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What changed in Yum China Holdings, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Yum China Holdings, Inc.'s 2024 and 2025 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 2025 report.

+486 added−494 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-27)

Top changes in Yum China Holdings, Inc.'s 2025 10-K

486 paragraphs added · 494 removed · 424 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

158 edited+28 added−25 removed114 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. 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.
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.
For example, our smart i-kitchen system now provides real-time order status for customers, all digitalized through our app and WeChat portal with customer-friendly user interface, providing them streamlined ordering experience.
For example, our smart i-kitchen system now provides real-time order status for customers, all digitalized through our app and WeChat portal with customer-friendly user interface, providing them with streamlined ordering experience.
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.
This is where digital online ordering technologies interact with traditional brick and mortar retail to enhance 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.
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.
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.
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-ready employability, respecting employees’ freedom of association, prohibiting child labor and forced labor and engaging with the communities we serve and our stakeholders.
We believe that our principal Hong Kong subsidiary, which is the equity holder of our Chinese subsidiaries operating substantially all of our KFC and Pizza Hut restaurants, met the relevant requirements pursuant to the tax arrangement between mainland China and Hong Kong in 2018 and is expected to meet the requirements in subsequent years, thus, it is more likely than not that our dividends or earnings expected to be repatriated to this principal Hong Kong subsidiary since 2018 are subject to the reduced withholding tax of 5%.
We believe that our principal Hong Kong subsidiary, which is the equity holder of our Chinese subsidiaries operating substantially all of our KFC and Pizza Hut restaurants, met the relevant requirements pursuant to the tax arrangement between mainland China and Hong Kong in 2018 and in subsequent years, thus, it is more likely than not that our dividends or earnings expected to be repatriated to this principal Hong Kong subsidiary since 2018 are subject to the reduced withholding tax of 5%.
We continue to identify and evaluate investment opportunities in high-quality assets to capture growth opportunities. We will prudently assess investment targets based on their strategic value, business scale and financial performance, among other factors. Operational Management Restaurant Unit Management Our restaurant management structure varies among our restaurant brands and restaurant size.
We continue to identify and evaluate investment opportunities in high-quality assets to capture growth opportunities. We will prudently assess investment targets based on their strategic value, business scale and financial performance, among other factors. Operational Management and Efficiency Restaurant Unit Management Our restaurant management structure varies among our restaurant brands and restaurant size.
Franchisees contribute to our revenue through the payment of upfront franchise fees and on-going royalties based on a percentage of sales, and payments for other transactions with us, such as purchases of food and paper products, advertising services, delivery services and other services.
Franchisees contribute to our revenue through the payment of a combination of upfront franchise fees and on-going royalties based on a percentage of sales, and payments for other transactions with us, such as purchases of food and paper products, advertising services, delivery services and other services.
Our new retail business is generally subject to VAT rates at 9% or 13%. The latest VAT rates imposed on our purchase of materials and services included 13%, 9% and 6%, which were gradually changed from 17%, 13%, 11% and 6% since 2017.
Our new retail business is generally subject to VAT rates at 9% or 13%. The latest VAT rates imposed on our purchase of materials and services mainly included 13%, 9% and 6%, which were gradually changed from 17%, 13%, 11% and 6% since 2017.
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.
We are dedicated to adopting innovations in our business model and restaurant operations to comprehensively reach our customers 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.
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.
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 • 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.
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 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 2025 system sales.
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.
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 2025, we launched around 600 new or upgraded menu items across all of our restaurant brands.
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.
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 13 to the Consolidated Financial Statements under “Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
In addition, we operate a tailor-made, world-class logistics management system, which is capable of accommodating large scale, wide coverage and advanced information dissemination as well as fast store expansions. The Company utilizes 33 logistics centers to distribute supplies to Company-owned and franchised stores, as well as to third-party customers.
In addition, we operate a tailor-made, world-class logistics management system, which is capable of accommodating large scale, wide coverage and advanced information dissemination as well as fast store expansions. The Company utilizes 34 logistics centers to distribute supplies to Company-owned and franchised stores, as well as to third-party customers.
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.
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.
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.
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 2025.
In April 2020, we partnered with Luigi Lavazza S.p.A. (“Lavazza Group”), the world-renowned family-owned Italian coffee company, and established a joint venture (“Lavazza joint venture”), to explore and develop the Lavazza coffee concept in China. Lavazza joint venture operates both the coffee shop business and the retail business. Lavazza coffee shops offer a premium and authentic Italian coffee experience.
In April 2020, we partnered with Luigi Lavazza S.p.A. (“Lavazza Group”), the world-renowned family-owned Italian coffee company, and established a joint venture (“Lavazza joint venture”), to explore and develop the Lavazza coffee concept in China. Lavazza joint venture operates both the coffee shop business and the retail business. Lavazza coffee shops offer an authentic Italian coffee experience.
In recent years, we have stepped up our investment in digitalization, embarking on end-to-end digitalization of our business operations. In 2021, we opened a digital R&D center with three sites in Shanghai, Nanjing and Xi’an, to strengthen our internal digital capabilities and support sustainable business growth by using advanced technology.
In recent years, we have stepped up our investment in digitalization, advancing on end-to-end digitalization of our business operations. In 2021, we opened a digital R&D center with three sites in Shanghai, Nanjing and Xi’an, to strengthen our internal digital capabilities and support sustainable business growth by using advanced technology.
The Tax Act has impacted Yum China in two material aspects: (1) in general, all of the foreign-source dividends received by Yum China from its foreign subsidiaries will be exempted from taxation starting from the tax year beginning after December 31, 2017 and (2) Yum China recorded additional income tax expense in the fourth quarter of 2017, including an estimated one-time transition tax on its deemed repatriation of accumulated undistributed foreign earnings and additional tax related to the revaluation of certain deferred tax assets.
The Tax Act has impacted Yum China in two material aspects: (1) in general, all of the foreign-source dividends received by Yum China from its foreign subsidiaries were exempted from taxation starting from the tax year beginning after December 31, 2017 and (2) Yum China recorded additional income tax expense in the fourth quarter of 2017, including an estimated one-time transition tax on its deemed repatriation of accumulated undistributed foreign earnings and additional tax related to the revaluation of certain deferred tax assets.
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.
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.
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 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 strategy and investment.
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.
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. 9 2025 Form 10-K • 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.
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.
Pizza Hut Pizza Hut is the leading and the largest casual dining restaurant (“CDR”) brand in China in terms of 2025 system sales and number of restaurants as of December 31, 2025, offering multiple dayparts, including breakfast, lunch, afternoon tea and dinner.
To further enhance the guest experience, we are also evaluating the possibility of adopting other digital initiatives in our restaurants and will continue to invest in this area, as discussed more fully below. Grow coffee business.
To further enhance customer experience, we are also evaluating the possibility of adopting other digital initiatives in our restaurants and will continue to invest in this area, as discussed more fully below. Grow coffee business.
See “Risk Factors—Risks Related to Doing Business in China—Regulations regarding acquisitions may impose significant regulatory approval and review requirements, which could make it more difficult for us to pursue growth through acquisitions” for more information; • We are subject to heightened data and cybersecurity regulations, including those enforced by the Cyberspace Administration of China (“CAC”) including the PRC Cybersecurity Law, which imposes tightened requirements on data privacy and cybersecurity practices, the PRC Data Security Law, which imposes data security and privacy obligations on entities and individuals carrying out data activities (including activities outside of the PRC), requires a national security review of data activities that may affect national security, and imposes restrictions on data transmissions, the PRC Personal Information Protection Law, which sets out the regulatory framework for handling and protection of personal information and transmission of personal information, among others.
See “Risk Factors—Risks Related to Doing Business in China—Regulations regarding acquisitions may impose significant regulatory approval and review requirements, which could make it more difficult for us to pursue growth through acquisitions” for more information; 11 2025 Form 10-K • We are subject to heightened data and cybersecurity regulations, including those enforced by the Cyberspace Administration of China (“CAC”) including the PRC Cybersecurity Law, which imposes tightened requirements on data privacy and cybersecurity practices, the PRC Data Security Law, which imposes data security and privacy obligations on entities and individuals carrying out data activities (including activities outside of the PRC), requires a national security review of data activities that may affect national security, and imposes restrictions on data transmissions, the PRC Personal Information Protection Law, which sets out the regulatory framework for handling and protection of personal information and transmission of personal information, among others.
The Company believes this central procurement model allows the Company to maintain quality control and achieves better prices and terms through volume purchases. In 2024, we launched Project Red Eye to improve supply chain efficiency.
The Company believes this central procurement model allows the Company to maintain quality control and achieve better prices and terms through volume purchases. In 2024, we launched Project Red Eye to improve supply chain efficiency.
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 crew leaders.
Certain dividends, interests and disposal gains, if any, received by us and our Hong Kong subsidiaries may be subject to the new tax regime. Pillar Two Income Tax.
Certain dividends, interests, intellectual property income and disposal gains, if any, received by us and our Hong Kong subsidiaries may be subject to the new tax regime. Pillar Two Income Tax.
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.
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 2025.
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.
Little Sheep had 135 units in both China and international markets as of December 31, 2025. 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.
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.
Founded in 2004, Huang Ji Huang had 627 units in China and internationally as of December 31, 2025. 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.
Every employee is required to formulate a specific development goal to improve their competencies in addition to completing the key objectives of the role. We prepare employees not just for fulfilling current job requirements, but also for more challenging expanded job responsibilities in the future. In 2024, the number of total training hours totaled around 10 million.
Every employee is required to formulate a specific development goal to improve their competencies in addition to completing the key objectives of the role. We prepare employees not just for fulfilling current job requirements, but also for more challenging expanded job responsibilities in the future. In 2025, the number of total training hours totaled around 8 million.
However, if the Hong Kong subsidiary is not considered to be the “beneficial owner” of the dividends by the Chinese local tax authority, the withholding tax rate on dividends paid to it by our Chinese subsidiaries would be subject to a withholding tax rate of 10% with retrospective effect, which would increase our tax liability and reduce the amount of cash available to the Company.
However, if the Hong Kong subsidiary is not considered to be the “beneficial owner” of the dividends by the Chinese tax authorities, the withholding tax rate on dividends paid to it by our Chinese subsidiaries would be subject to a withholding tax rate of 10% with retrospective effect, which would significantly increase our tax liability and reduce the amount of cash available to the Company.
Restaurants China, Ms. Wat served in both management and strategy positions at A.S. Watson Group (“Watson”), an international health, beauty and lifestyle retailer, in the U.K. from 2004 to 2014. Before joining Watson, Ms. Wat began her career in management consulting, including McKinsey & Company in Hong Kong. Ms.
Restaurants China, Ms. Wat served in both management and strategy positions at A.S. Watson Group (“Watson”), an international health, beauty and lifestyle retailer, in the 20 2025 Form 10-K U.K. from 2004 to 2014. Before joining Watson, Ms. Wat began her career in management consulting, including McKinsey & Company in Hong Kong. Ms.
In addition, under Chinese law, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital.
In addition, under Chinese law, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund statutory surplus reserves, until the aggregate amount of such a fund reaches 50% of its registered capital.
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.
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. 17 2025 Form 10-K The Company is committed to equality by providing fair recruitment, training and promotion opportunities for all employees.
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.
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 2025 Form 10-K
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.
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, 2025, we owned and operated approximately 83% of our restaurants.
We have the exclusive right to operate and sublicense the KFC, Pizza Hut and, subject to achieving certain agreed-upon milestones, Taco Bell brands in China, excluding Hong Kong, Macau and Taiwan. We own the intellectual property of the Little Sheep and Huang Ji Huang concepts outright. KFC was the first major global restaurant brand to enter China in 1987.
We have the exclusive right to operate and sublicense the KFC, Pizza Hut and, subject to the agreed terms, Taco Bell brands in China, excluding Hong Kong, Macau and Taiwan. We own the intellectual property of the Little Sheep and Huang Ji Huang concepts outright. KFC was the first major global restaurant brand to enter China in 1987.
We anticipate high franchisee demand for our brands, supported by strong unit economics, operational consistency and multiple store formats including new store models suitable for franchisees, such as KFC’s small-town mini, to drive restaurant growth.
We anticipate high franchisee demand for our brands, supported by strong unit economics, operational consistency and multiple store formats including new store models suitable for franchisees, such as KFC’s small town and Pizza Hut WOW, to drive restaurant growth.
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.
By the end of 2025, 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 2025, women holding director and above positions represented more than 50% of our senior management workforce.
See “Item 1A. Risk Factors—Risks Related to Doing Business in China—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.” Gains on Direct Disposal of Equity Interests in Our China Subsidiaries.
See “Item 1A. Risk Factors—Risks Related to Doing Business in China—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.” 13 2025 Form 10-K Gains on Direct Disposal of Equity Interests in Our China Subsidiaries.
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 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. Inflation Reduction Act of 2022 (the “IRA”). In August 2022, the IRA was signed into law in the U.S.
For office staff, the Company operates its flexible benefit platform, covering more than 7,000 employees. The platform allows employees to select benefits based on their individual needs, including family medical insurance, medical examination and recreational activities. Both office staff and RGMs are covered by the Company’s housing subsidy scheme.
For office staff, the Company operates its flexible benefit platform, covering approximately 7,000 employees. The platform allows employees to select benefits based on their individual needs, including family medical insurance, medical examinations and recreational activities. Both office staff and RGMs are covered by the Company’s housing subsidy scheme.
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.
In addition, Yum China makes investments in its China subsidiaries through capital contributions to further support their operational and growth needs. In 2025, one of Yum China’s subsidiaries, which was incorporated in Hong Kong, made capital contributions to its subsidiaries in China totaling approximately $15 million.
The Tax Act also requires a U.S. shareholder to be subject to tax on Global Intangible Low Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The U.S. Treasury Department and the IRS released the final transition tax regulations in the first quarter of 2019.
The Tax Act also requires a U.S. shareholder to be subject to tax on Global Intangible Low Taxed Income (“GILTI”) earned by certain foreign subsidiaries. 14 2025 Form 10-K The U.S. Treasury Department and the IRS released the final transition tax regulations in the first quarter of 2019.
Pursuant to the master license agreement, we are the exclusive licensee of the KFC, Pizza Hut and, subject to achieving certain agreed-upon milestones, Taco Bell brands and their related marks and other intellectual property rights for restaurant services in the PRC, excluding Hong Kong, Macau and Taiwan.
Pursuant to the master license agreement, we are the exclusive licensee of the KFC, Pizza Hut and, subject to the agreed terms, Taco Bell brands and their related marks and other intellectual property rights for restaurant services in the PRC, excluding Hong Kong, Macau and Taiwan.
Our subsidiaries incorporated in Hong Kong are generally subject to Hong Kong profits tax at a rate of 16.5%. For the years 2018 and onwards, the first HK$2 million of profits generated by one entity incorporated in Hong Kong is taxed at a rate of 8.25%, while the remaining profits will continue to be taxed at the 16.5% tax rate.
For the years 2018 and onwards, the first HK$2 million of profits generated by one entity incorporated in Hong Kong is taxed at a rate of 8.25%, while the remaining profits will continue to be taxed at the 16.5% tax rate.
We also consider the guest traffic and distance from the existing restaurants under the same brand to reduce sales transfer that may occur from existing restaurant units. Our flexible store formats and partnership with franchisees empower us to expand to additional strategic locations, including highway service centers, school campuses and hospitals.
We also consider the guest traffic and distance from the existing restaurants under the same brand to reduce sales transfer that may occur from existing restaurant units. Our flexible store formats and partnership with franchisees empower us to expand in lower-tier cities, remote areas and additional strategic locations, including highway service centers, school campuses and hospitals.
Expansion Management 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.
Expansion Management 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 and achieve healthy payback periods.
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!
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.” Intellectual Property Our use of certain material trademarks and service marks is governed by the master license agreement between Yum Restaurants Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned indirect subsidiary of the Company, and YUM, through YRI China Franchising LLC, a subsidiary of YUM, effective from January 1, 2020 and previously through Yum!
While they are not included in our headcount, they are an integral part of our operations and receive training and caring, enabling us to adapt to diverse business and customer needs. 16 2024 Form 10-K Our Board of Directors provides oversight on certain human capital matters, including inclusion and diversity, management succession planning, and our employee rewards and benefits program.
While they are not included in our headcount, they are an integral part of our operations and receive training and care, enabling us to adapt to diverse business and customer needs. Our Board of Directors provides oversight on certain human capital matters, including inclusion and diversity, management succession planning, and our employee rewards and benefits program.
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.
We are also building a coffee portfolio to capture the 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 KCOFFEE Cafes.
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.
Information about our Executive Officers The executive officers of the Company as of February 27, 2026, and their ages and current positions as of that date, are as follows: Name Age Title Joey Wat 54 Chief Executive Officer Adrian Ding 39 Chief Financial Officer Warton Wang 51 General Manager, KFC Jeff Kuai 45 General Manager, Pizza Hut Duoduo (Howard) Huang 53 Chief Supply Chain Officer Leila Zhang 57 Chief Technology Officer Pingping Liu 53 Chief Legal Officer Jerry Ding 40 Chief People Officer Xueling Lu 52 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.
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.
We may be subject to these taxes in the event of any future sale by us of a China resident enterprise. Gains on Indirect Disposal of Equity Interests in Our China Subsidiaries.
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.
Continuing Education Program The Company sponsors a continuing education program to help employees obtain higher education degrees. By the end of 2025, around 7,500 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.
They enable a digital guest experience by offering convenience, efficiency and interesting functionality before, during and after dining. 7 2024 Form 10-K Member engagement is fostered through our Super Apps and WeChat mini programs, which serve as the primary platforms for enrollment into our membership programs.
They enable a digital customer experience by offering convenience, efficiency and interesting functionality before, during and after dining. Member engagement is fostered through our Super Apps and WeChat mini programs, which serve as the primary platforms for enrollment into our membership programs.
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.
Restaurant Concepts KFC KFC is the leading and the largest quick-service restaurant (“QSR”) brand in China in terms of 2025 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, 2025, there were 12,997 KFC restaurants in over 2,500 cities across China.
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.
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 2025 was approximately RMB1.3 million and 1.0 million, respectively.
We require all third-party delivery companies to sign and strictly implement a letter of commitment on the food safety and quality practice of delivery food, which stipulates clear requirements for regulatory compliance, staff management, catering, delivery facilities, equipment and strict management of third-party platforms.
We have established a team managing delivery services for our restaurants. We require all third-party delivery companies to sign and strictly implement a letter of commitment on the food safety and quality practice of delivery food, which stipulates clear requirements for regulatory compliance, staff management, catering, delivery facilities, equipment and strict management of third-party platforms.
Supply Chain Management The Company’s restaurants, including those operated by franchisees, are large purchasers of a number of food and paper products, equipment and other restaurant supplies. The principal items purchased include protein ingredients (including poultry, beef, pork and seafood), cheese, oil, flour, vegetables and paper and packaging materials.
Supply Chain Management The Company’s restaurants, including those operated by franchisees, are large purchasers of a number of food and paper products, equipment and other restaurant supplies. The principal items purchased include protein ingredients (including poultry, beef, pork and seafood), cheese, oil, flour, vegetables and paper and packaging materials. The Company has not experienced any significant, continuous shortages of supplies.
By the end of 2024, we had opened 66 Angel Restaurants in 60 cities, providing jobs for over 300 people with special needs. Training and Development The Company values the growth of employees and continuously nurtures top talent through a systematic training system.
By the end of 2025, we had opened approximately 80 Angel Restaurants in over 70 cities, providing jobs for over 300 people with special needs. Training and Development The Company values the growth of employees and continuously nurtures top talent through a systematic training system.
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.
Since opening its first China restaurant unit in Beijing in 1990, Pizza Hut has grown rapidly and, as of year-end 2025, there were 4,168 Pizza Hut restaurants in over 1,000 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.
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.
Our policy is to pursue registration of our important intellectual property rights whenever feasible and to oppose vigorously any infringement of our rights. 16 2025 Form 10-K Competition Data from the National Bureau of Statistics of China indicates that sales in the restaurant industry in China totaled approximately RMB 5,756 billion in 2025, representing an increase of 3% compared with prior year.
We plan to continue to develop franchisee store portfolio over time by focusing on strategic and remote locations as well as lower tier cities previously beyond our reach. As of December 31, 2024, approximately 15% of our restaurants were operated by franchisees.
We plan to continue to develop franchise store portfolio over time by focusing on strategic channels and remote locations as well as lower-tier cities previously beyond our reach. As of December 31, 2025, approximately 17% of our restaurants were operated by franchisees.
Wat obtained a master of management degree from Kellogg School of Management at Northwestern University. Adrian Ding has served as our Acting Chief Financial Officer since October 2024, and Chief Investment Officer since February 2020. Mr. Ding joined the Company in March 2019 as Vice President of Corporate Finance.
Wat obtained a master of management degree from Kellogg School of Management at Northwestern University. Adrian Ding has served as our Chief Financial Officer since March 2025. Mr. Ding joined the Company in March 2019 as Vice President of Corporate Finance.
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.
We had $11.8 billion of revenues in 2025 and 18,101 restaurants as of December 31, 2025. 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.
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.
For the year ended December 31, 2025, the Company’s China subsidiaries distributed approximately $783 million in dividends to the Company’s Hong Kong-incorporated holding companies.
For the year ended December 31, 2024, the Company’s Hong Kong subsidiaries distributed approximately $1,670 million dividends to the Company’s Delaware holding company. In 2024, Yum China paid cash dividends to stockholders totaling $248 million and repurchased $1,242 million of its common stock.
For the year ended December 31, 2025, the Company’s Hong Kong subsidiaries distributed approximately $1,023 million dividends to the Company’s Delaware holding company. In 2025, Yum China paid cash dividends to stockholders totaling $353 million and repurchased $1,136 million of its common stock.
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.
As of December 31, 2025, there were 146 Lavazza coffee shops in mainland China and Hong Kong. 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.
RGMs are skilled and highly trained, with most having a college-level education. The performance of RGMs is regularly monitored and coached by senior operations leaders. Each restaurant brand issues detailed manuals, which may then be customized to meet local regulations and customs. These manuals set forth standards and requirements for all aspects of restaurant operations.
The performance of RGMs is regularly monitored and coached by senior operations leaders. Each restaurant brand issues detailed manuals, which may then be customized to meet local regulations and customs. These manuals set forth standards and requirements for all aspects of restaurant operations.
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!
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.
We continuously look for ways to improve the guest experience. Our brands also look to improve efficiency to drive sales growth. For instance, we continue to improve customer experience through our proprietary smartphone applications, pre-order services and store design. In addition, we are continuously investing in digital and automation to improve operating transparency and efficiency.
For instance, we continue to improve customer experience through our proprietary smartphone applications, pre-order services and store design. In addition, we are continuously investing in digital and automation to improve operating transparency and efficiency.
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.
Combining flexible store models and lower upfront investment opens up more site potential across city tiers and supports accelerating franchise growth. In addition, we continuously look for ways to improve customer experience. We continue to refresh the look of our restaurants and remodel with the latest technology, equipment and infrastructure.
Human Capital Management As of December 31, 2024, the Company had more than 350,000 employees, including approximately 140,000 full-time employees and approximately 211,000 part-time restaurant crew members. The Company has continued to improve its operational efficiency by simplifying and centralizing certain operational and kitchen tasks, and leveraging technology to automate key processes.
Human Capital Management As of December 31, 2025, the Company had approximately 290,000 employees, including approximately 130,000 full-time employees and approximately 160,000 part-time restaurant crew members. The Company has continued to improve its operational efficiency by streamlining and centralizing certain operational and kitchen tasks, and leveraging technology to automate key processes.
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.
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.
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.
With more than three decades 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 2025 system sales, with 18,101 restaurants covering over 2,500 cities primarily in China as of December 31, 2025.
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.
Kuai previously served as the General Manager, Pizza Hut Home Service from October 2016 to October 2017, a position he previously 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!
The 10% withholding income tax rate may be reduced or exempted pursuant to the provisions of any applicable tax treaties or tax arrangements.
The 10% withholding income tax rate may be reduced or exempted pursuant to the provisions of any applicable tax treaties or tax arrangements, as well as the interpretation in applying these treaties and arrangements.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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.
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. 49 2025 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.
For details, please refer to “—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 our securities to decline.” At this time, we do not know the extent to which our operations will be impacted by these laws and regulations.
For details, please refer to “—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.” At this time, we do not know the extent to which our operations will be impacted by these laws and regulations.
For example, our results of operations in the third quarter of 2016 were adversely impacted by an international court ruling in July 2016 regarding claims to sovereignty over the South China Sea, which triggered a series of regional protests and boycotts in China, intensified by social media, against a few international companies with well-known western brands.
For example, our results of operations in the third quarter of 2016 were adversely impacted by an international court ruling in July 2016 regarding claims to sovereignty over the South China Sea, which triggered a series of regional protests and boycotts in China, intensified by social media, against a few international companies with well-known western brands.
The opening and success of new restaurants depends on various factors, including: • our ability to obtain or self-fund adequate development financing; • competition in current and future markets; • our degree of penetration in existing markets; • the identification and availability of suitable and economically viable locations; • sales and margin levels at existing restaurants; • the negotiation of acceptable lease or purchase terms for new locations; • regulatory compliance regarding restaurant opening and operation; • the ability to meet construction schedules; • our ability to hire and retain qualified restaurant crews; and • general economic and business conditions.
The opening and success of new restaurants depends on various factors, including: • our ability to obtain or self-fund adequate development financing; • competition in current and future markets; • our degree of penetration in existing markets and new cities; • the identification and availability of suitable and economically viable locations; • sales and margin levels at existing restaurants; • the negotiation of acceptable lease or purchase terms for new locations; • regulatory compliance regarding restaurant opening and operation; • the ability to meet construction schedules; • our ability to hire and retain qualified restaurant crews; and • general economic and business conditions.
We believe that our principal Hong Kong subsidiary, which is the equity holder of our Chinese subsidiaries operating substantially all of our KFC and Pizza Hut restaurants, met the relevant requirements pursuant to the tax arrangement between the mainland China and Hong Kong in 2018 and is expected to meet the requirements in subsequent years, thus, it is more likely than not that our dividends or earnings expected to be repatriated to our principal Hong Kong subsidiary since 2018 are subject to the reduced withholding tax of 5%.
We believe that our principal Hong Kong subsidiary, which is the equity holder of our Chinese subsidiaries operating substantially all of our KFC and Pizza Hut restaurants, met the relevant requirements pursuant to the tax arrangement between the mainland China and Hong Kong in 2018 and in subsequent years, thus, it is more likely than not that our dividends or earnings expected to be repatriated to our principal Hong Kong subsidiary since 2018 are subject to the reduced withholding tax of 5%.
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, 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 State 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.
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.
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) failures or interruptions of service or security breaches in our information technology systems, (q) the occurrence of security breaches and cyber-attacks, (r) 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, (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 and the continued increase in delivery sales mix, (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) fluctuation of changes for our equity investments measured at fair value, lower yields of our short-term investments or lower returns of our future long-term bank deposits and notes may adversely affect our financial results, and (mm) our operating results or net income may be adversely affected by our investment in equity method investees; 23 2025 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, and uncertainties regarding the application of the withholding tax rates could have a material adverse effect on our business and financial results, (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 2025 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.
Our rapid growth also requires us to hire, train, and retain a wide range of talent who can adapt to a dynamic, competitive and challenging business environment and are capable of helping us conduct effective marketing and management. We will need to continue to attract, train and retain talent at all levels as we expand our business and operations.
Our rapid growth also requires us to hire, train, and retain a wide range of talents who can adapt to a dynamic, competitive and challenging business environment and are capable of helping us conduct effective marketing and management. We will need to continue to attract, train and retain talent at all levels as we expand our business and operations.
Furthermore, where, although a concentration of undertakings does not reach the threshold of notification prescribed by the State Council, the anti-monopoly agency may still require the undertakings to notify the concentration if there is evidence proving that the concentration of undertakings has or may have the effect of eliminating or restricting competition.
Furthermore, although a concentration of undertakings does not reach the threshold of notification prescribed by the State Council, the anti-monopoly agency may still require the undertakings to notify the concentration if there is evidence proving that the concentration of undertakings has or may have the effect of eliminating or restricting competition.
While these provisions have been negotiated and are specified in the lease agreement, they will increase our costs of operation and therefore may materially and adversely affect our results of operation and financial condition if we are not able to pass on the increased costs to our customers.
While these provisions have been negotiated and are specified in the lease agreement, they may increase our costs of operation and therefore may materially and adversely affect our results of operation and financial condition if we are not able to pass on the increased costs to our customers.
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.
For example, 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.
Such failures may be caused by various factors, including fire, natural disaster, power loss, telecommunications failure, problems with transitioning to upgraded or replacement systems, physical break-ins, programming errors, flaws in third-party software or services, disruptions or service failures of technology infrastructure facilities, such as storage servers, provided by third parties, errors or malfeasance by our employees or third-party service providers or breaches in the security of these systems or platforms, including unauthorized entry and computer viruses.
Such failures may be caused by various factors, including fire, natural disaster, power loss, telecommunications failure, problems with transitioning to upgraded or replacement systems, system overloads, physical break-ins, programming errors, flaws in third-party software or services, disruptions or service failures of technology infrastructure facilities, such as storage servers, provided by third parties, errors or malfeasance by our employees or third-party service providers or breaches in the security of these systems or platforms, including unauthorized entry and computer viruses.
In addition to increases in rent resulting from fluctuations in annual sales revenue, certain of our lease agreements include provisions specifying fixed increases in rental payments over the respective terms of the lease agreements.
In addition to increases in rent resulting from fluctuations in annual sales revenue, certain of our lease agreements include provisions specifying increases in rental payments over the respective terms of the lease agreements.
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.
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. 33 2025 Form 10-K In addition, the use and handling of this information is regulated by evolving and increasingly demanding laws and regulations.
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.
Our operations are vulnerable to interruption by inclement weather, 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.
These interruptions may be due to unforeseen events that are beyond our control or the control of third-party aggregators and outsourced riders, such as inclement weather, natural disasters, transportation disruptions or labor unrest. The occurrence of food safety or product quality issues may also result in interruptions or failures in our delivery service.
These interruptions may be due to unforeseen events that are beyond our control or the control of third-party aggregators and outsourced riders, such as inclement weather, natural disasters, transportation disruptions or labor shortages. The occurrence of food safety or product quality issues may also result in interruptions or failures in our delivery service.
We rely heavily on information technology systems across our operations, including those we use for finance and accounting functions, supply chain management, point-of-sale processing, online and mobile platforms, mobile payment processing, loyalty programs and various other processes and functions, and many of these systems are interdependent on one another for their functionality.
We rely heavily on information technology systems across our operations, including those we use for finance and accounting functions, supply chain management, point-of-sale processing, online and mobile platforms, delivery services, mobile payment processing, loyalty programs and various other processes and functions, and many of these systems are interdependent on one another for their functionality.
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.
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. 60 2025 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.
We have been using, and plan to continue to use, digital technologies to improve the customer experience and drive sales growth.
We have been using, and plan to continue to use, digital technologies to improve customer experience and drive sales growth.
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.
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. 56 2025 Form 10-K Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our results of operations and financial condition.
In May 2017, we acquired a controlling interest in Daojia with the expectation that the acquisition will further enhance our digital and delivery capabilities, and accelerate growth by building know-how and expertise in the expanding delivery market.
For example, in May 2017, we acquired a controlling interest in Daojia with the expectation that the acquisition will further enhance our digital and delivery capabilities, and accelerate growth by building know-how and expertise in the expanding delivery market.
In addition, under Chinese laws, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital.
In addition, under Chinese laws, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund statutory surplus reserve, until the aggregate amount of such a fund reaches 50% of its registered capital.
However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our control. 42 2024 Form 10-K If the PCAOB in the future makes another determination it is not able to inspect and investigate completely registered public accounting firms in mainland China and Hong Kong, the Company will again become a Commission-Identified Issuer and subject to potential delisting pursuant to the HFCAA.
However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our control. 43 2025 Form 10-K If the PCAOB in the future makes another determination it is not able to inspect and investigate completely registered public accounting firms in mainland China and Hong Kong, the Company will again become a Commission-Identified Issuer and subject to potential delisting pursuant to the HFCAA.
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 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 2025 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.
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 adverse publicity resulting from these allegations may also adversely affect our reputation, which in turn could adversely affect our results of operations. 58 2025 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.
Such system failures and any delayed restore process could result in: • additional computer and information security and systems development costs; • diversion of technical and other resources; • loss of customers and sales; • loss or theft of customer, employee or other data; • negative publicity; • harm to our business and reputation; • negative impact on the availability and the efficiency of our restaurant operations; and • exposure to litigation claims, government investigations and enforcement actions, fraud losses or other liabilities.
Such system failures and any delayed restore process could result in: • additional computer and information security and systems development costs; • diversion of technical and other resources; • loss of customers and sales; • loss or theft of customer, employee or other data; • negative publicity; • harm to our business and reputation; • negative impact on the availability and the efficiency of our restaurant operations or services; • adverse impact to our financial results; and • exposure to litigation claims, government investigations and enforcement actions, fraud losses or other liabilities.
The Chinese government has focused increasingly on regulation in the areas of information security and protection, including by implementing the PRC Cybersecurity Law effective June 1, 2017, which imposes tightened requirements on data privacy and cybersecurity practices. There are uncertainties with respect to the application of the cybersecurity law in certain circumstances.
The Chinese government has focused increasingly on regulation in the areas of information security and protection, including by implementing the PRC Cybersecurity Law effective June 1, 2017, with amendment effective January 1, 2026, which imposes tightened requirements on data privacy and cybersecurity practices. There are uncertainties with respect to the application of the cybersecurity law in certain circumstances.
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.
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. 42 2025 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.
If, notwithstanding receipt of the opinions, the distribution were determined to be a taxable transaction, YUM would be treated as having sold shares of the Company in a taxable transaction, likely resulting in a significant taxable gain.
If, notwithstanding receipt of the opinions, the distribution was determined to be a taxable transaction, YUM would be treated as having sold shares of the Company in a taxable transaction, likely resulting in a significant taxable gain.
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.
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. 59 2025 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. 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.
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 2025 Form 10-K We may not attain our target development goals; aggressive development could cannibalize existing sales; and new restaurants may not be profitable.
Additionally, our corporate reputation could suffer from a real or perceived failure of corporate governance or misconduct by a company officer, employee or representative. Franchise development may expose us to risks that could adversely affect our business, operating results and financial condition. As of December 31, 2024, approximately 15% of our restaurants were operated by franchisees.
Additionally, our corporate reputation could suffer from a real or perceived failure of corporate governance or misconduct by a company officer, employee or representative. Franchise development may expose us to risks that could adversely affect our business, operating results and financial condition. As of December 31, 2025, approximately 17% of our restaurants were operated by franchisees.
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.
Avian flu outbreaks could also adversely affect the price and availability of poultry, which could negatively impact our profit margins and revenues. 26 2025 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.
However, if the Hong Kong subsidiary is not considered to be the “beneficial owner” of the dividends by the Chinese local tax authority, any dividend paid to it by our Chinese subsidiaries would be subject to a withholding tax rate of 10% with retrospective effect, which would increase our tax liability and reduce the amount of cash available to our company.
However, if the Hong Kong subsidiary is not considered to be the “beneficial owner” of the dividends by the Chinese tax authorities, any dividend paid to it by our Chinese subsidiaries would be subject to a withholding tax rate of 10% with retrospective effect, which would significantly increase our tax liability and reduce the amount of cash available to our company.
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.
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 2025 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.
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.
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.
Furthermore, the laws governing intellectual property rights in China is evolving and subject to interpretation, and could involve substantial risks to us.
Furthermore, the laws governing intellectual property rights in China are evolving and subject to interpretation, and could involve substantial risks to us.
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.
Publicity relating to any noncompliance or alleged noncompliance could also harm our reputation and adversely affect our business and results of operations. 37 2025 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.
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.
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. 38 2025 Form 10-K 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. 55 2024 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. 57 2025 Form 10-K The interests of Primavera may differ from the interests of other holders of Company common stock.
In the event these assets are impaired, our financial results could be adversely impacted. Our new retail business may expose us to challenges and risks and may adversely affect our business, results of operations and financial condition. In order to drive growth from off-premise occasions, we launched packaged foods to capture at-home consumption demand.
In the event these assets are impaired, our financial results could be adversely impacted. 36 2025 Form 10-K Our new retail business may expose us to challenges and risks and may adversely affect our business, results of operations and financial condition. In order to drive growth from off-premise occasions, we launched packaged foods to capture at-home consumption demand.
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.
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.
In addition, under the master license agreement with YUM, as amended, we are required to have at least 225 Taco Bell restaurants by the end of 2025, subject to the terms of the agreement (the “2025 Measurement Condition”). As of December 31, 2024, there were 42 Taco Bell restaurants in China.
In addition, under the master license agreement with YUM, as amended, we were required to have at least 225 Taco Bell restaurants by the end of 2025, subject to the terms of the agreement (the “2025 Measurement Condition”). As of December 31, 2025, there were 28 Taco Bell restaurants in China.
As we continue to expand our digital initiatives, the risks relating to security breaches and cyber-attacks against our systems, both internal and those we have outsourced, may increase. 30 2024 Form 10-K Because of our brand recognition in China, we are consistently subject to attempts to compromise our security and information systems, including denial of service attacks, viruses, malicious software or ransomware, and exploitations of system flaws or weaknesses.
As we continue to expand our digital initiatives, the risks relating to security breaches and cyber-attacks against our systems, both internal and those we have outsourced, may increase. 32 2025 Form 10-K Because of our brand recognition in China, we are consistently subject to attempts to compromise our security and information systems, including denial of service attacks, viruses, malicious software or ransomware, social engineering, and exploitations of system flaws or weaknesses.
At this time, we do not know the extent to which the Anti-Foreign Sanctions Law and the Blocking Rules will impact our operations. 45 2024 Form 10-K The continuation of our operations also depends upon compliance with, among other things, applicable Chinese environmental, health, safety, labor, social security, pension and other laws and regulations.
At this time, we do not know the extent to which the Anti-Foreign Sanctions Law and the Blocking Rules will impact our operations. The continuation of our operations also depends upon compliance with, among other things, applicable Chinese environmental, health, safety, labor, social security, pension and other laws and regulations.
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.
Such payments could have a material adverse effect on our financial condition. 55 2025 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.
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.
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 approximately 290,000 employees. We also maintain important proprietary and other confidential information related to our operations and identifiable information about our franchisees and suppliers.
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.
These risks are described further under the section “Risks Related to Doing Business in China.” 27 2025 Form 10-K Our success is tied to the success of YUM’s brand strength, marketing campaigns and product innovation.
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.
We recorded a pre-tax loss of $26 million, a pre-tax gain of $38 million and a pre-tax loss of $50 million for the years ended 2025, 2024 and 2023, respectively. We also invest in short-term investments, such as time deposits, and long-term bank deposits and notes.
We have invested and intend to continue to invest significantly in technology systems and innovation to enhance digitalization and the guest experience and improve the efficiency of our operations. We cannot assure you that our investments in technology and innovation will generate sufficient returns or have the expected effects on our business operations, if at all.
We have invested and intend to continue to invest significantly in technology systems, including AI technologies, and innovation to enhance digitalization and customer experience and improve the efficiency of our operations. We cannot assure you that our investments in technology and innovation will generate sufficient returns or have the expected effects on our business operations, if at all.
Failures to realize the benefits we expected from these investments may adversely affect our financial results. 40 2024 Form 10-K Our operating results or net income may be adversely affected by our investment in equity method investees.
Failures to realize the benefits we expected from these investments may adversely affect our financial results. 41 2025 Form 10-K Our operating results or net income may be adversely affected by our investment in equity method investees.
The success of our business depends in large part on our continued ability to use the trademarks, service marks, recipes and other components of the KFC, Pizza Hut and Taco Bell branded systems that we license from YUM pursuant to the master license agreement we entered into in connection with the separation.
The success of our business depends in large part on our continued ability to use the trademarks, service marks, recipes and other components of the KFC, Pizza Hut and Taco Bell branded systems that we license from YUM pursuant to the master license agreement.
Any inability to successfully compete with the other restaurants, food delivery aggregators, other food delivery services and shared kitchens in our markets may prevent us from increasing or sustaining our revenues and profitability and could have a material adverse effect on our business, results of operations, financial condition and/or cash flows.
Any inability to successfully compete with the other restaurants, food delivery aggregators, other food delivery services and shared kitchens in our markets in terms of pricing, value perception or other competitive factors may prevent us from increasing or sustaining our revenues and profitability and could have a material adverse effect on our business, results of operations, financial condition and/or cash flows.
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 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 2026. 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 may also face challenges relating to temporary shortage of staff, including as a result of events outside our control. For example, due to widespread infections following the relaxation of COVID restrictions in China, we experienced a shortage of restaurant staff in December 2022.
We may also face challenges relating to temporary shortage of staff or riders required for our delivery business, including as a result of events outside our control. For example, due to widespread infections following the relaxation of COVID restrictions in China, we experienced a shortage of restaurant staff in December 2022.
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.
We also face regulatory uncertainties that could restrict our ability to adopt additional equity incentive plans for our directors and employees under Chinese laws. 51 2025 Form 10-K In addition, the STA has issued circulars concerning employees’ share-based awards.
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.
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.
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.
Any seasonal fluctuations reported in the future may differ from the expectations of our investors. 40 2025 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.
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.
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.
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.
Expansion of our store network is a key component of our growth strategy. We are accelerating our store network expansion to target our 20,000 store milestone in 2026 and 30,000 stores in 2030. 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.
As a result of these fluctuations, softer sales during a period in which we have historically experienced higher sales (such as the disruption in operations from the COVID-19 outbreak) would have a disproportionately negative effect on our full-year results, and comparisons of sales and results of operations within a financial year may not be able to be relied on as indicators of our future performance.
As a result of these fluctuations, softer sales during a period in which we have historically experienced higher sales would have a disproportionately negative effect on our full-year results, and comparisons of sales and results of operations within a financial year may not be able to be relied on as indicators of our future performance.
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 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. Item 1B. Unresolved Staff Comments. Not applicable.
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.
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.
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 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.
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.
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 discretionary surplus reserve. These reserves are not distributable as cash dividends.
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. We may invest in equity securities from time to time.
Fluctuation of changes for our equity investments measured at fair value, lower yields of our short-term investments or lower returns of our future long-term bank deposits and notes may adversely affect our financial results. We may invest in equity investments measured at fair value from time to time.
The Chinese Labor Contract Law that became effective on January 1, 2008 and amended on December 28, 2012 formalizes workers’ rights concerning overtime hours, pensions, layoffs, employment contracts and the role of trade unions, and provides for specific standards and procedures for employees’ protection.
A shortage of staff and riders could result in higher labor costs. The Chinese Labor Contract Law that became effective on January 1, 2008 and amended on December 28, 2012 formalizes workers’ rights concerning overtime hours, pensions, layoffs, employment contracts and the role of trade unions, and provides for specific standards and procedures for employees’ protection.
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.
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.
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 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.
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.
As of December 31, 2025, we leased approximately 15,000 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.
Our plan of capital returns to shareholders is based on current expectations, and our ability to fund our capital returns to our shareholders will primarily depend on our ongoing ability to generate cash from operations and the ability of our Chinese subsidiaries to repatriate funds out of mainland China.
Our plan of capital returns to shareholders is based on current expectations, which may change based on market conditions, capital needs or otherwise, and our ability to fund our capital returns to our shareholders will primarily depend on our ongoing ability to generate cash from operations and the ability of our Chinese subsidiaries to repatriate funds out of mainland China.
If any of our franchisees engage in any type of misconduct or unlawful activities, or fail to comply with our operational standards, our reputation could be adversely affected, which in turn could adversely affect our operating results and financial conditions. The occurrence of security breaches and cyber-attacks could negatively impact our business.
If any of our franchisees engage in any type of misconduct or unlawful activities, or fail to comply with our operational standards, our reputation could be adversely affected, which in turn could adversely affect our operating results and financial conditions.
However, since the VAT Law is relatively new and the detailed implementation rules are yet to be released, uncertainty still remains with respect to its interpretation, implementation and enforcement.
However, since the VAT Law and its implementation rules are relatively new, uncertainty still remains with respect to their interpretation and enforcement.
The techniques used to conduct security breaches and cyber-attacks, as well as the sources and targets of these attacks, change frequently and may not be recognized until launched against us or our third-party service providers. The rapid evolution and increased adoption of AI or GenAI technologies may intensify our cybersecurity risks.
The techniques used to conduct security breaches and cyber-attacks, as well as the sources and targets of these attacks, change frequently and may not be recognized until launched against us or our third-party service providers.
Our short-term investments and long-term bank deposits and notes as of December 31, 2024 amounted to $1,121 million and $1,088 million, respectively. We cannot guarantee that our investment in equity securities will not experience fair value losses, which may adversely affect our period-to-period earnings, financial condition and results of operations.
Our short-term investments and long-term bank deposits and notes as of December 31, 2025 amounted to $878 million and $678 million, respectively. We cannot guarantee that our equity investments measured at fair value will not experience fair value losses, which may adversely affect our period-to-period earnings, financial condition and results of operations.
On December 25, 2024, China enacted the prevailing VAT regulations into the VAT Law, which will come into effect on January 1, 2026. In terms of tax rates, the VAT Law maintains the existing rates of 13%, 9% and 6%.
On December 25, 2024, China enacted the prevailing VAT regulations into the VAT Law, which came into effect on January 1, 2026 along with its implementation rules. In terms of tax rates, the VAT Law maintains the existing standard rates of 13%, 9% and 6%.
Our use of GenAI technologies presents new risks and challenges to our business. We use GenAI technologies to innovate new business scenarios and solutions, such as media creatives generation, digital avatars, customer feedback analysis and customer service. The use of GenAI may be affected by global trends and applicable laws.
We use GenAI technologies to innovate new business scenarios and solutions, such as customer feedback analysis and customer service. The use of GenAI may be affected by global trends and applicable laws.
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.
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.
Our new retail business exposes us to challenges and risks associated with, for example, anticipating customer demand and preferences, managing inventory and handling more complex supply, quality control, product return and delivery service issues.
Our new retail business exposes us to challenges and risks associated with, for example, anticipating customer demand and preferences, managing inventory and handling more complex supply, quality control, product return and delivery service issues. Our limited experience in new retail business may make it more difficult for us to keep pace with evolving customer demands and preferences.
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.
If we are unable to achieve our commitments, our reputation, business or financial condition may be adversely affected. 45 2025 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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur 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.
Biggest changeTo 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. The Company maintains cybersecurity insurance as part of its overall insurance programs.
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.
Yum 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.
On top of that, significant cybersecurity incidents will be immediately reported to the Board in accordance with the Company’s incident response plan. 61 2025 Form 10-K Yum 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.
Removed
On top of that, significant cybersecurity incidents will be immediately reported to the Board in accordance with the Company’s incident response plan.
Added
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.
Removed
The Company maintains cybersecurity insurance as part of its overall insurance programs.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 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.
Biggest changeItem 2. Properties. As of year-end 2025, the Company had 15,060 Company-owned units in China. Of these Company-owned units, 14,998 units were leased properties and 62 units were owned properties.
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.
We sublease over 130 properties to franchisees and other third parties. Additional information about the Company’s leased properties is included in Note 9 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 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.
The leased Company-owned units are further detailed as follows: • KFC leased properties for 10,985 units. • Pizza Hut leased properties for 3,816 units. • Other restaurant concepts leased properties for 197 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 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, 2024. Item 4. Mine Safe ty Disclosures. Not applicable. 61 2024 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, 2025. Item 4. Mine Safe ty Disclosures. Not applicable. 62 2025 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 86 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 62 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 63 Item 6. [RESERVED] 64 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 65 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 85 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe 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
Biggest changeWe selected MSCI China Index and MSCI China Consumer Discretionary Index, as they are the measures to determine the payout of our certain PSU awards. 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 YUMC $ 100 $ 88 $ 97 $ 76 $ 88 $ 89 S&P China BMI $ 100 $ 81 $ 63 $ 56 $ 66 $ 86 MSCI Asia APEX 50 $ 100 $ 89 $ 68 $ 72 $ 88 $ 128 MSCI China $ 100 $ 79 $ 62 $ 55 $ 65 $ 86 MSCI China Consumer Discretionary $ 100 $ 65 $ 50 $ 42 $ 47 $ 57
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.
The graph assumes that the value of the investment in our common stock and each index was $100 on December 31, 2020 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.
Under Chinese laws, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital.
Under Chinese laws, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund statutory surplus reserve, until the aggregate amount of such a fund reaches 50% of its registered capital.
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.
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 2025, the Company declared and paid a quarterly cash dividend of $0.24 per share.
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.
Stock Performance Graph This graph compares the cumulative total return of our common stock from December 31, 2020 through December 31, 2025 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.
Our Board of Directors declared an increase in cash dividend to $0.24 per share on Yum China’s common stock in February 2025.
Our Board of Directors declared an increase in cash dividend to $0.29 per share on Yum China’s common stock in February 2026.
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.
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 discretionary surplus reserve. These reserves 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 21, 2025, there were 32,314 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 20, 2026, there were 30,358 holders of record of Yum China’s common stock.
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.
Our Board of Directors has authorized an aggregate of $5.4 billion for our share repurchase program, including its most recent increase in authorization announced on December 11, 2025, of which $1.2 billion remained available as of December 31, 2025.
The 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 following table provides information, as of December 31, 2025, with respect to shares of common stock repurchased by Yum China under the authorization during the quarter then ended: 63 2025 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) 10/1/25-10/31/25 2,055 $ 43.67 2,055 $ 520 11/1/25-11/30/25 3,879 $ 47.26 3,879 $ 337 12/1/25-12/31/25 3,818 $ 47.58 3,818 $ 1,156 Cumulative total 9,752 $ 46.63 9,752 $ 1,156 (a) Starting January 2024, the Company also repurchased shares of common stock through open market transactions on the HKEX.

Item 7. Management's Discussion & Analysis

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

99 edited+14 added−28 removed76 unchanged
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.
Biggest changeCore OP margin is defined as Core Operating Profit divided by Total revenues, excluding the impact of F/X. 68 2025 Form 10-K The following table sets forth the reconciliations of the most directly comparable GAAP financial measures to the non-GAAP financial measures: 2025 2024 Reconciliation of Operating Profit to Adjusted Operating Profit Operating Profit $ 1,290 $ 1,162 Special Items, Operating Profit — — Adjusted Operating Profit $ 1,290 $ 1,162 Reconciliation of Net Income to Adjusted Net Income Net Income – Yum China Holdings, Inc. $ 929 $ 911 Special Items, Net Income – Yum China Holdings, Inc. — — Adjusted Net Income – Yum China Holdings, Inc. $ 929 $ 911 Reconciliation of EPS to Adjusted EPS Basic Earnings Per Common Share $ 2.52 $ 2.34 Special Items, Basic Earnings Per Common Share — — Adjusted Basic Earnings Per Common Share $ 2.52 $ 2.34 Diluted Earnings Per Common Share $ 2.51 $ 2.33 Special Items, Diluted Earnings Per Common Share — — Adjusted Diluted Earnings Per Common Share $ 2.51 $ 2.33 Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate Effective tax rate (See Note 14) 27.2 % 26.7 % Impact on effective tax rate as a result of Special Items — — Adjusted effective tax rate 27.2 % 26.7 % Net income, along with the reconciliation to Adjusted EBITDA, is presented below: 2025 2024 Net Income – Yum China Holdings, Inc. $ 929 $ 911 Net income – noncontrolling interests 75 69 Equity in net (earnings) losses from equity method investments (15 ) (5 ) Income tax provision 369 356 Interest income, net (92 ) (129 ) Investment loss (gain) 24 (40 ) Operating Profit 1,290 1,162 Special Items, Operating Profit — — Adjusted Operating Profit 1,290 1,162 Depreciation and amortization 448 476 Store impairment charges 42 49 Adjusted EBITDA $ 1,780 $ 1,687 69 2025 Form 10-K Reconciliation of GAAP Operating Profit to Restaurant Profit is as follows: 2025 KFC Pizza Hut All Other Segments Corporate and Unallocated Elimination Total GAAP Operating Profit (Loss) $ 1,285 $ 183 $ (1 ) $ (177 ) $ — $ 1,290 Less: Franchise fees and income 81 10 13 — — 104 Revenues from transactions with franchisees 69 7 79 347 — 502 Other revenues 4 25 802 71 (750 ) 152 Add: General and administrative expenses 260 110 30 181 — 581 Franchise expenses 36 4 1 — — 41 Expenses for transactions with franchisees 58 6 73 344 — 481 Other operating costs and expenses 3 23 783 71 (748 ) 132 Closures and impairment expenses, net 26 8 3 — — 37 Other income, net — — — (1 ) — (1 ) Restaurant profit (loss) $ 1,514 $ 292 $ (5 ) $ — $ 2 $ 1,803 Company sales 8,717 2,282 40 — — 11,039 Restaurant margin (%) 17.4 % 12.8 % (13.7 )% N/A N/A 16.3 % 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 % Reconciliation of GAAP Operating Profit to Core Operating Profit is as follows: % Change 2025 2024 B/(W) Operating Profit $ 1,290 $ 1,162 11 Special Items, Operating Profit — — Adjusted Operating Profit $ 1,290 $ 1,162 11 Items Affecting Comparability F/X impact 2 — Core Operating Profit $ 1,292 $ 1,162 11 Total revenues 11,797 11,303 4 F/X impact (15 ) — Total revenues, excluding the impact of F/X $ 11,782 $ 11,303 4 Core OP margin (%) 11.0 % 10.3 % 0.7 ppts. 70 2025 Form 10-K Reconciliation of GAAP Operating Profit to Core Operating Profit by segment is as follows: 2025 KFC Pizza Hut All Other Segments Corporate and Unallocated Elimination Total GAAP Operating Profit (Loss) $ 1,285 $ 183 $ (1 ) $ (177 ) $ — $ 1,290 Special Items, Operating Profit — — — — — — Adjusted Operating Profit (Loss) $ 1,285 $ 183 $ (1 ) $ (177 ) $ — $ 1,290 Items Affecting Comparability — — — — — — F/X impact — 1 — 1 — 2 Core Operating Profit (Loss) $ 1,285 $ 184 $ (1 ) $ (176 ) $ — $ 1,292 2024 KFC Pizza Hut All Other Segments Corporate and Unallocated Elimination Total GAAP Operating Profit (Loss) $ 1,192 $ 153 $ (15 ) $ (168 ) $ — $ 1,162 Special Items, Operating Profit — — — — — — Adjusted Operating Profit (Loss) $ 1,192 $ 153 $ (15 ) $ (168 ) $ — $ 1,162 Items Affecting Comparability — — — — — — F/X impact — — — — — — Core Operating Profit (Loss) $ 1,192 $ 153 $ (15 ) $ (168 ) $ — $ 1,162 71 2025 Form 10-K Segment Results KFC KFC delivered strong performance in 2025 with increases in both total revenues and core operating profit.
Investment Gain (Loss) The investment gain (loss) mainly relates to the change in fair value of our investment in Meituan Dianping (“Meituan”).
Investment (Loss) Gain The investment (loss) gain mainly relates to the change in fair value of our investment in Meituan Dianping (“Meituan”).
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.
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.
In the year ended December 31, 2025, 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.
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.
We estimated the fair value of 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.
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.
No impairment charges on trademarks related to Little Sheep and Huang Ji Huang were recorded in 2025 and 2024. 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.
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.
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, 2025 compared to the year ended December 31, 2024.
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.
For a discussion of our operating results for the year ended December 31, 2024 compared to the year ended December 31, 2023, 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, 2024.
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.
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.
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.
As of December 31, 2025 and 2024, 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.
Under Chinese laws, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital.
Under Chinese laws, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund statutory surplus reserve, until the aggregate amount of such a fund reaches 50% of its registered capital.
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.
In the year ended December 31, 2025, we elected to perform a qualitative impairment assessment for each of our individual reporting units of KFC, Pizza Hut, Huang Ji Huang and Lavazza.
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.
Revenues from Transactions with Franchisees In 2025, 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.
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.
At December 31, 2025 and 2024, we had $20 million and $19 million, respectively, of unrecognized tax benefits related to the uncertainty with regard to the deductibility of certain business expenses incurred.
We believe system sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unit growth. • Effective January 1, 2018, the Company revised its definition of same-store sales growth to represent the estimated percentage change in sales of food of all restaurants in the Company system that have been open prior to the first day of our prior fiscal year, excluding the period during which stores are temporarily closed.
We believe system sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unit growth. 65 2025 Form 10-K • Effective January 1, 2018, the Company revised its definition of same-store sales growth to represent the estimated percentage change in sales of food of all restaurants in the Company system that have been open prior to the first day of our prior fiscal year, excluding the period during which stores are temporarily closed.
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.
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; 78 2025 Form 10-K • our credit ratings; • 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.
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.
See Note 3 for additional information. 76 2025 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 for 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.
We also established a joint venture with Lavazza Group, the world-renowned family-owned Italian coffee company, to explore and develop the Lavazza coffee concept in China. KFC was the first major global restaurant brand to enter China in 1987. With more than 35 years of operations, we have developed extensive operating experience in the China market.
We also established a joint venture with Lavazza Group, the world-renowned family-owned Italian coffee company, to explore and develop the Lavazza coffee concept in China. KFC was the first major global restaurant brand to enter China in 1987. With more than three decades of operations, we have developed extensive operating experience in the China market.
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.
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 $1,963 million as of December 31, 2025 was related to the KFC, Pizza Hut, Huang Ji Huang and Lavazza reporting units.
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.
See Note 9 for additional information. (b) This represents outstanding principal amount of short-term borrowings, by excluding the impact of debt discounts as of December 31, 2025. See Note 8 for additional information. (c) Purchase obligations relate primarily to capital expenditure commitment for infrastructure, as well as supply and service agreements.
We are transforming Pizza Hut into a more mass-market brand by widening price ranges, expanding the menu, and introducing breakthrough business models like Pizza Hut WOW. During 2024, we continued to focus on investing in value-for-money strategy, strengthening digital capabilities, fortifying delivery, expanding into new occasions and consumer segments and enhancing our asset portfolio to drive growth.
We are transforming Pizza Hut into a more mass-market brand by widening price ranges, expanding the menu, and introducing new store models like Pizza Hut WOW. During 2025, we continued to focus on investing in value-for-money strategy, strengthening digital capabilities, fortifying delivery, expanding into new occasions and consumer segments and enhancing our asset portfolio to drive growth.
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.
We currently expect our fiscal year 2026 capital expenditures to be in the range of approximately $600 million to $700 million. If our cash flows from operations are less than we require, we may need to access the capital markets to obtain financing.
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.
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.
The latest VAT rates imposed on our purchase of materials and services included 13%, 9% and 6%, which were gradually changed from 17%, 13%, 11% and 6% since 2017. These rate changes impact our input VAT on all materials and certain services, mainly including construction, transportation and leasing.
The latest VAT rates imposed on our purchase of materials and services mainly included 13%, 9% and 6%, which were gradually changed from 17%, 13%, 11% and 6% since 2017. These rate changes impact our input VAT on all materials and certain services, mainly including construction, transportation and leasing. However, the impact on our operating results was insignificant.
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.
Our indefinite-lived intangible assets had a book value of $128 million and $123 million as of December 31, 2025 and 2024, respectively, representing two material indefinite-lived intangible assets, which are our Little Sheep and Huang Ji Huang trademarks.
We have the exclusive right to operate and sublicense the KFC, Pizza Hut and, subject to achieving certain agreed-upon milestones, Taco Bell brands in China (excluding Hong Kong, Macau and Taiwan), and own the intellectual property of the Little Sheep and Huang Ji Huang concepts outright.
We have the exclusive right to operate and sublicense the KFC, Pizza Hut and, subject to the agreed terms, Taco Bell brands in China (excluding Hong Kong, Macau and Taiwan) and own the intellectual property of the Little Sheep and Huang Ji Huang concepts outright.
The Company has entered into share repurchase agreements in the U.S. and Hong Kong for an aggregate repurchase amount of approximately $360 million through open market transactions for the first half of 2025.
The Company has entered into share repurchase agreements in the U.S. and Hong Kong for an aggregate repurchase amount of approximately $460 million through open market transactions for the first half of 2026.
Franchise Fees and Income/Revenues from Transactions with Franchisees In 2024, the increase in Franchise fees and income and Revenues from transactions with franchisees, excluding the impact of F/X, was primarily driven by acceleration of franchise store openings. 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.
Franchise Fees and Income/Revenues from Transactions with Franchisees In 2025, the increase in Franchise fees and income and Revenues from transactions with franchisees, excluding the impact of F/X, was primarily driven by acceleration of franchise store openings. G&A Expenses In 2025, the increase in G&A expenses, excluding the impact of F/X, was primarily driven by higher performance-based compensation costs.
Operating Loss In 2024, the decrease in Operating loss, excluding the impact of F/X, was primarily driven by the decrease in Operating loss from certain emerging brands.
Operating Loss In 2025, the improvement in Operating loss, excluding the impact of F/X, was primarily driven by the decrease in Operating loss from certain emerging brands.
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.
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 side-by-side modules, such as KCOFFEE Cafes and KPRO, have enabled us to broaden our addressable market and capture new customer demand.
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.
The decrease was mainly due to the net impact on cash flows resulting from purchases and maturities of short-term investments, long-term bank deposits and notes, and the decrease in capital spending. Net cash used in financing activities was $1,689 million in 2025 as compared to $1,636 million in 2024.
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.
(1.6 ) ppts. 75 2025 Form 10-K Total Revenues In 2025, 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.
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.
As of December 31, 2025, we had outstanding short-term bank borrowings of RMB210 million (approximately $30 million), mainly to manage working capital at our operating subsidiaries. Such bank borrowings are due within one year from their issuance dates.
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.
Additional details on our reportable operating segments are included in Note 15. 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.
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.
We estimate that our total temporary difference for which we have not provided foreign withholding taxes is approximately $3 billion at December 31, 2025. The foreign withholding tax rate on this amount is 5% or 10% depending on the manner of repatriation, the applicable tax treaties or tax arrangements, as well as the interpretation in applying these treaties and arrangements.
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.
ASU 2025-10 is effective for the Company for annual period from January 1, 2029, with early adoption permitted. We are currently evaluating the impact the adoption of this standard may have on our financial statements.
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.
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 discretionary surplus reserve. These reserves are not distributable as cash dividends.
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.
The Company paid a cash dividend of $0.24 and $0.16 per share for each quarter of 2025 and 2024, respectively. Total cash dividends of $353 million and $248 million were paid to stockholders in 2025 and 2024, respectively.
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.
Performance Metrics 2025 % Change System Sales Growth 5 % System Sales Growth, excluding F/X 4 % Same-Store Sales Growth 1 % Unit Count 2025 2024 % Increase Company-owned 15,060 13,887 8 Franchisees 3,041 2,508 21 18,101 16,395 10 67 2025 Form 10-K 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.
We had no material contingent obligations as of December 31, 2024. Please see Note 17 for further discussion.
We had no material contingent obligations as of December 31, 2025. Please see Note 16 for further discussion.
KFC also continued its digital and delivery initiatives to enhance the customer experience. KFC’s loyalty program members exceeded 490 million at year-end 2024 and contributed approximately 65% of system sales at KFC in 2024.
KFC also continued its digital and delivery initiatives to enhance customer experience. KFC’s loyalty program members exceeded 550 million at year-end 2025 and contributed approximately 61% of system sales at KFC in 2025.
On June 7, 2022, the Chinese Ministry of Finance ("MOF") and the STA jointly issued Circular [2022] No. 21, to extend full VAT credit refunds to more sectors and increase the frequency for accepting taxpayers’ applications.
In June 2022, the Chinese Ministry of Finance (“MOF”) and the STA jointly issued Announcement [2022] No. 21, to extend full VAT credit refunds to more sectors and increase the frequency for accepting taxpayers’ applications.
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.
Operating Profit In 2025, 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. 73 2025 Form 10-K Pizza Hut Pizza Hut delivered strong performance in 2025 by accelerating store expansion with healthy returns and expanding profitability.
During the years ended December 31, 2024 and 2023, the Company repurchased 31.3 million shares of common stock for $1,242 million and 12.4 million shares of common stock for $617 million, respectively, under the repurchase program, excluding transaction costs and excise tax.
During the years ended December 31, 2025 and 2024, the Company repurchased 24.7 million shares of common stock for $1,136 million and 31.3 million shares of common stock for $1,242 million, respectively, under the repurchase program, excluding transaction costs and excise tax.
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”) , requiring public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory, employee compensation, depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included.
New Accounting Pronouncements Recently Adopted Accounting Pronouncements See Note 2 for details of recently adopted accounting pronouncements. 80 2025 Form 10-K New Accounting Pronouncements Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) ( “ASU 2024-03”) , requiring public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory, employee compensation, depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included.
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.
We have two reportable segments: KFC and Pizza Hut. Our non-reportable operating segments, including the operations of Lavazza, Huang Ji Huang, Little Sheep, Taco Bell and our delivery operating segment, and for 2024, also including e-commerce segment, are combined and referred to as All Other Segments, as these operating segments are insignificant both individually and in the aggregate.
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.
We have since grown to become the largest restaurant company in China in terms of 2025 system sales, with 18,101 restaurants covering over 2,500 cities primarily in China as of December 31, 2025.
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.
Overview Yum China Holdings, Inc. is the largest restaurant company in China in terms of 2025 system sales, with $11.8 billion of revenues in 2025 and 18,101 restaurants as of year-end 2025.
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.
Pizza Hut’s loyalty program members exceeded 210 million at year-end 2025 and contributed approximately 59% of system sales at Pizza Hut in 2025.
We evaluate indefinite-lived intangible assets for impairment on an annual basis or more often if an event occurs or circumstances change that indicates impairment might exist. We perform our annual test for impairment of our indefinite-lived intangible assets at the beginning of our fourth quarter.
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.
(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.
(b) See “Non-GAAP Measures” below for definitions and reconciliations of the most directly comparable GAAP financial measures to the non-GAAP measures.
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.
Borrowing Capacity As of December 31, 2025, the Company had credit facilities of RMB10,495 million (approximately $1,502 million), comprised of onshore credit facilities in the aggregate amount of RMB7,700 million (approximately $1,102 million), offshore credit facilities in the aggregate amount of $200 million and a credit facility of $200 million that can be used for either onshore or offshore. 79 2025 Form 10-K The credit facilities had remaining terms ranging from less than one year to three years as of December 31, 2025.
(c) OP margin is defined as Operating Profit divided by Total revenues. 66 2024 Form 10-K The Consolidated Results of Operations for the years ended December 31, 2024 and 2023 and other data are presented below: % B/(W) (a) 2024 2023 Reported Ex F/X Company sales $ 10,651 $ 10,391 2 4 Franchise fees and income 94 89 5 6 Revenues from transactions with franchisees 420 372 13 15 Other revenues 138 126 10 12 Total revenues $ 11,303 $ 10,978 3 5 Company restaurant expenses $ 8,972 $ 8,701 (3 ) (5 ) Operating Profit $ 1,162 $ 1,106 5 8 OP Margin (%) 10.3 % 10.1 % 0.2 ppts. 0.3 ppts.
(c) OP margin is defined as Operating Profit divided by Total revenues. 66 2025 Form 10-K The Consolidated Results of Operations for the years ended December 31, 2025 and 2024 and other data are presented below: % B/(W) (a) 2025 2024 Reported Ex F/X Company sales $ 11,039 $ 10,651 4 4 Franchise fees and income 104 94 10 10 Revenues from transactions with franchisees 502 420 20 19 Other revenues 152 138 9 9 Total revenues $ 11,797 $ 11,303 4 4 Company restaurant expenses $ 9,236 $ 8,972 (3 ) (3 ) Operating Profit $ 1,290 $ 1,162 11 11 OP Margin (%) 10.9 % 10.3 % 0.6 ppts. 0.7 ppts.
However, the impact on our operating results is not expected to be significant. Entities that are general VAT taxpayers are permitted to offset qualified input VAT paid to suppliers against their output VAT upon receipt of appropriate supplier VAT invoices on an entity-by-entity basis.
Entities that are general VAT taxpayers are permitted to offset qualified input VAT paid to suppliers against their output VAT upon receipt of appropriate supplier VAT invoices on an entity-by-entity basis.
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 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.
Consolidated Cash Flows Net cash provided by operating activities was $1,419 million in 2024 as compared to $1,473 million in 2023. The decrease was primarily driven by working capital changes. Net cash used in investing activities was $178 million in 2024 as compared to $743 million in 2023.
Consolidated Cash Flows Net cash provided by operating activities was $1,466 million in 2025 as compared to $1,419 million in 2024. The increase was primarily driven by the increase in Operating profit along with working capital changes. Net cash used in investing activities was $5 million in 2025 as compared to $178 million in 2024.
On February 5, 2025, the Board of Directors declared a 50% increase in the cash dividend, raising it to $0.24 per share, payable on March 27, 2025, to stockholders of record as of the close of business on March 6, 2025.
On February 4, 2026, the Board of Directors declared a 21% increase in the cash dividend, raising it to $0.29 per share, payable on March 25, 2026, to stockholders of record as of the close of business on March 4, 2026.
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.
Corporate & Unallocated % B/(W) 2025 2024 Reported Ex F/X Revenues from transactions with franchisees (a) $ 347 $ 289 20 20 Other revenues $ 71 $ 64 10 10 Expenses for transactions with franchisees (a) $ 344 $ 286 (20 ) (20 ) Other operating costs and expenses $ 71 $ 63 (12 ) (12 ) Corporate G&A expenses $ 181 $ 173 (5 ) (4 ) Other unallocated income, net $ (1 ) $ (1 ) 80 82 Interest income, net $ 92 $ 129 (29 ) (29 ) Investment (loss) gain $ (24 ) $ 40 NM NM Income tax provision (See Note 14) $ (369 ) $ (356 ) (4 ) (4 ) Equity in net earnings (losses) from equity method investments $ 15 $ 5 198 196 Effective tax rate (See Note 14) 27.2 % 26.7 % (0.5 ) ppts (0.5 ) 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.
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.
Net income for 2025 increased 2%, including or excluding the impact of F/X, mainly due to the increase in Operating profit, partially offset by the decrease in fair value of our investment in Meituan, less interest income due to lower investment balance and interest rates and higher income tax expenses in line with the increase in pre-tax income. 2025 financial highlights are below: %/ppts Change 2025 2024 Reported Ex F/X System Sales Growth (a) (%) 4 5 NM NM Same-Store Sales Growth (Decline) (a) (%) 1 (3 ) NM NM Operating Profit 1,290 1,162 +11 +11 Adjusted Operating Profit (b) 1,290 1,162 +11 +11 Core Operating Profit (b) 1,292 1,162 NM +11 OP Margin (c) (%) 10.9 10.3 +0.6 +0.7 Core OP Margin (b) (%) 11.0 10.3 NM +0.7 Net Income 929 911 +2 +2 Adjusted Net Income (b) 929 911 +2 +2 Diluted Earnings Per Common Share 2.51 2.33 +8 +8 Adjusted Diluted Earnings Per Common Share (b) 2.51 2.33 +8 +8 NM refers to not meaningful.
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.
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.
Delivery sales accounted for approximately 40% of Company sales at KFC in 2024 with store and city coverage of 86% and 98%, respectively, at the end of 2024. % B/(W) 2024 2023 Reported Ex F/X Company sales $ 8,375 $ 8,116 3 5 Franchise fees and income 69 62 11 13 Revenues from transactions with franchisees 55 45 25 27 Other revenues 10 17 (40 ) (39 ) Total revenues $ 8,509 $ 8,240 3 5 Company restaurant expenses $ 6,961 $ 6,676 (4 ) (6 ) G&A expenses $ 248 $ 263 6 4 Franchise expenses $ 32 $ 31 (7 ) (9 ) Expenses for transactions with franchisees $ 49 $ 39 (22 ) (23 ) Other operating costs and expenses $ 8 $ 15 48 47 Closures and impairment expenses, net $ 19 $ 12 (67 ) (69 ) Other expenses, net $ — $ 2 84 83 Operating Profit $ 1,192 $ 1,202 (1 ) 2 Core Operating Profit $ 1,218 $ 1,154 NM 6 OP margin (%) 14.0 % 14.6 % (0.6 ) ppts.
Delivery sales accounted for approximately 48% of Company sales at KFC in 2025 with store and city coverage of 92% and 98%, respectively, at the end of 2025. % B/(W) 2025 2024 Reported Ex F/X Company sales $ 8,717 $ 8,375 4 4 Franchise fees and income 81 69 16 16 Revenues from transactions with franchisees 69 55 25 24 Other revenues 4 10 (62 ) (62 ) Total revenues $ 8,871 $ 8,509 4 4 Company restaurant expenses $ 7,203 $ 6,961 (3 ) (3 ) G&A expenses $ 260 $ 248 (5 ) (4 ) Franchise expenses $ 36 $ 32 (11 ) (11 ) Expenses for transactions with franchisees $ 58 $ 49 (21 ) (21 ) Other operating costs and expenses $ 3 $ 8 69 69 Closures and impairment expenses, net $ 26 $ 19 (27 ) (26 ) Operating Profit $ 1,285 $ 1,192 8 8 Core Operating Profit $ 1,285 $ 1,192 NM 8 OP margin (%) 14.5 % 14.0 % 0.5 ppts. 0.5 ppts.
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.
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.
Delivery sales accounted for approximately 39% of Company sales at Pizza Hut in 2024 with store and city coverage of 92% and 92%, respectively, at the end of 2024. % B/(W) 2024 2023 Reported Ex F/X Company sales $ 2,223 $ 2,214 — 2 Franchise fees and income 8 7 5 7 Revenues from transactions with franchisees 5 4 16 18 Other revenues 24 21 14 15 Total revenues $ 2,260 $ 2,246 1 2 Company restaurant expenses $ 1,955 $ 1,951 — (2 ) G&A expenses $ 110 $ 118 7 6 Franchise expenses $ 4 $ 4 (2 ) (4 ) Expenses for transactions with franchisees $ 4 $ 4 (3 ) (5 ) Other operating costs and expenses $ 22 $ 19 (19 ) (20 ) Closures and impairment expenses, net $ 12 $ 8 (56 ) (59 ) Operating Profit $ 153 $ 142 7 11 Core Operating Profit $ 157 $ 132 NM 19 OP margin (%) 6.8 % 6.3 % 0.5 ppts. 0.5 ppts.
Delivery sales accounted for approximately 47% of Company sales at Pizza Hut in 2025 with store and city coverage of 96% and 96%, respectively, at the end of 2025. % B/(W) 2025 2024 Reported Ex F/X Company sales $ 2,282 $ 2,223 3 3 Franchise fees and income 10 8 26 26 Revenues from transactions with franchisees 7 5 50 50 Other revenues 25 24 2 1 Total revenues $ 2,324 $ 2,260 3 3 Company restaurant expenses $ 1,990 $ 1,955 (2 ) (2 ) G&A expenses $ 110 $ 110 (1 ) (1 ) Franchise expenses $ 4 $ 4 (19 ) (19 ) Expenses for transactions with franchisees $ 6 $ 4 (35 ) (35 ) Other operating costs and expenses $ 23 $ 22 (3 ) (3 ) Closures and impairment expenses, net $ 8 $ 12 32 34 Operating Profit $ 183 $ 153 19 20 Core Operating Profit $ 184 $ 153 NM 20 OP margin (%) 7.9 % 6.8 % 1.1 ppts. 1.1 ppts.
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.
Corporate G&A Expenses In 2025, the increase in Corporate G&A expenses, excluding the impact of F/X, was primarily driven by higher performance-based compensation costs. Interest Income, Net In 2025, the decrease in interest income, excluding the impact of F/X, was primarily driven by lower interest rates and lower investment balance with cash used in return to shareholders.
Our effective tax rate was 26.7% and 26.9% in 2024 and 2023, respectively. The lower effective tax rate in 2024 compared with that in 2023 was primarily due to the impact from fair value change of our investment in Meituan.
Our effective tax rate was 27.2% and 26.7% in 2025 and 2024, respectively. The higher effective tax rate in 2025 compared with that in 2024 was primarily due to higher withholding tax associated with higher planned repatriation of earnings outside of China and the impact from fair value change of our investment in Meituan.
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.
The increase was primarily driven by the increase of cash dividends paid on common stock, the decrease in the net proceeds from short-term bank borrowings, partially offset by the fluctuation in share repurchases. 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.
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. 84 2025 Form 10-K Unremitted Earnings of Foreign Subsidiaries We have investments in our foreign subsidiaries where the carrying values for financial reporting exceed the tax basis.
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.
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.
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.
All Other Segments All Other Segments reflects the results of Lavazza, Huang Ji Huang, Little Sheep, Taco Bell and our delivery operating segment, and for 2024, also the e-commerce segment. % B/(W) 2025 2024 Reported Ex F/X Company sales $ 40 $ 53 (25 ) (25 ) Franchise fees and income 13 17 (19 ) (19 ) Revenues from transactions with franchisees 79 71 11 11 Other revenues 802 648 24 23 Total revenues $ 934 $ 789 18 18 Company restaurant expenses $ 45 $ 58 24 24 G&A expenses $ 30 $ 37 19 19 Franchise expenses $ 1 $ 1 (35 ) (35 ) Expenses for transactions with franchisees $ 73 $ 65 (13 ) (13 ) Other operating costs and expenses $ 783 $ 635 (23 ) (23 ) Closure and impairment expenses, net $ 3 $ 8 64 64 Operating Loss $ (1 ) $ (15 ) 95 95 OP margin (%) (0.1 )% (2.0 )% 1.9 ppts. 1.9 ppts.
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, 2025, KFC operated 12,997 restaurants in over 2,500 cities across China. 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, 2025, Pizza Hut operated 4,168 restaurants in over 1,000 cities.
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.
Share Repurchases and Dividends On December 11, 2025, our Board of Directors increased the share repurchase authorization by $1 billion to an aggregate of $5.4 billion, of which $1.2 billion remained available as of December 31, 2025.
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.
We estimated the expected future volatility of the price of shares of Yum China common stock based on its historical volatility. 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.
Restaurant loss $ (5 ) $ (15 ) 58 58 Restaurant margin (%) (12.1 )% (25.1 )% 13.0 ppts. 13.0 ppts.
Restaurant loss $ (5 ) $ (5 ) 15 14 Restaurant margin (%) (13.7 )% (12.1 )% (1.6 ) ppts.
Share-Based Compensation We account for share awards issued to employees in accordance with Accounting Standards Codification Topic 718 (“ASC 718”), Compensation-Stock Compensation .
No impairment charge on goodwill was recorded in 2025 and 2024. 83 2025 Form 10-K Share-Based Compensation We account for share awards issued to employees in accordance with Accounting Standards Codification Topic 718 (“ASC 718”), Compensation-Stock Compensation .
Changes in the estimates and judgments could significantly affect our results of operations, financial condition and cash flows in future years. A description of what we consider to be our most significant critical accounting policies and estimates follows.
Changes in the estimates and judgments could significantly affect our results of operations, financial condition and cash flows in future years.
See Note 15 for a further discussion of our income taxes. 85 2024 Form 10-K
See Note 14 for a further discussion of our income taxes.
Our ability to fund our future operations and capital needs will primarily depend on our ongoing ability to generate cash from 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.
Restaurant profit $ 268 $ 263 2 5 Restaurant margin (%) 12.0 % 11.8 % 0.2 ppts. 0.2 ppts. 2024 % Change System Sales Growth 1 % System Sales Growth, excluding F/X 2 % Same-Store Sales (Decline) (5 )% Unit Count 2024 2023 % Increase Company-owned 3,525 3,155 12 Franchisees 199 157 27 3,724 3,312 12 2023 New Builds Closures 2024 Company-owned 3,155 539 (169 ) 3,525 Franchisees 157 47 (5 ) 199 Total 3,312 586 (174 ) 3,724 75 2024 Form 10-K Company Sales and Restaurant Profit The changes in Company sales and Restaurant profit were as follows: Income (Expense) 2023 Store Portfolio Actions Other F/X 2024 Company sales $ 2,214 $ 146 $ (98 ) $ (39 ) $ 2,223 Cost of sales (692 ) (49 ) 2 12 (727 ) Cost of labor (649 ) (38 ) 49 10 (628 ) Occupancy and other operating expenses (610 ) (38 ) 38 10 (600 ) Restaurant profit $ 263 $ 21 $ (9 ) $ (7 ) $ 268 In 2024, the increase in Company sales, excluding the impact of F/X, was primarily driven by net unit growth, partially offset by same-store sales decline.
Restaurant profit $ 292 $ 268 9 9 Restaurant margin (%) 12.8 % 12.0 % 0.8 ppts. 0.8 ppts. 2025 % Change System Sales Growth 4 % System Sales Growth, excluding F/X 4 % Same-Store Sales Growth 1 % Unit Count 2025 2024 % Increase Company-owned 3,830 3,525 9 Franchisees 338 199 70 4,168 3,724 12 2024 New Builds Closures Refranchised 2025 Company-owned 3,525 505 (199 ) (1 ) 3,830 Franchisees 199 150 (12 ) 1 338 Total 3,724 655 (211 ) — 4,168 74 2025 Form 10-K Company Sales and Restaurant Profit The changes in Company sales and Restaurant profit were as follows: Income (Expense) 2024 Store Portfolio Actions Other F/X 2025 Company sales $ 2,223 $ 44 $ 12 $ 3 $ 2,282 Cost of sales (727 ) (15 ) (9 ) (1 ) (752 ) Cost of labor (628 ) (8 ) (3 ) (1 ) (640 ) Occupancy and other operating expenses (600 ) (13 ) 16 (1 ) (598 ) Restaurant profit $ 268 $ 8 $ 16 $ — $ 292 In 2025, the increase in Company sales, excluding the impact of F/X, was primarily driven by net unit growth and same-store sales growth.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed4 unchanged
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.
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, 2025, the Company’s Operating profit would have decreased by approximately $120 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. 86 2024 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. 85 2025 Form 10-K

Other YUMC 10-K year-over-year comparisons