Yum China Holdings, Inc.

What they do

Yum China operates and franchises restaurants in China under the KFC, Pizza Hut, Lavazza, Huang Ji Huang, Little Sheep and Taco Bell brands. It holds exclusive rights to operate and sublicense KFC, Pizza Hut and Taco Bell in China excluding Hong Kong, Macau and Taiwan, and owns the Little Sheep and Huang Ji Huang concepts outright. The company reported $11.8 billion of revenues in 2025.

Revenue drivers

• KFC — The largest QSR brand in China by 2025 system sales, with 13,789 restaurants as of June 30, 2026; KFC is one of two reportable segments and the largest revenue contributor.
• Pizza Hut — The largest casual dining restaurant brand in China by 2025 system sales, with 4,549 restaurants as of June 30, 2026; it is the second reportable segment.
• All Other Segments — Lavazza, Huang Ji Huang, Little Sheep, Taco Bell and the delivery operating segment, described as insignificant individually and in the aggregate relative to KFC and Pizza Hut.
• Franchise revenue — Franchisees pay upfront fees, ongoing royalties of approximately 6% of system sales on average, and payments for food, paper, advertising and delivery services.

Recent performance

For Q2 2026, total revenues rose 13% YoY to $3.1 billion, with system sales up 6% excluding F/X and same-store sales up 1%. Operating profit grew 14% to $348 million and diluted EPS rose 21% to $0.70. The company opened 560 net new stores, a second-quarter record, and total store count reached 19,297. Delivery sales grew 26% YoY and represented approximately 54% of total Company sales.

Strategy

Management is focused on expanding geographic footprint in existing and new cities, with 560 net new stores opened in Q2 2026 and 41% opened by franchisees. It is rolling out KCOFFEE cafe, KPRO and car-side pickup at KFC, and Pizza Hut Burger Bar, while using KFC Small Town and Pizza Hut WOW formats to penetrate lower-tier cities. The company expects to close its acquisition of the Pizza Hut brand in Mainland China in August 2026, which it says will remove license fees and support margin expansion. It targets returning $1.5 billion to shareholders in 2026, roughly 10% of current market capitalization.

Risks

• Dynamic operating environment — The CEO stated the operating environment remains dynamic, and the company faces tougher comparisons in the second half of 2026 following last year's delivery platform subsidies.
• Delivery cost pressure — Restaurant margin was flat YoY at 16.1% in Q2 2026, primarily due to increased rider cost from a higher delivery mix, offset by streamlined operations.
• Foreign exchange exposure — The company presents certain metrics excluding F/X because currency translation affects reported results; Q2 2026 EPS growth was 21% as reported but 14% excluding F/X.
• Pizza Hut acquisition integration — The acquisition of the Pizza Hut brand in Mainland China is expected to close in August 2026, and management cites expected license fee savings and margin expansion from the transaction.

Outlook

Management said it is confident in delivering full-year growth targets, while acknowledging tougher comparisons in the second half of 2026 after last year's delivery platform subsidies. It expects the Pizza Hut brand acquisition to support margin expansion, with Pizza Hut's restaurant margin approaching KFC's. It also expects more potential new stores to meet payback requirements of two to three years.