Low prices, takeout, and external pressures—has Yum China truly found the "optimal balance point"?

In 2025, as consumers relentlessly pursue "value for money" and the proportion of delivery sales continues to rise, every move by restaurant giants is placed under the microscope.

On February 4th, Yum China released its Q4 and full-year financial report for 2025, showing that this leading chain restaurant company in China continues to achieve simultaneous growth in overall scale, same-store sales, and profitability.

In the fourth quarter, Yum China's system sales rose 7% year-on-year; same-store sales increased 3%, marking the third consecutive quarter of positive growth.

In terms of scale, the company added a net total of 1,706 stores for the year, bringing the total number of stores to 18,101, covering more than 2,500 towns.

What’s drawing more market attention is the expansion of profit margins: the annual operating profit margin reached 10.9%, up 60 basis points year-on-year, and after excluding special items, set the highest benchmark since the company's U.S. listing.

Delivery Becomes Dominant

Over the past year, the subsidy wars between delivery platforms have inevitably become the biggest disturbance to chain restaurant profits.

A higher proportion of delivery generally means higher platform commissions, courier fees, and the unavoidable diversion of orders from the company’s own channels.

In 2025, Yum China's delivery sales increased by 25% year-on-year, with delivery accounting for 48% of restaurant revenue, up 9 percentage points from the same period last year.

In the fourth quarter, delivery made up 53% of KFC's sales and 54% of Pizza Hut's, continuing to climb throughout the year.

To offset cost pressures, from January 26th, KFC slightly raised the prices of its delivery products by about 0.8 yuan.

Yum China CEO Joey Wat confirmed at the earnings meeting that this price adjustment will help partially offset the increase in courier costs brought by the higher delivery proportion.

Joey Wat stated: "As we have observed in the past decade, delivery business keeps growing, and we expect this trend to continue in 2026."

Yum China CFO Andy Yeung pointed out that the current “subsidy competition” between delivery platforms benefits larger merchants, as they have the freedom to cooperate across multiple platforms and can leverage subsidies for long-term gains.

Meanwhile, efficiency measures promoted across multiple business lines at Yum China are also delivering results.

On the product side, large single-item innovations have driven sales and repeat purchases, while IP co-branded products boost per-customer transaction value. In 2025, sales of such large single items made up one-third of KFC’s total sales, spawning representative innovations such as Spicy Original Chicken and Crispy Golden Sand Chicken Wings.

In store operations, the pilot “Q-Rui” assistant can integrate staffing and inventory data to support automated scheduling and intelligent restocking, freeing restaurant managers from tedious tasks and improving overall efficiency.

Results show that this “dynamic balance” is effective, with KFC and Pizza Hut restaurant profit margins in Q4 2025 increasing by 70 and 60 basis points respectively.

"Side-by-side" Model Drives Growth

When it comes to improving per-square-meter efficiency and unlocking growth potential in existing stores, the “side-by-side” model demonstrates substantial energy.

For example, KFC’s sub-brand K-Coffee increased its store count from 700 in 2024 to 2,200 by the end of 2025—a threefold expansion.

In 2025, K-Coffee launched new products at the pace of one per week, driving mid single-digit sales growth for KFC's main stores.

The number of KPRO (KFC’s healthier, lighter food brand) stores also surpassed 200, contributing double-digit sales growth for the parent stores.

Yum China plans to double KPRO to over 400 stores in 2026, focusing on expansion into higher-tier cities.

The new store types rolled out with the “side-by-side” model heavily rely on existing KFC locations, sharing kitchens, storage, and staff. Multi-brand synergy allows the company to boost system sales with “flanking increments” without significantly increasing rental costs.

In 2025, Yum China also piloted a “Twin Stars” model, pairing KFC and Pizza Hut under the “side-by-side” framework in lower-tier cities.

Yum China stated that around 40 “Twin Stars” locations had opened in 2025, with plans to accelerate expansion in 2026.

Towards 30,000 Stores

Previously, at Investor Day, Yum China outlined its long-term goal: to reach 30,000 stores by 2030, with entry into 4,500 cities—up from about 2,500 currently.

Yum China pointed out that its current coverage only reaches about one-third of China's population, leaving substantial room for market penetration.

Take Chongqing as an example: this massive city, with a permanent population exceeding 30 million, has just 4 KFC stores per one million people—far below Shanghai's 28.

To make such leaps, Yum China is structurally adjusting its expansion model—accelerating franchise licensing.

In 2025, the proportion of new KFC and Pizza Hut stores that were franchises rose to 36%, up from 25% last year. According to plans, this ratio will further increase to 40%-50% in 2026.

Currently, company-owned stores remain at the core of the business, accounting for more than 80% of total stores.

But in lower-tier cities, transportation hubs, and gas stations—strategic locations—franchisees have become the vanguard for Yum China’s deeper expansion.

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

In 2025, Pizza Hut entered more than 200 new cities, about half of which adopted the lighter-weight WOW model, helping set a record annual opening of 444 new stores.

For new brands, the updated Lavazza coffee store format is also showing benefits.

Lavazza’s same-store sales turned positive in 2025, with capital expenditure per latest model at about 500,000 yuan—only half of the previous model. Meanwhile, retail sales of Lavazza packaged coffee products grew by more than 40%, and operating profits doubled year-on-year.

Yum China has expressed confidence in achieving the 20,000-store milestone in 2026.

With per-store capital expenditure and franchise share both rising, the company expects total annual capex to remain in the $600 million to $700 million range, with a shareholder return target of $1.5 billion.

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