Anne Ling

Anne Ling asked about Yum China's plans for Gemini store openings in 2026, seeking specific figures. She also requested clarification on the 'equity and franchise hybrid model' and inquired about the 2026 expansion plans for K-Coffee and K-Pro, including their contribution to same-store sales growth in 2025.

Answer

CEO Joey Wat described Gemini stores as side-by-side KFC Small Town and Pizza Hut WOW stores sharing back-end resources, effective for lower-tier cities with attractive CapEx and a target payback of two years. CFO Adrian Ding clarified that the 'equity franchise hybrid model' refers to Yum China's accelerated franchising initiative, not a specific store model. He noted K-Coffee Cafe contributed mid-single-digit incremental sales to parent KFC stores, and K-Pro (new version) generated double-digit incremental sales, though their overall contribution to 2025 same-store sales was limited due to their relatively small footprint.

Ann Ling from Jefferies asked about Yum China's specific plans for ramping up Gemini store openings in 2026 and sought clarification on the 'equity and franchise hybrid model.' She also inquired about the 2026 expansion plans for K Coffee Cafe and K Pro, and their respective contributions to same-store sales growth in 2025.

Answer

CEO Joey Wat explained that Gemini stores (side-by-side KFC Small Town and Pizza Hut WOW) are effective for lower-tier cities with attractive CapEx (CNY 0.7-0.8 million per pair) and shared resources, aiming for a two-year payback and incremental OP margin for franchise business. She clarified that the 'equity and franchise hybrid model' refers to the overall acceleration of franchising, not a specific store model. CFO Adrian Ding stated that K Coffee Cafe contributed mid-single-digit incremental sales to parent KFC stores, and K Pro (new version) contributed double-digit incremental sales with incremental profits, but their overall contribution to KFC's same-store sales growth in 2025 was limited due to their relatively small footprint (200+ K Pro, 2,200 K Coffee Cafe out of 13,000 KFC stores).

Anne Ling from Jefferies questioned the potential long-term restaurant and operating margin goals for Pizza Hut, referencing its historical highs in 2013.

Answer

CFO Adrian Ding indicated that detailed long-term guidance would be provided at the November Investor Day. For now, he reiterated the outlook for moderate margin improvement for the full year 2025. He outlined mid-to-long-run opportunities for margin expansion across cost of sales, labor, and other expenses, suggesting Pizza Hut's margin could eventually settle between its current level and KFC's.

Anne Ling from Jefferies asked about the potential long-term restaurant and operating margin goals for Pizza Hut, referencing its historical highs and questioning what it would take to achieve further improvement with the current business model.

Answer

CFO Adrian Ding noted that detailed long-term guidance would be shared at the November Investor Day. However, he confirmed opportunities for margin improvement across cost of sales, labor, and other expenses, suggesting a mid-to-long-run goal for Pizza Hut's margin to land somewhere between its current level and KFC's. This would be driven by efficiencies, automation, and lower-CapEx models like Pizza Hut Wow!.

Anne Ling from Jefferies requested more details on the performance of the KCOFFEE side-by-side stores, asking about the incremental sales benefit to the host KFC store and any available data on profitability.

Answer

CEO Joey Wat shared that the KCOFFEE side-by-side model provides a 'single-digit sales uplift' to the host store and is incrementally profitable due to its efficient operating model. She highlighted the rapid expansion to over 500 cafes and noted the significant growth opportunity, as a majority of Yum China's members have yet to try KCOFFEE.