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Items Affecting Comparability of Net Income and Cash Flows
 12 Months Ended
Dec. 31, 2016
Items Affecting Comparability Of Net Income And Cash Flows Disclosure [Abstract]  
Items Affecting Comparability of Net Income and Cash Flows Items Affecting Comparability of Net Income and Cash Flows

Refranchising (Gain) Loss

The Refranchising (gain) loss by reportable segment is presented below. We do not allocate such gains and losses to our segments for performance reporting purposes.

 
 
Refranchising (gain) loss
 
 
 
 
 
 
 
2016
 
2015
 
2014
 
 
 
 
 
KFC Division(a)
 
$
(20
)
 
$
33

 
$
(18
)
 
 
 
 
 
Pizza Hut Division(a)(b)
 
(50
)
 
55

 
6

 
 
 
 
 
Taco Bell Division
 
(71
)
 
(65
)
 
(4
)
 
 
 
 
 
Worldwide
 
$
(141
)
 
$
23

 
$
(16
)
 
 
 
 
 

(a)
In 2010, we refranchised our then-remaining Company-operated restaurants in Mexico. To the extent we owned it, we did not sell the real estate related to certain of these restaurants, instead leasing it to the franchisee. During 2015, we sold the real estate for approximately $58 million. While these proceeds exceeded the book value of the real estate, the sale represented a substantial liquidation of our Mexican foreign entities under GAAP. As such, the accumulated translation losses associated with our Mexican business were included in our loss on the sale. We recorded charges of $80 million representing the excess of the sum of the book value of the real estate and other related assets and our accumulated translation losses over the sales price. Consistent with the classification of the original Mexico market-wide refranchising transaction, these charges were classified as Refranchising (gain) loss. Refranchising losses of $40 million were associated with both the KFC and Pizza Hut Divisions.

We continue to earn U.S. dollar-denominated franchise fees, most of which are sales-based royalties, under our existing franchise contracts with our Mexico franchisee.

(b)
In 2016, we recognized a net gain of $11 million related to the reclassification of accumulated translation adjustments associated with Pizza Hut Australia upon entering into a master franchising agreement for that business that was deemed a complete liquidation of the Pizza Hut Australia foreign entity.

YUM's Strategic Transformation Initiatives

In October 2016, we announced YUM's Strategic Transformation Initiatives following the Separation. Major features of the Company’s strategic transformation plans involve being more focused on the development of our three brands, increasing our franchise ownership and creating a leaner, more efficient cost structure. We incurred pre-tax costs of $71 million related to our Strategic Transformation Initiatives in 2016. These costs, primarily recorded in G&A expenses, included severance costs, charges associated with a voluntary retirement program offered to certain U.S. employees, consulting costs incurred to facilitate YUM's Strategic Transformation Initiatives and losses associated with the sale of Corporate aircraft upon our decision to no longer own our own aircraft. YUM's Strategic Transformation Initiatives represent the continuation of YUM's transformation of its operating model and capital structure following the Separation and recapitalization of YUM. Due to the scope of the initiatives as well as their significance, costs associated with these initiatives are not being allocated to any segment for performance reporting.

Modifications of Share-based Compensation Awards

In connection with the Separation, we modified certain share-based compensation awards held as part of our Executive Income Deferral ("EID") Plan in phantom shares of YUM Common Stock to provide one phantom Yum China share-based award for each outstanding phantom YUM share-based award. These Yum China awards may now be settled in cash, as opposed to stock, which requires recognition of the fair value of these awards each quarter in our income statement. Cumulative fair value in excess of previously recorded expense as of December 31, 2016, and related costs resulted in non-cash pre-tax charges of $30 million being recorded to G&A expense in 2016. These costs are not being allocated to any of our segment operating results given they were a direct result of the Separation. See Note 16 for further discussion of share-based and deferred compensation plans.

KFC U.S. Acceleration Agreement

During 2015, we reached an agreement with our KFC U.S. franchisees that gave us brand marketing control as well as an accelerated path to expanded menu offerings, improved assets and enhanced customer experience. In connection with this agreement we anticipate investing a total of approximately $120 million from 2015 through 2018 primarily to fund new back-of house equipment for franchisees and to provide incentives to accelerate franchisee store remodels. We recorded pre-tax charges for the portion of these investments made in 2016 and 2015 of $26 million and $72 million, respectively. These amounts were recorded primarily as Franchise and license expenses and are not being allocated to the KFC Division segment operating results.

In addition to the investments above we agreed to fund $60 million of incremental system advertising. During 2016 and 2015, we incurred $20 million and $10 million in incremental system advertising expense, respectively, with the remaining funding to occur in 2017 and 2018. The amounts recorded were primarily in Franchise and license expenses and are included in the KFC Division segment operating results.

YUM Retirement Plan Settlement Charge

During the fourth quarter of 2016, the Company allowed certain former employees with deferred vested balances in the YUM Retirement Plan ("the Plan") an opportunity to voluntarily elect an early payout of their pension benefits. As a result of settlement payments made of approximately $205 million related to this program, all of which were funded from existing Plan assets, we recorded a pre-tax settlement charge to G&A expenses in 2016 of $25 million that was not allocated to any of our segment operating results due to the size and non-recurring nature of the program. See Note 15 for further discussion of our pension plans.

Store Closure and Impairment Activity

Store closure (income) costs and Store impairment charges by reportable segment are presented below.
 
 
2016
 
 
KFC
 
Pizza Hut
 
Taco Bell
 
Worldwide
Store closure (income) costs(a)
 
$
3

 
$
(4
)
 
$
—

 
$
(1
)
Store impairment charges
 
8

 
4

 
3

 
15

Closure and impairment (income) expenses
 
$
11

 
$
—

 
$
3

 
$
14


 
 
2015
 
 
KFC
 
Pizza Hut
 
Taco Bell
 
Worldwide
Store closure (income) costs(a)
 
$
1

 
$
(2
)
 
$
(1
)
 
$
(2
)
Store impairment charges
 
8

 
5

 
4

 
17

Closure and impairment (income) expenses
 
$
9

 
$
3

 
$
3

 
$
15


 
 
2014
 
 
KFC
 
Pizza Hut
 
Taco Bell
 
Worldwide
Store closure (income) costs(a)
 
$
2

 
$
1

 
$
—

 
$
3

Store impairment charges
 
8

 
4

 
3

 
15

Closure and impairment (income) expenses
 
$
10

 
$
5

 
$
3

 
$
18


(a)
Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated a Company-owned restaurant that was closed, lease reserves established when we cease using a property under an operating lease and subsequent adjustments to those reserves and other facility-related expenses from previously closed stores. Remaining lease obligations for closed stores were not material at December 31, 2016 or December 26, 2015.