This is an English adaptation of a FoodBud historical article originally published on February 15, 2024.
Yum! Brands reported full-year 2023 system sales of $63.8 billion, up from $59.3 billion in 2022 and $49.2 billion in 2021. Full-year revenue was $7.08 billion, with net income of $1.6 billion. Digital orders generated nearly $30 billion in revenue, up 22% year on year.
On the earnings call, CEO David Gibbs described 2023 as an exceptional year in which Yum crossed the $60 billion sales threshold. He said that in 2024, KFC’s global estate was expected to exceed 30,000 restaurants, Pizza Hut to exceed 20,000, and Yum! Brands overall to pass 60,000 restaurants.
Yum! Brands added 3,347 net new restaurants in 2023, reaching 58,708 restaurants globally by year-end.
By brand:
KFC’s largest system-sales market in 2023 was China, accounting for 27% of the brand’s global system sales, followed by the United States at 15%.
For Pizza Hut, the United States was the largest contributor at 41% of 2023 system sales, followed by China at 18%.
David Gibbs said he visited Yum China’s team in Shanghai in December 2023 and praised the business, describing Yum China as one of the world’s most outstanding restaurant-chain operators. He highlighted its ability to evolve continuously and its supply-chain advantages, which supported rapid growth and structural cost optimization.
Yum China reported full-year 2023 revenue of $10.98 billion, up 21% excluding foreign-currency translation. Of that growth, 9% came from net new stores and 7% from same-store sales growth. Net income was $800 million, up 87% year on year.
Digital orders exceeded $9.2 billion in revenue, representing 89% of company-store revenue. Yum China added 1,697 net new stores during the year, reaching 14,644 stores. KFC and Pizza Hut together had more than 470 million members, up 14% year on year. The most loyal K-Friends customers purchased more than 100 times per year, and member sales represented about 65% of KFC and Pizza Hut system sales.
KFC China passed 10,000 restaurants in 2023, ending the year with 10,296 stores. Nearly 40% of those stores had opened in the previous three years. KFC China added 1,202 net new stores and generated $8.2 billion in total revenue.
Delivery represented about 38% of KFC China’s restaurant revenue in the fourth quarter of 2023 and 36% for the full year. Off-premise business represented about 66% of full-year restaurant revenue, compared with 69% in 2022.
Pizza Hut China ended 2023 with 3,312 stores after adding 409 net new units. Full-year revenue was $2.2 billion. Delivery accounted for about 40% of restaurant revenue in the fourth quarter and 37% for the full year. Off-premise sales represented 46% of full-year sales, down from 52% in the prior year but still well above the pre-pandemic 2019 level of 30%.
Yum China’s 2024 outlook called for 1,500 to 1,700 net new stores, with a target of 20,000 total stores by 2026.
Yum China CEO Joey Wat and CFO Andy Yeung discussed several points relevant to operators:
1. KFC currently serves about one-third of China’s population. Its next target was to expand coverage to one-half of the population by 2026.
2. In recent years, more than half of Yum China’s new stores were opened in lower-tier cities. Management said these stores performed well because wages and rents were lower, while average ticket was similar to first-tier cities. The company said these stores primarily serve middle-class consumers in those markets, and that expanding the product price ladder can further enlarge the addressable market.
3. KFC’s new-store investment payback period was two years, while Pizza Hut’s was three years. In 2023, rent as a share of sales fell to 8.7%, the lowest level in 10 years.
4. Yum China launched more than 500 new or upgraded products in 2023. Several popular products entered what management called the $100 million sales club. The Golden SPA Chicken Burger, launched in the fourth quarter of 2022 with limited promotion, became one such product in 2023.
Additional product data included:
5. Yum China’s average ticket in the fourth quarter of 2023 was RMB 39. Analysts questioned whether widening the price ladder, including lower-price products, would pressure overall revenue. Joey Wat said KFC could balance RMB 20-level meal sets with beef burgers priced as high as RMB 50.
She also cited an earlier KFC example: when the company lowered the price of small Coke, few customers chose it. Yum China’s view is that lower-price products are needed to enter fifth- and sixth-tier cities and attract more young consumers, including students.
At Pizza Hut, average ticket declined from RMB 120 to RMB 90 over the previous five years. Management viewed this as effective: to open more stores and reach a more mass-market customer base, the brand needed suitable products and pricing to capture incremental demand. At the same time, with labor and rent costs rising, the company said it must keep improving employee productivity and management scope.
The broader approach is to use multiple price bands to expand the customer base, first increasing sales scale and then improving profit.
6. Joey Wat pushed back on the simple idea that China’s consumption was only trading down. She said China’s restaurant industry recovery in 2023 was energetic, with overall industry data showing double-digit growth of 20%. She argued that competitors were actively opening stores because the opportunity was visible.
Wat acknowledged that consumers had become more rational, but said consumption upgrading was also happening alongside China’s 5% GDP growth in 2023 and ongoing urbanization. Yum China tracks the top 6,000 shopping centers in China; 400 of them opened in 2023, with two-thirds opening in the second half. Excluding tourist-site and transportation-hub stores, which recovered strongly, Yum China stores in these shopping centers outperformed stores in other locations.
7. In the fourth quarter and full year of 2023, northern China recovered the best by region. By city tier, second-tier cities in central China recovered the best. Management pointed to regional hub cities with active economies and lower living costs. Changsha, Hunan was cited as an example: rent was only 10%-15% of Shanghai’s level, while average ticket was similar.
8. Yum China’s weekend business was stronger than weekday business, which management described as striking because weekend sales had been challenged after the pandemic. KFC’s whole-chicken product was positioned specifically to drive weekend delivery and takeaway occasions: customers could put a whole chicken on the table, add vegetables and rice, and create a complete meal.
Note: 2024 outlook and 2026 store targets are historical forward-looking figures from the original February 15, 2024 article.