In 2025, characterized by consumers' extreme pursuit of value-for-money and a continuously rising share of food delivery, every move made by major restaurant chains is placed under a microscope.
On February 4th, Yum China's released financial results for the fourth quarter and full year of 2025 revealed that the largest chain restaurant operator in China maintained synchronized growth in overall scale, same-store sales, and profitability.
In the fourth quarter, Yum China's system sales grew by 7% year-over-year. Same-store sales increased by 3% compared to the same period last year, marking the third consecutive quarter of positive growth.
In terms of scale, the company achieved a net addition of 1,706 new stores for the full year, bringing the total store count to 18,101, covering more than 2,500 towns and cities.
More notably, the market focused on the expansion of profit margins. The full-year operating profit margin reached 10.9%, an increase of 60 basis points year-over-year. Excluding special items, this represented the company's highest level since its U.S. listing.
**Delivery Shifts from Supporting Role to Lead**
Over the past year, subsidy wars among food delivery platforms inevitably became the most significant profit disruptor for chain restaurant brands.
An increase in the proportion of delivery sales often implies higher platform commissions, rider delivery fees, and an unavoidable diversion of orders from proprietary channels.
In 2025, Yum China's delivery sales grew by 25% year-over-year, accounting for 48% of the company's restaurant revenue, an increase of 9 percentage points compared to the previous year.
In the fourth quarter, the delivery mix for KFC and Pizza Hut reached 53% and 54% respectively, showing a consistent upward trend throughout the year.
To counter cost pressures, KFC implemented a modest price increase of approximately 0.8 RMB on its delivery products starting January 26th.
Yum China's CEO confirmed during the earnings call that this price adjustment helps partially offset the rising rider costs associated with the increasing delivery mix.
The CEO stated, "As we have observed over the past decade, the delivery business continues to grow, and we expect this trend to persist into 2026."
Yum China's CFO pointed out that the current subsidy competition among delivery platforms is favorable for larger merchants. Merchants have the option to cooperate with multiple platforms and can leverage subsidy periods to secure long-term benefits.
Concurrently, Yum China's multi-pronged operational efficiency initiatives are yielding results.
At the product level, sales and repurchase rates are being driven by major product innovations, while collaborations with IPs help increase the average check. In 2025, sales from major products already accounted for one-third of KFC's total sales, spawning representative innovations like Spicy Original Recipe Chicken and Crispy Golden Chicken Wings.
In store operations, the pilot promotion of the "Q-Smart" assistant integrates labor and inventory data to enable automated scheduling and intelligent replenishment, freeing restaurant managers from routine tasks and thereby improving overall labor efficiency.
The results demonstrate the effectiveness of this "dynamic balance." In the fourth quarter of 2025, restaurant-level margins for KFC and Pizza Hut expanded by 70 and 60 basis points, respectively.
**"Side-by-Side" Expansion for Incremental Growth**
In enhancing sales per square foot and unlocking growth potential in existing stores, the "side-by-side" model is proving to be a significant force.
Taking KFC as an example, the store count for its sub-brand, K-Coffee, surged from 700 stores in 2024 to 2,200 by the end of 2025, tripling in scale.
In 2025, K-Coffee, by launching a new product nearly every week on average, contributed a mid-single-digit percentage sales increase to its parent KFC stores.
KPRO, focused on the light meal segment, has also surpassed the 200-store threshold, delivering a double-digit percentage sales lift to parent stores.
Yum China plans to double the scale of KPRO to over 400 stores in 2026, with a focus on high-tier cities.
New stores for these expanded categories, developed using the "side-by-side" model, are largely attached to existing KFC stores, sharing back-of-house facilities, storage, and staff. This multi-brand synergy allows the company to achieve "flanking incremental growth" in system sales without significantly increasing rental costs.
In 2025, Yum China also piloted a "Twin Stars" model, co-locating KFC and Pizza Hut "side-by-side," in lower-tier cities.
Yum China stated that approximately 40 pairs of "Twin Stars" stores were established in 2025, with plans to accelerate the pace of openings in 2026.
**Targeting 30,000 Stores**
During a previous Investor Day, Yum China outlined its long-term goal: to reach a total of 30,000 stores by 2030 and increase the number of cities served from the current approximately 2,500 to 4,500.
Yum China noted that its services currently only cover about one-third of China's population, indicating vast room for further market penetration.
Using Chongqing as an example, this megacity with a permanent population exceeding 30 million has a KFC store density of only 4 stores per million people, far lower than Shanghai's 28 stores per million.
To achieve this leap, Yum China is structurally adjusting its expansion model by accelerating the granting of franchise rights.
In 2025, the proportion of franchisees among the net new store additions for KFC and Pizza Hut increased to 36%, up from 25% in the same period last year. According to the plan, this proportion is expected to further increase to 40%-50% in 2026.
Currently, company-owned stores remain the core of the business, accounting for over 80% of the total store count.
However, in strategic locations such as lower-tier cities, transportation hubs, and gas stations, franchisees serve as the vanguard for Yum China's penetration into the market's finer capillaries.
Store format innovation is another crucial driver for its expansion into new markets.
In 2025, Pizza Hut entered over 200 new cities, with about half of these openings utilizing the lighter, more flexible WOW model, contributing to a record annual net addition of 444 stores.
For emerging brands, the benefits of the updated Lavazza coffee store format are beginning to show.
Lavazza's same-store sales turned positive in 2025. The capital expenditure for the latest store model is approximately 500,000 RMB, only half that of the older model. Concurrently, retail sales of Lavazza packaged products grew by over 40%, and operating profit doubled year-over-year.
Yum China expressed confidence in achieving its target of 20,000 stores in 2026.
With capital expenditure per store decreasing and the proportion of franchised stores increasing, the company expects its total capital expenditure for the full year to remain in the range of $600 million to $700 million. The target for shareholder returns is $1.5 billion.
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