In the third quarter, Yum China added 536 stores, racing in the "cost-performance era."

In the era of super cost-effectiveness in the restaurant industry, Yum China’s expansion speed is still accelerating.

In the third quarter of this year, Yum China's total revenue was $3.2 billion, a year-on-year increase of 4% excluding the impact of foreign currency translation, and operating profit increased by 8% year-on-year to 400 million yuan.

However, due to an investment in Meituan in the third quarter that had a negative impact of 8 million yuan, net profit saw a year-on-year decline of 5%.

The rapid growth in revenue is primarily due to the swift expansion of store numbers.

In this quarter, Yum China added a net of 536 new stores, bringing the total number of stores in China to 17,514 by the end of September. In reference to its annual target, the completion rate of its store opening plan has exceeded 60%.

Among them, KFC added a net of 402 new stores, setting a historical high for the third quarter.

The expansion speed of KFC's coffee brand, K Coffee, has once again surpassed the company's previous guidance.

Yum China had raised the annual store guidance for K Coffee twice during the financial disclosures for the first and second quarters. In August of this year, Yum China projected that K Coffee would reach a scale of 1,700 stores by the end of the year.

However, by the end of the third quarter, the actual scale of K Coffee had already reached 1,800 stores.

K Coffee adopts a store-in-store model "shoulder to shoulder" with KFC: it designates independent areas within existing KFC standard stores, sharing the kitchen and space, thereby significantly reducing the difficulty of site selection and initial capital investment for individual stores.

In addition, KPRO, which also operates in a store-in-store format and focuses on healthy light meals, has now expanded to over 100 stores in high-tier cities.

Yum China stated that most active members have not yet tried K Coffee and KPRO, indicating that this model holds great growth potential within the existing membership system.

Pizza Hut also set a record by adding a net of 158 new stores in the third quarter.

The WOW store model, which focuses on "single-person meals," has expanded to 250 stores, with nearly 50 new stores added since the beginning of the year, helping the Pizza Hut brand enter 40 new cities.

Yum China expects Pizza Hut's store scale to achieve double-digit year-on-year growth for the entire year.

From Yum China's sales performance, it is clear that cost-effectiveness remains the main theme of the current fast-food market.

Since the beginning of the year, KFC's OK meal and Pizza Hut's entry-level pizza have both achieved double-digit sales growth.

To respond to changes in the market environment, Yum China has implemented differentiated pricing strategies for its two major brands in recent years, ensuring profit margins: maintaining stable average spending per customer at KFC while strategically lowering prices at Pizza Hut.

However, the market has been cautious about its "price for volume" strategic path for a long time.

The reason is that, although Yum China's same-store transaction volume has increased year-on-year for 11 consecutive quarters, it only achieved positive same-store sales in the second quarter of this year.

In addition to the operational efficiency improvements brought by the "shoulder to shoulder" model and automation, another important lever for Yum China to enhance quality and efficiency is product innovation.

This involves how to rely on existing raw materials for product combinations and innovations without significantly increasing supply chain costs, expanding consumption scenarios, attracting a broader customer base, and thereby supporting profit margins under a low-price strategy.

For example, KFC's "Crispy Golden Chicken Wings" have quickly matched the sales of the classic New Orleans Grilled Wings, further expanding the sales scale of core categories; the pizza burger launched by Pizza Hut is also a reconfiguration of existing raw materials into a hamburger form, precisely supplementing the demand for "single-person meals." A person related to YUM China revealed to Xinfeng that KFC is exploring the launch of "big carbohydrate" products priced below 20 RMB through specific channels in certain regions to reach budget-conscious customers and enhance its appeal in lower-tier cities.

In the third quarter, the profit margins for KFC and Pizza Hut restaurants reached 18.5% and 13.4%, respectively, an increase of 20 and 60 basis points year-on-year.

However, with the rapid increase in the proportion of takeout business, operational efficiency is currently facing structural impacts.

During the same period, YUM China's takeout sales grew by 32% year-on-year, with its share of total restaurant revenue rising from 40% in the same period last year to 51%.

Qu Cuiyong stated at the earnings conference that despite an increase in promotional activities on delivery platforms, the company's core brands have consistently adhered to a strategy that balances growth and profitability, ensuring profit margins while driving customer traffic. In the long term, based on historical experience, the company expects subsidy levels to return to normal.

Benefiting from the traffic exposure brought by subsidies from delivery platforms, in the third quarter, KFC's daily sales of coffee cups increased by 30% year-on-year, while LAVAZZA achieved double-digit growth in same-store sales