On December 24, news of KFC's price increase surged into the trending topics.

KFC's official statement indicated that the average price increase is 2%, with specific adjustments ranging from 0.5 yuan to 2 yuan; this is the brand's first product price adjustment in nearly two years.

As early as mid-year, consumers reported on Social Media that the benefits of the KFC fan card had changed, with the phrase 'breakfast two-piece set at 40% off' being altered to 'starting from 40% off'.

Regarding this price adjustment, a relevant person from KFC stated: given the changes in Operation costs, the company will regularly assess and cautiously adjust the price structure. KFC's widely popular promotional meals, such as the 'Crazy Four' deals, 'Crazy Day' activities, 'OK Meal', and 'Kids Meal', will remain unchanged in price.

In the current situation where the "Crazy Thursday" promotion has become normalized, the operating efficiency of individual Restaurants is decreasing, which is a problem that YUM CHINA and its backing cannot ignore.$YUM CHINA (09987.HK)$

In the third quarter, YUM CHINA's revenue grew by 5% year-on-year to 3.07 billion dollars, setting a new high for single-quarter revenue; Operating profit increased by 15% year-on-year to 0.371 billion dollars; core Operating profit grew by 18%.

However, the same-store sales and average transaction value of its two major brands are both lower than the same period last year.

In the third quarter, KFC's same-store sales decreased by 2% year-on-year, and the average transaction value dropped by 3%; Pizza Hut's same-store sales fell by 4%, with an average transaction value decrease of 9%.

During the third quarter performance call, YUM CHINA's management mentioned that KFC is expanding its price range, with pricing in the third quarter slightly lower than the previous quarter and higher than in 2019. However, in the long run, KFC's pricing will tend to stabilize.

Pizza Hut has chosen to strengthen its "value for money" approach, with the brand implementing a comprehensive price reduction on 30 products at the beginning of December, covering various categories including pizza, snacks, and beverages.

Regarding the relationship between volume and price, YUM CHINA's CEO Qu Cui Rong stated that, in the long run, YUM CHINA will indeed focus on the growth of transaction volume.

According to disclosures, KFC and Pizza Hut have achieved positive growth in same-store traffic for seven consecutive quarters.

In addition, by optimizing its delivery strategy, YUM CHINA has attracted more small Orders, gaining a larger market share on delivery platforms.

The number of YUM CHINA's store locations is continuously expanding.

In the third quarter, YUM CHINA added a net of 438 new stores, of which 145 were franchise stores, accounting for 33%.

As of September 30, KFC has a total of 11,283 stores, of which franchise stores account for 12%; Pizza Hut has a total of 3,606 stores, with franchise stores accounting for 5%.

The company expects that in the coming years, the proportion of franchise stores among net new KFC stores will gradually increase to 40%-50%, while for Pizza Hut, it will rise to 20%-30%.

The new store model, which requires lower investment and is more suitable for deeper market penetration, is highly anticipated.

In May of this year, Pizza Hut launched the WOW restaurant, focusing on 'meals for one' and high cost performance, with a menu that includes mushroom soup for 9 yuan, and pasta and pizza for 15 yuan.

YUM CHINA revealed that after 5 months of the WOW restaurants launching, the number of stores has reached 150, covering more than ten provinces. By the end of this year, the number of WOW stores will exceed 200.

According to the latest store opening guidelines, YUM CHINA expects to net about 1,500-1,700 new stores in 2024, aiming to reach 200,000 stores by 2026.

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