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What changed in Yum China Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Yum China Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+470 added−447 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-29)

Top changes in Yum China Holdings, Inc.'s 2024 10-K

470 paragraphs added · 447 removed · 378 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

118 edited+20 added−17 removed159 unchanged
Biggest changeOur China subsidiaries may deduct reasonable expenses that are actually incurred and are related to the generation of their income, including interest and other borrowing expenses, amortization of land use rights and depreciation of buildings and certain fixed assets, subject to any restrictions that may be imposed under the EIT Law, its implementation regulations and any applicable tax notices and circulars issued by the Chinese government or tax authorities.
Biggest changeOur China subsidiaries may deduct reasonable expenses that are actually incurred and are related to the generation of their income, including interest and other borrowing expenses, amortization of land use rights and depreciation of buildings and certain fixed assets, subject to any restrictions that may be imposed under the EIT Law, its implementation regulations and any applicable tax notices and circulars issued by the Chinese government or tax authorities. 12 2024 Form 10-K Yum China and each subsidiary of Yum China that is organized outside of China intends to conduct its management functions in a manner that does not cause it to be a China resident enterprise, including by carrying on its day-to-day management activities and maintaining its key records, such as resolutions of its board of directors and resolutions of stockholders, outside of China.
Accordingly, we face various legal and operational risks and uncertainties under the complex and evolving Chinese laws and regulations, including the following: • Changes in Chinese political policies and economic and social policies or conditions may materially and adversely affect our business, results of operations and financial condition and may result in our inability to sustain our growth and expansion strategies. • The interpretation and enforcement of Chinese laws, rules and regulations may change from time to time, which could have a material adverse effect on us. • The audit report included in this Form 10-K is prepared by auditors who are located in China, and in the event the Public Company Accounting Oversight Board is unable to inspect our auditors, our common stock will be subject to potential delisting from the New York Stock Exchange. • Changes in political, business, economic and trade relations between the United States and China may have a material adverse impact on our business, results of operations and financial condition. • Fluctuation in the value of RMB may result in foreign currency exchange losses. • The increasing focus on environmental sustainability issues may create operational challenges for us, increase our costs and harm our reputation. • Interventions in or the imposition of restrictions and limitations by the PRC government on currency conversion and payments of foreign currency and RMB out of mainland China may limit our ability to utilize our cash balances effectively, including making funds held by our China-based subsidiaries unavailable for use outside of mainland China, which could limit or eliminate our ability to pay dividends and affect the value of your investment. • Changes in the laws and regulations of China or noncompliance with applicable laws and regulations may have a significant impact on our business, results of operations and financial condition, and may cause the value of our securities to decline. • We rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries in China to fund offshore cash requirements. • Under the EIT Law, if we are classified as a China resident enterprise for Chinese enterprise income tax purposes, such classification would likely result in unfavorable tax consequences to us and our non-Chinese stockholders. • We and our stockholders face uncertainty with respect to indirect transfers of equity interests in China resident enterprises through transfer of non-Chinese-holding companies.
Accordingly, we face various legal and operational risks and uncertainties under the complex and evolving Chinese laws and regulations, including the following: • Changes in Chinese political policies and economic and social policies or conditions may materially and adversely affect our business, results of operations and financial condition and may result in our inability to sustain our growth and expansion strategies. 8 2024 Form 10-K • The interpretation and enforcement of Chinese laws, rules and regulations may change from time to time, which could have a material adverse effect on us. • The audit report included in this Form 10-K is prepared by auditors who are located in China, and in the event the Public Company Accounting Oversight Board is unable to inspect our auditors, our common stock will be subject to potential delisting from the New York Stock Exchange. • Changes in political, business, economic and trade relations between the United States and China may have a material adverse impact on our business, results of operations and financial condition. • Fluctuation in the value of RMB may result in foreign currency exchange losses. • The increasing focus on environmental sustainability issues may create operational challenges for us, increase our costs and harm our reputation. • Interventions in or the imposition of restrictions and limitations by the PRC government on currency conversion and payments of foreign currency and RMB out of mainland China may limit our ability to utilize our cash balances effectively, including making funds held by our China-based subsidiaries unavailable for use outside of mainland China, which could limit or eliminate our ability to pay dividends and affect the value of your investment. • Changes in the laws and regulations of China or noncompliance with applicable laws and regulations may have a significant impact on our business, results of operations and financial condition, and may cause the value of our securities to decline. • We rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries in China to fund offshore cash requirements. • Under the EIT Law, if we are classified as a China resident enterprise for Chinese enterprise income tax purposes, such classification would likely result in unfavorable tax consequences to us and our non-Chinese stockholders. • We and our stockholders face uncertainty with respect to indirect transfers of equity interests in China resident enterprises through transfer of non-Chinese-holding companies.
Each employee, without regard to race, religion, color, age, gender or gender identity, disability, military or veteran status, sexual orientation, citizenship or national origin, is provided with fair opportunity on the Company’s diverse platform. Gender Equality The Company is committed to gender equality by providing fair recruitment, training and promotion opportunities for all employees.
Each employee, without regard to race, religion, color, age, gender or gender identity, disability, military or veteran status, sexual orientation, citizenship or national origin, is provided with fair opportunity on the Company’s platform. The Company is committed to equality by providing fair recruitment, training and promotion opportunities for all employees.
By the end of 2023, our female employees represented more than 50% of the total workforce. The Company continues to make progress in nurturing talented leaders across all management levels. By the end of 2023, women holding director and above positions represented 53% of our senior management workforce.
By the end of 2024, our female employees represented more than 50% of the total workforce. The Company continues to make progress in nurturing talented leaders across all management levels. By the end of 2023, women holding director and above positions represented 53% of our senior management workforce.
Risk Factors—Risks Related to Doing Business in China—The audit report included in this Form 10-K is prepared by auditors who are located in China, and in the event the PCAOB is unable to inspect our auditors, our common stock will be subject to potential delisting from the New York Stock Exchange.” 15 2023 Form 10-K Intellectual Property Our use of certain material trademarks and service marks is governed by a master license agreement between Yum Restaurants Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned indirect subsidiary of the Company, and Yum!
Risk Factors—Risks Related to Doing Business in China—The audit report included in this Form 10-K is prepared by auditors who are located in China, and in the event the PCAOB is unable to inspect our auditors, our common stock will be subject to potential delisting from the New York Stock Exchange.” 15 2024 Form 10-K Intellectual Property Our use of certain material trademarks and service marks is governed by a master license agreement between Yum Restaurants Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned indirect subsidiary of the Company, and Yum!
We are dedicated to adopting innovations in our business model and restaurant operations, which enables us to comprehensively reach our guests and provide superior products and services in a technology-driven and happy way, as vividly demonstrated by our slogan “Good food, good fun, and good value.” We believe we are a pioneer and first-mover among restaurant brands in China in utilizing and investing in emerging digital technologies to modernize our business operations and accelerate our growth, which is critical to empower and maintain our competitive advantage in China.
We are dedicated to adopting innovations in our business model and restaurant operations to comprehensively reach our guests and provide superior products and services in a technology-driven and happy way, as vividly demonstrated by our slogan “Good food, good fun, and good value.” We believe we are a pioneer and first-mover among restaurant brands in China in utilizing and investing in emerging digital technologies to modernize our business operations and accelerate our growth, which is critical to empower and maintain our competitive advantage in China.
Diversity, Inclusion and Equal Opportunities The Company is committed to fostering a working environment that is professional, inclusive and non-discriminatory for employees. In our workplaces, differences are understood, appreciated and encouraged.
Diversity, Inclusion and Equal Opportunities for All Employees The Company is committed to fostering a working environment that is professional, inclusive and non-discriminatory for employees. In our workplaces, differences are understood, appreciated and encouraged.
In particular, the OECD's Pillar Two initiative introduces a 15% global minimum tax applied on a country-by-country basis and for which many jurisdictions have now committed to an effective enactment date starting January 1, 2024. See “Item 1A. Risk Factors” for a discussion of risks relating to federal, state, local and international regulation relating to taxation of our business.
In particular, the OECD’s Pillar Two initiative introduces a 15% global minimum tax applied on a jurisdiction-by-jurisdiction basis and for which many jurisdictions have now committed to an effective enactment date starting January 1, 2024. See “Item 1A. Risk Factors” for a discussion of risks relating to federal, state, local and international regulation relating to taxation of our business.
Measured by number of restaurants, we believe Pizza Hut has an approximate four-to-one lead over its nearest western CDR competitor in China as of the end of 2023. 2 2023 Form 10-K Other Concepts In addition to KFC and Pizza Hut, our restaurant brand portfolio also includes Lavazza, Huang Ji Huang, Little Sheep and Taco Bell. Lavazza .
Measured by number of restaurants, we believe Pizza Hut has an approximate four-to-one lead over its nearest western CDR competitor in China as of the end of 2024. 2 2024 Form 10-K Other Concepts In addition to KFC and Pizza Hut, our restaurant brand portfolio also includes Lavazza, Huang Ji Huang, Little Sheep and Taco Bell. Lavazza .
Going forward, we intend to continue to optimize our delivery service by adopting innovative technologies, rolling out new delivery menu items and developing novel delivery service concepts, such as our dynamically adjusting delivery coverage for each store by daypart, taking into account the operating hours of nearby stores. 4 2023 Form 10-K Enhance digital capabilities.
Going forward, we intend to continue to optimize our delivery service by adopting innovative technologies, rolling out new delivery menu items and developing novel delivery service concepts, such as our dynamically adjusting delivery coverage for each store by daypart, taking into account the operating hours of nearby stores. 4 2024 Form 10-K Enhance digital capabilities.
In addition, our centralized recruitment process frees up our RGMs from spending significant amount of time on administrative tasks, allowing them to focus on operational tasks. 17 2023 Form 10-K The Company offers a tailored and fast-tracked YUMC Management Trainee Program for fresh graduate trainees in its marketing and supply chain functions.
In addition, our centralized recruitment process frees up our RGMs from spending significant amount of time on administrative tasks, allowing them to focus on operational tasks. 17 2024 Form 10-K The Company offers a tailored and fast-tracked YUMC Management Trainee Program for fresh graduate trainees in its marketing and supply chain functions.
We are working toward our target of a 30% reduction of non-degradable plastic packaging weight by 2025, as compared to a 2019 baseline. 19 2023 Form 10-K Nutrition We advocate a balanced diet and healthy eating habits through product innovation, variety in offerings, industry communication, public education and other relevant measures.
We are working toward our target of a 30% reduction of non-degradable plastic packaging weight by 2025, as compared to a 2019 baseline. 19 2024 Form 10-K Nutrition We advocate a balanced diet and healthy eating habits through product innovation, variety in offerings, industry communication, public education and other relevant measures.
The KFC, Pizza Hut, Lavazza, Huang Ji Huang, Little Sheep and Taco Bell brands are collectively referred to as the “brands” or “concepts.” Throughout this Form 10-K, the terms “brands” and “concepts” are used interchangeably and “restaurants,” “stores” and “units” are used interchangeably. General Yum China is the largest restaurant company in China in terms of 2023 system sales.
The KFC, Pizza Hut, Lavazza, Huang Ji Huang, Little Sheep and Taco Bell brands are collectively referred to as the “brands” or “concepts.” Throughout this Form 10-K, the terms “brands” and “concepts” are used interchangeably and “restaurants,” “stores” and “units” are used interchangeably. General Yum China is the largest restaurant company in China in terms of 2024 system sales.
The IRA contains certain tax measures, including an excise tax of 1% on net share repurchases that occur after December 31, 2022. For more information on our dividends and share repurchases, see the Consolidated Statements of Cash Flows and Note 15 to the Consolidated Financial Statements under “Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
The IRA contains certain tax measures, including an excise tax of 1% on net share repurchases that occur after December 31, 2022. For more information on our dividends and share repurchases, see the Consolidated Statements of Cash Flows and Note 14 to the Consolidated Financial Statements under “Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
We also conduct regular product quality inspections on main menu items, and perform microbiological testing of restaurants’ utensils, small wares, water, ice and food to ensure they meet the required standards. 6 2023 Form 10-K We have established a team managing delivery services for our restaurants.
We also conduct regular product quality inspections on main menu items, and perform microbiological testing of restaurants’ utensils, small wares, water, ice and food to ensure they meet the required standards. 6 2024 Form 10-K We have established a team managing delivery services for our restaurants.
We completed the evaluation of the impact on our transition tax computation based on the final regulations released in the first quarter of 2019 and recorded additional income tax expense for the transition tax accordingly. 14 2023 Form 10-K Inflation Reduction Act of 2022 (the “IRA”). In August 2022, the IRA was signed into law in the U.S.
We completed the evaluation of the impact on our transition tax computation based on the final regulations released in the first quarter of 2019 and recorded additional income tax expense for the transition tax accordingly. 14 2024 Form 10-K Inflation Reduction Act of 2022 (the “IRA”). In August 2022, the IRA was signed into law in the U.S.
We expect to expand our business through organic growth, growth of franchise units and development of our emerging brands. 5 2023 Form 10-K Our expansion strategy has been systematically focused on high potential locations across city tiers, including increasing store density in existing cities and entering new cities.
We expect to expand our business through organic growth, growth of franchise units and development of our emerging brands. 5 2024 Form 10-K Our expansion strategy has been systematically focused on high potential locations across city tiers, including increasing store density in existing cities and entering new cities.
These reports may also be obtained by visiting the SEC’s website at http://www.sec.gov . The reference to the Company’s website address and the SEC’s website address is for informational purposes only, does not constitute incorporation by reference of the information contained on the websites and should not be considered part of this Form 10-K.
These reports may also be obtained by visiting the SEC’s website at http://www.sec.gov . 21 2024 Form 10-K The reference to the Company’s website address and the SEC’s website address is for informational purposes only, does not constitute incorporation by reference of the information contained on the websites and should not be considered part of this Form 10-K.
For more information regarding the Company’s cash flows, see our Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 and the related notes to our Consolidated Financial Statements. Cash Management Policies The Company has comprehensive cash management policies in place, including specific policies governing approvals with respect to fund transfers throughout our organization.
For more information regarding the Company’s cash flows, see our Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 and the related notes to our Consolidated Financial Statements. Cash Management Policies The Company has comprehensive cash management policies in place, including specific policies governing approvals with respect to fund transfers throughout our organization.
Treasury Department and the IRS released Notice 2023-7, announcing their intention to issue proposed regulations addressing the application of the new CAMT. In 2023, additional notices were released to continue to provide interim guidance regarding certain CAMT issues before proposed regulations are published. Hong Kong Profits Tax.
Treasury Department and the IRS released Notice 2023-7, announcing their intention to issue proposed regulations addressing the application of the new CAMT. In 2023 and 2024, additional notices or proposed regulations were released to continue to provide interim guidance regarding certain CAMT issues before proposed regulations are published. Hong Kong Profits Tax.
KFC primarily competes with western QSR brands in China, such as McDonald’s, Dicos and Burger King, among which we believe KFC had an approximate two-to-one lead over its nearest competitor in terms of store count as of the end of 2023.
KFC primarily competes with western QSR brands in China, such as McDonald’s, Dicos and Burger King, among which we believe KFC had an approximate two-to-one lead over its nearest competitor in terms of store count as of the end of 2024.
Repatriation of Dividends from Our China Subsidiaries. Dividends (if any) paid by our China subsidiaries to their direct offshore parent companies are subject to Chinese withholding income tax at the rate of 10%, provided that such dividends are not effectively connected with any establishment or place of the offshore parent company in China.
Dividends (if any) paid by our China subsidiaries to their direct offshore parent companies are subject to Chinese withholding income tax at the rate of 10%, provided that such dividends are not effectively connected with any establishment or place of the offshore parent company in China.
The Organization for Economic Cooperation and Development (the "OECD"), the European Union and other jurisdictions (including jurisdictions in which we have operations or presence) have committed to enacting substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed.
The Organization for Economic Cooperation and Development (the “OECD”), the European Union and other jurisdictions (including jurisdictions in which we have operations or presence) have committed to enacting substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed.
Enhanced scrutiny by the Chinese tax authorities may have a negative impact on potential acquisitions and dispositions we may pursue in the future. • There may be difficulties in effecting service of legal process, conducting investigations, collecting evidence, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us and our management. • The Chinese government may determine that the variable interest entity structure of Daojia does not comply with Chinese laws on foreign investment in restricted industries. • Certain defects caused by non-registration of our lease agreements related to certain properties occupied by us in China may materially and adversely affect our ability to use such properties. • Our restaurants are susceptible to risks in relation to unexpected land acquisitions, building closures or demolitions. • Any failure to comply with Chinese regulations regarding our employee equity incentive plans may subject Chinese plan participants or us to fines and other legal or administrative sanctions. • Failure to make adequate contributions to various employee benefit plans as required by Chinese regulations may subject us to penalties. • Proceedings instituted by the Securities and Exchange Commission (the “SEC”) against certain China-based accounting firms, including our independent registered public accounting firm, could result in our financial statements being determined to not be in compliance with the requirements of the Exchange Act. 9 2023 Form 10-K • Chinese regulation of loans to, and direct investment in, Chinese entities by offshore holding companies and governmental administration of currency conversion may restrict or prevent us from making loans or additional capital contributions to our Chinese subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business. • Regulations regarding acquisitions may impose significant regulatory approval and review requirements, which could make it more difficult for us to pursue growth through acquisitions. • The PRC government has significant oversight and discretion to exert supervision over offerings of our securities conducted outside of China and foreign investment in China-based issuers, and may limit or completely hinder our ability to offer securities to investors, which may cause the value of such securities to significantly decline.
Enhanced scrutiny by the Chinese tax authorities may have a negative impact on potential acquisitions and dispositions we may pursue in the future. • There may be difficulties in effecting service of legal process, conducting investigations, collecting evidence, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us and our management. • The Chinese government may determine that the variable interest entity structure of Daojia does not comply with Chinese laws on foreign investment in restricted industries. • Certain defects caused by non-registration of our lease agreements related to certain properties occupied by us in China may materially and adversely affect our ability to use such properties. • Our restaurants are susceptible to risks in relation to unexpected land acquisitions, building closures or demolitions. • Any failure to comply with Chinese regulations regarding our employee equity incentive plans may subject Chinese plan participants or us to fines and other legal or administrative sanctions. • Failure to make adequate contributions to various employee benefit plans as required by Chinese regulations may subject us to penalties. • Proceedings instituted by the Securities and Exchange Commission (the “SEC”) against certain China-based accounting firms, including our independent registered public accounting firm, could result in our financial statements being determined to not be in compliance with the requirements of the Exchange Act. • Chinese regulation of loans to, and direct investment in, Chinese entities by offshore holding companies and governmental administration of currency conversion may restrict or prevent us from making loans or additional capital contributions to our Chinese subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business. • Regulations regarding acquisitions may impose significant regulatory approval and review requirements, which could make it more difficult for us to pursue growth through acquisitions. • The PRC government has significant oversight and discretion to exert supervision over offerings of our securities conducted outside of China and foreign investment in China-based issuers, and may limit or completely hinder our ability to offer securities to investors, which may cause the value of such securities to significantly decline. 9 2024 Form 10-K These risks could result in a material adverse change in our operations and the value of our shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless.
Pizza Hut Pizza Hut is the leading and the largest casual dining restaurant (“CDR”) brand in China in terms of 2023 system sales and number of restaurants as of December 31, 2023, offering multiple dayparts, including breakfast, lunch, afternoon tea and dinner.
Pizza Hut Pizza Hut is the leading and the largest casual dining restaurant (“CDR”) brand in China in terms of 2024 system sales and number of restaurants as of December 31, 2024, offering multiple dayparts, including breakfast, lunch, afternoon tea and dinner.
We may be subject to these taxes in the event of any future sale by us of a China resident enterprise. 13 2023 Form 10-K Gains on Indirect Disposal of Equity Interests in Our China Subsidiaries.
We may be subject to these taxes in the event of any future sale by us of a China resident enterprise. 13 2024 Form 10-K Gains on Indirect Disposal of Equity Interests in Our China Subsidiaries.
If we decide to finance our wholly-owned Chinese subsidiaries by means of capital contributions, in practice, we might be still required to obtain approval from China’s Ministry of Commerce (“MOFCOM”) or other regulatory authorities.
If we decide to finance our wholly-owned Chinese subsidiaries by means of capital contributions, in practice, we might be still required to report to China’s Ministry of Commerce (“MOFCOM”) or obtain approval from other authorities.
Meanwhile, the Company has established a comprehensive welfare and care system known as "YUMC Care", which offers employees benefits tailored to their life stage and individual needs. For example, the Company provides RMB 1 million medical insurance coverage for each RGM, family care scheme for restaurant management teams, and critical illness insurance for service team leaders.
Meanwhile, the Company has established a comprehensive welfare and care system known as “YUMC Care,” which offers employees benefits tailored to their life stage and individual needs. For example, the Company provides RMB 1 million medical insurance coverage for each RGM, family care scheme for restaurant management teams, and critical illness insurance for service team leaders.
The Company owns and operates a substantial portion of these logistics centers. Our current network covers our stores in more than 2,000 cities and towns, with capacity to cover more than 3,000 cities and towns.
The Company owns and operates a substantial portion of these logistics centers. Our current network covers our stores in over 2,200 cities and towns, with capacity to cover more than 3,000 cities and towns.
We are also building a coffee portfolio to capture the underserved coffee market in China across different customer segments, including coffee products provided by KFC, which offers convenience and value. In addition to our extensive network of KFC stores, KFC also offers coffee products through our TO-GO windows, coffee trucks or counters, and standalone coffee stores.
We are also building a coffee portfolio to capture the underserved coffee market in China across different customer segments, including coffee products provided by KFC, which offers convenience and value. In addition to our extensive network of KFC stores, KFC also offers coffee products through our TO-GO windows, coffee trucks or counters, and KCOFFEE Cafes.
Moreover, managers and staff are also equipped with self-designed "smart watches", and in some pilot stores, "smart glasses", to closely monitor the real-time ordering and serving procedures of the restaurants and make timely staffing adjustments, which substantially improves management efficiency and guest satisfaction.
Moreover, managers and staff are also equipped with self-designed “smart watches,” and in some pilot stores, “smart glasses,” to closely monitor the real-time ordering and serving procedures of the restaurants and make timely staffing adjustments, which substantially improves management efficiency and guest satisfaction.
Cash may also be transferred among the Company’s China subsidiaries and their offshore holding companies by means of intercompany loans. No such intercompany loans were made in 2023.
Cash may also be transferred among the Company’s China subsidiaries and their offshore holding companies by means of intercompany loans. No such intercompany loans were made in 2024.
Little Sheep had 163 units in both China and international markets as of December 31, 2023. Little Sheep primarily operates a franchise model. Taco Bell. Taco Bell is the world’s leading western QSR brand specializing in Mexican-style food, including tacos, burritos, quesadillas, salads, nachos and similar items. We opened our first Taco Bell restaurant in Shanghai, China, in December 2016.
Little Sheep had 183 units in both China and international markets as of December 31, 2024. Little Sheep primarily operates a franchise model. Taco Bell. Taco Bell is the world’s leading western QSR brand specializing in Mexican-style food, including tacos, burritos, quesadillas, salads, nachos and similar items. We opened our first Taco Bell restaurant in Shanghai, China, in December 2016.
We will continue to promote signature value campaigns such as “Crazy Thursday” and “Buy More Save More on Sunday” for KFC and “Scream Wednesday” for Pizza Hut, which offer selected menu items at attractive prices, and have received positive consumer feedback.
We continue to promote signature value campaigns such as “Crazy Thursday” and “Buy More Save More on Weekends” for KFC and “Scream Wednesday” for Pizza Hut, which offer selected menu items at attractive prices, and have received positive consumer feedback.
Continuing Education Program The Company sponsors a continuing education program to help employees obtain college degrees. By the end of 2023, around 5,000 employees were granted subsidies and achieved higher education degrees through our continuing education program. In addition, the Company also provides scholarships for eligible employees to achieve postgraduate degrees.
Continuing Education Program The Company sponsors a continuing education program to help employees obtain higher education degrees. By the end of 2024, around 5,000 employees were granted subsidies and achieved higher education degrees through our continuing education program. In addition, the Company also provides scholarships for eligible employees to achieve postgraduate degrees.
See “Risk Factors—Risks Related to Our Business and Industry—Unauthorized access to, or improper use, disclosure, theft or destruction of, our customer or employee personal, financial or other data or our proprietary or confidential information that is stored in our information systems or by third parties on our behalf could result in substantial costs, expose us to litigation and damage our reputation;” and 11 2023 Form 10-K • We may be subject to regulations relating to overseas securities offering and listing of China-based companies, including pursuant to the Opinions on Intensifying Crack Down on Illegal Securities Activities issued by the PRC government authorities, which called for enhanced oversight of overseas listed companies as well as overseas equity fundraising and listing by Chinese companies, and proposed measures such as the construction of regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies; the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and the supporting guidelines issued by the CSRC, which regulate overseas securities offering and listing activities by China-based companies; the draft Regulations on Network Data Security Management issued by the CAC, which requires, among other things, that a prior cybersecurity review be conducted by the Cybersecurity Review Office before listing overseas for data processors which process over one million users’ personal information, and for the listing in Hong Kong of data processors which affect or may affect national security; the Revised Cybersecurity Review Measures, jointly issued by the National Development and Reform Commission, the Ministry of Industry and Information Technology of the PRC, and several other administrations, which require, among other things, that a network platform operator holding over one million users’ personal information must apply with the Cybersecurity Review Office for a cybersecurity review before any public offering or listing outside of mainland PRC and Hong Kong.
See “Risk Factors—Risks Related to Our Business and Industry—Unauthorized access to, or improper use, disclosure, theft or destruction of, our customer or employee personal, financial or other data or our proprietary or confidential information that is stored in our information systems or by third parties on our behalf could result in substantial costs, expose us to litigation and damage our reputation;” and 11 2024 Form 10-K • We may be subject to regulations relating to overseas securities offering and listing of China-based companies, including pursuant to the Opinions on Intensifying Crack Down on Illegal Securities Activities issued by the PRC government authorities, which called for enhanced oversight of overseas listed companies as well as overseas equity fundraising and listing by Chinese companies, and proposed measures such as the construction of regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies; the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and the supporting guidelines issued by the CSRC, which regulate overseas securities offering and listing activities by China-based companies; the Revised Cybersecurity Review Measures, jointly issued by the National Development and Reform Commission, the Ministry of Industry and Information Technology of the PRC, and several other administrations, which require, among other things, that a network platform operator holding over one million users’ personal information must apply with the Cybersecurity Review Office for a cybersecurity review before any public offering or listing outside of mainland PRC and Hong Kong.
Founded in 2004, Huang Ji Huang had 631 units in China and internationally as of December 31, 2023. Huang Ji Huang primarily operates a franchise model and is an industry-leading simmer pot brand. Little Sheep. Little Sheep, with its roots in Inner Mongolia, China, specializes in “Hot Pot” cooking, which is very popular in China, particularly during the winter months.
Founded in 2004, Huang Ji Huang had 686 units in China and internationally as of December 31, 2024. Huang Ji Huang primarily operates a franchise model and is an industry-leading simmer pot brand. Little Sheep. Little Sheep, with its roots in Inner Mongolia, China, specializes in “Hot Pot” cooking, which is very popular in China, particularly during the winter months.
We continuously enhance our Super Apps to address the needs of customers and improve their digital experience. For example, we introduced member-exclusive perks, App-exclusive new product pre-sales and lucky draws to attract our customers. In 2023, digital ordering accounted for approximately 89% of total Company sales.
We continuously enhance our Super Apps to address the needs of customers and improve their digital experience. For example, we introduced member-exclusive perks, App-exclusive new product pre-sales and lucky draws to attract our customers. In 2024, digital ordering accounted for approximately 90% of total Company sales.
Before joining Lear Corporation, Ms. Lu spent 10 years in public accounting with Ernst & Young, specializing in audits and initial public offerings of companies listed in the U.S., SEC reporting and Sarbanes-Oxley compliance. Ms. Lu is a certified public accountant in California and a member of the American Institute of Certified Public Accountants.
Lu spent 10 years in public accounting with Ernst & Young, specializing in audits and initial public offerings of companies listed in the U.S., SEC reporting and Sarbanes-Oxley compliance. Ms. Lu is a certified public accountant in California and a member of the American Institute of Certified Public Accountants.
Our policy is to pursue registration of our important intellectual property rights whenever feasible and to oppose vigorously any infringement of our rights. Competition Data from the National Bureau of Statistics of China indicates that sales in the restaurant industry in China totaled approximately RMB 5,289 billion in 2023, representing an increase of 20% compared with prior year.
Our policy is to pursue registration of our important intellectual property rights whenever feasible and to oppose vigorously any infringement of our rights. Competition Data from the National Bureau of Statistics of China indicates that sales in the restaurant industry in China totaled approximately RMB 5,572 billion in 2024, representing an increase of 5% compared with prior year.
These documents, as well as our SEC filings, are available in print free of charge to any stockholder who requests a copy from our Investor Relations Department by contacting Yum China at 101 East Park Boulevard, Suite 805, Plano, Texas 75074, United States of America, Attention: Investor Relations. 22 2023 Form 10-K
These documents, as well as our SEC filings, are available in print free of charge to any stockholder who requests a copy from our Investor Relations Department by contacting Yum China at 101 East Park Boulevard, Suite 805, Plano, Texas 75074, United States of America, Attention: Investor Relations.
We believe that there are significant opportunities to further expand within China, and we intend to focus our efforts on increasing our geographic footprint in both existing and new cities. As of December 31, 2023, we owned and operated approximately 86% of our restaurants.
We believe that there are significant opportunities to further expand within China, and we intend to focus our efforts on increasing our geographic footprint in both existing and new cities. As of December 31, 2024, we owned and operated approximately 85% of our restaurants.
Furthermore, our robotic servers have been rolled out in nearly half of our Pizza Hut restaurants, an effort we have been continuously carrying out nationwide that not only brings better digital experience but also saves on crew work.
Furthermore, our robotic servers have been rolled out in over 60% of our Pizza Hut restaurants, an effort we have been continuously carrying out nationwide that not only brings better digital experience but also saves on crew work.
As we are opening more smaller format stores and actively managing costs, the average capital spending for each new KFC and Pizza Hut restaurant unit in 2023 was approximately RMB1.5 million and 1.3 million, respectively.
As we are opening more smaller format stores and actively managing costs, the average capital spending for each new KFC and Pizza Hut restaurant unit in 2024 was approximately RMB1.5 million and 1.2 million, respectively.
In addition, Yum China makes investments in its China subsidiaries through capital contributions to further support their operational and growth needs. In 2023, one of Yum China’s subsidiaries, which was incorporated in Hong Kong, made capital contributions to its subsidiaries in China totaling approximately $100 million.
In addition, Yum China makes investments in its China subsidiaries through capital contributions to further support their operational and growth needs. In 2024, one of Yum China’s subsidiaries, which was incorporated in Hong Kong, made capital contributions to its subsidiaries in China totaling approximately $12 million.
As of December 31, 2023, there were 122 Lavazza coffee shops in China. The retail business involves selling retail coffee products beyond Lavazza coffee shops. Huang Ji Huang. In April 2020, we completed the acquisition of a controlling interest in Huang Ji Huang.
As of December 31, 2024, there were 112 Lavazza coffee shops in China. The retail business involves selling retail coffee products beyond Lavazza coffee shops. Huang Ji Huang. In April 2020, we completed the acquisition of a controlling interest in Huang Ji Huang.
Chinese Nutrition Society - Yum China Dietary Health Foundation has now become one of the largest and most influential special research foundations in China in the field of health and nutrition. We also cooperate with the China Foundation for Rural Development to encourage public donations to improve child nutrition in rural areas.
Chinese Nutrition Society - Yum China Dietary Health Foundation has now become one of the most influential specialized research foundations in China in the field of health and nutrition in the restaurant industry. We also cooperate with the China Foundation for Rural Development to encourage public donations to improve child nutrition in rural areas.
We believe supply chain management is crucial to the sustainability of our business and we are dedicated to applying digitalization and automation technologies in our supply chain management system. Our in-house and integrated supply chain management system employs more than 1,300 staff in food safety, quality assurance, procurement management, logistics, engineering and supply chain system.
We believe supply chain management is crucial to the sustainability of our business and we are dedicated to applying digitalization and automation technologies in our supply chain management system. Our in-house and integrated supply chain management system employs over 1,000 staff in food safety, quality assurance, procurement management, logistics, engineering and supply chain system.
We believe our digitalization along with automation, the Internet of Things and AI work together to enhance food safety and improve overall store efficiency. 8 2023 Form 10-K Doing Business in China Risks Related to Doing Business in China Substantially all of our business operations are located in China.
We believe our digitalization along with automation, the Internet of Things and AI work together to enhance food safety and improve overall store efficiency. Doing Business in China Risks Related to Doing Business in China Substantially all of our business operations are located in China.
Combining flexible store models and lower upfront investment opens up more site potential across city tiers. In addition, we continuously look for ways to improve the guest experience. We continue to refresh the look of our restaurants and remodel with the latest technology, equipment and infrastructure.
We continue to lower the capital expenditures per store to tap into more locations. Combining flexible store models and lower upfront investment opens up more site potential across city tiers. In addition, we continuously look for ways to improve the guest experience. We continue to refresh the look of our restaurants and remodel with the latest technology, equipment and infrastructure.
On December 16, 2021, the PCAOB issued a report on its determination that it was unable to inspect or investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong because of positions taken by Chinese authorities in those jurisdictions.
On December 16, 2021, the PCAOB issued a report on its determination that it was unable to inspect or investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong because of positions taken by Chinese authorities in those jurisdictions. Our independent registered public accounting firm was subject to the determinations announced by the PCAOB on December 16, 2021.
Since opening its first China restaurant unit in Beijing in 1990, Pizza Hut has grown rapidly and, as of year-end 2023, there were 3,312 Pizza Hut restaurants in over 700 cities across China. Pizza Hut has an extensive menu offering a broad variety of pizzas, steaks, pasta, rice dishes and other entrees, appetizers, beverages and desserts.
Since opening its first China restaurant unit in Beijing in 1990, Pizza Hut has grown rapidly and, as of year-end 2024, there were 3,724 Pizza Hut restaurants in over 800 cities across China. Pizza Hut has an extensive menu offering a broad variety of pizzas, pasta, steaks, rice dishes, burgers and other entrees, appetizers, beverages and desserts.
This is where digital online ordering technologies interact with traditional brick and mortar retail to enhance the customer experience. We see considerable growth potential in the delivery market by aligning our proven restaurant operation capabilities with our delivery network that offers consumers the ability to order restaurant food anywhere. Delivery contributed approximately 36% of Company sales in 2023.
This is where digital online ordering technologies interact with traditional brick and mortar retail to enhance the customer experience. We see considerable growth potential in the delivery market by aligning our proven restaurant operation capabilities with our delivery network that offers consumers the ability to order restaurant food anywhere.
We are committed to reducing the use of salt and sugar as part of our nutrition and health initiatives. We have increased the offering of grains, fruits, vegetables and beans in our menus to promote balanced food choices. We have collaborated with scientific institutions to promote dietary health for 16 years.
We are committed to reducing the use of salt and sugar as part of our nutrition and health initiatives. We have increased the offering of grains, fruits, vegetables and beans in our menus to promote balanced food choices. We have collaborated with academic organizations to promote dietary health for 17 years.
Engagement and Wellbeing The Top Employers Institute has certified the Company as a Top Employer China for the sixth consecutive year.
Engagement and Wellbeing The Top Employers Institute has certified the Company as a Top Employer in China for the seventh consecutive year.
For further information on food safety issues, see “Item 1A. Risk Factors—Risks Related to Our Business and Industry—Food safety and foodborne illness concerns may have an adverse effect on our reputation and business.” Our quality assurance department regularly conducts unannounced food safety and operation excellence checks of all restaurants covering food safety, product quality and guest service.
Risk Factors—Risks Related to Our Business and Industry—Food safety and foodborne illness concerns may have an adverse effect on our reputation and business.” Our quality assurance department regularly conducts unannounced food safety and operation excellence checks of all restaurants covering food safety, product quality and guest service.
We are currently tracking over 1,000 cities that do not have a KFC or Pizza Hut restaurant. For additional information on the risks associated with this growth strategy, see the section entitled “Item 1A.
We are currently tracking over 800 cities that do not have a KFC, and 1,400 cities that have KFC but do not have a Pizza Hut restaurant. For additional information on the risks associated with this growth strategy, see the section entitled “Item 1A.
She served as our President and Chief Operating Officer from February 2017 to February 2018 and the Chief Executive Officer, KFC from October 2016 to February 2017, a position she held at Yum! Restaurants China, from August 2015 to October 2016. Ms. Wat joined Yum!
She served as our President and Chief Operating Officer from February 2017 to February 2018 and the Chief Executive Officer, KFC from October 2016 to February 2017, a position she held at Yum! Restaurants China, from August 2015 to October 2016. Ms. Wat joined Yum! Restaurants China in September 2014 as President of KFC China. Before joining Yum!
Wang served as our Chief Development Officer from July 2020 to June 2022. Mr. Wang joined KFC as an operations management trainee in 1998. He was promoted to Market Manager of KFC in 2007 and was appointed as a Regional Vice President, KFC Field Operations in 2015. Jeff Kuai has served as the General Manager, Pizza Hut since November 2017.
Warton Wang has served as the General Manager, KFC since May 2022. Mr. Wang served as our Chief Development Officer from July 2020 to June 2022. Mr. Wang joined KFC as an operations management trainee in 1998. He was promoted to Market Manager of KFC in 2007 and was appointed as a Regional Vice President, KFC Field Operations in 2015.
As of December 31, 2023, our loyalty programs had over 440 million members and over 155 million members for KFC and Pizza Hut, respectively. The programs have been effective in increasing order frequency and enhancing guest loyalty. Digital sales exceeded $9 billion, with digital ordering accounted for approximately 89% of total Company sales in 2023.
As of December 31, 2024, our loyalty programs had over 490 million members and over 180 million members for KFC and Pizza Hut, respectively. The programs have been effective in increasing order frequency and enhancing guest loyalty. Digital sales exceeded $9 billion, with digital ordering accounted for approximately 90% of total Company sales in 2024.
We had $11 billion of revenues in 2023 and 14,644 restaurants as of December 31, 2023. Our growing restaurant network consists of our flagship KFC and Pizza Hut brands, as well as emerging brands such as Lavazza, Huang Ji Huang, Little Sheep and Taco Bell.
We had $11.3 billion of revenues in 2024 and 16,395 restaurants as of December 31, 2024. Our growing restaurant network consists of our flagship KFC and Pizza Hut brands, as well as emerging brands such as Lavazza, Huang Ji Huang, Little Sheep and Taco Bell.
With more than 35 years of operations, we have developed extensive operating experience in the China market. We have since grown to become the largest restaurant company in China in terms of 2023 system sales, with 14,644 restaurants covering over 2,000 cities primarily in China as of December 31, 2023.
With more than 35 years of operations, we have developed extensive operating experience in the China market. We have since grown to become the largest restaurant company in China in terms of 2024 system sales, with 16,395 restaurants covering over 2,200 cities primarily in China as of December 31, 2024.
Information about our Executive Officers The executive officers of the Company as of February 29, 2024, and their ages and current positions as of that date, are as follows: Name Age Title Joey Wat 52 Chief Executive Officer Andy Yeung 51 Chief Financial Officer Warton Wang 49 General Manager, KFC Jeff Kuai 43 General Manager, Pizza Hut Duoduo (Howard) Huang 51 Chief Supply Chain Officer Leila Zhang 55 Chief Technology Officer Pingping Liu 51 Chief Legal Officer Jerry Ding 38 Chief People Officer Xueling Lu 50 Controller and Principal Accounting Officer Joey Wat has served as our Chief Executive Officer since March 2018 and as a member of our Board of Directors since July 2017.
Information about our Executive Officers The executive officers of the Company as of February 27, 2025, and their ages and current positions as of that date, are as follows: Name Age Title Joey Wat 53 Chief Executive Officer Adrian Ding 38 Acting Chief Financial Officer and Chief Investment Officer Warton Wang 50 General Manager, KFC Jeff Kuai 44 General Manager, Pizza Hut Duoduo (Howard) Huang 52 Chief Supply Chain Officer Leila Zhang 56 Chief Technology Officer Pingping Liu 52 Chief Legal Officer Jerry Ding 39 Chief People Officer Xueling Lu 51 Controller and Principal Accounting Officer Joey Wat has served as our Chief Executive Officer since March 2018 and as a member of our Board of Directors since July 2017.
Payment As early as June 2015, we started to partner with Alipay on digital payment functionalities, making us among the first batch of restaurant chains in China to make mobile payment available to guests. We commenced mobile payment cooperation with WeChat Pay in 2016.
Payment As early as June 2015, we started to partner with Alipay on digital payment functionalities, making us among the first batch of restaurant chains in China to make mobile payment available to guests. We commenced mobile payment cooperation with WeChat Pay in 2016. Digital payments grew from 33% of Company sales in 2016 to 99% in 2024.
Dining Experience Menu Innovations Offering appealing, tasty and convenient food at great prices is our value proposition. We have a dedicated food innovation team primarily focusing on the development and innovation of new recipes and improvement of existing products. In 2023, we launched over 500 new and improved products across all of our restaurant brands.
Dining Experience Menu Innovations Offering appealing, tasty and convenient food at great prices is our value proposition. We have a dedicated food innovation team primarily focusing on the development and innovation of new recipes and improvement of existing products. In 2024, we launched around 600 new or upgraded menu items across all of our restaurant brands.
For the year ended December 31, 2023, the Company’s China subsidiaries distributed approximately $709 million in dividends to the Company’s Hong Kong-incorporated holding companies.
For the year ended December 31, 2024, the Company’s China subsidiaries distributed approximately $1,028 million in dividends to the Company’s Hong Kong-incorporated holding companies.
We expanded our restaurant count from 7,562 at the end of 2016 to 14,644 at the end of 2023, representing a compound annual growth rate (CAGR) of approximately 10%.
We expanded our restaurant count from 7,562 at the end of 2016 to 16,395 at the end of 2024, representing a compound annual growth rate (CAGR) of approximately 10%.
As of December 31, 2023, there were 120 Taco Bell units in China. Our Strategies We have been implementing our “RGM” strategy, which stands for “Resilience, Growth and Moat” since 2021. Going forward, we are transitioning our "RGM" strategy to place greater emphasis on growth. It centers on expanding our store footprint, increasing sales and boosting profits.
As of December 31, 2024, there were 42 Taco Bell units in China. Our Strategies We have been implementing our “RGM” strategy, which stands for “Resilience, Growth and Moat,” since 2021, and have been transitioning our “RGM” strategy to place greater emphasis on growth. It centers on expanding our store footprint, increasing sales and boosting profits.
Jerry Ding has served as our Chief People Officer since January 2024. Mr. Ding served as Head of Corporate Strategy from November 2019 to May 2023 and brand leader of Taco Bell from November 2021 to May 2023. Prior to joining Yum China, Mr. Ding worked at McKinsey & Company for over six years, specializing in developing corporate-level strategies.
Ding served as Head of Corporate Strategy from November 2019 to July 2023 and brand leader of Taco Bell from November 2021 to May 2023. Prior to joining Yum China, Mr. Ding worked at McKinsey & Company for over six years, specializing in developing corporate-level strategies. Xueling Lu has served as our Controller and Principal Accounting Officer since January 2018.
Restaurant Concepts KFC KFC is the leading and the largest quick-service restaurant (“QSR”) brand in China in terms of 2023 system sales. Founded in Corbin, Kentucky by Colonel Harland D. Sanders in 1939, KFC opened its first restaurant in Beijing, China in 1987. As of December 31, 2023, there were 10,296 KFC restaurants in more than 2,000 cities across China.
Restaurant Concepts KFC KFC is the leading and the largest quick-service restaurant (“QSR”) brand in China in terms of 2024 system sales. Founded in Corbin, Kentucky by Colonel Harland D. Sanders in 1939, KFC opened its first restaurant in Beijing, China in 1987. As of December 31, 2024, there were 11,648 KFC restaurants in over 2,200 cities across China.
Under the board’s oversight, the Company regularly conducts a people planning review to attract, retain and develop a workforce that aligns with our values and strategies. 16 2023 Form 10-K Culture and People Philosophy The Company is committed to the “People First” philosophy by implementing our principle of “Fair, Care, Pride.” In 2022, we released our Human Rights Policy, highlighting our commitment to create a workplace and a community that respect and protect human rights, which includes providing a discrimination-free and harassment-free workplace, ensuring fair compensation, creating a safe and healthy working environment, encouraging a diverse and inclusive culture, equipping employees with future employability, respecting employees’ freedom of association, prohibiting child labor and forced labor and engaging with the communities we serve and our stakeholders.
Culture and People Philosophy The Company is committed to the “People First” philosophy by implementing our principle of “Fair, Care, Pride.” In 2022, we released our Human Rights Policy, highlighting our commitment to create a workplace and a community that respect and protect human rights, which includes providing a discrimination-free and harassment-free workplace, ensuring fair compensation, creating a safe and healthy working environment, encouraging a diverse and inclusive culture, equipping employees with future employability, respecting employees’ freedom of association, prohibiting child labor and forced labor and engaging with the communities we serve and our stakeholders.
Xueling Lu has served as our Controller and Principal Accounting Officer since January 2018. Ms. Lu previously served as Senior Director, Finance of Yum China, a position she held since she joined the Company in November 2016. Prior to joining the Company, Ms. Lu was the Asia Pacific Controller of Lear Corporation from 2013 to 2016.
Ms. Lu previously served as Senior Director, Finance of Yum China, a position she held since she joined the Company in November 2016. Prior to joining the Company, Ms. Lu was the Asia Pacific Controller of Lear Corporation from 2013 to 2016. Before joining Lear Corporation, Ms.
Huang served as Vice President, Pizza Hut Regional Operations, from June 2018 to November 2021. Before transferring to Pizza Hut, Mr. Huang held various leadership positions in KFC, including as General Manager of Nanjing and Wuxi markets. Mr. Huang joined Yum! Restaurants China in 1995. Leila Zhang has served as our Chief Technology Officer since March 2018. Ms.
Duoduo (Howard) Huang has served as our Chief Supply Chain Officer since November 2021. Mr. Huang served as Vice President, Pizza Hut Regional Operations, from June 2018 to November 2021. Before transferring to Pizza Hut, Mr. Huang held various leadership positions in KFC, including as General Manager of Nanjing and Wuxi markets. Mr. Huang joined Yum!
Government Regulation The Company is subject to various laws affecting its business, including the following: • Each of our restaurants in China is required to obtain (1) the relevant food business license; (2) the environmental protection assessment and inspection registration or approval; and (3) the fire safety inspection acceptance approval or other alternatives.
See “—Government Regulation—Regulations Relating to Dividend Distribution” for more information. 10 2024 Form 10-K Government Regulation The Company is subject to various laws affecting its business, including the following: • Each of our restaurants in China is required to obtain (1) the relevant food business license; (2) the environmental protection assessment and inspection registration or approval; and (3) the fire safety inspection acceptance approval or other alternatives.
As of the end of 2023, this program has allowed more than 13,900 RGMs to become stockholders of Yum China. In addition, the Company granted RSUs valued at $3,000 to all eligible RGMs starting in February 2021, covering approximately 4,800 RGMs. The turnover rate of RGMs was around 9 % in 2023.
As of the end of 2024, this program has allowed more than 14,700 RGMs to become stockholders of Yum China. In addition, the Company granted RSUs valued at $3,000 to all eligible RGMs starting in February 2021, covering approximately 5,600 RGMs as of the end of 2024. The turnover rate of RGMs was 9.7 % in 2024.
These dividends to stockholders generally had no tax consequence to the Company, but may be taxable (including by way of withholding) to its stockholders. In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law in the U.S.
The source of funds for these dividends and repurchases was cash on hand held outside of mainland China. These dividends to stockholders generally had no tax consequence to the Company, but may be taxable (including by way of withholding) to its stockholders. In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law in the U.S.
Mr. Kuai previously served as the General Manager, Pizza Hut Home Service from October 2016 to October 2017, a position he held at Yum! Restaurants China from January 2015 to October 2016. From March 2012 to August 2013, Mr. Kuai was Director of Delivery Support Center for Yum!
Jeff Kuai has served as the General Manager, Pizza Hut since November 2017. Mr. Kuai previously served as the General Manager, Pizza Hut Home Service from October 2016 to October 2017, a position he held at Yum! Restaurants China from January 2015 to October 2016. From March 2012 to August 2013, Mr.
Our franchise program is designed to promote consistency and quality, and we are selective in granting franchises. Franchisees supply capital initially by paying a franchise fee to us and by purchasing or leasing the land use rights, building, equipment, signs, seating, inventories and supplies; and, over the longer term, by reinvesting in the business through expansion.
Franchisees supply capital initially by paying a franchise fee to us and by purchasing or leasing the land use rights, building, equipment, signs, seating, inventories and supplies; and, over the longer term, by reinvesting in the business through expansion.
In addition to Original Recipe ® chicken, whole chicken and other chicken products, KFC in China has an extensive menu featuring beef burgers, pork, seafood, rice dishes, congees, fresh vegetables, desserts, coffee, tea and many other products.
In addition to Original Recipe ® chicken, whole chicken and other chicken products, KFC in China has an extensive menu featuring beef burgers, pork, seafood, rice dishes, congees, fresh vegetables, desserts, coffee, tea and many other products. KFC also seeks to increase revenue from different channels, including dine-in, delivery and takeaway.
Yum China uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information. 21 2023 Form 10-K The Company makes available through the Investor Relations website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after electronically filing such material with the SEC.
The Company makes available through the Investor Relations website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after electronically filing such material with the SEC.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur company and other non-resident enterprises in our group may be subject to filing obligations or taxation if our company and other non-resident enterprises in our group are transferors in such transactions, and may be subject to withholding obligations if our company and other non-resident enterprises in our group are transferees in such transactions. 48 2023 Form 10-K There may be difficulties in effecting service of legal process, conducting investigations, collecting evidence, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us and our management.
Biggest changeThere may be difficulties in effecting service of legal process, conducting investigations, collecting evidence, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us and our management. We conduct substantially all of our operations in China and substantially all of our long-lived assets are located in China.
Pursuant to the Trial Administrative Measures, we are required to file with the CSRC within three business days upon completion of any subsequent securities offering in the overseas markets where our securities are currently listed on. Failure to perform our filing obligations may result in penalties imposed on the Company and responsible officers.
Pursuant to the Trial Administrative Measures, we are required to file with the CSRC within three business days upon completion of any subsequent securities offering in the overseas markets where our securities are currently listed. Failure to perform our filing obligations may result in penalties imposed on the Company and responsible officers.
In the future, your percentage ownership in the Company may be diluted because of equity awards that we grant to our directors, officers and employees or otherwise as a result of equity issuances for acquisitions or capital market transactions.
In the future, your percentage of ownership in the Company may be diluted because of equity awards that we grant to our directors, officers and employees or otherwise as a result of equity issuances for acquisitions or capital market transactions.
Such shortages or disruptions could be caused by inclement weather, natural disasters such as floods, drought and hurricanes, increased demand, labor shortages, problems in production or distribution, restrictions on imports or exports, government levies, political instability in the countries in which suppliers and distributors are located, the financial instability of suppliers and distributors, suppliers’ or distributors’ failure to meet our standards, product quality issues, inflation, other factors relating to the suppliers and distributors and the countries in which they are located, food safety warnings or advisories or the prospect of such pronouncements or other conditions beyond our control.
Such shortages or disruptions could be caused by inclement weather, natural disasters such as fires, floods, drought and hurricanes, increased demand, labor shortages, problems in production or distribution, restrictions on imports or exports, government levies, political instability in the countries in which suppliers and distributors are located, the financial instability of suppliers and distributors, suppliers’ or distributors’ failure to meet our standards, product quality issues, inflation, other factors relating to the suppliers and distributors and the countries in which they are located, food safety warnings or advisories or the prospect of such pronouncements or other conditions beyond our control.
Summary of Risk Factors We are exposed to a variety of risks, which have been separated into five general groups: • Risks related to our business and industry, including (a) food safety and foodborne illness concerns, (b) significant failure to maintain effective quality assurance systems for our restaurants, (c) significant liability claims, food contamination complaints from our customers or reports of incidents of food tampering, (d) health concerns arising from outbreaks of viruses or other illnesses, (e) the fact that the operation of our restaurants is subject to the terms of the master license agreement with YUM, (f) the fact that substantially all of our revenue is derived from our operations in China, (g) the fact that our success is tied to the success of YUM’s brand strength, marketing campaigns and product innovation, (h) shortages or interruptions in the availability and delivery of food products and other supplies, (i) fluctuation of raw materials prices, (j) our inability to attain our target development goals, the potential cannibalization of existing sales by aggressive development and the possibility that new restaurants will not be profitable, (k) risks associated with leasing real estate, (l) inability to obtain desirable restaurant locations on commercially reasonable terms, (m) labor shortages or increases in labor costs, (n) the fact that our success depends substantially on our corporate reputation and on the value and perception of our brands, (o) the occurrence of security breaches and cyber-attacks, (p) failure to protect the integrity and security of our customer or employee personal, financial or other data or our proprietary or confidential information that is stored in our information systems or by third parties on our behalf, (q) failures or interruptions of service or security breaches in our information technology systems, (r) the fact that our business depends on the performance of, and our long-term relationships with, third-party mobile payment processors, internet infrastructure operators, internet service providers, delivery aggregators and third-party e-commerce platforms, (s) failure to provide timely and reliable delivery services by our restaurants, (t) our growth strategy with respect to Lavazza may not be successful, (u) the anticipated benefits of our acquisitions may not be realized in a timely manner or at all, (v) challenges and risks related to our new retail and e-commerce businesses, (w) use of GenAI technologies, (x) our inability or failure to recognize, respond to and effectively manage the impact of social media, (y) failure to comply with anti-bribery or anti-corruption laws, (z) U.S. federal income taxes, changes in tax rates, disagreements with tax authorities and imposition of new taxes, (aa) changes in consumer discretionary spending and general economic conditions, (bb) the fact that the restaurant industry in which we operate is highly competitive, (cc) loss of or failure to obtain or renew any or all of the approvals, licenses and permits to operate our business, (dd) our inability to adequately protect the intellectual property we own or have the right to use, (ee) our licensor’s failure to protect its intellectual property, (ff) seasonality and certain major events in China, (gg) our failure to detect, deter and prevent all instances of fraud or other misconduct committed by our employees, customers or other third parties, (hh) the fact that our success depends on the continuing efforts of our key management and experienced and capable personnel as well as our ability to recruit new talent, (ii) our strategic investments or acquisitions may be unsuccessful; (jj) our investment in technology and innovation may not generate the expected level of returns, (kk) fair value changes for our investment in equity securities, lower yields of our short-term investments or lower returns of our future long-term bank deposits and notes may adversely affect our financial condition and results of operations, and (ll) our operating results may be adversely affected by our investment in equity method investees; 23 2023 Form 10-K • Risks related to doing business in China, including (a) changes in Chinese political policies and economic and social policies or conditions, (b) the interpretation and enforcement of Chinese laws, rules and regulations may change from time to time with little advance notice, and the risk that the PRC government may intervene or influence our operations, which could result in a material change in our operations and/or the value of our securities to decline, (c) the audit report included in this Form 10-K is prepared by auditors who are located in China, and in the event the PCAOB is unable to inspect our auditors, our common stock will be subject to potential delisting from the New York Stock Exchange, (d) changes in political, business, economic and trade relations between the United States and China, (e) fluctuation in the value of the Chinese Renminbi, (f) the fact that we face increasing focus on environmental sustainability issues, (g) limitation on our ability to utilize our cash balances effectively, including making funds held by our China-based subsidiaries unavailable for use outside of mainland China, due to interventions in or the imposition of restrictions and limitations by the PRC government on currency conversion and payments of foreign currency and RMB out of mainland China, (h) changes in the laws and regulations of China or noncompliance with applicable laws and regulations, (i) reliance on dividends and other distributions on equity paid by our principal subsidiaries in China to fund offshore cash requirements, (j) potential unfavorable tax consequences resulting from our classification as a China resident enterprise for Chinese enterprise income tax purposes, (k) uncertainty regarding indirect transfers of equity interests in China resident enterprises and enhanced scrutiny by Chinese tax authorities, (l) difficulties in effecting service of legal process, conducting investigations, collecting evidence, enforcing foreign judgments or bringing original actions in China against us, (m) the Chinese government may determine that the variable interest entity structure of Daojia does not comply with Chinese laws on foreign investment in restricted industries, (n) inability to use properties due to defects caused by non-registration of lease agreements related to certain properties, (o) risk in relation to unexpected land acquisitions, building closures or demolitions, (p) potential fines and other legal or administrative sanctions for failure to comply with Chinese regulations regarding our employee equity incentive plans and various employee benefit plans, (q) proceedings instituted by the SEC against certain China-based accounting firms, including our independent registered public accounting firm, could result in our financial statements being determined to not be in compliance with the requirements of the Exchange Act, (r) restrictions on our ability to make loans or additional capital contributions to our Chinese subsidiaries due to Chinese regulation of loans to, and direct investment in, Chinese entities by offshore holding companies and governmental administration of currency conversion, (s) difficulties in pursuing growth through acquisitions due to regulations regarding acquisitions, and (t) the PRC government has significant oversight and discretion to exert supervision over offerings of securities conducted outside of China and over foreign investment in China-based issuers, and may limit or completely hinder our ability to offer securities to investors, or cause the value of our securities to significantly decline; these risks are each discussed in detail in the section “Risks Related to Doing Business in China.” • Risks related to the separation and related transactions, including (a) incurring significant tax liabilities if the distribution does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes and the Company could be required to indemnify YUM for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement, (b) being obligated to indemnify YUM for material taxes and related amounts pursuant to indemnification obligations under the tax matters agreement if YUM is subject to Chinese indirect transfer tax with respect to the distribution, (c) potential indemnification liabilities owing to YUM pursuant to the separation and distribution agreement, (d) the indemnity provided by YUM to us with respect to certain liabilities in connection with the separation may be insufficient to insure us against the full amount of such liabilities, (e) the possibility that a court would require that we assume responsibility for obligations allocated to YUM under the separation and distribution agreement, and (f) potential liabilities due to fraudulent transfer considerations; • Risks related to our common stock, including (a) the fact that we cannot guarantee the timing or amount of dividends on, or repurchases of, our common stock, (b) the impact on the trading prices of our common stock due to different characteristics of the capital markets in Hong Kong and the U.S., (c) different interests between Primavera and other holders of our common stock, and (d) the existence of anti-takeover provisions that may discourage or delay acquisition attempts that you might consider favorable; and • General risk factors. 24 2023 Form 10-K Risks Related to Our Business and Industry Food safety and foodborne illness concerns may have an adverse effect on our reputation and business.
Summary of Risk Factors We are exposed to a variety of risks, which have been separated into five general groups: • Risks related to our business and industry, including (a) food safety and foodborne illness concerns, (b) significant failure to maintain effective quality assurance systems for our restaurants, (c) significant liability claims, food contamination complaints from our customers or reports of incidents of food tampering, (d) health concerns arising from outbreaks of viruses or other illnesses, (e) the fact that the operation of our restaurants is subject to the terms of the master license agreement with YUM, (f) the fact that substantially all of our revenue is derived from our operations in China, (g) the fact that our success is tied to the success of YUM’s brand strength, marketing campaigns and product innovation, (h) shortages or interruptions in the availability and delivery of food products and other supplies, (i) fluctuation of raw materials prices, (j) our inability to attain our target development goals, the potential cannibalization of existing sales by aggressive development and the possibility that new restaurants will not be profitable, (k) risks associated with leasing real estate, (l) inability to obtain desirable restaurant locations on commercially reasonable terms, (m) labor shortages or increases in labor costs, (n) the fact that our success depends substantially on our corporate reputation and on the value and perception of our brands, (o) challenges and risks related to our franchise development, (p) the occurrence of security breaches and cyber-attacks, (q) failure to protect the integrity and security of our customer or employee personal, financial or other data or our proprietary or confidential information that is stored in our information systems or by third parties on our behalf, (r) failures or interruptions of service or security breaches in our information technology systems, (s) the fact that our business depends on the performance of, and our long-term relationships with, third-party mobile payment processors, internet infrastructure operators, internet service providers, delivery aggregators and third-party e-commerce platforms, (t) failure to provide timely and reliable delivery services by our restaurants, (u) our growth strategy with respect to our coffee business may not be successful, (v) the anticipated benefits of our acquisitions may not be realized in a timely manner or at all, (w) challenges and risks related to our new retail business, (x) use of GenAI technologies, (y) our inability or failure to recognize, respond to and effectively manage the impact of social media, (z) failure to comply with anti-bribery or anti-corruption laws, (aa) U.S. federal income taxes, changes in tax rates, disagreements with tax authorities and imposition of new taxes, (bb) changes in consumer discretionary spending and general economic conditions, (cc) the fact that the restaurant industry in which we operate is highly competitive, (dd) loss of or failure to obtain or renew any or all of the approvals, licenses and permits to operate our business, (ee) our inability to adequately protect the intellectual property we own or have the right to use, (ff) our licensor’s failure to protect its intellectual property, (gg) seasonality and certain major events in China, (hh) our failure to detect, deter and prevent all instances of fraud or other misconduct committed by our employees, customers or other third parties, (ii) the fact that our success depends on the continuing efforts of our key management and experienced and capable personnel as well as our ability to recruit new talent, (jj) our strategic investments or acquisitions may be unsuccessful; (kk) our investment in technology and innovation may not generate the expected level of returns, (ll) fair value changes for our investment in equity securities, lower yields of our short-term investments or lower returns of our future long-term bank deposits and notes may adversely affect our financial condition and results of operations, and (mm) our operating results or net income may be adversely affected by our investment in equity method investees; 22 2024 Form 10-K • Risks related to doing business in China, including (a) changes in Chinese political policies and economic and social policies or conditions, (b) the interpretation and enforcement of Chinese laws, rules and regulations may change from time to time with little advance notice, and the risk that the PRC government may intervene or influence our operations, which could result in a material change in our operations and/or the value of our securities to decline, (c) the audit report included in this Form 10-K is prepared by auditors who are located in China, and in the event the PCAOB is unable to inspect our auditors, our common stock will be subject to potential delisting from the New York Stock Exchange, (d) changes in political, business, economic and trade relations between the United States and China, (e) fluctuation in the value of the Chinese Renminbi, (f) the fact that we face increasing focus and evolving requirements on environmental sustainability issues, (g) limitation on our ability to utilize our cash balances effectively, including making funds held by our China-based subsidiaries unavailable for use outside of mainland China, due to interventions in or the imposition of restrictions and limitations by the PRC government on currency conversion and payments of foreign currency and RMB out of mainland China, (h) changes in the laws and regulations of China or noncompliance with applicable laws and regulations, (i) reliance on dividends and other distributions on equity paid by our principal subsidiaries in China to fund offshore cash requirements, (j) potential unfavorable tax consequences resulting from our classification as a China resident enterprise for Chinese enterprise income tax purposes, (k) uncertainty regarding indirect transfers of equity interests in China resident enterprises and enhanced scrutiny by Chinese tax authorities, (l) difficulties in effecting service of legal process, conducting investigations, collecting evidence, enforcing foreign judgments or bringing original actions in China against us, (m) the Chinese government may determine that the variable interest entity structure of Daojia does not comply with Chinese laws on foreign investment in restricted industries, (n) inability to use properties due to defects caused by non-registration of lease agreements related to certain properties, (o) risk in relation to unexpected land acquisitions, building closures or demolitions, (p) potential fines and other legal or administrative sanctions for failure to comply with Chinese regulations regarding our employee equity incentive plans and various employee benefit plans, (q) proceedings instituted by the SEC against certain China-based accounting firms, including our independent registered public accounting firm, could result in our financial statements being determined to not be in compliance with the requirements of the Exchange Act, (r) restrictions on our ability to make loans or additional capital contributions to our Chinese subsidiaries due to Chinese regulation of loans to, and direct investment in, Chinese entities by offshore holding companies and governmental administration of currency conversion, (s) difficulties in pursuing growth through acquisitions due to regulations regarding acquisitions, and (t) the PRC government has significant oversight and discretion to exert supervision over offerings of securities conducted outside of China and over foreign investment in China-based issuers, and may limit or completely hinder our ability to offer securities to investors, or cause the value of our securities to significantly decline; these risks are each discussed in detail in the section “Risks Related to Doing Business in China.” • Risks related to the separation and related transactions, including (a) incurring significant tax liabilities if the distribution does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes and the Company could be required to indemnify YUM for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement, (b) being obligated to indemnify YUM for material taxes and related amounts pursuant to indemnification obligations under the tax matters agreement if YUM is subject to Chinese indirect transfer tax with respect to the distribution, (c) potential indemnification liabilities owing to YUM pursuant to the separation and distribution agreement, (d) the indemnity provided by YUM to us with respect to certain liabilities in connection with the separation may be insufficient to insure us against the full amount of such liabilities, (e) the possibility that a court would require that we assume responsibility for obligations allocated to YUM under the separation and distribution agreement, and (f) potential liabilities due to fraudulent transfer considerations; • Risks related to our common stock, including (a) the fact that we cannot guarantee the timing or amount of dividends on, or repurchases of, our common stock, (b) the impact on the trading prices of our common stock due to different characteristics of the capital markets in Hong Kong and the U.S., (c) different interests between Primavera and other holders of our common stock, and (d) the existence of anti-takeover provisions that may discourage or delay acquisition attempts that you might consider favorable; and • General risk factors. 23 2024 Form 10-K Risks Related to Our Business and Industry Food safety and foodborne illness concerns may have an adverse effect on our reputation and business.
In light of the various requirements imposed by Chinese regulations on loans to and direct investment in Chinese entities by offshore holding companies as discussed above, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, or at all, with respect to future loans by us to our Chinese subsidiaries or with respect to future capital contributions by us to our Chinese subsidiaries.
In light of the various requirements imposed by Chinese regulations on loans to and direct investment in Chinese entities by offshore holding companies as discussed above, we cannot assure you that we will be able to complete the necessary government registrations or reports or obtain the necessary government approvals on a timely basis, or at all, with respect to future loans by us to our Chinese subsidiaries or with respect to future capital contributions by us to our Chinese subsidiaries.
These executive orders were revoked on June 9, 2021 by President Biden, who then signed an executive order directing the Department of Commerce to launch a national security review of apps with links to foreign adversaries (which is defined to include China) and issue recommendations for regulatory and legislative action to address the associated risks.
These executive orders were revoked on June 9, 2021 by former President Biden, who then signed an executive order directing the Department of Commerce to launch a national security review of apps with links to foreign adversaries (which is defined to include China) and issue recommendations for regulatory and legislative action to address the associated risks.
Our operations are vulnerable to interruption by natural disasters, such as fires, floods and earthquakes, war, terrorism, power failures and power shortages, hardware and software failures, computer viruses and other events beyond our control. In particular, our business is dependent on prompt delivery and reliable transportation of our food products by our logistics partners.
Our operations are vulnerable to interruption by natural disasters, such as fires, floods, hurricanes, earthquakes, war, terrorism, power failures and power shortages, hardware and software failures, computer viruses and other events beyond our control. In particular, our business is dependent on prompt delivery and reliable transportation of our food products by our logistics partners.
Any report or publicity linking us, our competitors, our restaurants, including restaurants operated by us or our franchisees, to instances of foodborne illness or food safety issues could adversely affect our restaurants’ brands and reputations as well as our revenues and profits and possibly lead to product liability claims, litigation and damages.
Any report or publicity linking us, our restaurants, including restaurants operated by us or our franchisees, our suppliers and our competitors, to instances of foodborne illness or food safety issues could adversely affect our restaurants’ brands and reputations as well as our revenues and profits and possibly lead to product liability claims, litigation and damages.
Therefore, we cannot assure you that our investments or acquisitions will benefit our business strategy, generate sufficient net revenues to offset the associated investment or acquisition costs, or otherwise result in the intended benefits. Our investment in technology and innovation may not generate the expected level of returns.
Therefore, we cannot assure you that our investments or acquisitions will benefit our business strategy, generate sufficient revenues to offset the associated investment or acquisition costs, or otherwise result in the intended benefits. Our investment in technology and innovation may not generate the expected level of returns.
Any significant revaluation of RMB may materially affect our cash flows, net revenues, earnings and financial position, and the value of, and any dividends payable on, our common stock in U.S. dollars.
Any significant revaluation of RMB may materially affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our common stock in U.S. dollars.
We may experience difficulties in integrating our operations with new investments or acquired businesses, implementing our strategies or achieving expected levels of net revenues, profitability, productivity or other benefits.
We may experience difficulties in integrating our operations with new investments or acquired businesses, implementing our strategies or achieving expected levels of revenues, profitability, productivity or other benefits.
Our information technology systems, such as those we use for administrative functions, including human resources, payroll, accounting and internal and external communications, can contain personal, financial or other information of our over 430,000 employees. We also maintain important proprietary and other confidential information related to our operations and identifiable information about our franchisees.
Our information technology systems, such as those we use for administrative functions, including human resources, payroll, accounting and internal and external communications, can contain personal, financial or other information of our over 350,000 employees. We also maintain important proprietary and other confidential information related to our operations and identifiable information about our franchisees.
We cannot provide assurance that we will be able to enter into new lease agreements for prime locations on commercially reasonable terms, if at all. If we cannot obtain desirable restaurant locations on commercially reasonable terms, our business, results of operations and ability to implement our growth strategy may be materially and adversely affected.
We cannot provide assurance that we, or our franchisees, will be able to enter into new lease agreements for prime locations on commercially reasonable terms, if at all. If we, or our franchisees, cannot obtain desirable restaurant locations on commercially reasonable terms, our business, results of operations and ability to implement our growth strategy may be materially and adversely affected.
We, directly or indirectly, receive and maintain certain personal, financial and other information about our customers in various information systems that we maintain and in those maintained by third-party service providers when, for example, receiving orders through mobile or online platforms, accepting digital payments, operating loyalty programs and conducting digital marketing programs.
We, directly or indirectly, receive and maintain certain personal information about our customers in various information systems that we maintain and in those maintained by third-party service providers when, for example, receiving orders through mobile or online platforms, accepting digital payments, operating loyalty programs and conducting digital marketing programs.
In addition, the OECD's Pillar Two initiative introduces a 15% global minimum tax applied on a country-by-country basis and for which many jurisdictions (including jurisdictions in which we have operations or presence) have now committed to an effective enactment date starting January 1, 2024.
In addition, the OECD’s Pillar Two initiative introduces a 15% global minimum tax applied on a jurisdiction-by-jurisdiction basis and for which many jurisdictions (including jurisdictions in which we have operations or presence) have now committed to an effective enactment date starting January 1, 2024.
The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of Company common stock. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock. 59 2023 Form 10-K Item 1B. Unresolved Staff Comments.
The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of Company common stock. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock. 59 2024 Form 10-K Item 1B. Unresolved Staff Comments.
The increasing focus on environmental sustainability issues may create operational challenges for us, increase our costs and harm our reputation. There has been increasing public focus by governmental and non-governmental organizations and other stakeholders on environmental sustainability matters, including climate change and a circular economy.
The increasing focus and evolving requirements on environmental sustainability issues may create operational challenges for us, increase our costs and harm our reputation. There has been increasing public focus by governmental and non-governmental organizations and other stakeholders on environmental sustainability matters, including climate change and a circular economy.
In addition, when we acquire additional equity interest in equity method investees to obtain control, it may result in gain or loss from re-measurement of our previously held equity interest and thus have a significant impact on our operating results.
In addition, when we acquire additional equity interest in equity method investees to obtain control, it may result in gain or loss from re-measurement of our previously held equity interest and thus have a significant impact on our operating results or net income.
Although we do not expect to be liable for any obligations that are not allocated to us under the separation and distribution agreement, a court could disregard the allocation agreed to between the parties, and require that we assume responsibility for obligations allocated to YUM (for example, tax and/or environmental liabilities), particularly if YUM were to refuse or were unable to pay or perform the allocated obligations. 55 2023 Form 10-K Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our results of operations and financial condition.
Although we do not expect to be liable for any obligations that are not allocated to us under the separation and distribution agreement, a court could disregard the allocation agreed to between the parties, and require that we assume responsibility for obligations allocated to YUM (for example, tax and/or environmental liabilities), particularly if YUM were to refuse or were unable to pay or perform the allocated obligations. 54 2024 Form 10-K Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our results of operations and financial condition.
If we decide to finance our wholly-owned Chinese subsidiaries by means of capital contributions, in practice, we might be still required to obtain approval from the MOFCOM or other regulatory authorities.
If we decide to finance our wholly-owned Chinese subsidiaries by means of capital contributions, in practice, we might be still required to report to the MOFCOM or obtain approval from other authorities.
We generally do not have renewal options for our leases and need to negotiate the terms of renewal with the lessor, who may insist on a significant modification to the terms and conditions of the lease agreement. 29 2023 Form 10-K The rent under the majority of our current restaurant lease agreements is generally payable in one of three ways: (i) fixed rent; (ii) the higher of a fixed base rent or a percentage of the restaurant’s annual sales revenue; or (iii) a percentage of the restaurant’s annual sales revenue.
We generally do not have renewal options for our leases and need to negotiate the terms of renewal with the lessor, who may insist on a significant modification to the terms and conditions of the lease agreement. 28 2024 Form 10-K The rent under the majority of our current restaurant lease agreements is generally payable in one of three ways: (i) fixed rent; (ii) the higher of a fixed base rent or a percentage of the restaurant’s annual sales revenue; or (iii) a percentage of the restaurant’s annual sales revenue.
We may not be able to increase our product prices enough to pass these increased labor costs on to our customers, in which case our business and results of operations would be materially and adversely affected. 30 2023 Form 10-K In addition, our delivery business requires a large number of riders, which are either contracted with us or the aggregators’ platforms to deliver orders for KFC or Pizza Hut stores.
We may not be able to increase our product prices enough to pass these increased labor costs on to our customers, in which case our business and results of operations would be materially and adversely affected. 29 2024 Form 10-K In addition, our delivery business requires a large number of riders, which are either contracted with us or the aggregators’ platforms to deliver orders for KFC or Pizza Hut stores.
Any adverse publicity resulting from these allegations may also adversely affect our reputation, which in turn could adversely affect our results of operations. 57 2023 Form 10-K In addition, the restaurant industry around the world has been subject to claims that relate to the nutritional content of food products, as well as claims that the menus and practices of restaurant chains have led to customer health issues, including weight gain and other adverse effects.
Any adverse publicity resulting from these allegations may also adversely affect our reputation, which in turn could adversely affect our results of operations. 56 2024 Form 10-K In addition, the restaurant industry around the world has been subject to claims that relate to the nutritional content of food products, as well as claims that the menus and practices of restaurant chains have led to customer health issues, including weight gain and other adverse effects.
Any future determination to declare and pay cash dividends will be at the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, actual or anticipated cash requirements, tax considerations, contractual or regulatory restrictions and such other factors as our Board of Directors deems relevant.
Any determination to declare and pay cash dividends and repurchase shares will be at the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, actual or anticipated cash requirements, tax considerations, contractual or regulatory restrictions and such other factors as our Board of Directors deems relevant.
If we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends on our common stock, strategic acquisitions or investments or other business purposes, the appreciation of the U.S. dollar against RMB would have a negative effect on U.S. dollar amounts available to us.
If we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends and share repurchases of our common stock, strategic acquisitions or investments or other business purposes, the appreciation of the U.S. dollar against RMB would have a negative effect on U.S. dollar amounts available to us.
Furthermore, we have incurred substantial costs, and may need to incur additional costs and use additional management and other resources, to comply with these requirements going forward. 58 2023 Form 10-K If we fail to remedy any material weakness, our financial statements may be inaccurate and we may face restricted access to the capital markets, which could adversely affect our business, results of operations and financial condition.
Furthermore, we have incurred substantial costs, and may need to incur additional costs and use additional management and other resources, to comply with these requirements going forward. 57 2024 Form 10-K If we fail to remedy any material weakness, our financial statements may be inaccurate and we may face restricted access to the capital markets, which could adversely affect our business, results of operations and financial condition.
If we are unable to manage the cost of our raw materials or to increase the prices of our products, it may have an adverse impact on our future profit margin. 28 2023 Form 10-K We may not attain our target development goals; aggressive development could cannibalize existing sales; and new restaurants may not be profitable.
If we are unable to manage the cost of our raw materials or to increase the prices of our products, it may have an adverse impact on our future profit margin. 27 2024 Form 10-K We may not attain our target development goals; aggressive development could cannibalize existing sales; and new restaurants may not be profitable.
Avian flu outbreaks could also adversely affect the price and availability of poultry, which could negatively impact our profit margins and revenues. 26 2023 Form 10-K The operation of our restaurants is subject to the terms of the master license agreement which, if terminated or limited, would materially adversely affect our business, results of operations and financial condition.
Avian flu outbreaks could also adversely affect the price and availability of poultry, which could negatively impact our profit margins and revenues. 25 2024 Form 10-K The operation of our restaurants is subject to the terms of the master license agreement which, if terminated or limited, would materially adversely affect our business, results of operations and financial condition.
Since 2012, Chinese economic growth has slowed and any prolonged slowdown in the Chinese economy may reduce the demand for our products and adversely affect our business, results of operations and financial condition. Restaurant dining, and specifically casual dining, is discretionary for customers and tends to be higher during periods in which favorable economic conditions prevail.
In recent years, Chinese economic growth has slowed and any prolonged slowdown in the Chinese economy may reduce the demand for our products and adversely affect our business, results of operations and financial condition. Restaurant dining, and specifically casual dining, is discretionary for customers and tends to be higher during periods in which favorable economic conditions prevail.
Few hedging options are available in China to reduce our exposure to exchange rate fluctuations. In addition, our currency exchange loss may be magnified by Chinese exchange administration regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates and regulations on exchange may have a material adverse effect on your investment.
Hedging options available in China may not fully reduce our exposure to exchange rate fluctuations. In addition, our currency exchange loss may be magnified by Chinese exchange administration regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates and regulations on exchange may have a material adverse effect on your investment.
Any significant failure of or deviation from these quality assurance systems could have a material adverse effect on our business, reputation, results of operations and financial condition. 25 2023 Form 10-K Any significant liability claims, food contamination complaints from our customers or reports of incidents of food tampering could adversely affect our business, reputation, results of operations and financial condition.
Any significant failure of or deviation from these quality assurance systems could have a material adverse effect on our business, reputation, results of operations and financial condition. 24 2024 Form 10-K Any significant liability claims, food contamination complaints from our customers or reports of incidents of food tampering could adversely affect our business, reputation, results of operations and financial condition.
Customers’ tendency to become more cost-conscious as a result of an economic slowdown or decreases in disposable income may reduce our customer traffic or average revenue per customer, which may adversely affect our revenues. The interpretation and enforcement of Chinese laws, rules and regulations may change from time to time, which could have a material adverse effect on us.
Customers’ tendency to become more cost-conscious as a result of an economic slowdown or decreases in disposable income may reduce our customer traffic or average revenue per customer, which may adversely affect our revenues. 41 2024 Form 10-K The interpretation and enforcement of Chinese laws, rules and regulations may change from time to time, which could have a material adverse effect on us.
In such event, we may be forced to close the affected restaurant(s) or relocate to other locations, which may have an adverse effect on our business and results of operations. Any failure to comply with Chinese regulations regarding our employee equity incentive plans may subject Chinese plan participants or us to fines and other legal or administrative sanctions.
In such event, we may be forced to close the affected restaurant(s) or relocate to other locations, which may have an adverse effect on our business and results of operations. 49 2024 Form 10-K Any failure to comply with Chinese regulations regarding our employee equity incentive plans may subject Chinese plan participants or us to fines and other legal or administrative sanctions.
Publicity relating to any noncompliance or alleged noncompliance could also harm our reputation and adversely affect our business and results of operations. 36 2023 Form 10-K As a U.S. company with operations concentrated in China, we are subject to both U.S. federal income tax and Chinese enterprise income tax, which could result in relatively higher taxes compared to companies operating primarily in the U.S.
Publicity relating to any noncompliance or alleged noncompliance could also harm our reputation and adversely affect our business and results of operations. As a U.S. company with operations concentrated in China, we are subject to both U.S. federal income tax and Chinese enterprise income tax, which could result in relatively higher taxes compared to companies operating primarily in the U.S.
Changes in legislation, regulation or interpretation of existing laws and regulations in the U.S., China, and other jurisdictions where we are subject to taxation could increase our taxes and have an adverse effect on our results of operations and financial condition. 37 2023 Form 10-K Our results of operations may be adversely impacted by changes in consumer discretionary spending and general economic conditions.
Changes in legislation, regulation or interpretation of existing laws and regulations in the U.S., China, and other jurisdictions where we are subject to taxation could increase our taxes and have an adverse effect on our results of operations and financial condition. Our results of operations may be adversely impacted by changes in consumer discretionary spending and general economic conditions.
Because of the different characteristics of the U.S. and Hong Kong capital markets, the historical market prices of our shares may not be indicative of the trading performance of the shares in the future. 56 2023 Form 10-K The interests of Primavera may differ from the interests of other holders of Company common stock.
Because of the different characteristics of the U.S. and Hong Kong capital markets, the historical market prices of our shares may not be indicative of the trading performance of the shares in the future. 55 2024 Form 10-K The interests of Primavera may differ from the interests of other holders of Company common stock.
We are assessed with tax on GILTI earned by certain foreign subsidiaries, and it causes our effective tax rate to increase and affect the amount of any distributions available to our stockholders. Tax matters, including changes in tax rates, disagreements with tax authorities and imposition of new taxes could impact our results of operations and financial condition.
We are assessed with tax on GILTI earned by certain foreign subsidiaries, and it causes our effective tax rate to increase and affect the amount of any distributions available to our stockholders. 36 2024 Form 10-K Tax matters, including changes in tax rates, disagreements with tax authorities and imposition of new taxes could impact our results of operations and financial condition.
Digital ordering, including delivery, mobile orders and kiosk orders, accounted for approximately 89% of total Company sales in 2023, and digital payments, including mobile payments, accounted for approximately 99% of Yum China Company sales in 2023. As a result, the implementation of this executive order could adversely affect our business in a material way.
Digital ordering, including delivery, mobile orders and kiosk orders, accounted for approximately 90% of total Company sales in 2024, and digital payments, including mobile payments, accounted for approximately 99% of Yum China Company sales in 2024. As a result, the implementation of this executive order could adversely affect our business in a material way.
We are relatively new to these businesses and our lack of experience may make it more difficult for us to keep pace with evolving customer demands and preferences. We may misjudge customer demand, resulting in inventory buildup and possible inventory write-downs and write-offs.
We are relatively new to this business and our lack of experience may make it more difficult for us to keep pace with evolving customer demands and preferences. We may misjudge customer demand, resulting in inventory buildup and possible inventory write-downs and write-offs.
Such payments could have a material adverse effect on our financial condition. 54 2023 Form 10-K Potential indemnification liabilities owing to YUM pursuant to the separation and distribution agreement could materially and adversely affect our business, results of operations and financial condition.
Such payments could have a material adverse effect on our financial condition. 53 2024 Form 10-K Potential indemnification liabilities owing to YUM pursuant to the separation and distribution agreement could materially and adversely affect our business, results of operations and financial condition.
Even if there is no cash flow from equity method investees until dividends are received, the performance of equity method investees may affect our results of operations through our equity method accounting.
Even if there is no cash flow from equity method investees until dividends are received, the performance of equity method investees may affect our results of operations or net income through our equity method accounting.
These risks are described further under the section “Risks Related to Doing Business in China.” 27 2023 Form 10-K Our success is tied to the success of YUM’s brand strength, marketing campaigns and product innovation.
These risks are described further under the section “Risks Related to Doing Business in China.” 26 2024 Form 10-K Our success is tied to the success of YUM’s brand strength, marketing campaigns and product innovation.
We may invest in equity securities from time to time. In September 2018, we invested in the equity securities of Meituan Dianping, the fair value of which is determined based on the closing market price for the shares at the end of each reporting period, with subsequent fair value changes recorded in our consolidated statements of income.
In September 2018, we invested in the equity securities of Meituan Dianping, the fair value of which is determined based on the closing market price for the shares at the end of each reporting period, with subsequent fair value changes recorded in our consolidated statements of income.
We generally enter into lease agreements with initial terms of 10 to 20 years. Approximately 6% of our existing lease agreements expire before the end of 2024. Most of our lease agreements contain an early termination clause that permits us to terminate the lease agreement early if the restaurant’s restaurant profit is negative for a specified period of time.
We generally enter into lease agreements with initial terms of 10 to 20 years. Over 5% of our existing lease agreements expire before the end of 2025. Most of our lease agreements contain an early termination clause that permits us to terminate the lease agreement early if the restaurant’s restaurant profit is negative for a specified period of time.
We also face regulatory uncertainties that could restrict our ability to adopt additional equity incentive plans for our directors and employees under Chinese laws. 50 2023 Form 10-K In addition, the STA has issued circulars concerning employees’ share-based awards.
We also face regulatory uncertainties that could restrict our ability to adopt additional equity incentive plans for our directors and employees under Chinese laws. In addition, the STA has issued circulars concerning employees’ share-based awards.
If our security and information systems or the security and information systems of third-party service providers are compromised for any reason, including as a result of data corruption or loss, security breach, cyber-attack or other external or internal methods, or if our employees, franchisees or service providers fail to comply with laws, regulations and practice standards, and this information is obtained by unauthorized persons, used or disclosed inappropriately or destroyed, it could subject us to litigation and government enforcement actions, cause us to incur substantial costs, liabilities and penalties and/or result in a loss of customer confidence, any and all of which could adversely affect our business, reputation, ability to attract new customers, results of operations and financial condition.
If our security and information systems or the security and information systems of third-party service providers are compromised for any reason, including as a result of data corruption or loss, security breach, cyber-attack or other external or internal methods, or if our employees, franchisees or service providers fail to comply with laws, regulations and practice standards, and this information is obtained by unauthorized persons, used or disclosed inappropriately or destroyed, it could subject us to litigation and government enforcement actions, cause us to incur substantial costs, liabilities and penalties and/or result in a loss of customer confidence, any and all of which could adversely affect our business, reputation, ability to attract new customers, results of operations and financial condition. 31 2024 Form 10-K In addition, the use and handling of this information is regulated by evolving and increasingly demanding laws and regulations.
Furthermore, if we fail to leverage GenAI technologies as effectively or rapidly as our peers, our competitiveness could be materially and adversely impacted. Our inability or failure to recognize, respond to and effectively manage the impact of social media could materially adversely impact our business and results of operations.
Furthermore, if we fail to leverage GenAI technologies as effectively or rapidly as our peers, our competitiveness could be materially and adversely impacted. 35 2024 Form 10-K Our inability or failure to recognize, respond to and effectively manage the impact of social media could materially adversely impact our business and results of operations.
Any seasonal fluctuations reported in the future may differ from the expectations of our investors. 39 2023 Form 10-K We may be unable to detect, deter and prevent all instances of fraud or other misconduct committed by our employees, customers or other third parties.
Any seasonal fluctuations reported in the future may differ from the expectations of our investors. We may be unable to detect, deter and prevent all instances of fraud or other misconduct committed by our employees, customers or other third parties.
These and other macroeconomic factors could have an adverse effect on our sales, profitability or development plans, which could harm our results of operations and financial condition. The restaurant industry in which we operate is highly competitive.
These and other macroeconomic factors could have an adverse effect on our sales, profitability or development plans, which could harm our results of operations and financial condition. 37 2024 Form 10-K The restaurant industry in which we operate is highly competitive.
KFC and Pizza Hut have also partnered with third-party delivery aggregators, allowing our products to be listed on and ordered through their mobile or online platforms. Interruptions or failures in our delivery services could prevent the timely or successful delivery of our products.
We have also partnered with third-party delivery aggregators, allowing our products to be listed on and ordered through their online platforms. Interruptions or failures in our delivery services could prevent the timely or successful delivery of our products.
In addition, on August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State-Owned Assets Supervision and Administration Commission, the STA, the State Administration for Industry and Commerce of the People's Republic of China, the CSRC and the SAFE, jointly adopted the Provisions of the Ministry of Commerce on M&A of a Domestic Enterprise by Foreign Investors (“M&A Rules ”), which came into effect on September 8, 2006 and was amended on June 22, 2009.
In addition, on August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State-Owned Assets Supervision and Administration Commission, the STA, the State Administration for Industry and Commerce of the PRC (now known as the Statement Administration for Market Regulation of the PRC), the CSRC and the SAFE, jointly adopted the Provisions of the Ministry of Commerce on M&A of a Domestic Enterprise by Foreign Investors (“M&A Rules ”), which came into effect on September 8, 2006 and was amended on June 22, 2009.
In addition to market and industry factors, the prices and trading volumes for our shares may be highly volatile for specific business reasons, including: • actual or anticipated fluctuations in our results of operations; • significant liability claims, health concerns, food contamination complaints from our customers, shortages or interruptions in the availability of food or other supplies, or reports of incidents of food tampering; • foreign exchange issues; • geopolitical instability, conflict, or social unrest in the markets in which we operate, in Hong Kong, the United States or worldwide; • changes in the regulatory, legal and political environment in which we operate, in Hong Kong, the United States or worldwide; • the domestic and worldwide economies as a whole; or • the delisting of our common stock from the New York Stock Exchange.
In addition to market and industry factors, the demand, prices and trading volumes for our shares may be highly volatile for specific reasons, including: • actual or anticipated fluctuations in our results of operations; • significant liability claims, health concerns, food contamination complaints from our customers, shortages or interruptions in the availability of food or other supplies, or reports of incidents of food tampering; • foreign exchange issues; • geopolitical instability, conflict, or social unrest in the markets in which we operate, in Hong Kong, the United States or worldwide; • changes in the regulatory, legal and political environment in which we operate, in Hong Kong, the United States or worldwide; • the domestic and worldwide economies as a whole; • investor sentiment towards China-based companies listed in the United States, whether due to U.S. and China relations or other factors; or • the delisting of our common stock from the New York Stock Exchange.
As of December 31, 2023, we leased over 12,500 properties in China, and to our knowledge, the lessors of most properties leased by us, most of which are used as premises for our restaurants, had not registered the lease agreements with government authorities in China.
As of December 31, 2024, we leased over 13,800 properties in China, and to our knowledge, the lessors of most properties leased by us, most of which are used as premises for our restaurants, had not registered the lease agreements with government authorities in China.
For example, Primavera may have an interest in pursuing acquisitions, divestitures, financings or other transactions that could enhance their respective equity portfolios, even though such transactions might involve risks to holders of Company common stock.
The interests of Primavera may differ from those of other holders of Company common stock in material respects. For example, Primavera may have an interest in pursuing acquisitions, divestitures, financings or other transactions that could enhance their respective equity portfolios, even though such transactions might involve risks to holders of Company common stock.
Our business depends on the performance and reliability of the internet infrastructure in China. Almost all access to the internet in China is maintained through state-owned telecommunications operators under administrative control, and we obtain access to end-user networks operated by such telecommunications operators and internet service providers to give customers access to our websites.
Almost all access to the internet in China is maintained through state-owned telecommunications operators under administrative control, and we obtain access to end-user networks operated by such telecommunications operators and internet service providers to give customers access to our websites.
If our products are not delivered on time and in proper condition, customers may refuse to accept our products and have less confidence in our services, in which case our business and reputation may be adversely affected. 34 2023 Form 10-K Our growth strategy with respect to Lavazza may not be successful.
If our products are not delivered on time and in proper condition, customers may refuse to accept our products and have less confidence in our services, in which case our business and reputation may be adversely affected. Our growth strategy with respect to our coffee business may not be successful.
If we fail to extend or renew the agreements with these mobile payment processors on acceptable terms, if these mobile payment processors are unwilling or unable to provide us with payment processing service or impose onerous requirements on us in order to access their services, or if they increase the fees they charge us for these services, our business and results of operations could be harmed.
If we fail to extend or renew the agreements with these mobile payment processors on acceptable terms, if these mobile payment processors are unwilling or unable to provide us with payment processing service or impose onerous requirements on us in order to access their services, or if they increase the fees they charge us for these services, our business and results of operations could be harmed. 33 2024 Form 10-K Our business depends on the performance and reliability of the internet infrastructure in China.
We are a holding company and conduct all of our business through our operating subsidiaries. We rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries for our cash requirements. As noted above, distributions to us from our subsidiaries may result in incremental tax costs.
We rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries for our cash requirements. As noted above, distributions to us from our subsidiaries may result in incremental tax costs.
Virtually all of our restaurants are located, and our revenues and profits originate, in China. As a consequence, our financial results are dependent on our results in China, and our business is highly exposed to all of the risks of doing business there.
As a consequence, our financial results are dependent on our results in China, and our business is highly exposed to all of the risks of doing business there.
As of year-end 2023, we leased over 12,500 properties in China for our Company-owned restaurants. For information regarding our leased properties, please refer to Item 2.
As of year-end 2024, we leased over 13,800 properties in China for our Company-owned restaurants. For information regarding our leased properties, please refer to Item 2.
Our growth strategy depends on our ability to build new restaurants in China. We are accelerating our store network expansion to reach our 20,000 store milestone. The successful development of new units depends in large part on our ability to open new restaurants and to operate these restaurants profitably.
Expansion of our store network is a key component of our growth strategy. We are accelerating our store network expansion to reach our 20,000 store milestone by 2026. The successful development of new units depends in large part on our ability and our franchisees’ ability to open new restaurants and to operate these restaurants profitably.
In addition, on January 5, 2021, former President Trump signed an executive order banning transactions by any person, or with respect to any property, subject to the jurisdiction of the United States with persons that develop or control the following Chinese-connected software applications: Alipay, CamScanner, QQ Wallet, SHAREit, Tencent QQ, VMate, WeChat Pay, and WPS Office, some of which are critical to the operation of our business.
During President Trump’s first term in office, he signed executive orders banning transactions by any person, or with respect to any property, subject to the jurisdiction of the United States with respect to WeChat, and with persons that develop or control the following Chinese-connected software applications: Alipay, CamScanner, QQ Wallet, SHAREit, Tencent QQ, VMate, WeChat Pay, and WPS Office, some of which are critical to the operation of our business.
The Hong Kong Stock Exchange and the New York Stock Exchange have different trading hours, trading characteristics (including trading volume and liquidity), trading and listing rules, and investor bases (including different levels of retail and institutional participation).
We are subject to both New York Stock Exchange and Hong Kong Stock Exchange listing and regulatory requirements concurrently. The Hong Kong Stock Exchange and the New York Stock Exchange have different trading hours, trading characteristics (including trading volume and liquidity), trading and listing rules, and investor bases (including different levels of retail and institutional participation).
We may also experience higher return rates on these products, receive more customer complaints about them and face costly product liability claims as a result of selling them, which would harm our brands and reputation as well as our financial performance.
We may also experience higher return rates on these products, receive more customer complaints about them and face costly product liability claims as a result of selling them, which would harm our brands and reputation as well as our financial performance. Furthermore, we rely on third parties to provide logistics and delivery services for our new retail products.
The contractual arrangements may also be (i) disregarded by the PRC tax authorities and result in increased tax liabilities; or (ii) found by Chinese government authorities, courts or arbitral tribunals to be unenforceable.
The contractual arrangements may also be (i) disregarded by the PRC tax authorities and result in increased tax liabilities; or (ii) found by Chinese government authorities, courts or arbitral tribunals to be unenforceable. Any of the foregoing could result in an adverse effect on Daojia.
Therefore, it remains uncertain whether we will be required to obtain regulatory approvals from the CAC or any other PRC governmental authorities for offerings outside of mainland China. 53 2023 Form 10-K If the CSRC, CAC or other PRC governmental authorities later promulgate new rules or interpretations requiring that we obtain their approvals for future offerings or listings outside of mainland China or for foreign investments in our securities, we may be unable to obtain such approvals in a timely manner, or at all.
If the CSRC, CAC or other PRC governmental authorities later promulgate new rules or interpretations requiring that we obtain their approvals for future offerings or listings outside of mainland China or for foreign investments in our securities, we may be unable to obtain such approvals in a timely manner, or at all.
As of year-end 2023, approximately 90% of KFC restaurants and over 95% of Pizza Hut restaurants offer delivery services. Delivery contributed to approximately 36% of KFC and Pizza Hut Company sales for 2023. Customers may order delivery service through KFC and Pizza Hut’s websites and Apps.
As of year-end 2024, over 85% of KFC restaurants and over 90% of Pizza Hut restaurants offer delivery services. Delivery contributed to approximately 39% of KFC and Pizza Hut Company sales for 2024. Customers may order delivery service through KFC and Pizza Hut’s Apps and WeChat mini programs.
The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall Chinese economy but may also have a negative effect on us.
While the Chinese economy has experienced significant growth in recent decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall Chinese economy but may also have a negative effect on us.
In 2019, the United States and China imposed new or higher tariffs on goods imported from each other. If the United States or China continues imposing such tariffs, or if additional tariffs or trade restrictions are implemented by the United States or by China, the resulting trade barriers could have a significant adverse impact on our business.
If the United States or China continues imposing such tariffs, or if additional tariffs or trade restrictions are implemented by the United States or by China, the resulting trade barriers could have a significant adverse impact on our business.
All of these factors could materially and adversely affect the market price of our common stock and our ability to access the capital markets. 51 2023 Form 10-K Chinese regulation of loans to, and direct investment in, Chinese entities by offshore holding companies and governmental administration of currency conversion may restrict or prevent us from making loans or additional capital contributions to our Chinese subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business.
Chinese regulation of loans to, and direct investment in, Chinese entities by offshore holding companies and governmental administration of currency conversion may restrict or prevent us from making loans or additional capital contributions to our Chinese subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business.
We conduct substantially all of our operations in China and substantially all of our long-lived assets are located in China. Our executive officers, including our Chief Executive Officer and Chief Financial Officer, and a majority of our directors reside within mainland China and/or Hong Kong or spend significant amounts of time in mainland China and/or Hong Kong.
Our executive officers, including our Chief Executive Officer and Chief Financial Officer, and a majority of our directors reside within mainland China and/or Hong Kong or spend significant amounts of time in mainland China and/or Hong Kong.
We recorded a pre-tax loss $50 million, $27 million and $38 million for the year ended 2023, 2022 and 2021, respectively. We also invest in short-term investments, such as time deposits, and long-term bank deposits and notes. Our short-term investments and long-term bank deposits and notes as of December 31, 2023 amounted to $1,472 million and $1,265 million, respectively.
We recorded a pre-tax gain of $38 million, a pre-tax loss of $50 million and $27 million for the years ended 2024, 2023 and 2022, respectively. We also invest in short-term investments, such as time deposits, and long-term bank deposits and notes.
In addition, we may incur significant costs for using alternative packaging materials, which in turn may have an adverse impact on our profit margins. 44 2023 Form 10-K Interventions in or the imposition of restrictions and limitations by the PRC government on currency conversion and payments of foreign currency and RMB out of mainland China may limit our ability to utilize our cash balances effectively, including making funds held by our China-based subsidiaries unavailable for use outside of mainland China, which could limit or eliminate our ability to pay dividends and affect the value of your investment.
Interventions in or the imposition of restrictions and limitations by the PRC government on currency conversion and payments of foreign currency and RMB out of mainland China may limit our ability to utilize our cash balances effectively, including making funds held by our China-based subsidiaries unavailable for use outside of mainland China, which could limit or eliminate our ability to pay dividends and affect the value of your investment.
These contractual arrangements allow Daojia to: • receive substantially all of the economic benefits and absorb all of the expected losses from its consolidated affiliated entities; • exercise effective control over its consolidated affiliated entities; and • hold an exclusive option to purchase all or part of the equity interests in its consolidated affiliated entities when and to the extent permitted by Chinese laws.
These contractual arrangements allow Daojia to: • receive substantially all of the economic benefits and absorb all of the expected losses from its consolidated affiliated entities; • exercise effective control over its consolidated affiliated entities; and • hold an exclusive option to purchase all or part of the equity interests in its consolidated affiliated entities when and to the extent permitted by Chinese laws. 48 2024 Form 10-K However, the VIE structure and contractual arrangements described above may not be as effective in providing control over Daojia’s consolidated affiliated entities as direct ownership.
Applicable Chinese laws, rules and regulations also require certain merger and acquisition transactions to be subject to security review. 52 2023 Form 10-K Due to the level of our revenues, our proposed acquisition of control of, or decisive influence over, any company with revenues within China of more than RMB800 million in the year prior to any proposed acquisition would be subject to the State Administration for Market Regulation (“SAMR”) merger control review.
Due to the level of our revenues, our proposed acquisition of control of, or decisive influence over, any company with revenues within China of more than RMB800 million in the year prior to any proposed acquisition would be subject to the State Administration for Market Regulation (“SAMR”) merger control review.
The fact that our trademarks are duly registered may not be adequate to protect these intellectual property rights.
We believe that our brands are essential to our success and our competitive position. The fact that our trademarks are duly registered may not be adequate to protect these intellectual property rights.
In addition, subject to applicable regulatory requirements, our amended and restated certificate of incorporation authorizes us to issue one or more classes or series of preferred stock that have such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over Company common stock respecting dividends and distributions, as our Board of Directors generally may determine.
Such awards will have a dilutive effect on the Company’s earnings per share, which could adversely affect the market price of Company common stock. 58 2024 Form 10-K In addition, subject to applicable regulatory requirements, our amended and restated certificate of incorporation authorizes us to issue one or more classes or series of preferred stock that have such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over Company common stock respecting dividends and distributions, as our Board of Directors generally may determine.
Our success depends on the continuing efforts of our key management and experienced and capable personnel as well as our ability to recruit new talent. Our future success is significantly dependent upon the continued service of our key management as well as experienced and capable personnel generally.
Our future success is significantly dependent upon the continued service of our key management as well as experienced and capable personnel generally.
However, given the uncertainty regarding the application of the EIT Law to us and our future operations, there can be no assurance that we or any of our non-Chinese subsidiaries will not be treated as a China resident enterprise now or in the future for Chinese tax law purposes. 47 2023 Form 10-K We and our stockholders face uncertainty with respect to indirect transfers of equity interests in China resident enterprises through transfer of non-Chinese-holding companies.
However, given the uncertainty regarding the application of the EIT Law to us and our future operations, there can be no assurance that we or any of our non-Chinese subsidiaries will not be treated as a China resident enterprise now or in the future for Chinese tax law purposes.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeYum China Compliance Oversight Committee (the "Compliance Committee"), primarily comprised of leaders and representatives from our information technology, supply chain, legal, finance, HR and public affairs functions, as well as internal audit group, is responsible for assisting the Board and Audit Committee in overseeing the Company’s cybersecurity risks.
Biggest changeYum China Compliance Oversight Committee (the “ Compliance Committee” ), primarily comprised of leaders and representatives from our information technology, supply chain, legal, finance, HR and public affairs functions, as well as internal audit group, is responsible for assisting the Board and Audit Committee in overseeing the Company’s cybersecurity risks.
These engagements assist us in ensuring our cybersecurity management practices and technical measures comply with applicable laws, regulations, industry standards and the Company’s policies. The Company has maintained ISO/IEC 27001:2013 certification since 2018 for certain online business. We have established processes designed to manage cybersecurity threats associated with the use of third-party service providers.
These engagements assist us in ensuring our cybersecurity management practices and technical measures comply with applicable laws, regulations, industry standards and the Company’s policies. The Company has maintained ISO/IEC 27001 certification since 2018 for certain online business. We have established processes designed to manage cybersecurity threats associated with the use of third-party service providers.
Our CTO, as a member of the Compliance Committee, served various positions in the Company’s information technology department for more than 20 years and began leading the department in 2017. 60 2023 Form 10-K To its knowledge, the Company has not experienced a material cybersecurity breach within the last three years, nor identified any risks from cybersecurity threats that have materially affected us, including our business strategy, results of operations or financial condition.
Our CTO, as a member of the Compliance Committee, served various positions in the Company’s information technology department for more than 20 years and began leading the department in 2017. 60 2024 Form 10-K To its knowledge, the Company has not experienced a material cybersecurity breach within the last three years, nor identified any risks from cybersecurity threats that have materially affected us , including our business strategy, results of operations or financial condition.
Through receiving regular reports from the Chief Technology Officer ("CTO") and the Chief Legal Officer, the Audit Committee discusses with management cybersecurity risk mitigation and incident management, and reviews management reports regarding the Company’s cybersecurity governance processes, incident response system and applicable cybersecurity laws, regulations and standards, status of projects to strengthen internal cybersecurity management, the evolving threat environment, vulnerability assessments, specific cybersecurity incidents and management’s efforts to monitor, detect and prevent cybersecurity threats.
Through receiving regular reports from the Chief Technology Officer (“ CTO” ) and the Chief Legal Officer, the Audit Committee discusses with management cybersecurity risk mitigation and incident management, and reviews management reports regarding the Company’s cybersecurity governance processes, incident response system and applicable cybersecurity laws, regulations and standards, status of projects to strengthen internal cybersecurity management, the evolving threat environment, vulnerability assessments, specific cybersecurity incidents and management’s efforts to monitor, detect and prevent cybersecurity threats.
The Compliance Committee meets regularly to discuss legal and regulatory developments on cybersecurity, assess the Company's emerging cybersecurity risks and mitigation plans, and determine strategy to promote cybersecurity compliance. Through ongoing communications, the Compliance Committee is informed about and monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents.
The Compliance Committee meets regularly to discuss legal and regulatory developments on cybersecurity, assess the Company’ s emerging cybersecurity risks and mitigation plans, and determine strategy to promote cybersecurity compliance. Through ongoing communications, the Compliance Committee is informed about and monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease our corporate headquarters in Shanghai and Dallas, Texas in the U.S., and regional offices and an innovation center in China, and own building, land use rights, or both for 14 non-store properties, which primarily include logistics centers, seasoning facilities and office buildings for Little Sheep and Huang Ji Huang.
Biggest changeWe also lease our corporate headquarters in Shanghai and Dallas, Texas in the U.S., and regional offices and an innovation center in China, and own building, land use rights, or both for non-store properties, which primarily include logistics centers, seasoning facilities for Little Sheep and Huang Ji Huang and certain regional office buildings.
We sublease over 150 properties to franchisees and other third parties. Additional information about the Company’s leased properties is included in Note 11 to the Consolidated Financial Statements in Part II, Item 8. We believe that our properties are generally in good operating condition and are suitable for the purposes for which they are being used.
We sublease over 150 properties to franchisees and other third parties. Additional information about the Company’s leased properties is included in Note 10 to the Consolidated Financial Statements in Part II, Item 8. We believe that our properties are generally in good operating condition and are suitable for the purposes for which they are being used.
The leased Company-owned units are further detailed as follows: • KFC leased properties for 9,194 units. • Pizza Hut leased properties for 3,140 units. • Other restaurant concepts leased properties for 255 units. Company-owned restaurants in China are generally leased for initial terms of 10 to 20 years and generally do not have renewal options.
The leased Company-owned units are further detailed as follows: • KFC leased properties for 10,143 units. • Pizza Hut leased properties for 3,510 units. • Other restaurant concepts leased properties for 174 units. Company-owned restaurants in China are generally leased for initial terms of 10 to 20 years and generally do not have renewal options.
Item 2. Properties. As of year-end 2023, the Company had 12,648 Company-owned units in China. Of these Company-owned units, 12,589 units were leased properties and 59 units were owned properties.
Item 2. Properties. As of year-end 2024, the Company had 13,887 Company-owned units in China. Of these Company-owned units, 13,827 units were leased properties and 60 units were owned properties.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMatters faced by the Company from time to time include, but are not limited to, claims from landlords, employees, guests and others related to operational, contractual or employment issues. We are not involved in any material legal proceedings as of December 31, 2023. Item 4. Mine Safe ty Disclosures. Not applicable. 61 2023 Form 10-K PART II
Biggest changeMatters faced by the Company from time to time include, but are not limited to, claims from landlords, employees, guests and others related to operational, contractual or employment issues. We are not involved in any material legal proceedings as of December 31, 2024. Item 4. Mine Safe ty Disclosures. Not applicable. 61 2024 Form 10-K PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 61 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 62 Item 6. [RESERVED] 63 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 64 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 84 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 61 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 62 Item 6. [RESERVED] 63 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 64 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 86 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table provides information, as of December 31, 2023, with respect to shares of common stock repurchased by Yum China under the authorization during the quarter then ended: Period Total Number of Shares Purchased (thousands) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (thousands) Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (millions) 10/1/23-10/31/23 601 $ 53.24 601 $ 838 11/1/23-11/30/23 5,519 $ 44.84 5,519 $ 1,590 12/1/23-12/31/23 1,369 $ 41.23 1,369 $ 1,534 Cumulative total 7,489 $ 44.86 7,489 $ 1,534 Stock Performance Graph This graph compares the cumulative total return of our common stock from December 31, 2018 through December 31, 2023 with the comparable cumulative total return of the S&P China BMI, MSCI Asia APEX 50, MSCI China Index and MSCI China Consumer Discretionary Index.
Biggest changeThe following table provides information, as of December 31, 2024, with respect to shares of common stock repurchased by Yum China under the authorization during the quarter then ended: 62 2024 Form 10-K Period Total Number of Shares Purchased (thousands) Average Price Paid Per Share (a) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (thousands) Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (millions) 10/1/24-10/31/24 1,449 $ 45.68 1,449 $ 413 11/1/24-11/30/24 1,234 $ 47.67 1,234 $ 1,354 12/1/24-12/31/24 1,281 $ 48.76 1,281 $ 1,292 Cumulative total 3,964 $ 47.30 3,964 $ 1,292 (a) Starting January 2024, the Company also repurchased shares of common stock through open market transactions on the HKEX.
The graph assumes that the value of the investment in our common stock and each index was $100 on December 31, 2018 and that all dividends were reinvested. We selected the S&P China BMI and MSCI Asia APEX 50 for comparison, as YUMC is an index member of both of these indices.
The graph assumes that the value of the investment in our common stock and each index was $100 on December 31, 2019 and that all dividends were reinvested. We selected the S&P China BMI and MSCI Asia APEX 50 for comparison, as YUMC is an index member of both of these indices.
We have paid a quarterly cash dividend on Yum China common stock since the fourth quarter of 2017, except for the second and third quarter of 2020 due to the unprecedented effects of the COVID-19 pandemic. In 2023, the Company declared and paid a quarterly cash dividend of $0.13 per share.
We have paid a quarterly cash dividend on Yum China common stock since the fourth quarter of 2017, except for the second and third quarter of 2020 due to the unprecedented effects of the COVID-19 pandemic. In 2024, the Company declared and paid a quarterly cash dividend of $0.16 per share.
At the discretion of the board of directors, as an enterprise incorporated in China, each of our Chinese subsidiaries may allocate a portion of its after-tax profits based on Chinese accounting standards to staff welfare and bonus funds.
At the discretion of the board of directors, as an enterprise incorporated in China, each of our Chinese subsidiaries may allocate a portion of its after-tax profits based on Chinese accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends.
On the same day, the Company’s shares of common stock traded on the HKEX were included in the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. The Company’s common stock listed on the NYSE and HKEX continue to be fully fungible. As of February 22, 2024, there were 34,506 holders of record of Yum China’s common stock.
On the same day, the Company’s shares of common stock traded on the HKEX were included in the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. The Company’s common stock listed on the NYSE and HKEX continue to be fully fungible. As of February 21, 2025, there were 32,314 holders of record of Yum China’s common stock.
Our Board of Directors declared an increase in the cash dividend to $0.16 per share on Yum China’s common stock in February 2024.
Our Board of Directors declared an increase in cash dividend to $0.24 per share on Yum China’s common stock in February 2025.
These reserve funds and staff welfare and bonus funds are not distributable as cash dividends. 62 2023 Form 10-K Our Board of Directors has authorized an aggregate of $3.4 billion for our share repurchase program, including its most recent increase in authorization on November 2, 2023.
Our Board of Directors has authorized an aggregate of $4.4 billion for our share repurchase program, including its most recent increase in authorization on November 4, 2024, of which $1.3 billion remained available as of December 31, 2024.
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We selected MSCI China Index, as our relative total shareholder return against this index is one of the measures to determine the payout of certain PSU awards.
Added
Price paid for shares repurchased on the HKEX have been converted into U.S. dollars at the exchange rate on the date of repurchase.
Removed
We also selected MSCI China Consumer Discretionary Index, an industry index which includes listed companies in the restaurant industry and other related sectors. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 YUMC $ 100 $ 145 $ 173 $ 152 $ 169 $ 132 S&P China BMI $ 100 $ 122 $ 159 $ 128 $ 100 $ 90 MSCI Asia APEX 50 $ 100 $ 126 $ 169 $ 150 $ 114 $ 122 MSCI China $ 100 $ 123 $ 159 $ 125 $ 98 $ 87 MSCI China Consumer Discretionary $ 100 $ 152 $ 227 $ 147 $ 113 $ 96
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Stock Performance Graph This graph compares the cumulative total return of our common stock from December 31, 2019 through December 31, 2024 with the comparable cumulative total return of the S&P China BMI, MSCI Asia APEX 50, MSCI China Index and MSCI China Consumer Discretionary Index.
Added
We selected MSCI China Index and MSCI China Consumer Discretionary Index, as they are the measures to determine the payout of our certain PSU awards. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 YUMC $ 100 $ 119 $ 105 $ 116 $ 91 $ 105 S&P China BMI $ 100 $ 130 $ 105 $ 82 $ 74 $ 86 MSCI Asia APEX 50 $ 100 $ 134 $ 119 $ 91 $ 97 $ 118 MSCI China $ 100 $ 129 $ 102 $ 80 $ 71 $ 84 MSCI China Consumer Discretionary $ 100 $ 150 $ 97 $ 74 $ 63 $ 71

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeReconciliation of GAAP Operating Profit to Restaurant Profit 2023 KFC Pizza Hut All Other Segments Corporate and Unallocated Elimination Total GAAP Operating Profit (Loss) $ 1,202 $ 142 $ (31 ) $ (207 ) $ — $ 1,106 Less: Franchise fees and income 62 7 20 — — 89 Revenues from transactions with franchisees 45 4 74 249 — 372 Other revenues 17 21 624 44 (580 ) 126 Add: General and administrative expenses 263 118 43 214 — 638 Franchise expenses 31 4 1 — — 36 Expenses for transactions with franchisees 39 4 67 246 — 356 Other operating costs and expenses 15 19 614 42 (578 ) 112 Closures and impairment expenses, net 12 8 9 — — 29 Other expenses (income), net 2 — — (2 ) — — Restaurant profit (loss) $ 1,440 $ 263 $ (15 ) $ — $ 2 $ 1,690 Company sales 8,116 2,214 61 — — 10,391 Restaurant margin % 17.7 % 11.8 % (25.1 )% N/A N/A 16.3 % 69 2023 Form 10-K 2022 KFC Pizza Hut All Other Segments Corporate and Unallocated Elimination Total GAAP Operating Profit (Loss) $ 787 $ 70 $ (50 ) $ (178 ) $ — $ 629 Less: Franchise fees and income 56 7 18 — — 81 Revenues from transactions with franchisees 33 4 39 211 — 287 Other revenues 10 10 563 42 (534 ) 91 Add: General and administrative expenses 254 110 46 184 — 594 Franchise expenses 29 4 1 — — 34 Expenses for transactions with franchisees 30 3 35 211 — 279 Other operating costs and expenses 7 8 557 39 (533 ) 78 Closures and impairment expenses, net 16 4 12 — — 32 Other expenses (income), net 97 — — (3 ) — 94 Restaurant profit (loss) $ 1,121 $ 178 $ (19 ) $ — $ 1 $ 1,281 Company sales 7,120 1,939 51 — — 9,110 Restaurant margin % 15.7 % 9.2 % (37.6 )% N/A N/A 14.1 % Reconciliation of GAAP Operating Profit to Core Operating Profit 2023 KFC Pizza Hut All Other Segments Corporate and Unallocated Elimination Total GAAP Operating Profit (Loss) $ 1,202 $ 142 $ (31 ) $ (207 ) $ — $ 1,106 Special Items, Operating Profit — — — 15 — 15 Adjusted Operating Profit $ 1,202 $ 142 $ (31 ) $ (192 ) $ — $ 1,121 Items Affecting Comparability Temporary relief from landlords (a) (9 ) (2 ) — — — (11 ) Temporary relief from government agencies (b) (5 ) (2 ) — — — (7 ) VAT deductions (c) (36 ) (6 ) (2 ) — — (44 ) Amortization of reacquired franchise rights (d) 2 — — — — 2 F/X impact 57 11 (2 ) (6 ) — 60 Core Operating Profit (Loss) $ 1,211 $ 143 $ (35 ) $ (198 ) $ — $ 1,121 2022 KFC Pizza Hut All Other Segments Corporate and Unallocated Elimination Total GAAP Operating Profit (Loss) $ 787 $ 70 $ (50 ) $ (178 ) $ — $ 629 Special Items, Operating Profit — — — 4 — 4 Adjusted Operating Profit $ 787 $ 70 $ (50 ) $ (174 ) $ — $ 633 Items Affecting Comparability Temporary relief from landlords (a) (32 ) (6 ) (1 ) — — (39 ) Temporary relief from government agencies (b) (34 ) (14 ) — — — (48 ) VAT deductions (c) (12 ) (2 ) (2 ) — — (16 ) Amortization of reacquired franchise rights (d) 97 — — — — 97 F/X impact — — — — — — Core Operating Profit (Loss) $ 806 $ 48 $ (53 ) $ (174 ) $ — $ 627 Details of Items Affecting Comparability are presented below: (a) In relation to the effects of the COVID-19 pandemic, the Company was granted lease concessions from landlords.
Biggest changeReconciliation of GAAP Operating Profit to Restaurant Profit is as follows: 2024 KFC Pizza Hut All Other Segments Corporate and Unallocated Elimination Total GAAP Operating Profit (Loss) $ 1,192 $ 153 $ (15 ) $ (168 ) $ — $ 1,162 Less: Franchise fees and income 69 8 17 — — 94 Revenues from transactions with franchisees 55 5 71 289 — 420 Other revenues 10 24 648 64 (608 ) 138 Add: General and administrative expenses 248 110 37 173 — 568 Franchise expenses 32 4 1 — — 37 Expenses for transactions with franchisees 49 4 65 286 — 404 Other operating costs and expenses 8 22 635 63 (606 ) 122 Closures and impairment expenses, net 19 12 8 — — 39 Other income, net — — — (1 ) — (1 ) Restaurant profit (loss) $ 1,414 $ 268 $ (5 ) $ — $ 2 $ 1,679 Company sales 8,375 2,223 53 — — 10,651 Restaurant margin (%) 16.9 % 12.0 % (12.1 )% N/A N/A 15.7 % 2023 KFC Pizza Hut All Other Segments Corporate and Unallocated Elimination Total GAAP Operating Profit (Loss) $ 1,202 $ 142 $ (31 ) $ (207 ) $ — $ 1,106 Less: Franchise fees and income 62 7 20 — — 89 Revenues from transactions with franchisees 45 4 74 249 — 372 Other revenues 17 21 624 44 (580 ) 126 Add: General and administrative expenses 263 118 43 214 — 638 Franchise expenses 31 4 1 — — 36 Expenses for transactions with franchisees 39 4 67 246 — 356 Other operating costs and expenses 15 19 614 42 (578 ) 112 Closures and impairment expenses, net 12 8 9 — — 29 Other expenses (income), net 2 — — (2 ) — — Restaurant profit (loss) $ 1,440 $ 263 $ (15 ) $ — $ 2 $ 1,690 Company sales 8,116 2,214 61 — — 10,391 Restaurant margin (%) 17.7 % 11.8 % (25.1 )% N/A N/A 16.3 % 70 2024 Form 10-K Reconciliation of GAAP Operating Profit to Core Operating Profit is as follows: % Change 2024 2023 B/(W) Operating Profit $ 1,162 $ 1,106 5 Special Items, Operating Profit — 15 Adjusted Operating Profit $ 1,162 $ 1,121 4 Items Affecting Comparability Temporary relief from landlords (a) — (11 ) Temporary relief from government agencies (b) — (7 ) VAT deductions (c) — (44 ) Amortization of reacquired franchise rights (d) — 2 F/X impact (e) 28 — Core Operating Profit $ 1,190 $ 1,061 12 Total revenues 11,303 10,978 3 F/X impact (e) 200 — Total revenues, excluding the impact of F/X $ 11,503 $ 10,978 5 Core OP margin (%) 10.4 % 9.7 % 0.7 ppts.
Since 2016, we have been under a national audit on transfer pricing by the STA in China regarding our related party transactions for the period from 2006 to 2015. The information and views currently exchanged with the tax authorities focus on our franchise arrangement with YUM.
Since 2016, we have been under a national audit on transfer pricing by the STA in China regarding our related party transactions for the period from 2006 to 2015. The information and views currently exchanged with the tax authorities focus on our franchise arrangement with YUM.
We continue to provide information requested by the tax authorities to the extent it is available to the Company. It is reasonably possible that there could be significant developments, including expert review and assessment by the STA, within the next 12 months.
We continue to provide information requested by the tax authorities to the extent it is available to the Company. It is reasonably possible that there could be significant developments, including expert review and assessment by the STA, within the next 12 months.
The ultimate assessment and decision of the STA will depend upon further review of the information provided, as well as ongoing technical and other discussions with the STA and in-charge local tax authorities, and therefore it is not possible to reasonably estimate the potential impact at this time. We will continue to defend our transfer pricing position.
The ultimate assessment and decision of the STA will depend upon further review of the information provided, as well as ongoing technical and other discussions with the STA and in-charge local tax authorities, and therefore it is not possible to reasonably estimate the potential impact at this time. We will continue to defend our transfer pricing position.
However, if the STA prevails in the assessment of additional tax due based on its ruling, the assessed tax, interest and penalties, if any, could have a material adverse impact on our financial position, results of operations and cash flows.
However, if the STA prevails in the assessment of additional tax due based on its ruling, the assessed tax, interest and penalties, if any, could have a material adverse impact on our financial position, results of operations and cash flows.
We believe our principal uses of cash in the future will be primarily to fund our operations and capital expenditures for accelerating store network expansion and store remodeling, to step up investments in digitalization, automation and logistics infrastructure, to provide returns to our stockholders, as well as to explore opportunities for acquisitions or investments that build and support our ecosystem.
We believe our principal uses of cash in the future will be primarily to fund our operations and capital expenditures for accelerating store network expansion and store remodeling, to step up investments in digitalization, automation and logistics infrastructure, to provide returns to our stockholders, as well as to explore opportunities for investments that build and support our ecosystem or strategic acquisitions.
We evaluate unrecognized tax benefits, including interest thereon, on a quarterly basis to ensure that they have been appropriately adjusted for events, including change or developments with respect to tax audits, audit settlements and expiration of the statute of limitation, which may impact our ultimate payment for such exposures.
We evaluate unrecognized tax benefits, including interest and penalty thereon, on a quarterly basis to ensure that they have been appropriately adjusted for events, including change or developments with respect to tax audits, audit settlements and expiration of the statute of limitation, which may impact our ultimate payment for such exposures.
In the year ended December 31, 2023, we elected to perform the qualitative impairment assessment for the Little Sheep and Huang Ji Huang trademarks by evaluating all pertinent factors, including but not limited to macroeconomic conditions, industry and market conditions and financial performance and concluded that it was more likely than not that the assets were not impaired.
In the year ended December 31, 2024, we elected to perform the qualitative impairment assessment for the Little Sheep and Huang Ji Huang trademarks by evaluating all pertinent factors, including but not limited to macroeconomic conditions, industry and market conditions and financial performance and concluded that it was more likely than not that the assets were not impaired.
No impairment charges on trademarks related to Little Sheep and Huang Ji Huang were recorded in 2023 and 2022. Our finite-lived intangible assets that are not allocated to an individual restaurant are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.
No impairment charges on trademarks related to Little Sheep and Huang Ji Huang were recorded in 2024 and 2023. Our finite-lived intangible assets that are not allocated to an individual restaurant are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.
Based on our qualitative assessment, the Company concluded that no changes in events or circumstances have occurred that indicated impairment may exist and it was more likely than not that the fair value of the reporting units exceeds their carrying amount and therefore no quantitative assessment was required. No impairment charge on goodwill was recorded in 2023 and 2022.
Based on our qualitative assessment, the Company concluded that no changes in events or circumstances have occurred that indicated impairment may exist and it was more likely than not that the fair value of the reporting units exceeds their carrying amount and therefore no quantitative assessment was required. No impairment charge on goodwill was recorded in 2024 and 2023.
We estimate that our total temporary difference for which we have not provided foreign withholding taxes is approximately $3 billion at December 31, 2023. The foreign withholding tax rate on this amount is 5% or 10% depending on the manner of repatriation and the applicable tax treaties or tax arrangements.
We estimate that our total temporary difference for which we have not provided foreign withholding taxes is approximately $3 billion at December 31, 2024. The foreign withholding tax rate on this amount is 5% or 10% depending on the manner of repatriation and the applicable tax treaties or tax arrangements.
Restaurant profit (“Restaurant profit”) is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, restaurant-level payroll and employee benefits, rent, depreciation and amortization of restaurant-level assets, advertising expenses, and other operating expenses. Company restaurant margin percentage is defined as Restaurant profit divided by Company sales.
Restaurant profit is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, restaurant-level payroll and employee benefits, rent, depreciation and amortization of restaurant-level assets, advertising expenses, and other operating expenses. Company restaurant margin percentage is defined as Restaurant profit divided by Company sales.
Throughout this Form 10-K when we refer to the “financial statements,” we are referring to the “Consolidated Financial Statements,” unless the context indicates otherwise. This MD&A includes a discussion of our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Throughout this Form 10-K when we refer to the “financial statements,” we are referring to the “Consolidated Financial Statements,” unless the context indicates otherwise. This MD&A includes a discussion of our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023.
For a discussion of our operating results for the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
For a discussion of our operating results for the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Measured by number of restaurants, we believe Pizza Hut had an approximate four-to-one lead over its nearest western CDR competitor in China as of the end of 2023. We have two reportable segments: KFC and Pizza Hut.
Measured by number of restaurants, we believe Pizza Hut had an approximate four-to-one lead over its nearest western CDR competitor in China as of the end of 2024. We have two reportable segments: KFC and Pizza Hut.
We have not included in the table above approximately $24 million of liabilities for unrecognized tax benefits related to the uncertainty with regard to the deductibility of certain business expenses incurred as well as related accrued interest and penalties.
We have not included in the table above approximately $23 million of liabilities for unrecognized tax benefits related to the uncertainty with regard to the deductibility of certain business expenses incurred as well as related accrued interest and penalties.
As of December 31, 2023 and 2022, the Company has not made an allowance for the recoverability of VAT assets, as the balance is expected to be utilized to offset against VAT payables or be refunded in the future.
As of December 31, 2024 and 2023, the Company has not made an allowance for the recoverability of VAT assets, as the balance is expected to be utilized to offset against VAT payables or be refunded in the future.
The Company reviews its breakage estimates at least annually based upon the latest available information regarding redemption and expiration patterns. 80 2023 Form 10-K Impairment or Disposal of Long-Lived Assets We review long-lived assets of restaurants (primarily operating lease right-of-use assets and property, plant and equipment (“PP&E”)) semi-annually for impairment, or whenever events or changes in circumstances indicate that the carrying amount of a restaurant may not be recoverable.
The Company reviews its breakage estimates at least annually based upon the latest available information regarding redemption and expiration patterns. 82 2024 Form 10-K Impairment or Disposal of Long-Lived Assets We review long-lived assets of restaurants (primarily operating lease right-of-use assets and property, plant and equipment (“PP&E”)) semi-annually for impairment, or whenever events or changes in circumstances indicate that the carrying amount of a restaurant may not be recoverable.
In the year ended December 31, 2023, we elected to perform a qualitative impairment assessment for each of our individual reporting units of KFC, Pizza Hut, Huang Ji Huang and Lavazza.
In the year ended December 31, 2024, we elected to perform a qualitative impairment assessment for each of our individual reporting units of KFC, Pizza Hut, Huang Ji Huang and Lavazza.
For purposes of our impairment analysis, we update the cash flows that were initially used to value the finite-lived intangible asset to reflect our current estimates and assumptions over the asset’s future remaining life. 81 2023 Form 10-K Impairment of Goodwill We evaluate goodwill for impairment on an annual basis as of the beginning of our fourth quarter or more often if an event occurs or circumstances change that indicates impairment might exist.
For purposes of our impairment analysis, we update the cash flows that were initially used to value the finite-lived intangible asset to reflect our current estimates and assumptions over the asset’s future remaining life. 83 2024 Form 10-K Impairment of Goodwill We evaluate goodwill for impairment on an annual basis as of the beginning of our fourth quarter or more often if an event occurs or circumstances change that indicates impairment might exist.
The risk-free interest rate was based on the U.S. Treasury zero-coupon yield in effect with maturity terms equal to the expected term or performance measurement period of the awards. The dividend yield was estimated based on the Company’s dividend policy. We use historical turnover data to estimate the expected forfeiture rate.
The risk-free interest rate was based on the U.S. Treasury zero-coupon yield in effect with maturity terms equal to the expected term or performance measurement period of the awards. The dividend yield was estimated based on the Company’s dividend policy at the time of the grant. We use historical turnover data to estimate the expected forfeiture rate.
The Company will continue to review the classification of VAT assets at each balance sheet date, giving consideration to different local implementation practices of refunding VAT assets and the outcome of potential administrative reviews. 76 2023 Form 10-K Pursuant to Circular [2019] No. 39, Circular [2019] No. 87 and Circular [2022] No. 11 jointly issued by relevant government authorities, including the MOF and the STA, from April 1, 2019 to December 31, 2022, general VAT taxpayers in certain industries that meet certain criteria were allowed to claim an additional 10% or 15% input VAT, which would be used to offset their VAT payables.
The Company will continue to review the classification of VAT assets at each balance sheet date, giving consideration to different local implementation practices of refunding VAT assets and the outcome of potential administrative reviews. 78 2024 Form 10-K Pursuant to Circular [2019] No. 39, Circular [2019] No. 87 and Circular [2022] No. 11 jointly issued by relevant government authorities, including the MOF and the STA, from April 1, 2019 to December 31, 2022, general VAT taxpayers in certain industries that meet certain criteria were allowed to claim an additional 10% or 15% input VAT, which were used to offset their VAT payables.
These estimates are highly subjective, and our ability to achieve the forecasted cash is affected by factors such as changes in our operating performance and business strategies and changes in economic conditions. Our goodwill of $1,932 million as of December 31, 2023 was related to the KFC, Pizza Hut, Huang Ji Huang and Lavazza reporting units.
These estimates are highly subjective, and our ability to achieve the forecasted cash is affected by factors such as changes in our operating performance and business strategies and changes in economic conditions. Our goodwill of $1,880 million as of December 31, 2024 was related to the KFC, Pizza Hut, Huang Ji Huang and Lavazza reporting units.
This VAT policy was further extended to December 31, 2023 but the additional deduction was reduced to 5% or 10% respectively. VAT deductions were primarily recorded as a reduction to Food and paper and Occupancy and other operating expenses within Company restaurant expenses included in the Consolidated Statements of Income.
This VAT policy was further extended to December 31, 2023 but the additional deduction was reduced to 5% or 10% respectively. VAT deductions were primarily recorded as a reduction to Food and paper and Occupancy and other operating expenses within Company restaurant expenses included in the Consolidated Statements of Income. Such preferential policy was not extended in 2024.
Additional details on our reportable operating segments are included in Note 17. 64 2023 Form 10-K We intend for this MD&A to provide the reader with information that will assist in understanding our results of operations, including metrics that management uses to assess the Company’s performance.
Additional details on our reportable operating segments are included in Note 16. 64 2024 Form 10-K We intend for this MD&A to provide the reader with information that will assist in understanding our results of operations, including metrics that management uses to assess the Company’s performance.
See Note 11 for additional information. (b) This represents outstanding principal amount of short-term borrowings, by excluding the impact of debt discounts as of December 31, 2023. See Note 9 for additional information. (c) Purchase obligations relate primarily to capital expenditure commitment for infrastructure, as well as supply and service agreements.
See Note 10 for additional information. (b) This represents outstanding principal amount of short-term borrowings, by excluding the impact of debt discounts as of December 31, 2024. See Note 9 for additional information. (c) Purchase obligations relate primarily to capital expenditure commitment for infrastructure, as well as supply and service agreements.
Under the BS and MCS models, we made a number of assumptions regarding the fair value of the share-based awards, including: • the expected future volatility of the price of shares of Yum China common stock; • the risk-free interest rate; • the expected dividend yield; and • the expected term. 82 2023 Form 10-K We estimated the expected future volatility of the price of shares of Yum China common stock based on the historical price volatility of the publicly traded shares of common stock of comparable companies in the same business as Yum China as well as the historical volatility of the Company’s common stock.
Under the BS and MCS models, we made a number of assumptions regarding the fair value of the share-based awards, including: • the expected future volatility of the price of shares of Yum China common stock; • the risk-free interest rate; • the expected dividend yield; and • the expected term. 84 2024 Form 10-K We estimated the expected future volatility of the price of shares of Yum China common stock based on the historical volatility of the Company’s common stock and historical price volatility of the publicly traded shares of common stock of comparable companies in the same business as Yum China.
Our access to, and the availability of, financing on acceptable terms and conditions in the future or at all will be impacted by many factors, including, but not limited to: • our financial performance; • our credit ratings; • the liquidity of the overall capital markets and our access to the U.S. capital markets; and • the state of the Chinese, U.S. and global economies, as well as relations between the Chinese and U.S. governments.
Our access to, and the availability of, financing on acceptable terms and conditions in the future or at all will be impacted by many factors, including, but not limited to: • our financial performance; • our credit ratings; 79 2024 Form 10-K • the liquidity of the overall capital markets and our access to capital markets; and • the state of the Chinese, U.S. and global economies, as well as relations between the Chinese and U.S. governments.
As of December 31, 2023, we also had outstanding bank guarantees of RMB222 million (approximately $31 million) mainly to secure our lease payments to landlords for certain Company-owned restaurants. Our credit facilities were therefore reduced by outstanding short-term bank borrowings, adjusted for unamortized interest and collateral, and outstanding guarantees.
As of December 31, 2024, we also had outstanding bank guarantees of RMB258 million (approximately $35 million) mainly to secure our lease payments to landlords for certain Company-owned restaurants. Our credit facilities were therefore reduced by outstanding short-term bank borrowings, adjusted for unamortized interest and collateral, and outstanding guarantees.
Our indefinite-lived intangible assets had a book value of $127 million and $130 million as of December 31, 2023 and 2022, respectively, representing two material indefinite-lived intangible assets, which are our Little Sheep and Huang Ji Huang trademarks.
Our indefinite-lived intangible assets had a book value of $123 million and $127 million as of December 31, 2024 and 2023, respectively, representing two material indefinite-lived intangible assets, which are our Little Sheep and Huang Ji Huang trademarks.
The VAT deductions were recorded as a reduction to the related expense item, primarily in Company restaurant expenses included in the Consolidated Statements of Income. We have been benefiting from the retail tax structure reform since it was implemented on May 1, 2016.
The VAT deductions were recorded as a reduction to the related expense item, primarily in Company restaurant expenses included in the Consolidated Statements of Income. Such preferential VAT policy was not extended in 2024. We have been benefiting from the retail tax structure reform since it was implemented on May 1, 2016.
At December 31, 2023 and 2022, we had $20 million and $21 million, respectively, of unrecognized tax benefits related to the uncertainty with regard to the deductibility of certain business expenses incurred.
At December 31, 2024 and 2023, we had $19 million and $20 million, respectively, of unrecognized tax benefits related to the uncertainty with regard to the deductibility of certain business expenses incurred.
We also use Restaurant profit and Restaurant margin for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe they provide useful information to investors as to the profitability of our Company-owned restaurants. 67 2023 Form 10-K Core Operating Profit is defined as Operating Profit adjusted for Special Items, and further excluding Items Affecting Comparability and the impact of F/X.
We also use Restaurant profit and Restaurant margin for the purpose of internally evaluating the performance of our Company-owned restaurants and we believe they provide useful information to investors as to the profitability of our Company-owned restaurants. Core Operating Profit is defined as Operating Profit adjusted for Special Items, and further excluding Items Affecting Comparability and the impact of F/X.
Share Repurchases and Dividends On November 2, 2023, our Board of Directors increased the share repurchase authorization by $1 billion to an aggregate of $3.4 billion.
Share Repurchases and Dividends On November 4, 2024, our Board of Directors increased the share repurchase authorization by $1 billion to an aggregate of $4.4 billion.
Our non-reportable operating segments, including the operations of Lavazza, Huang Ji Huang, Little Sheep and Taco Bell (and for 2022, also including COFFii & JOY and East Dawning), our delivery operating segment and our e-commerce business, are combined and referred to as All Other Segments, as these operating segments are insignificant both individually and in the aggregate.
Our non-reportable operating segments, including the operations of Lavazza, Huang Ji Huang, Little Sheep and Taco Bell, our delivery operating segment and our e-commerce business, are combined and referred to as All Other Segments, as these operating segments are insignificant both individually and in the aggregate.
Pizza Hut is the leading and the largest casual dining restaurant (“CDR”) brand in China in terms of system sales and number of restaurants. As of December 31, 2023, Pizza Hut operated 3,312 restaurants in over 700 cities.
Pizza Hut is the leading and the largest casual dining restaurant (“CDR”) brand in China in terms of system sales and number of restaurants. As of December 31, 2024, Pizza Hut operated 3,724 restaurants in over 800 cities.
As of December 31, 2023, KFC operated 10,296 restaurants in more than 2,000 cities across China. KFC primarily competes with western QSR brands in China, such as McDonald’s, Dicos and Burger King, among which we believe KFC had an approximate two-to-one lead over its nearest competitor in terms of store count as of the end of 2023.
As of December 31, 2024, KFC operated 11,648 restaurants in over 2,200 cities across China. KFC primarily competes with western QSR brands in China, such as McDonald’s, Dicos and Burger King, among which we believe KFC had an approximate two-to-one lead over its nearest competitor in terms of store count as of the end of 2024.
The Company paid a cash dividend of $0.13 and $0.12 per share for each quarter of 2023 and 2022, respectively. Total cash dividends of $216 million and $202 million were paid to stockholders in 2023 and 2022, respectively.
The Company paid a cash dividend of $0.16 and $0.13 per share for each quarter of 2024 and 2023, respectively. Total cash dividends of $248 million and $216 million were paid to stockholders in 2024 and 2023, respectively.
We had no material contingent obligations as of December 31, 2023. Please see Note 18 for further discussion.
We had no material contingent obligations as of December 31, 2024. Please see Note 17 for further discussion.
We currently expect our fiscal year 2024 capital expenditures to be in the range of approximately $700 million to $850 million. 77 2023 Form 10-K If our cash flows from operations are less than we require, we may need to access the capital markets to obtain financing.
We currently expect our fiscal year 2025 capital expenditures to be in the range of approximately $700 million to $800 million. If our cash flows from operations are less than we require, we may need to access the capital markets to obtain financing.
Income Tax Provision Our income tax provision primarily includes tax on our earnings generally at the Chinese statutory tax rate of 25% with certain Chinese subsidiaries qualified at preferential tax rates, withholding tax on planned or actual repatriation of earnings outside of China, Hong Kong profits tax, and U.S. corporate income tax, if any.
See Note 3 for additional information. 77 2024 Form 10-K Income Tax Provision Our income tax provision primarily includes tax on our earnings generally at the Chinese statutory tax rate of 25% with certain Chinese subsidiaries qualified at preferential tax rates, withholding tax on planned or actual repatriation of earnings outside of China, Hong Kong profits tax, and U.S. corporate income tax, if any.
Overview Yum China Holdings, Inc. is the largest restaurant company in China in terms of 2023 system sales, with $11 billion of revenues in 2023 and 14,644 restaurants as of year-end 2023.
Overview Yum China Holdings, Inc. is the largest restaurant company in China in terms of 2024 system sales, with $11.3 billion of revenues in 2024 and 16,395 restaurants as of year-end 2024.
We have since grown to become the largest restaurant company in China in terms of 2023 system sales, with 14,644 restaurants covering over 2,000 cities primarily in China as of December 31, 2023.
We have since grown to become the largest restaurant company in China in terms of 2024 system sales, with 16,395 restaurants covering over 2,200 cities primarily in China as of December 31, 2024.
As of December 31, 2023, VAT assets of $91 million, VAT assets of $6 million and net VAT payable of $5 million were recorded in Prepaid expenses and other current assets, Other assets and Accounts payable and other current liabilities, respectively, on the Consolidated Balance Sheets.
As of December 31, 2024, current and non-current VAT assets of $117 million and $8 million and net VAT payable of $8 million were recorded in Prepaid expenses and other current assets, Other assets and Accounts payable and other current liabilities, respectively, on the Consolidated Balance Sheets.
Performance Metrics 2023 % Change System Sales Growth 14 % System Sales Growth, excluding F/X 21 % Same-Store Sales Growth 7 % Unit Count 2023 2022 % Increase Company-owned 12,648 11,161 13 Franchisees 1,996 1,786 12 14,644 12,947 13 Non-GAAP Measures In addition to the results provided in accordance with GAAP throughout this MD&A, the Company provides the following non-GAAP measures: • Measures adjusted for Special Items, which include Adjusted Operating Profit, Adjusted Net Income, Adjusted Earnings Per Common Share ("EPS"), Adjusted Effective Tax Rate and Adjusted EBITDA; • Company Restaurant Profit ("Restaurant profit") and Restaurant margin; • Core Operating Profit that excludes Special Items, and further adjusted for Items Affecting Comparability and the impact of F/X; These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP.
Performance Metrics 2024 % Change System Sales Growth 3 % System Sales Growth, excluding F/X 5 % Same-Store Sales (Decline) (3 )% 67 2024 Form 10-K Unit Count 2024 2023 % Increase Company-owned 13,887 12,648 10 Franchisees 2,508 1,996 26 16,395 14,644 12 Non-GAAP Measures In addition to the results provided in accordance with GAAP throughout this MD&A, the Company provides the following non-GAAP measures: • Measures adjusted for Special Items, which include Adjusted Operating Profit, Adjusted Net Income, Adjusted Earnings Per Common Share ("EPS"), Adjusted Effective Tax Rate and Adjusted EBITDA; • Company Restaurant Profit ("Restaurant profit") and Restaurant margin; • Core Operating Profit and Core OP margin, which exclude Special Items, and further adjusted for Items Affecting Comparability and the impact of F/X; These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP.
However, the amount of our expected benefit from this VAT regime depends on a number of factors, some of which are outside of our control. The interpretation and application of the new VAT regime are not settled at some local governmental levels. In addition, China is in the process of enacting the prevailing VAT regulations into a national VAT law.
However, the amount of our expected benefit from this VAT regime depends on a number of factors, some of which are outside of our control. The interpretation and application of the new VAT regime are not settled at some local governmental levels.
Total Revenues In 2023, the increase in Total revenues, excluding the impact of F/X, was primarily driven by inter-segment revenue generated by our delivery team for services provided to Company-owned restaurants as a result of increased delivery sales, as well as revenue generated from delivery services provided to franchisees.
Total Revenues 76 2024 Form 10-K In 2024, the increase in Total revenues, excluding the impact of F/X, was primarily driven by inter-segment revenue generated by our delivery team for services provided to Company-owned restaurants as a result of increased delivery sales, partially offset by decline in Company sales.
Net cash used in investing activities was $743 million in 2023 as compared to $522 million in 2022. The increase was mainly due to the net impact on cash flows resulting from purchases and maturities of short-term investments, and long-term bank deposits and notes.
The decrease was mainly due to the net impact on cash flows resulting from purchases and maturities of short-term investments, and long-term bank deposits and notes. Net cash used in financing activities was $1,636 million in 2024 as compared to $716 million in 2023.
(b) See “Non-GAAP Measures” below for definitions and reconciliations of the most directly comparable GAAP financial measures to the non-GAAP measures.
(a) Represents year-over-year change in percentage. (b) See “Non-GAAP Measures” below for definitions and reconciliations of the most directly comparable GAAP financial measures to the non-GAAP measures.
As of December 31, 2023, we had outstanding short-term bank borrowings of RMB1,189 million (approximately $168 million), mainly to manage working capital at our operating subsidiaries. Such bank borrowings were secured by $79 million short-term investments, and are due within one year from their issuance dates.
As of December 31, 2024, we had outstanding short-term bank borrowings of RMB929 million (approximately $127 million), mainly to manage working capital at our operating subsidiaries. Such bank borrowings are due within one year from their issuance dates.
In addition, this also includes government subsidies for employee benefits and providing training to employees, with higher amounts received during 2022 impacted by the COVID-19 pandemic. The temporary relief was primarily recognized as a reduction to Payroll and employee benefits within Company restaurant expenses included in the Consolidated Statement of Income. See Note 2 government subsidies for additional information.
(b) In relation to the effects of the COVID-19 pandemic, the Company received government subsidies for employee benefits and providing training to employees. The temporary relief was primarily recognized as a reduction to Payroll and employee benefits within Company restaurant expenses included in the Consolidated Statement of Income. See Note 2 for additional information about our government subsidies.
Corporate G&A Expenses In 2023, the increase in Corporate G&A expenses, excluding the impact of F/X, was primarily driven by higher compensation costs. Interest Income, Net In 2023, the increase in interest income, excluding the impact of F/X, was primarily driven by higher interest rates and higher investment balance during the year.
Corporate G&A Expenses In 2024, the decrease in Corporate G&A expenses, excluding the impact of F/X, was primarily driven by lower performance-based compensation costs. Interest Income, Net In 2024, the decrease in interest income, excluding the impact of F/X, was primarily driven by lower investment balance during the year.
As of December 31, 2023, the Company had unused credit facilities of approximately $881 million.
As of December 31, 2024, the Company had unused credit facilities of approximately $1,041 million.
We perform our annual test for impairment of our indefinite-lived intangible assets at the beginning of our fourth quarter. When we evaluate these assets for impairment, we have the option to first perform a qualitative assessment to determine whether an intangible asset group is impaired.
When we evaluate these assets for impairment, we have the option to first perform a qualitative assessment to determine whether an intangible asset group is impaired.
We believe presenting Core Operating Profit provides additional information to further enhance comparability of our operating results and we use this measure for purposes of evaluating the performance of our core operations. The following table sets forth the reconciliations of the most directly comparable GAAP financial measures to the non-GAAP financial measures.
We believe presenting Core Operating Profit provides additional information to further enhance comparability of our operating results and we use this measure for purposes of evaluating the performance of our core operations.
See Note 16 for a further discussion of our income taxes. 83 2023 Form 10-K
See Note 15 for a further discussion of our income taxes. 85 2024 Form 10-K
Investment Loss The investment loss mainly relates to the change in fair value of our investment in Meituan Dianping (“Meituan”). See Note 3 for additional information.
Investment Gain (Loss) The investment gain (loss) mainly relates to the change in fair value of our investment in Meituan Dianping (“Meituan”).
(15 ) (4 ) Adjusted Net Income – Yum China Holdings, Inc. $ 842 $ 446 Reconciliation of EPS to Adjusted EPS Basic Earnings Per Common Share $ 1.99 $ 1.05 Special Items, Basic Earnings Per Common Share (0.03 ) (0.01 ) Adjusted Basic Earnings Per Common Share $ 2.02 $ 1.06 Diluted Earnings Per Common Share $ 1.97 $ 1.04 Special Items, Diluted Earnings Per Common Share (0.03 ) (0.01 ) Adjusted Diluted Earnings Per Common Share $ 2.00 $ 1.05 Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate Effective tax rate (See Note 16) 26.9 % 30.1 % Impact on effective tax rate as a result of Special Items 0.4 % 0.2 % Adjusted effective tax rate 26.5 % 29.9 % Net income, along with the reconciliation to Adjusted EBITDA, is presented below: 2023 2022 Reconciliation of Net Income to Adjusted EBITDA Net Income – Yum China Holdings, Inc. $ 827 $ 442 Net income – noncontrolling interests 74 36 Equity in net (earnings) losses from equity method investments (4 ) 2 Income tax provision 329 207 Interest income, net (169 ) (84 ) Investment loss 49 26 Operating Profit 1,106 629 Special Items, Operating Profit 15 4 Adjusted Operating Profit 1,121 633 Depreciation and amortization 453 602 Store impairment charges 37 51 Adjusted EBITDA $ 1,611 $ 1,286 68 2023 Form 10-K Details of Special Items are presented below: Details of Special Items 2023 2022 Share-based compensation expense for Partner PSU Awards (a) $ (15 ) $ (4 ) Special Items, Operating Profit (15 ) (4 ) Tax effect on Special Items (b) — — Special Items, net income – including noncontrolling interests (15 ) (4 ) Special Items, net income – noncontrolling interests — — Special Items, Net Income – Yum China Holdings, Inc. $ (15 ) $ (4 ) Weighted-average Diluted Shares Outstanding (in millions) 420 425 Special Items, Diluted Earnings Per Common Share $ (0.03 ) $ (0.01 ) (a) In February 2020, the Company granted Partner PSU Awards to select employees who were deemed critical to the Company’s execution of its strategic operating plan.
Core OP margin is defined as Core Operating Profit divided by Total revenues, excluding the impact of F/X. 68 2024 Form 10-K The following table sets forth the reconciliations of the most directly comparable GAAP financial measures to the non-GAAP financial measures: 2024 2023 Reconciliation of Operating Profit to Adjusted Operating Profit Operating Profit $ 1,162 $ 1,106 Special Items, Operating Profit — (15 ) Adjusted Operating Profit $ 1,162 $ 1,121 Reconciliation of Net Income to Adjusted Net Income Net Income – Yum China Holdings, Inc. $ 911 $ 827 Special Items, Net Income – Yum China Holdings, Inc. — (15 ) Adjusted Net Income – Yum China Holdings, Inc. $ 911 $ 842 Reconciliation of EPS to Adjusted EPS Basic Earnings Per Common Share $ 2.34 $ 1.99 Special Items, Basic Earnings Per Common Share — (0.03 ) Adjusted Basic Earnings Per Common Share $ 2.34 $ 2.02 Diluted Earnings Per Common Share $ 2.33 $ 1.97 Special Items, Diluted Earnings Per Common Share — (0.03 ) Adjusted Diluted Earnings Per Common Share $ 2.33 $ 2.00 Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate Effective tax rate (See Note 15) 26.7 % 26.9 % Impact on effective tax rate as a result of Special Items — 0.4 % Adjusted effective tax rate 26.7 % 26.5 % Net income, along with the reconciliation to Adjusted EBITDA, is presented below: 2024 2023 Net Income – Yum China Holdings, Inc. $ 911 $ 827 Net income – noncontrolling interests 69 74 Equity in net (earnings) losses from equity method investments (5 ) (4 ) Income tax provision 356 329 Interest income, net (129 ) (169 ) Investment (gain) loss (40 ) 49 Operating Profit 1,162 1,106 Special Items, Operating Profit — 15 Adjusted Operating Profit 1,162 1,121 Depreciation and amortization 476 453 Store impairment charges 49 37 Adjusted EBITDA $ 1,687 $ 1,611 Details of Special Items are presented below: 2024 2023 Share-based compensation expense for Partner PSU Awards (a) $ — $ (15 ) Special Items, Operating Profit — (15 ) Tax effect on Special Items (b) — — Special Items, net income – including noncontrolling interests — (15 ) Special Items, net income – noncontrolling interests — — Special Items, Net Income – Yum China Holdings, Inc. $ — $ (15 ) Weighted-average Diluted Shares Outstanding (in millions) 390 420 Special Items, Diluted Earnings Per Common Share $ — $ (0.03 ) 69 2024 Form 10-K (a) In February 2020, the Company granted Partner PSU Awards to select employees who were deemed critical to the Company’s execution of its strategic operating plan.
Operating Profit In 2023, the increase in Operating profit, excluding the impact of F/X, was primarily driven by the increase in Restaurant profit and decrease in Other expenses, net, partially offset by higher G&A expenses. 72 2023 Form 10-K Pizza Hut Pizza Hut delivered strong performance in 2023 by accelerating store expansion with healthy returns, achieving solid same-store sales growth and expanding profitability.
Operating Profit In 2024, the increase in Operating profit, excluding the impact of F/X, was primarily driven by lower G&A expenses. 74 2024 Form 10-K Pizza Hut Pizza Hut delivered strong performance in 2024 by accelerating store expansion with healthy returns and expanding profitability.
All Other Segments All Other Segments reflects the results of Lavazza, Huang Ji Huang, Little Sheep and Taco Bell (and for 2022, also including COFFii & JOY and East Dawning), our delivery operating segment and our e-commerce business. % B/(W) 2023 2022 Reported Ex F/X Company sales $ 61 $ 51 20 26 Franchise fees and income 20 18 14 21 Revenues from transactions with franchisees 74 39 89 99 Other revenues 624 563 11 16 Total revenues $ 779 $ 671 16 22 Company restaurant expenses $ 76 $ 70 (9 ) (15 ) G&A expenses $ 43 $ 46 8 3 Franchise expenses $ 1 $ 1 9 4 Expenses for transactions with franchisees $ 67 $ 35 (93 ) (102 ) Other operating costs and expenses $ 614 $ 557 (10 ) (16 ) Closure and impairment expenses, net $ 9 $ 12 25 21 Operating Loss $ (31 ) $ (50 ) 39 36 Restaurant loss $ (15 ) $ (19 ) 20 15 Restaurant margin % (25.1 )% (37.6 )% 12.5 ppts. 12.5 ppts.
All Other Segments All Other Segments reflects the results of Lavazza, Huang Ji Huang, Little Sheep and Taco Bell, our delivery operating segment and our e-commerce business. % B/(W) 2024 2023 Reported Ex F/X Company sales $ 53 $ 61 (13 ) (12 ) Franchise fees and income 17 20 (16 ) (14 ) Revenues from transactions with franchisees 71 74 (4 ) (3 ) Other revenues 648 624 4 6 Total revenues $ 789 $ 779 1 3 Company restaurant expenses $ 58 $ 76 22 21 G&A expenses $ 37 $ 43 11 10 Franchise expenses $ 1 $ 1 16 15 Expenses for transactions with franchisees $ 65 $ 67 3 2 Other operating costs and expenses $ 635 $ 614 (3 ) (5 ) Closure and impairment expenses, net $ 8 $ 9 15 14 Operating Loss $ (15 ) $ (31 ) 48 48 OP margin (%) (2.0 )% (3.9 )% 1.9 ppts. 1.9 ppts.
Amounts have not been allocated to any segment for purposes of making operating decisions or assessing financial performance as the transactions are corporate revenues and expenses in nature. Revenues from Transactions with Franchisees In 2023, the increase in Revenues from transactions with franchisees, excluding the impact of F/X, was mainly due to the increase in system sales for franchisees.
Amounts have not been allocated to any segment for purposes of making operating decisions or assessing financial performance as the transactions are corporate revenues and expenses in nature.
Based on the information currently available to the Company, such preferential policy is not expected to be extended. See “Significant Known Events, Trends or Uncertainties Expected to Impact Future Results” session within MD&A for additional information on VAT deductions.
See “Significant Known Events, Trends or Uncertainties Expected to Impact Future Results” session within MD&A for additional information on VAT deductions.
The laws, rules and regulations applicable to our Chinese subsidiaries permit payments of dividends only out of their accumulated profits, if any, determined in accordance with applicable Chinese accounting standards and regulations.
In addition, our ability to declare and pay any dividends on our stock may be restricted by our earnings available for distribution under applicable Chinese laws. The laws, rules and regulations applicable to our Chinese subsidiaries permit payments of dividends only out of their accumulated profits, if any, determined in accordance with applicable Chinese accounting standards and regulations.
KFC’s loyalty program members exceeded 440 million at year-end 2023 and contributed approximately 64% of system sales at KFC in 2023.
Pizza Hut’s loyalty program members exceeded 180 million at year-end 2024 and contributed approximately 64% of system sales at Pizza Hut in 2024.
Pursuant to Circular [2023] No. 1 jointly issued by the MOF and the STA in January 2023, such VAT policy was further extended to December 31, 2023 but the additional deduction was reduced to 5% or 10% respectively. Based on the information currently available to the Company, such preferential policy is not expected to be extended.
Pursuant to Circular [2023] No. 1 jointly issued by the MOF and the STA in January 2023, such VAT policy was further extended to December 31, 2023 but the additional deduction was reduced to 5% or 10% respectively. Accordingly, we recognized such VAT deductions of $44 million in 2023.
The lease concessions were primarily in the form of rent reduction over the period of time when the Company’s restaurant business was adversely impacted. Such concessions were primarily recognized as a reduction of Occupancy and other operating expenses within Company restaurant expenses included in the Consolidated Statement of Income in the period the concession was granted.
Such concessions were primarily recognized as a reduction of Occupancy and other operating expenses within Company restaurant expenses included in the Consolidated Statement of Income in the period the concession was granted. See Note 10 for additional information.
Operating Loss In 2023, the decrease in Operating loss, excluding the impact of F/X, was primarily driven by the decrease in Operating loss from certain emerging brands. 74 2023 Form 10-K Corporate & Unallocated % B/(W) 2023 2022 Reported Ex F/X Revenues from transactions with franchisees (a) $ 249 $ 211 18 24 Other revenues $ 44 $ 42 7 12 Expenses for transactions with franchisees (a) $ 246 $ 211 (17 ) (23 ) Other operating costs and expenses $ 42 $ 39 (10 ) (16 ) Corporate G&A expenses $ 214 $ 184 (17 ) (20 ) Other unallocated income, net $ 2 $ 3 (6 ) (1 ) Interest income, net $ 169 $ 84 101 103 Investment loss $ (49 ) $ (26 ) (91 ) (91 ) Income tax provision (See Note 16) $ (329 ) $ (207 ) (59 ) (66 ) Equity in net earnings (losses) from equity method investments $ 4 $ (2 ) NM NM Effective tax rate (See Note 16) 26.9 % 30.1 % 3.2 ppts 3.2 ppts (a) Primarily includes revenues and associated expenses of transactions with franchisees derived from the Company’s central procurement model whereby food and paper products are centrally purchased and then mainly sold to KFC and Pizza Hut franchisees.
Corporate & Unallocated % B/(W) 2024 2023 Reported Ex F/X Revenues from transactions with franchisees (a) $ 289 $ 249 16 18 Other revenues $ 64 $ 44 45 48 Expenses for transactions with franchisees (a) $ 286 $ 246 (16 ) (18 ) Other operating costs and expenses $ 63 $ 42 (50 ) (52 ) Corporate G&A expenses $ 173 $ 214 19 19 Other unallocated income, net $ 1 $ 2 (76 ) (76 ) Interest income, net $ 129 $ 169 (23 ) (23 ) Investment gain (loss) $ 40 $ (49 ) NM NM Income tax provision (See Note 15) $ (356 ) $ (329 ) (8 ) (10 ) Equity in net earnings (losses) from equity method investments $ 5 $ 4 18 18 Effective tax rate (See Note 15) 26.7 % 26.9 % 0.2 ppts 0.2 ppts (a) Primarily includes revenues and associated expenses of transactions with franchisees derived from the Company’s central procurement model whereby food and paper products are centrally purchased and then mainly sold to KFC and Pizza Hut franchisees.
Liquidity and Capital Resources Historically we have funded our operations through cash generated from the operation of our Company-owned stores and our franchise operations. Our global offering in September 2020 provided us with $2.2 billion in net proceeds. Our ability to fund our future operations and capital needs will primarily depend on our ongoing ability to generate cash from operations.
The increase was primarily driven by the increase in share repurchases and repayment of short-term bank borrowings. Liquidity and Capital Resources Historically we have funded our operations through cash generated from the operation of our Company-owned stores and our franchise operations. Our global offering in September 2020 provided us with $2.2 billion in net proceeds.
G&A Expenses In 2023, the increase in G&A expenses, excluding the impact of F/X, was primarily driven by higher compensation costs and higher travel expenses from the resumption of business travel. Operating Profit In 2023, the increase in Operating profit, excluding the impact of F/X, was primarily driven by the increase in Restaurant profit, partially offset by higher G&A expenses.
G&A Expenses In 2024, the decrease in G&A expenses, excluding the impact of F/X, was primarily driven by lower performance-based compensation costs. Operating Profit In 2024, the increase in Operating profit, excluding the impact of F/X, was primarily driven by the increase in Restaurant profit and lower G&A expenses.
Most of the revenues, costs, assets and liabilities of the Company are denominated in Chinese Renminbi (“RMB”). Any significant change in the exchange rate between US$ and RMB may materially affect the Company’s business, results of operations, cash flows and financial condition, depending on the weakening or strengthening of RMB against the US$. See “Item 7A.
Any significant change in the exchange rate between US$ and RMB may materially affect the Company’s business, results of operations, cash flows and financial condition, depending on the weakening or strengthening of RMB against the US$. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for further discussion.
ASU 2023-09 is effective for the Company from January 1, 2025, with early adoption permitted. We are currently evaluating the impact the adoption of this standard may have on our financial statements. Critical Accounting Policies and Estimates Our reported results are impacted by the application of certain accounting policies that require us to make subjective or complex judgments.
ASU 2023-09 is effective for the Company from January 1, 2025, with early adoption permitted. We are currently evaluating the impact the adoption of this standard may have on our financial statements.
(b) Tax effect was determined based upon the nature, as well as the jurisdiction, of each Special Item at the applicable tax rate.
The impact from these special awards is excluded from metrics that management uses to assess the Company’s performance. (b) Tax effect was determined based upon the nature, as well as the jurisdiction, of each Special Item at the applicable tax rate.
Points, which generally expire 18 months after being earned, may be redeemed for future purchases of KFC or Pizza Hut branded products or other products for free or at a discounted price. Points cannot be redeemed or exchanged for cash.
Loyalty Programs Each of the Company’s KFC and Pizza Hut reportable segments operates a loyalty program that allows registered members to earn points for each qualifying purchase. Points, which generally expire 18 months after being earned, may be redeemed for future purchases of KFC or Pizza Hut branded products or other products for free or at a discounted price.
Net income for 2023 increased 87%, or 97% excluding $46 million F/X impact, mainly due to the increase in Operating profit and higher interest income, net of higher income tax expenses in line with the increase in pre-tax income. 65 2023 Form 10-K 2023 financial highlights are below: %/ppts Change 2023 2022 Reported Ex F/X System Sales Growth (a) (%) 21 (5 ) NM NM Same-Store Sales Growth (a) (%) 7 (7 ) NM NM Operating Profit 1,106 629 +76 +86 Adjusted Operating Profit (b) 1,121 633 +77 +87 Core Operating Profit (b) 1,121 627 NM +79 Net Income 827 442 +87 +97 Adjusted Net Income (b) 842 446 +89 +99 Diluted Earnings Per Common Share 1.97 1.04 +89 +100 Adjusted Diluted Earnings Per Common Share (b) 2.00 1.05 +90 +101 (a) System Sales and Same-Store Sales growth percentages as shown in 2023 financial highlights exclude the impact of F/X.
Net income for 2024 increased 10%, or 13% excluding the impact of F/X, mainly due to the increase in Operating profit and increase in fair value of our investment in Meituan, partially offset by lower interest income and higher income tax expenses in line with the increase in pre-tax income. 65 2024 Form 10-K 2024 financial highlights are below: %/ppts Change 2024 2023 Reported Ex F/X System Sales Growth (a) (%) 5 21 NM NM Same-Store Sales (Decline) Growth (a) (%) (3 ) 7 NM NM Operating Profit 1,162 1,106 +5 +8 Adjusted Operating Profit (b) 1,162 1,121 +4 +6 Core Operating Profit (b) 1,190 1,061 NM +12 OP Margin (c) (%) 10.3 10.1 +0.2 +0.3 Core OP Margin (b) (%) 10.4 9.7 NM +0.7 Net Income 911 827 +10 +13 Adjusted Net Income (b) 911 842 +8 +11 Diluted Earnings Per Common Share 2.33 1.97 +18 +22 Adjusted Diluted Earnings Per Common Share (b) 2.33 2.00 +17 +19 (a) System Sales and Same-Store Sales growth percentages as shown in 2024 financial highlights exclude the impact of F/X.
These PSU awards will only vest if threshold performance goals are achieved over a four-year performance period, with the payout ranging from 0% to 200% of the target number of shares subject to the PSU awards. Partner PSU Awards were granted to address increased competition for executive talent, motivate transformational performance and encourage management retention.
These PSU awards will only vest if threshold performance goals are achieved over a four-year performance period, with the payout ranging from 0% to 200% of the target number of shares subject to the PSU awards. These awards vested as of December 31, 2023 with a payout in the first quarter of 2024.
Franchise Fees and Income/Revenues from Transactions with Franchisees In 2023, the increase in Franchise fees and income and Revenues from transactions with franchisees, excluding the impact of F/X, was primarily driven by net unit growth and same-store sales growth.
Revenues from Transactions with Franchisees In 2024, the increase in Revenues from transactions with franchisees, excluding the impact of F/X, was mainly due to the increase in system sales for franchisees primarily driven by acceleration of franchise store openings.
Borrowing Capacity As of December 31, 2023, the Company had credit facilities of RMB7,112 million (approximately $1,002 million), comprised of onshore credit facilities in the aggregate amount of RMB5,550 million (approximately $782 million) and offshore credit facilities in the aggregate amount of $220 million. 78 2023 Form 10-K The credit facilities had remaining terms ranging from less than one year to three years as of December 31, 2023.
Borrowing Capacity As of December 31, 2024, the Company had credit facilities of RMB8,790 million (approximately $1,204 million), comprised of onshore credit facilities in the aggregate amount of RMB6,600 million (approximately $904 million), offshore credit facilities in the aggregate amount of $100 million and a credit facility of $200 million that can be used for either onshore or offshore. 80 2024 Form 10-K The credit facilities had remaining terms ranging from less than one year to three years as of December 31, 2024.
PSUs have market conditions that are based on the closing price of Yum China’s stock or relative total shareholder return against selected indices or the constituents of the indices measured over the performance period. The fair values of PSUs have been determined based on the outcome of a Monte-Carlo Simulation model (the “MCS model”).
We estimated the fair value of stock options and SARs at the grant date using the Black-Scholes option-pricing model (“the BS model”). PSUs have market conditions that are based on the closing price of Yum China’s stock or relative total shareholder return against selected indices or the constituents of the indices measured over the performance period.
KFC continued to focus on innovative products, creating abundant value for our customers, updating ingredients and tastes to meet Chinese consumers’ needs, as well as on introducing entry price point products. KFC also continued its digital and delivery initiatives to enhance the customer experience.
KFC continued to focus on innovative products, creating abundant value for our customers, updating ingredients and tastes to meet Chinese consumers’ needs, as well as on introducing entry price point products. Our breakthrough business models, such as KCOFFEE Cafes, have enabled us to broaden our addressable market and capture new customer demand.
These judgments involve estimations of the effect of matters that are inherently uncertain and may significantly impact our quarterly or annual results of operations or financial condition. Changes in the estimates and judgments could significantly affect our results of operations, financial condition and cash flows in future years.
Critical Accounting Policies and Estimates Our reported results are impacted by the application of certain accounting policies that require us to make subjective or complex judgments. These judgments involve estimations of the effect of matters that are inherently uncertain and may significantly impact our quarterly or annual results of operations or financial condition.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs substantially all of the Company’s operations are located in China, the Company is exposed to movements in the RMB foreign currency exchange rate. For the year ended December 31, 2023, the Company’s Operating profit would have decreased by approximately $106 million if the RMB weakened 10% relative to the U.S. dollar.
Biggest changeAs substantially all of the Company’s operations are located in China, the Company is exposed to movements in the RMB foreign currency exchange rate. For the year ended December 31, 2024, the Company’s Operating profit would have decreased by approximately $111 million if the RMB weakened 10% relative to the U.S. dollar.
Equity investment in Meituan is recorded at fair value, which is measured on a recurring basis and is subject to market price volatility. See Note 3 for further discussion on our investment in Meituan. 84 2023 Form 10-K
Equity investment in Meituan is recorded at fair value, which is measured on a recurring basis and is subject to market price volatility. See Note 3 for further discussion on our investment in Meituan. 86 2024 Form 10-K

Other YUMC 10-K year-over-year comparisons