Yum China’s Delivery and Menu Boosts Fast-Food Sales

KFC Yum China
Customers walk into a KFC store in downtown Shanghai (Photo: REUTERS)

Yum China's menu and deliveries jumped sales at its KFC and Pizza Hut outlets in the country following its slow growth in recent years. The company, that operates not less than 8.600 restaurants, announced last Tuesday that its revenue increased by 4 percent to $2.3 billion in the first quarter from the same period in 2018. Its sales increased by 4 percent in its existing stores.

Yum China suffered difficult years before its growth in the first quarter. The company's revenue growth was driven mainly by new openings. Last year, the same-store sales of Yum China grew just 1 percent while its Pizza hut outlets declined by 5 percent.

According to analysts, Yum China was slow in adapting to the growth in food delivery. Consumers also see the brand as stale. Joey Wat, the company's chief executive, said during an interview with the Financial Times that the key problem was that like any brand that has been around for a long time you need to refresh. He cited the company's new offerings including chicken wrapped in potato chips and peach-flavored tea.

In the first quarter of the year, same-store sales at Pizza Hut increased by 1 percent recovering from its decline in 2018. The increase is due to the change of items on the menu for three quarters. Ms. Wat said that when they come up with a new product that gets customers to come in, that is how they create same-store sales.

Yum China's New York-listed shares poorly performed in 2018 but it recovered by a third since the first month of the year. The company currently have 50,000 couriers and its deliveries now account for nearly 20 percent of its total sales.

Ms. Wat said that the increase in same-store sales would become more challenging because of a larger base but she believes that growth would be driven by the companies 650 outlets this year. She noted that there are 1,000 cities where we don't have stores.

According to her, wage and social security for the company's employees increased 6 percent a year. The company maintained the number of its employees due to the high demand of orders by mobile phone and digital screen in stores.

She said that nearly 90 percent of orders of KFC are paid digitally with an increase of 18 percent in 2016. She also said that in the past that store would have six or seven people at the counter collecting money, now that would be one or two because they have more digital and mobile orders.

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