Python- IF Else statement and return

I'm trying to write a code to let user input a letter and return the digit like our phone keypad. My working is:

phone_letters = [" ", "", "ABC", "DEF", "GHI", "JKL", "MNO", "PQRS", "TUV", "WXYZ"]


def let_to_num():

    letter =input("Enter: ")
    key = 0
    while key < 10:

        if letter.upper() in phone_letters[key]:
            return key
        else:
            return "Not found"

print(let_to_num())

However it doesn't work and the correct answer should be:

while key < 10:

        if letter.upper() in phone_letters[key]:
            return key
        else:
            key += 1
return "Not found"

What i understand is "IF" input not in phone_letter, then we jump to else and return "Not found". "IF" input can find in phone_letter then return "key" and end.

I don't understand why the (return "Not found") put inside the else statement will return "Not found" for every input? And what is the function for "key += 1"