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NEW YORK, Nov 4 (Reuters Breakingviews) - The new CEO at Yum Brands (YUM.N), opens new tab looks ready to slice up the joint. Chris Turner only sat down at the head of the fast-food table a month ago, but on Tuesday he kicked off a formal strategic review, often code for a sale, of Pizza Hut. Extra cheese in the form of more capital and business-model upgrades is unlikely to be on the menu. Offloading the chain to beef up Taco Bell and KFC would be the tastier financial option. It's easy to understand why Turner, opens new tab has lost his appetite for tomato and cheese pies. Pizza Hut's share of Yum operating profit has tumbled to 11% from 17% in early 2023. Sales at U.S. stores open at least a year dropped 6% in the third quarter from the same span in 2024, while the operating margin thinned by more than 4 percentage points. Management blames technology spending, but there's a bigger issue. Sign up here. Every store closure, format shift or pricing change requires negotiating with the independent operators of some 20,000 franchises struggling because paying to spruce up stores has become a more regular occurrence. EYM's 77 Pizza Huts sold for about $12 million in a fire sale, opens new tab earlier this year. Another franchisee is shuttering, opens new tab 68 locations and a third, India's Sapphire Foods (SAPI.NS), opens new tab, has halted, opens new tab expansion. Successful makeovers capitalize on positions of strength. From 2010 to 2015, rival Domino's (DPZ.O), opens new tabinvested, opens new tab heavily, opens new tab in online ordering, delivery tracking and store remodeling. A McDonald's (MCD.N), opens new tab turnaround under then-CEO Steve Easterbrook cost $6 billion, largely funded, opens new tabby franchisees. Both worked partly because restaurants were healthy enough to help pay for them. Under Pizza Hut's weaker circumstances, the $40 billion Yum would be better off selling, even at a discount. The chain is expected to generate $340 million of earnings before interest and taxes this year, according to estimates gathered by Visible Alpha. At 10 times that operating profit, a deep-dish discount to the 21 times at which peers Domino's and Papa John's (PZZA.O), opens new tab trade on average, the enterprise would be worth just $3.4 billion. Any proceeds could be more productively used to buy back Yum shares or invested in faster-growing fried chicken and tacos. Take out the pizza, and a KFC and Taco Bell combo meal should command a higher valuation, too. It fetches less than 21 times forecast 2026 earnings, below Burger King and Popeyes owner Restaurant Brands (QSR.TO), opens new tab and McDonald's. In the end, Turner will probably land on the best recipe, but it may prove tougher to deliver. Follow Sebastian Pellejero on LinkedIn, opens new tab. Context News For more insights like these, click here, opens new tab to try Breakingviews for free. Editing by Jeffrey Goldfarb; Production by Pranav Kiran Breakingviews Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time. Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors. Sebastian Pellejero is a U.S. columnist for Reuters Breakingviews, based in New York. He writes about topics across business, investing, markets and technology. Prior to joining in March 2025, he worked as an equity research analyst at BlackRock and a markets reporter for The Wall Street Journal, along with stints at Bloomberg and Debtwire. He is a graduate of Wake Forest University and speaks Spanish.
