Under the influence of low prices, takeout, and external pressures, has Yum China truly found the "optimal balance point"?

In 2025, as consumers pursue “cost performance” to the extreme and the share of delivery continues to rise, every move by the catering giants is under a microscope.

On February 4th, Yum China released its Q4 and full-year 2025 financial reports, showing that this largest Chinese restaurant chain still maintains synchronized growth in overall scale, same-store sales, and profitability.

In the fourth quarter, Yum China’s system-wide sales increased by 7% year-over-year; same-store sales grew by 3% year-over-year, marking the third consecutive quarter of positive growth.

In terms of scale, the company added 1,706 new stores throughout the year, reaching a total of 18,101 stores, covering over 2,500 towns.

What’s more, market attention is drawn to profit margin expansion: the full-year operating profit margin reached 10.9%, up 60 basis points year-over-year. After excluding special items, it hit the highest level since the company’s U.S. listing.

“The rise of delivery”—From Guests to Hosts

Over the past year, subsidy wars on delivery platforms have inevitably become the biggest profit disruptors for chain restaurant brands.

The increasing share of delivery often means higher platform commissions, rider delivery fees, and unavoidable diversion of orders from owned channels.

By 2025, Yum China’s delivery sales grew by 25% year-over-year, accounting for 48% of the company’s restaurant revenue, up 9 percentage points from the same period last year.

In Q4, delivery shares for KFC and Pizza Hut reached 53% and 54%, respectively, showing a continuous upward trend throughout the year.

To offset cost pressures, KFC raised delivery product prices by about 0.8 yuan starting January 26th.

Yum China CEO Cui Cuirong confirmed at the earnings call that this price adjustment helps partially offset the rising rider costs caused by the increased delivery share.

Cui Cuirong stated: “As we have observed over the past 10 years, delivery business continues to grow, and we expect this trend to persist into 2026.”

Yum China CFO Ding Xiao pointed out that the current subsidy competition on delivery platforms favors larger merchants, who have the option to cooperate across multiple platforms and can seek long-term benefits during subsidy periods.

Meanwhile, Yum China’s multi-line operational efficiency initiatives are also showing results.

On the product side, innovation of flagship items drives sales and repurchase rates, while collaborations with IPs boost average order value. By 2025, sales of big flagship items accounted for one-third of KFC’s total sales, with innovative products like Spicy Original Chicken and Crispy Golden Chicken Wings emerging.

In store operations, the pilot “Q-Rui” assistant integrates manpower and inventory data to enable automatic scheduling and intelligent replenishment, freeing restaurant managers from tedious tasks and improving overall efficiency.

The results show this “dynamic balance” is effective. In Q4 2025, KFC and Pizza Hut’s restaurant profit margins increased by 70 and 60 basis points, respectively.

“Shoulder to Shoulder” for Incremental Growth

In enhancing store productivity and unlocking growth potential in existing stores, the “Shoulder to Shoulder” model demonstrates significant energy.

Take KFC as an example: its sub-brand K-悦 Coffee’s store count surged from 700 in 2024 to 2,200 by the end of 2025, tripling in scale.

In 2025, K-悦 Coffee introduced about one new product per week, bringing mid-single-digit sales growth to the parent KFC stores.

Focusing on the light food segment, KPRO (Kenny’s Light Food) has surpassed 200 stores, also delivering double-digit sales growth to the parent stores.

Yum China plans to double KPRO’s scale to over 400 stores in 2026, with a focus on high-tier cities.

New store categories expanded via the “Shoulder to Shoulder” model are largely attached to existing KFC stores, sharing kitchens, warehouses, and staff. Multi-brand collaboration allows the company to achieve “lateral growth” in system sales without significantly increasing rental costs.

In 2025, Yum China also piloted the “Twin Stars” model, where KFC and Pizza Hut are co-located in lower-tier cities.

Yum China stated that by 2025, about 40 pairs of “Twin Star” stores have been deployed, with plans to accelerate store openings in 2026.

Aiming for 30,000 Stores

At the Investor Day, Yum China outlined its long-term goal: to reach 30,000 stores by 2030, increasing the number of cities from around 2,500 now to 4,500.

Yum China pointed out that its current service coverage is only about one-third of China’s population, leaving vast room for market penetration.

For example, in Chongqing—a mega city with a permanent population of over 30 million—KFC’s per capita store density is only 4 stores per million people, far below Shanghai’s 28.

To achieve this leap, Yum China is structurally adjusting its expansion model: accelerating decentralization of franchise rights.

In 2025, the proportion of franchise stores among net new KFC and Pizza Hut outlets increased from 25% last year to 36%. The plan is to further raise this to 40%-50% in 2026.

Currently, company-operated stores still constitute the core of the business, accounting for over 80% of total stores.

However, in lower-tier cities, transportation hubs, and gas stations, franchisees are the vanguard of deeper market penetration.

Store format innovation is another key driver for expansion into new markets.

In 2025, Pizza Hut entered over 200 new cities, with about half adopting the lighter WOW model, setting a record of 444 new openings for the year.

Emerging brands like Lavazza are also showing benefits from updated store formats.

Same-store sales turned positive in 2025, with the latest model’s capital expenditure around 500,000 yuan—half of the old model’s. Meanwhile, retail sales of Lavazza coffee products grew over 40%, and operating profit doubled year-over-year.

Yum China is confident in reaching the target of 20,000 stores by 2026.

With reduced capital expenditure per store and increased franchise proportion, the company expects total annual capital expenditure to remain between $600 million and $700 million, with shareholder returns targeted at $1.5 billion.

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