t, and because they relied on late nights. As some of you can imagine, the breakfast business is impacted when people aren’t on the roads going to work. They are not going through a drive-through for breakfast as much, and the late-night businesses obviously impact people aren’t out in bars and theaters and things like that. Taco Bell had the impact from that. Their core business' drive-through business is perfectly designed for this time, and then they are embracing the delivery and carry out models. I think Taco Bell and their creative team are well positioned to get through this. As far as the outside capital, that wasn’t meant to imply anything along the lines of a pipe or anything like that. That was more designed to address if we do have franchisees that are in financial distress, one of the options we have is interested buyers outside the system, in addition to in many cases, buyers in the system, as options to take over those businesses and restructure them. I think people recognize that Yum!, given the skew towards off-premise, is well positioned to come out of this stronger. There are a lot of outside people with capital that want to participate in that, which Chris and the team will take into account as we address the few situations that become problematic.

Thank you, operator. We have time for one more question please.

Okay. Today’s final question will come from Jon Tower with Wells Fargo. Please go ahead.

Awesome, great, thanks. Just a couple for me. First, how close are you working with the franchisees to access the PPP loans in the U.S.? And then I guess second, in terms of thinking about historically that the growth of the franchise system and new store growth, how much of that has been self-funded versus debt funded? Then lastly, as you think about this business longer-term, and I think you just kind of answered part of this, but continuing the thread, has there been anything that you have implemented throughout this crisis that you believe will carry forward from an operating perspective post-crisis across the brands? Thank you.

Why don’t I take the last two, and then I will turn it over to Chris on the PPP. As far as new store development, the same thing that Chris talked about, we have 2,000 franchisees. Some of them have no debt, like Yum! China; some of them have significant debt. I don’t know that there is one broad brush answer to how we financed new store development. I think some of it is through taking on debt and others are doing cash flow of their business? Clearly, the increase in new unit development indicates that the return and almost all of it being done by franchisees indicates that the returns franchisees are getting meet all of their requirements. We still think that those that can access capital or have capital will take advantage of the opportunity to build a potentially secure size at potentially better rates right now. As far as, I’m sorry, the third part of the question? What things will sustain? Yes, it is a great question in terms of what the future of the restaurant industry looks like. Obviously, there are these trends that are accelerating right now, as I mentioned, digital order and pay, delivery, and off-premise. I think automation has a bigger role to play in the business as people look for less contact in their food. But then I also think that this is creating new opportunities that play to the strengths in Yum!. We have this strength in value and convenience and really customer trust. The foundation of QSR has always been value and convenience, but these may have different definitions as we go forward. Convenience, one of the things I’m excited about is curbside pickup. Curbside pickup in a contactless way is a great way for customers to take control of the order process; it has all sorts of advantages over delivery in some ways in terms of cost, accuracy, and time. We are seeing surprisingly well, our delivery businesses increasing, our carryout business through the contactless curbside pickup, like we have launched at Pizza Hut. It is also increasing pretty strongly. That is a change that I think is here to stay. I bought a TV the other day and did it through curbside pickup, and it was an easy process. I know consumers are starting to talk more about that. I think on value, you are seeing a big change in terms of family meals, obviously, with more people eating at home. I think some of that is going to stay, and our brands have been great at pivoting to offering more value in larger party size constructs. The thing that we probably haven’t talked about enough is, when you have three brands like we have with the history that they have with consumers, there is a level of trust that consumers have. I have seen it in a lot of surveys about what brands they want to use at this time. There really has to be that trust. We have always been about things like going above and beyond in food safety. We have had a long history of operating in the communities that people live in. I think they trust our brands, and I think that trust in brands is going to continue. I will let Chris talk just a little bit about franchisee accessing PPP, and then I will close out.

Yes. So, on the question of government support, again, we are thinking about franchise health globally. If we think about our 2,000 franchisees around the globe, I mentioned earlier the mix of small businesses and larger businesses. When we talk about that sales drop we experienced in March, the overall average being down 30%, but in some markets with full closures, those franchisees experienced even bigger drops. That was a dramatic cash flow hit to any of our franchisees in markets that were affected like that. As we mentioned, given the nature of the pandemic, it is requiring this multifaceted solve that includes the franchisees driving their business, Yum! providing things like the grace periods, the other suppliers being involved, and these government support programs. Those government programs are different from one country to the next. The nature of the program and the extent of the program is obviously specific to what each government and each country or locality is doing. To the extent we can, we try to help our franchisees understand those programs. We appreciate that they are available. Ultimately, it is the individual franchise’s decision to access any of those programs. But certainly, to the extent the franchisees have been challenged, the aim of many of those programs around the globe is focused on keeping employees employed, keeping them safe, and helping provide a service to consumers in that market. We appreciate the fact that that has been there to support our franchisees in market where it has been available around the globe.

Great. Thanks, Chris. And thanks, everybody. I just want to reiterate that as you all know, we finished 2019 on a really strong note, and we are off to a good start in 2020 before the impact of COVID-19. The business, on a widespread broad basis, was in good shape before the end of 2019. We are incredibly uniquely positioned to get through this and come out stronger, and that is our marching orders. All we talk about is how do we identify the consumer trends that we need to react to, be nimble and evolve the business, leveraging the learnings that we have from those 290 brand/country combinations. Our unrivaled culture and talent, particularly in terms of the way we are always been attuned to consumers’ needs and constantly evolving. What we offer to the changing consumer is serving us well in this time of changing consumer needs. Our iconic brands, as I mentioned, with the trust and this combination of value and convenience. The diversified business model with 290 brand/country combinations gives us this ability to leverage learnings from around the world. Finally, our strength in the off-premise segment will position us well for recovery and growth. COVID-19 is a stark reminder of just how globally connected we all are. By working together, we can limit the spread of COVID-19 and support our frontlines and communities while doing our part to offer convenient, affordable food in a safe environment. With that, I will hand it over to our CFO, Chris Turner.

Thank you. This concludes today’s conference call. You may now disconnect your lines and have a wonderful day.