Under the pressure of low prices, takeout, and external factors, has YUM China really found the "best balance point"?

In 2025, where consumers are pursuing "cost-performance ratio" to the extreme and the proportion of delivery continues to rise, every move of the catering giants is placed under a microscope.

On February 4th, Yum China released its fourth quarter and full-year financial report for 2025, showing that this largest chain catering enterprise in China continues to maintain synchronized growth in overall scale, same-store sales, and profitability.

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

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

What attracts more market attention is the expansion of profit margins: the annual operating profit margin reached 10.9%, an increase of 60 basis points year-on-year, and after excluding special items, it set the highest level since the company's listing in the United States.

Delivery's "Reverse Dominance"

In the past year, the subsidy war from delivery platforms has inevitably become the biggest profit interference for chain catering brands.

The increase in the proportion of delivery often means higher platform commissions, delivery fees for riders, and an unavoidable diversion of orders from self-owned channels.

In 2025, Yum China's delivery sales grew by 25% year-on-year, accounting for 48% of the company's restaurant revenue, an increase of 9 percentage points compared to the same period last year.

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

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

Yum China's CEO, Joey Wat, confirmed at the earnings conference that this price adjustment helps partially offset the rising rider costs due to the increased delivery proportion.

Joey Wat stated: "As we have observed over the past 10 years, the delivery business continues to grow, and we expect this trend to persist in 2026."

Yum China's CFO, Ding Xiao, pointed out that the current subsidy competition from delivery platforms is beneficial for larger merchants, as they have the option to cooperate with multiple platforms and can strive for long-term benefits during the subsidy period.

In the process, Yum China's multi-line collaborative operational efficiency measures are also releasing effectiveness.

On the product level, sales and repurchase are driven through innovation in major products, and the average transaction value is enhanced through IP collaborations. In 2025, sales of major products accounted for one-third of KFC's total sales, leading to representative innovations such as Spicy Original Chicken and Crispy Golden Chicken Wings.

On the store operation side, the pilot promotion of the "Q-Rui" assistant can integrate manpower and inventory data, achieving automatic scheduling and intelligent replenishment, freeing restaurant managers from tedious tasks and thereby improving overall labor efficiency.

As a result, this "dynamic balance" has proven effective; in the fourth quarter of 2025, the restaurant profit margins for KFC and Pizza Hut increased by 70 and 60 basis points, respectively.

"Shoulder to Shoulder" for Incremental Growth

In terms of improving space efficiency and opening up growth potential for existing stores, the "shoulder to shoulder" model has shown considerable energy.

Taking KFC as an example, the number of its sub-brand K-Coffee stores skyrocketed from 700 in 2024 to 2,200 by the end of 2025, tripling in scale In 2025, Kenuo Coffee brought a mid-single-digit sales increase to KFC's parent store by launching a new product every week on average.

KPRO (Kenuo Light Food), focusing on the light meal segment, has also crossed the threshold of 200 stores, contributing to a double-digit sales increase for the parent store.

Yum China plans to double the scale of KPRO to over 400 stores by 2026, with a focus on high-tier cities.

The new category stores expanded under the "shoulder-to-shoulder" model heavily rely on existing KFC stores, sharing kitchens, storage, and staff. The multi-brand collaboration allows the company to achieve "sideway increments" in system sales without significantly increasing rental costs.

In 2025, Yum China also piloted the "Gemini" model, which places KFC and Pizza Hut "shoulder-to-shoulder" in lower-tier cities.

Yum China stated that by 2025, approximately 40 pairs of "Gemini" stores have been established, and the pace of store openings is expected to accelerate in 2026.

Aiming for 30,000 Stores

Previously at the Investor Day, Yum China outlined its long-term goal: to reach a total of 30,000 stores by 2030, increasing the number of cities served from the current approximately 2,500 to 4,500.

Yum China pointed out that its services currently cover only about one-third of China's population, indicating a vast penetration space in the market.

Taking Chongqing as an example, this giant city with a permanent population of over 30 million has a per capita store density of only 4 stores per million people for KFC, far lower than Shanghai's 28 stores.

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

In 2025, the proportion of franchises in the net new stores of KFC and Pizza Hut increased from 25% in the same period last year to 36%. According to the plan, this proportion is expected to further increase to 40%-50% in 2026.

Currently, self-operated stores remain the core of the business, accounting for over 80% of the company's total stores.

However, in lower-tier cities, transportation hubs, gas stations, and other strategic locations, franchisees have become the vanguard for Yum China to penetrate deeper into the market.

Store type innovation is another important means driving its expansion into new markets.

In 2025, Pizza Hut entered over 200 new cities, with about half adopting the lighter WOW model, helping to achieve a record annual opening of 444 stores.

In terms of emerging brands, the updated Lavazza coffee store model has also begun to show benefits.

Its same-store sales turned positive in 2025, with the latest model's capital expenditure around 500,000 yuan, only half of the old model. Meanwhile, retail sales of Lavazza coffee packaging products grew by over 40%, and operating profits doubled year-on-year.

Yum China expressed confidence in achieving the goal of 20,000 stores by 2026.

With the decrease in capital expenditure per store and the increase in the proportion of franchises, the company expects total annual capital expenditure to remain in the range of $600 million to $700 million, with a shareholder return target of $1.5 billion