By Waylon Cunningham
(Reuters) -KFC’s parent company in China reported an aggressive expansion of stores on Tuesday, riding the growth of China’s middle-class in relatively smaller cities that have few chain restaurants despite populations numbering in the millions.
Yum China Holdings reported that 336 net new store openings drove most of its 4% sales growth in the quarter, following a central plank of its stated strategy. The company reported 1% same-store sales growth even as a slowing economy in China saw consumers tighten spending.
Yum China Holdings, a Shanghai-based spin-off of Yum! Brands, owns and franchises more than 17,000 stores in the country, including more than 12,000 locations for KFC, which it says is the largest restaurant chain in China.
“We have a solid pipeline and remain confident in achieving our target of 1,600 to 1,800 net new stores in 2025,” Chief Financial Officer Adrian Ding said on the earnings call.
Yum China said in recent filings that there are over 800 cities without a KFC and 1,400 cities that have a KFC but no Pizza Hut.
Behind the rapid growth is a vast logistics network and in-house supply chain that allows Yum China to open new stores quickly. “Other restaurants don’t have that,” said Ivan Su, an analyst with Morningstar, comparing the company’s network to the U.S.-based restaurant supply company Sysco.
Yum China said in its annual filing that its supply network could cover stores in more than 3,000 cities and towns, though it currently only has stores in around 2,200 cities and towns.
KCOFFEE is among the company’s fastest-growing store brands. The company reported 300 new openings in the second quarter, bringing the total to 1,300 locations. Ding said Tuesday the company was raising its goal for KCOFFEE locations by the end of 2025 from 1,500 to 1,700 locations.
Most of Yum China’s stores are corporate-owned, and around 15% are franchisee-owned, according to its latest annual filing. The company aims to increase the proportion of franchisees for new stores.
(Reporting by Waylon Cunningham; Editing by Leslie Adler)
