With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

These companies use the creative forces of capitalism to solve big problems—and do well by doing good.

<p>According to the United Nations, one-fifth of the total food available to consumers—about 290 pounds (132 kg) per year for every person on the planet—goes to waste. Redistributing that surplus food can be both a lifesaving benefit for the food-insecure, and a solution to an environmental problem (since decaying food emits greenhouse gases). In 2020, Yum China—which operates roughly 17,000 KFC and Pizza Hut fast food outlets across China and brought in $11.3 billion in revenue in 2024—launched its Food Bank program, distributing surplus food to those in need. Over 1,000 stations in over 180 cities have saved more than 1,600 tons of food, enough to feed 4,000 people for a year, since the program’s launch. Yum China’s success was included as a case study in how China’s new charity law, which encourages more charitable activities to be community-based, was implemented. Food waste is a priority for the company: Yum China wants to reduce its food waste by 10% by 2030, compared with its 2020 baselines.
</p>

Change the World

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are food services and hotels and casinos.

Fortune Sector Leaders: Hotels, Restaurants, and Leisure

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

World's Most Admired Companies

The companies on this list are mobilizing the creative tools of capitalism to help solve social problems.

CTW-2023-Yum china

China’s rapid development has focused more on its cities than its countryside, with urban disposable incomes almost 2.5 times greater than rural ones. Yum China—China’s largest restaurant manager, and operator of brands like Kentucky Fried Chicken and Pizza Hut in the country—launched its One Yuan Donation program over 15 years ago with a simple appeal to customers to donate just one yuan ($0.14) toward rural causes. The campaign as a whole has channeled over $30 million to rural development initiatives, and now the company’s efforts have expanded to include “grow local” schemes to introduce regional produce, from Yunnan truffles to Tartary buckwheat, to its e-commerce platforms and menu items. (The campaign also now encourages much larger donations.) Yum China is also striving to reduce its food waste and carbon emissions, in part by establishing food banks to distribute excess food to the local community.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-363-Yum China Holdings

The spin-off company of Yum! Brands has a workforce of 271,000 employees. It's incorporated in the United States while its operational headquarters is in Shanghai. The company has the exclusive right to operate the KFC, Pizza Hut, and Taco Bell brands in China.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-361-Yum-China-Holdings

The fast food restaurant company separated from Yum! Brands in 2016 to solely focus on growth of the KFC, Pizza Hut, and Taco Bell brands in China. While its operations are mostly in China, it is incorporated in the U.S. and maintains a headquarters in Texas.

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

Sector

Industry

Current All-Star Rank

Previous All-Star Rank

Industry Rank

Previous Industry Rank

Overall Score

Innovation

People Management

Use of Corporate Assets

Social Responsibility

Quality of Management

Financial Soundness

Long-Term Investment Value

Quality of Products/Services

Global Competitiveness

Change The World

Impact Segment

Prior Year Rank

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

Yum China operates over 16,000 Kentucky Fried Chicken and Pizza Hut outlets, among other brands, across China, making it the country’s largest restaurant company. Born from Yum Brands’ 2016 decision to spin off its China operations into an independent company, Yum China now generates more revenue than its erstwhile U.S. parent. Yum China is now experimenting with more locally inspired fare, while foraying into China’s second- and third-tier cities to reach new markets. Yum China is one of a few Fortune 500 companies to generate almost all of its revenue outside the U.S.

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Q4 2024

Yum China Holdings (YUMC): Company Profile, Stock Price, News, Rankings

legacy

Yum China Holdings

yum china holdings

Good day, and thank you for standing by. Welcome to Yum China's fourth quarter and fiscal year 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Ms. Florence Yip, Senior Director, Investor Relations of Yum China. Please go ahead. 

Thank you, operator. Hello, everyone, and welcome to Yum China's fourth quarter 2025 earnings conference call. With me on the call are our CEO, Ms. Joey Wat, and our CFO, Mr. Adrian Ding. Before we begin, I'll remind everyone that our remarks and investor materials contain forward-looking statements. These are subject to future events and uncertainties, and actual results may differ materially. Please refer to these forward-looking statements together with the cautionary statement in our earnings release and the risk factors included in our SEC filings. We'll also be talking about non-GAAP financial measures. We encourage you to review the comparable GAAP measures, along with the reconciliation of non-GAAP and GAAP measures provided in our earnings release, which is available on our investor relations website at ir.yumchina.com. You can also find both a webcast replay and a PowerPoint presentation on our IR website.

Please note that all year-over-year growth rates discussed today exclude the impact of foreign currency, unless we mention otherwise. With that, I'll now turn the call over to Joey Wat, CEO of Yum China. Joey?  

Thank you. Hello, everyone, and thank you for joining us. I would like to start by saying thank you to our team for delivering strong results this year, especially in such a dynamic market. In 2025, we opened more than 1,700 net new stores, taking our total to over 18,000 stores across more than 2,500 cities. Our focus on both system sales growth and same-store sales growth is paying off. Same-store sales growth has been positive for three consecutive quarters. System sales growth improved sequentially in quarter four, reaching 7%. Our dual focus on innovation and operational efficiency also boost our healthy margins. OP margin expanded year-over-year in every quarter of 2025, reaching 10.9% for the full year. It is the highest level since our U.S. listing, excluding special items.

Operating profit grew 11% to $1.3 billion for the full year and was up 23% year-over-year in quarter four. By brand, both KFC and Pizza Hut exceed our expectations in 2025. KFC's solid momentum continued, with system sales growth reaching 8% in quarter four and 5% for the full year. Pizza Hut transformed its menu and operations, resulting in 16% same-store transaction growth and 20% operating profit growth in 2025. While we accelerated growth, we also returned $1.5 billion to shareholders in 2025 through dividends and share repurchases, which is around 8%-9% of our current market cap. Let me share a few key highlights from our core initiatives, and then I will hand it over to Adrian to go through our results in more detail.  

First, we continue to delight our customers with year-round innovation, launching about 600 new or upgraded items annually. At the same time, we stay laser focused on our hero products, which are significant drivers of sales and repeat purchases. These items have a loyal fan base that is also highly receptive to the new innovations they inspire. At KFC, our hero-inspired innovations include Spicy Original Recipe Chicken, 辣 味 原 味 鸡, and Crackling Golden Chicken Wings, 薄 脆 金 沙 鸡 翅. In 2025, hero products accounted for one-third of KFC sales, and together with their inspired innovations, they delivered high single-digit sales growth. At Pizza Hut, we sold over 200 million pizzas in 2025. The pizza category continued to grow strongly.

Our newest thin crust pizza, 手 作 薄 底, perfectly crispy, with plenty of toppings, has earned top reviews and become our best-selling crust... It now accounts for one out of every three pizzas sold, and is bringing more customers, especially younger ones, into our stores. Second, we focus on delivering great value for money and emotional value on top of serving good food. As we shared at our Investor Day, our pricing strategy has been crucial to our success, and has helped us deliver 12 consecutive quarters of same-store transaction growth. Total transactions grew 8%, exceeding 2 billion transactions in 2025. Emotional value matters, too. Last year, we partnered with 70 leading IPs in gaming, animation, and sports. Whether tied to the latest hits or tapping into childhood memories, these collaborations help us engage customers and capture additional traffic.

Beyond themed toys and special packaging, we decorated select stores and pop-up stores to make the experience more fun for our customers. Third, we capture new opportunities through front-end segmentation and back-end consolidation. Our multi-brand portfolio, diverse modules, and food offerings help us reach more customer segments and serve a wide range of occasions. On the back end, we foster synergies by sharing and centralizing resources in and across stores, regions, and even brands. Side-by-side modules, K-Coffee and KPRO, are scaling quickly, reaching 2,200 and 200 KFC locations respectively. They drive incremental sales and profit with light investment. Last year, we also piloted the Gemini model, which places KFC and Pizza Hut stores side by side to support entry into lower-tier cities.

With a CapEx of CNY 0.7 million-CNY 0.8 million for a pair of stores, it's a very attractive model for franchisees. We opened around 40 pairs of Gemini stores last year and expect to ramp up openings in 2026. Fourth, we are adopting an equity and franchise hybrid model to drive faster and more efficient store openings. We see great potential for growth in China. Recently, I visited Chongqing, China's largest city by population, with over 30 million people. In this vibrant market, I saw a strong appetite for affordable, good food. KFC's density there is only four stores per million people, well below the average of 17 in Tier 1 and 2 cities, or Shanghai's 28. With menu innovation and multiple store formats, we are confident we can continue to expand our market share in China.

To capture incremental opportunities in lower-tier cities, remote areas, and strategic locations, we began accelerating franchise expansion in 2024. The franchise mix of net new openings for KFC and Pizza Hut increased from 25% in 2024 to 36% in 2025. Equity stores remain the core of our business, representing over 80% of our store portfolio. The payback period of our new stores remain healthy at around 2 years for KFC and 2-3 years for Pizza Hut. Last but not least, we are embracing Gen AI across our business to drive growth and efficiency. In our restaurants, we are piloting QSmart, an agent AI assistant that integrates operation data such as labor and inventory. It identifies potential issues, recommend actions, and implements. For example, QSmart can detect staffing shortage, propose replacement staff, and initiate calls to them.

This helps our LGM save time, make informed decisions, and run restaurants more smoothly. In January, we rolled out Smart K, our AI ordering agent, to all KFC super app users. Smart K helps customers place orders. This feature has already been used by 2 million members, especially those who order breakfast and coffee. Customers respond positively to the added convenience and customized suggestions. At our Investor Day in November last year, we introduced our RGM 3.0 strategy, which takes a balanced approach across all three aspects of resilience, growth, and moat. We also outlined our plans for our next phase of growth, including expanding to over 30,000 stores by 2030. We are confident that we can continue our rapid growth while improving profitability and returning capital to shareholders. Let me now turn the call over to Adrian.

Thank you, Joey. Let me now update key highlights by brand, starting with KFC. In 2025, KFC opened 1,349 net new stores, bringing its total to nearly 13,000 locations. System sales grew 5%, and restaurant margins expanded 50 basis points to 17.4%. Same-store sales growth turned positive for three consecutive quarters. In quarter four, system sales growth sequentially improved to 8% year-over-year. Same-store sales grew 3%, and same-store transactions increased by 3% year-over-year. Ticket average was flat, as growth in smaller orders was offset by the increase in delivery sales mix, which carries a relatively higher ticket average. KFC's side-by-side modules are rolling out rapidly. K Coffee Cafe triple its footprint from 700 locations in 2024 to 2,200 locations in 2025.

While expanding to more locations, we also increased per store daily cup sales by 25% year-over-year. Menu innovation has been key in driving repeat purchases. Last year, we launched a new product every week on average. KCOFFEE cafes generated a mid-single-digit sales uplift for their parent KFC stores, and we're confident in its future expansion. K Pro added more than 200 locations in just one year. This light meal concept offers grain and pasta bowls and superfood smoothies. Backed by KFC's trusted quality and strong value for money, K Pro has resonated well with consumers and generated a double-digit sales uplift in its parent KFC stores. We aim to double K Pro's footprint to more than 400 locations in 2026, focusing on higher-tier cities. Now, moving on to Pizza Hut.

In 2025, Pizza Hut opened a record 444 net new stores, raising its total to 4,168 stores. Restaurant margins improved by 80 basis points to 12.8%, bringing its OP margin to 7.9%, the highest level since our 2016 listing. In quarter four, system sales grew 6% year-over-year, up from 4% in quarter three. Same-store sales grew 1%, positive for the third consecutive quarter. Same-store transactions increased 13%, growing double digits for the fourth consecutive quarter. Ticket average was CNY 69, down 11% year-over-year, reflecting our mass market strategy. Last year, Pizza Hut entered more than 200 new cities. About half of these, around 100 new cities, adopted the WOW format. We continue to refine the store format and test different service models.

The CapEx for a standalone new WOW store is around CNY 0.65 million-CNY 0.85 million. With lower CapEx, streamlined operations, and a simplified menu, WOW enables us to penetrate previously untapped locations, especially in lower-tier cities. We saw improving restaurant margins and a solid estimated payback period of 2-3 years for the new WOW stores, in line with the average new stores for Pizza Hut. Our emerging brands are also making steady progress. Lavazza opened 34 net new stores, including its first store in Hong Kong, taking its total store count to 146. Same-store sales growth turned positive in 2025, and overall store economics improved meaningfully. Its latest light model requires only CNY 0.5 million in CapEx, roughly half the cost of the previous formats.

Its retail business of packaged coffee products, the other growth engine, delivered over 40% sales growth and more than doubled operating profit year-over-year in 2025. Let me now go through our quarter four PNL. System sales grew 7% year-over-year, and same-store sales grew 3%. Our restaurant margin was 13.0%, 70 basis points higher year-over-year, mainly due to improvements in cost of sales and occupancy and other cost ratios. Cost of sales was 31.6%, 30 basis points lower year-over-year, mainly due to the favorable commodity prices and supply chain efficiency gains. We share some of these savings with our consumers in the form of great value for money. Cost of labor was 29.4%, 120 basis points higher year-over-year.

While overall rider costs were higher due to a higher delivery mix, we maintained non-rider costs as a percent of sales at relatively stable levels through operational efficiency gains despite wage inflation. Occupancy and other was 26.0%, 160 basis points lower year-over-year, mainly due to sales leverage, store CapEx optimizations, and better rent. Our OP margin was 6.6%, 80 basis points higher year-over-year. Operating profit was $187 million, growing 23% year-over-year. Net income was $140 million, 22% higher year-over-year. Excluding our investment in Meituan, net income grew 14% year-over-year. Our investment in Meituan had a negative impact of $0.5 million in quarter four, compared to a negative impact of $9 million in quarter four last year.

As a reminder, we recognized $11 million net in interest income in quarter four this year due to a lower cash balance, resulting from the cash we returned to shareholders and lower interest rates. Diluted EPS was $0.40, 29% higher year-over-year, or up 21% year-over-year, excluding our investment in Meituan. For the full year, system sales grew 4% and same-store sales grew 1%. Restaurant margin was 16.3%, 60 basis points higher year-over-year. Both KFC and Pizza Hut's restaurant margin improved year-over-year. G&A expenses were 4.9% of revenue, 10 basis points lower year-over-year. Operational efficiency gains more than offset higher performance-based compensation in the year. Operating profit grew 11% to $1.3 billion. Diluted EPS was $2.51, growing 8% year-over-year, or 14%, excluding our investment in Meituan.

Total CapEx was $626 million. Capital efficiency improved. ROIC reached 17.3%, up from 16.9% in 2024. Let's now turn to capital returns to shareholders. We're on track to return a total of $4.5 billion to shareholders from 2024 through 2026. That is $1.5 billion each year. In 2025, we returned $353 million in cash dividends and $1.14 billion in share repurchases. In 2026, we remain committed to returning $1.5 billion to shareholders. We're raising our quarterly dividend by 21% from $0.24 to $0.29. At $0.29 per quarter, the payout ratio will exceed 45% of our 2025 diluted EPS, with an annual dividend totaling around $400 million.  

We have also initiated a $460 million share repurchase plan for the first half of 2026. With these arrangements, we are well-positioned to deliver on our commitment for the year. Starting in 2027, as outlined at our 2025 Investor Day, we plan to return approximately 100% of annual free cash flow after subsidiary dividend payments to non-controlling interests. This is expected to translate into an average annual return of $900 million-$1 billion+ in 2027 and 2028, and exceed $1 billion in 2028 and onwards. These commitments are supported by our healthy cash position and robust cash generation. In 2025, we generated $840 million in free cash flow, an increase of 18% year-over-year, and ended the year with $2.0 billion in net cash. Now, moving on to our 2026 outlook.

We're confident we will reach more than 20,000 stores in 2026. This means opening over 1,900 net new stores, with 40%-50% coming from franchisees for both KFC and Pizza Hut. We will continue to deepen our presence across China, especially in lower-tier cities and strategic locations, using a variety of store formats. With lower CapEx per store and a higher franchise mix, we expect the total CapEx to stay in the range of $600 million-$700 million this year. As for other financial metrics, we expect our growth in 2026 to be consistent with our three-year guidance shared at our Investor Day. That is, same-store sales index of 100-102, mid to high single-digit system sales growth, high single-digit operating profit growth-...

Double-digit EPS growth and a slight improvement in restaurant margin and OP margin for Yum China. As activity on delivery platforms remain dynamic, we have factored in different scenarios and are confident that the impact on our businesses will be limited due to our balanced and disciplined approach. Our full year projections are based on our current plans and have not assumed any changes in macro. Any improvement would represent potential upside. We will continue to track the progress of our new store openings, module development and rollouts, and other core initiatives, and provide updates as we go. For quarter one, we're working hard to deliver our fourth consecutive quarter of positive same-store sales growth and 13 consecutive quarter of positive same-store transaction growth. On margins, we face a tough year-over-year comparison. First, rider costs are the biggest headwind, driven by a higher delivery sales mix.

Delivery mix increased from 42% in quarter one to 53% in quarter four last year, and is expected to grow further. Second, the benefit from lower commodity prices will be smaller than before. Additionally, last year's base already reflected significant benefits from Project Fresh Eye and Project RED. KFC's restaurant margin was already 19.8%, and Pizza Hut's restaurant margin improved 190 basis points year-over-year in quarter one last year, setting a high base for quarter one this year. We'll focus on efficiency and sales leverage and strive to maintain Yum China restaurant margin and OP margin roughly in line with the prior year period in quarter one. With that, let me pass it back to Joey for her remarks on the Chinese New Year.

Thank you, Adrian. Let me share a few thoughts on the Chinese New Year, our key trading window of the year. Chinese New Year falls on February seventeenth, considerably later than in most years. Our teams have prepared comprehensive scenario plans by the week and even daily. People will soon be traveling and gathering for the holiday season. Our brands are focusing on their signature products to capture the heavy traffic during Chinese New Year, while maintaining strong operational efficiency. At KFC, buckets have long been our Chinese New Year signature, offering exciting food and abundant value. This year, in addition to our classic Golden Bucket and wing bucket, we are introducing for the first time, Peanuts and Sunflower Seed Mini Bucket. These packaged snacks honor Chinese traditions and help create a festive Chinese New Year atmosphere.  

At Pizza Hut, we are focusing on one of our hero products, the Super Supreme Pizza. This time, we are adding new twists by pairing it with our classic bolognese and trendy salted egg yolk toppings. Customers can also top up the pizza with a mountain of crunchy potato chips and rich sauce. These offerings are available in combos designed for family and friend gatherings and to drive ticket average. Overall, for this Chinese New Year, we are executing according to our plans. Trading year to date has been in line with our expectations. With that, I would like to wish everyone a happy and prosperous Year of the Horse. Now, let me pass it back to Florence. Thanks, Joey. Now, we will open the call for questions. In order to give more people the chance to ask questions, please limit your questions to one at a time.

Thank you. We will now begin the question and answer session. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. A moment for our first question. Our first question comes from the line of Michelle Cheng from Goldman Sachs. Please go ahead, Michelle.

Hi, Joey, Adrian, Florence, and congrats for the very strong results and ended 2025 with these impressive numbers. My question is about pricing. We noticed that you raised the delivery menu price recently, and earlier, we also hear some other brands are raising the price. So can you comment on your expectation on the pricing trend, including any changes in your and market promotion activities, and how this will be reflected in the same-store sales growth? Especially, we should have a pretty easy base for the first quarter on both same-store sales growth and overall sales last year, first quarter. And separately, if I may, regarding this delivery mix, we noticed that delivery mix increased quite a lot, but the margin is still pretty good.

So unlike other kind of catering business, which has been suffering from higher delivery mix and lower margin, and for Pizza Hut, we even see payroll cost is down in fourth quarter. So can you still elaborate a little bit more on how we should think about 2026 delivery mix and impact on the margin? Thank you very much.

Thank you, Michelle. Let me take the price of pricing, and Adrian can answer the second one. The price increase for KFC, it was a mild adjustment. It only affects the delivery menu, and it has no change to dine-in and take away. And we also did not make any change to the signature campaign, such as the Crazy Thursday or the Weekend Buy More, Save More. And the price increase helped absorb some rider costs increase because of higher delivery mix. With that said, we remain committed to offering great value for money, something we have done consistently for a long time, and therefore, we are very committed to it. And that was thoroughly discussed at our investor day together with our good food and emotional value.

The primary goal of the price of our business of our commitment is still to drive traffic. So we are still targeting the teens consecutive quarter of same-store transaction growth and fourth quarter of same-store growth in quarter one. So far, the trading has been in line with our expectation. So overall, in short, in the short term and long term, I hope this demonstrate our confidence in our business model. Adrian?

Yeah, sure. Michelle, on your second question regarding margin outlook and also the delivery mix, I guess very briefly on delivery mix outlook for 2026, we do expect, you know, further increase in mix for delivery, for full year 2026. I mean, our delivery growth has been, you know, pretty solid for the past more than 10 years. And for the past one year, given the dynamics in delivery aggregators, our growth have been particular high, particularly high, which has driven, you know, pretty big surge in delivery mix, I think from 42% for last year to around 48% for the full year 2025. So it's a pretty significant increase.

For the full year 2026, you know, we do believe, regardless of the delivery aggregator subsidy dynamics, we do expect that the delivery mix will surge further. In terms of the margin impact on Yum China and the two brands, as we mentioned, in the prepared remarks, we expect a full year restaurant margin, Op margin, to slightly improve year-over-year, and we are confident to achieve and deliver that. Specifically on two brands, for KFC, we expect a full year restaurant margin to remain relatively stable year-over-year.

It's already at a very healthy level, and as you may recall, during our investor day three months ago, we actually give a long-term guidance for KFC's restaurant margin, which is to be relatively stable over the long term as well, at a healthy level. For Pizza Hut, we expect the full year restaurant margin to slightly improve from 2025's level, with streamlined operation offsetting higher delivery costs on a higher base year-over-year. I would like to reiterate that for quarter one specifically, we face a tougher year-on-year comparison, as we mentioned in the prepared remarks. You know, there are different factors that we mentioned in terms of meaningful delivery mix increase, and thereby the rider cost increase correspondingly.

And also, the tailwind from favorable commodity prices gradually reduce, and also the quarter one last year is a really high base, with KFC's restaurant margin being as high as 19.8%, and Pizza Hut's restaurant margin improved by 190 basis points year over year in quarter one last year. So both brands has really high base. And, obviously, our guidance for the quarter one margin being kind of stable, has accounted for the price increase on delivery platforms for KFC. And lastly, I think you asked about, you know, how do we understand each line, you know, of the key cost line items for full year 2026. For COS, cost of sales, we expect it to remain relatively stable.

There will be tailwind for commodity prices, but the tailwind will be smaller, and we will pass, you know, good value for money to our consumers. For COS will be relatively stable for Yum China and for KFC and Pizza Hut. For COL, cost of labor, obviously, we face continued headwind from the higher rider costs as a result of the higher delivery mix expected for this year as well. And we aim to maintain the non-rider cost stable, offsetting the low single-digit wage inflation through more streamlined operations. And lastly, on O&O, occupancy and other costs, we continue to explore optimization opportunities and expect O&O as a percentage of sales to keep improving year-over-year for the full year 2026, which is supported by store CapEx optimization and better rent. So hopefully that addressed your question. Thank you, Michelle.

Thank you so much, Joey and Adrian, and wish you a great Chinese New Year.

Thank you. We will now take our next question from Chen Luo from Bank of America. Please go ahead, Chen.

Hi, Joey, Adrian, and Florence. Congrats again on the strong result. In fact, today is Li Chun in China, and/or for those foreign investors, it actually stands for the first day of spring, so China consumption has been in winter for too many years... and our strong result has fortunately brought us a touch of warmth. And my question is more on the sales side. I noticed that our SSG has actually edged up higher in Q4 versus Q3, despite the fact that the online delivery subsidy intensity has eased a little bit Q on Q. Well, what have we done differently to boost SSG in Q4?

And also, as we are already into the pre-Spring Festival season, can you actually share with us some color on the year-to-date trading environment? I understand that we have the calendar distortion, so any comparison based on the lunar calendar would be helpful. And lastly, I noticed that for SSG, for the system sales and revenue growth, usually in previous quarters, revenue growth will be slower than the system sales growth. But in Q4, on the constant currency basis, both numbers came in around 7%. How to reconcile the Q4 pattern versus the previous few quarters? That's all my questions. Thank you.

Thank you. Let me make a few comments on the trading in Chinese New Year, and Adrian can tackle the numbers. So overall, the customer sentiment, as we mentioned at our Investor Day, we are seeing, or we continue to see early signs of improving consumer sentiment, which is good news. With that said, Chinese New Year is a very key trading window. Heavy traffic concentrate into several days, and it create a very a significant challenge to operation. So we need to balance sales initiative with operational efficiency, as wages are higher, much higher during the public holidays. Point two is the Chinese New Year this year, as you mentioned, Chen Luo, is considerably later than most years, and we actually have yet to reach the peak trading.

We call it in Chinese, Pa Po, so we are climbing up the mountain, but we have not reached the peak yet. So it's slightly a bit early to make any big comment. So all we can see right now, while sales is ramping up year-to-date, trading has been in line with our expectation. And last but not least, we will continue our strategy to drive traffic, sales, and profit growth for the quarter, all three at the same time. We target to deliver our fourth consecutive quarter of positive SSG and 13 consecutive quarter of positive transaction growth, as I mentioned earlier. Adrian?

Sure, sure. Lu Chen, on the second question regarding the, you know, the comparison between revenue growth and system sales growth. Yes, normally, system sales growth should be slightly higher than revenue growth, and that's mainly caused by the higher growth, of the franchise business contributing fully to the system sales, but only, you know, roughly half to the revenue. And, you know, sometimes you do see similar figure or even same figure for the growth of the two metrics. That's, you know, partially also because of, rounding as well. But, you know, going forward, I think, generally speaking, we do expect a slightly higher system sales growth than revenue growth, you know, if we, kind of disregard the rounding, factor in it. So hopefully that'll address your question, Lu Chen.

Sorry, one more line is system sales growth. When we open a lot of stores during the last quarter, it helps the number, particularly the quarter four is slightly smaller one. Yeah. Thank you.

Thank you. We will now take our next question from Lillian Lou from Morgan Stanley. Please ask your question.

Okay. Hey, hey, Joey and Adrian Ding. Congrats again. I have one question on Pizza Hut sales momentum, 'cause obviously KFC still deliver very strong momentum in fourth quarter, higher than Pizza Hut's trend. I recall on the invest- 2020, six onwards, major sales growth will be mainly driven by, actually growth actually will be mainly driven by Pizza Hut, which should growing at a faster rate than KFC. Would like to understand, in particular for 2026, what kind of incremental measures management plan to implement to drive up the Pizza Hut revenue or system sales momentum, which could be higher than KFC? Thank you.

For Pizza Hut, first of all, our core business continue to drive very nice growth. In 2025, you will see, we actually enter more than 200 cities, and this is a very big number for Pizza Hut. And that was helped by the Pizza Hut bio model, which alone entered into more than 100 cities. Because for a long time, Pizza Hut's city penetration was stuck at 900 cities. But now we are in over 1,000 cities, and 2024 was the year we shared that we feel that Pizza Hut has reached the inflection point. So 2024 was nice growth, and 2025, with the help of, Pizza WOW Store, also grow very nicely. So that's one way.

The other one I would like to mention is some additional color on the product. So it's worth trying, if you have not tried yet, it's the Handcrafted Thin Crust Pizza, so those quality pizza. The new crust was really, actually is really amazing. And within a very short time, it accounts for 1 out of 3 pizzas sold, and this is a very big number. So now we have good variety of pizza crust with 4 choices: the thin crust, the pan, the hand tossed, and stuffed crust. And for those who spend a lot of time on pizza, you will know that, doing pizza crust is the real deal. It's much harder than doing the topping. And the other product I would highlight is burger.

We have been selling burger for more than a year now, and it's mid-single digit of our sales mix. So from the module to the key products, these are very exciting growth driver for 2025, and it will continue into 2026. I think I'll pause here. Thank you, Lillian.

Thank you. We will now take our next question from Anne Ling from Jefferies. Please ask your question, Ann.

Hi. Thank you, management team. A couple of questions here. So I'd like to check, first, regarding the company mentioned about the, like, you know, expanding or ramping up in year 2026, the Gemini stores. So, just want to check whether we will have the figure, like, you know, how much more Gemini store do we plan to open? And you mentioned that, you know, there is a new format, you know, on the franchising, which is called equity franchise model. I'm just wondering whether it means that, Pizza Hut will-- Sorry, I mean, Yum China will be investing in the franchise model, and if you can elaborate that.

And second question is on the news, the coffee format as well as the K Pro. What is our plan for year 2026? And whether, like, you know, this attribute to, like, you know, same store sales growth, you know, how much is attribute to same store sales growth in year 2025? Thank you.

Again, I'll take the first question, Adrian, you can take the second one. Thank you, Ann. So Gemini store are the side by side, KFC Small Town, and Pizza Hut WOW Store is a pair with their own separate entrance and counter. However, on the back, we share the in-store resources, the staff, equipments, rent, and it's particularly effective to enter lower tier cities. And the CapEx is good. It's only CNY 0.78 million for pair, so very attractive for franchisee. And the sales is sort of the lighter version of the KFC Small Town and the lighter version of Pizza WOW. So we would like to control the average payback estimate at about still at two years. The menu will continue to be even simpler.

So KFC menu will be similar to the Small Town one. Pizza Hut menu. It's probably only about 20-25% of the regular margin, and we expect the margin contribution will be incremental. And it's still early stage. We only have 42 pairs right now. It's very small number, and we're testing it, but we do expect the Gemini model to improve its OP margin of our franchise business in the long term. And that's sort of the most updated progress of the Gemini store. Adrian?

Yeah, sure. Anna, I think you have a small question between the first one and second one, which is, what is the equity franchise hybrid model?

Just to clarify, that is not a particular store model. It's like, basically means the acceleration of franchising initiative for Yum China. So, you know, in the future, we'll become a business, shifting from a equity-focused business only to a hybrid of equity franchise business.

So that's not a particular model, just to clarify on that one. And then, your second question is basically regarding K Coffee Cafe and K Pro. You know, as we mentioned, K Coffee Cafe contributes mid-single-digit incremental sales to the parent KFC store. And K Pro, which is a reasonably new initiative, I mean, the K Pro model now is quite different from, like, the older K Pro stores years ago, right? So, you know, this new version of K Pro, we opened more than 200 new locations in the year 2025, and it's contributing double-digit incremental sales for the parent store with incremental profits.

Given it's only 200 locations or slightly more than 200 locations out of a 13,000 total store count for KFC, so you could imagine the K Pro contribution to the same store sales there for KFC is rather limited. Similar for K Coffee Cafe, actually, 'cause if you think about K Coffee as a whole, the menu mix for K Coffee and K Coffee Cafe altogether is roughly, you know, we mentioned previously, roughly 4% of KFC's menu mix. So, you know, the K Coffee Cafe alone is even smaller. But we do have high hopes of both these two modules. You know, when they grow bigger and bigger, when they have more locations, they will represent higher contribution to the same-store sales growth of KFC. Thank you.

Thank you. We will now take our next question from the line of Christine Peng from UBS. Please ask your question.

Thank you, management, for the opportunity to raise questions. So I have two questions. So firstly is about K-Pro. So Adrian, can you provide us more details in terms of the economics of the K-Pro model, such as ticket value, the margin profile, and most importantly, if you can provide some details in terms of the customer profile, you know, the kind of the differentiation from the major format of KFC? I think that would be very helpful to understand the model in a longer term. I think the second question is about the Pizza Hut launching a burger. You know, the management rationale behind this?

Because, obviously, this is mostly, you know, targeted, maybe like a single person menu. And, in terms of the product differentiation, pricing strategies, what are the differentiations from the KFC burger offering? And, what's gonna be, you know, the longer term, you know, development strategy for this category going forward? Thank you.

Christine, for the K-Pro, we plan to double the number of store in 2026, so from 200+ to at least 400. It offers a very good value for money for the light meal, with very strong food safety as a brand. The menu is very distinct. You just need to cross the border and try in Shenzhen. We have quite a few of those in Shenzhen. It offers energy bowls and smoothies. Smoothies are doing incredibly well there. In terms of the format, what else I can say is, again, it's consistent with our corporate strategy of front-end segmentation and back-end consolidation.

So it has its own counter and space for seating space for customer, but we share the KFC store space, membership, equipment, resources, you name it. Here's some interesting sort of context for the customer. A significant portion of customers, namely could be as high as 80% or 90% of our sales are from KFC members. This is a great example how our membership program is really helping our long-term and short-term business. So it's alternative. It's an alternative for KFC members, and that drives frequency. The frequency so far is very pleasing to us because it gives very little psychological burden to people for the light meal option, I guess. Also, you can imagine the office location work really well for the K-Pro.

So we are hopeful for that. Then let me move on to pizza burger. We offer that for over a year now, and it's different from KFC burger. It's different in both ways. The pizza burger bun is freshly made in the store with the same pizza crust dough, if that makes sense. So now you can probably understand why we are doing burger, because we have this lovely dough. We can make pizza dough, and we can also make burger bun. Why not? It tastes really good, and then with very high quality meat, and there are two flavor which fantastic is the burger with pineapple, fresh pineapple, and also bolognese sauce, which is quite creative. Why bolognese sauce? It's pizza sauce.

It's a sauce the customer really love. It's classic. We have this category, this new product called burger. You are absolutely right, it works very well for the single person's offering. We can see the single person meal is opportunity for Pizza Hut. Right now, the base is low, but for 2025, that one person meal is growing at 50%, 50, for Pizza Hut. It's lovely. We continue to do a bit more of that, and let's see what 2026 will bring us. But again, it's still early days. It's only one year. We'll continue to learn and do better for our customers. Thank you, Christine.

I'll take our next question from Ethan Wang from CLSA. Please go ahead, Ethan.

Good evening. So my question is, the delivery-

Sorry, Ethan, you might want to speak louder. We have hard time hearing you.

Sorry about that. Good evening. Yes, Joey. Yeah, hi. So, my question is on the delivery strategy. So if we take a relatively longer-term view, I know delivery is our key strategy to grow our same-store sales growth. You mentioned that in yesterday. But given what is happening in China, and especially last year, it seems likely that consumers also want dine-in experience when they do so much delivery. And in lower-tier cities, maybe consumers also want to do dine-in. So I'm just wondering how do we think about the dine-in and the pickup consumption scenario going forward? Are we saying we still focus on delivery, so that is the only focus, or actually we're doing something on those two fronts? That's my question. Thank you.

Thank you, Ethan. That's a good question as well. So as we have observed, the overall last 10 years trend, as Adrian mentioned earlier, the delivery continued to grow. So we continue to expect it to grow in 2026 too. But at the same time, I'm with you too, the dine-in and takeaway will still continue too. If I look at Pizza Hut, the takeaway, for example, 2025 takeaway percentage compared to 2019, it almost double. And I want to grow more for takeaway. Takeaway is a good business. But at the same time, dine-in is still an important part of our business. For KFC, dine-in is still about 30%, and Pizza Hut is over 40%, about 45%.

So it's still a very important part, and we still believe that the business will still be there in the long term. But at the same time, we are not judgmental. We basically embrace whatever the customer preference in terms of delivery, takeaway, and dine-in, and we strive to serve them well in all three channel. And then we'll balance the cost structure to do the best we could. So yeah, we really are open-minded, and we'll do our best, but dine-in will continue. And in the lower tier city, will dine-in be slightly higher? To a certain extent, in the sense that the ticket average, the big... All the big family consumption still is a hotspot.

But one last thing is, you know, how do we balance the growth of delivery? While the growth of delivery continues, we protect the margin. As you can see, we have done it, but at the same time, we have new growth drivers, such as "...", means like, customer right now, we see growing in terms of car ownership, right? The car ownership is growing, and then the business related to that is growing, too. And then we will deliver the food closest to customer's car. And that is growing nicely. Now we have over 4,000+ KFC stores have that we call car side pickup.

So, we are doing a variety of the business to balance the sales growth. Thank you, Ethan.

Thank you. Our final question for today comes from Sijie Lin from CICC. Please go ahead, Sijie.

Thank you for the last question. Thank you, Joey and Adrian. So my question is on the delivery platform subsidy. We know it's very dynamic, but could you provide a sense on how should we evaluate the trend and impact in 2026? And will the platform competition mitigate? What measures will we take to attract customers back to our own channel? Thank you.

Thank you, Sujie. So on delivery platform subsidy dynamics, you know, as we mentioned in the prepared remarks, we have a different scenarios planning for the subsidy, how that evolves. And regardless of the, what the scenario would be, we believe, and we're confident that the impact on our business will be limited, because of our disciplined approach, to drive sales, at the same time, to protect margin and price integrity. And at the same time, and that's kind of the short, short-term, horizon. The long-term horizon is, we do believe this whole delivery aggregator subsidy, as we previously mentioned, is good for the merchants, especially the larger merchants, in the long run, because the merchants have choice of multiple... working with multiple parties.

Also, you know, we can obviously take the opportunity to secure some long-term benefits, you know, during the subsidy war. So, that's a response on the, both the short term and, and long term. And, you know, I think the natural, question has always been around margin, and, as we demonstrated in the previous quarters, we were able to protect our margins, actually even slightly increase our margin. And that's why we're confident to give the guidance for the full year 2026. We have an improvement in restaurant margin and, OP margin for Yum China slightly.

But, you know, I would like to caution again, sorry to repeat myself, for quarter one, we face a tough comparison, and our guidance for quarter one is to stay roughly in line for restaurant margin and OP margin year-over-year for quarter one. Thank you, Sujie.

This concludes our Q&A session. Thank you for joining the call today.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.

Yum China Holdings (YUMC) Q4 2025 Earnings Call Transcript

Company Participants