The race for scale in the chain restaurant industry continues. At a recent investor day, Yum China (YUMC) unveiled its ambitious goal of reaching 30,000 stores by 2030, marking the largest Chinese restaurant group’s entry into an unprecedented expansion cycle. CEO Joey Wat stated, "From 1987 to 2020, it took us 33 years to open our first store. Now, we aim to double our store count by 2026 and surpass 30,000 in the following four years." Simultaneously, Yum China pledged higher profitability and shareholder returns, with KFC targeting over RMB 10 billion in operating profit by 2028—the first Chinese restaurant chain to achieve this milestone—and Pizza Hut aiming to double its 2024 operating profit by 2029.

Despite recent price competition, Yum China has successfully expanded system sales, same-store growth, and operating profits. However, maintaining this balance amid rapid expansion will test its operational capabilities.

**Growth Drivers** Yum China outlined a clear roadmap: achieving 20,000 stores by 2026, exceeding 25,000 by 2028 (including 17,000+ KFC and 6,000+ Pizza Hut locations). KFC will drive most of the growth, while Pizza Hut and emerging brands like Lavazza contribute incrementally. The company plans to expand coverage from one-third to half of China’s population by 2028, entering 4,500 cities (up from ~2,500).

To penetrate lower-tier markets, Yum China has refined its store models. Pizza Hut’s "WOW" format, launched in May 2024, has already entered 40 new cities. Meanwhile, same-store growth remains modest (0–2%), necessitating a mass-market approach. KFC has stabilized prices since 2016, while Pizza Hut reduced average checks by ~30% since 2019. Future pricing adjustments may focus on value-driven products rather than further cuts.

Innovations like co-located stores (sharing kitchens and seating) and brand extensions (K Coffee, KPRO) bolster efficiency. K Coffee, now with 1,800+ stores, targets 5,000 by 2029; KPRO has entered 20+ cities within a year. New initiatives, such as Pizza Hut’s burger menu and KFC’s budget-friendly "High-Carb" line, aim to widen customer reach.

**Operational Efficiency** Yum China’s "Resilience, Growth, and Moat" (RGM 3.0) strategy emphasizes backend consolidation—integrating supply chains, AI platforms, and multi-store management. For example, iKitchen optimizes Pizza Hut’s kitchen workflows, while Mega RGM managers oversee clusters of KFC stores.

Supply chain synergies maximize resource use, exemplified by utilizing entire chickens across products. Top-selling items (e.g., KFC’s Spicy Chicken Wings and Zinger Burger, generating RMB 22 billion annually) streamline operations. The company is also developing integrated industrial parks, with the first (combining distribution, fresh-cut vegetables, and bakery) set for 2026 completion in Datong.

Digital transformation, powered by AI assistants (Q-Rui, D-Rui, C-Rui), enhances decision-making but retains human oversight. Centralized HR platforms now handle 89% of recruitment, reducing administrative burdens.

**Financial Targets** CFO Andy Yeung projects ROIC to rise from 16.9% (2024) to ~20% by 2028, driven by profitability gains and disciplined capex (USD 6–7B annually, 75–85% allocated to stores). Franchising will grow to 40–50% of new KFC/Pizza Hut stores (20%+ system-wide by 2028), lowering investment thresholds (RMB 500K for KFC’s "Town Model," RMB 650K for Pizza Hut WOW).

Shareholder returns will average USD 1.5B annually (2024–2026), transitioning to ~100% of free cash flow post-2027 (~USD 1B+ annually by 2028), split between dividends and buybacks.

As Yum China scales, execution precision and adaptability will define its long-term value.