ic mix of digital innovation, asset-light expansion and product localisation to drive long-term growth.  “We turned same-store sales growth positive while expanding our store portfolio to nearly 17,000 locations,” Joey Wat, CEO of Yum China, said. “We delivered double-digit growth in operating profit and substantially expanded our margins.” Delivery remains a key growth engine, with sales rising 22 per cent year-over-year. Roughly 45 per cent of Yum China’s system-wide sales now come from delivery. Digital ordering accounted for 94 per cent of total sales during the quarter, with digital transactions totalling $2.4 billion. Loyalty programs remain a cornerstone of the company’s engagement strategy. Yum China’s combined member base for KFC and Pizza Hut hit 560 million, a 13 per cent increase from the year before. Member-driven sales now represent 64 per cent of total system sales. “We are reinforcing our strategic moat via our membership programs and Super Apps, and enhancing the in-store experience, while capturing additional traffic on delivery platforms,” Wat said.  KFC’s scales quietly, coffee gains ground KFC, the company’s largest brand, continues to deliver steady performance. While system sales jumped 5 per cent, operating profit climbed 11 per cent to $292 million. The company opened 295 net new KFC stores in the quarter. The company also continues to expand its coffee offering through KCoffee. The sub-brand now operates inside more than 1300 KFC outlets, allowing the company to expand in China’s competitive coffee market with minimal incremental investment. Pizza Hut, slightly lagging behind KFC in both innovation and profitability, is showing signs of a more successful turnaround. Same-store transactions jumped 17 per cent year-on-year, though average ticket size fell 13 per cent.  “Pizza Hut’s new menu has widened our price ranges, reaching previously underserved customer segments and contributing to double-digit same-store transactions growth for the quarter,” Wat said.  System sales for Pizza Hut rose 3 per cent overall, while operating profit increased 16 per cent to $46 million. Delivery now accounts for 43 per cent of Pizza Hut’s revenue. The chain opened 95 net new stores in the quarter, 22 per cent of which were franchised.  “In addition to great value for money, our meal sets with IP-themed toys brought emotional value to our customers and helped us set a new 2025 daily sales record on Children’s Day,” Wat added.  Expansion strategy Yum China opened 336 net new stores across all brands during the second quarter, bringing its total footprint to 16,978 restaurants in more than 2300 cities. The company remains on track to open between 1600 and 1800 new stores this year, making this one of its most aggressive expansion years yet. A key shift is the rising role of franchising. Franchisees opened 89 of the new stores during the quarter, representing 26 per cent of the total. The company expected the number of net new franchised stores to rise to between 40 and 50 per cent for KFC and between 20 and 30 per cent for Pizza Hut by the end of this year.  This franchise-led model is allowing Yum China to grow into lower-tier cities and new trade zones with lower capital intensity and more flexible local adaptation. It’s also enabling the company to revise its capital expenditure target down to between $600 million and $700 million for the year from an initial estimate of between $700 million and $800 million. AI enters the kitchen As part of its digital transformation, Yum China quietly launched a pilot program this quarter that supports restaurant management across its store network. Dubbed Q-Smart, the AI-powered assistant is designed to support restaurant managers with day-to-day decision-making. Piloted at select KFC locations, Q-Smart helps frontline managers handle tasks such as labour scheduling, inventory control and food safety compliance. Unlike traditional software tools, Q-Smart is voice-activated and works via wearable devices like wireless earphones and smartwatches. “Q-Smart is not just an AI tool – it is a potential game-changer for how restaurants can be managed,” said Leila Zhang, chief technology officer at Yum China. “We believe that Q-Smart will not only help Yum China improve its operational efficiency, but can also serve as an example for the digital transformation and smart development of the catering industry.” By embedding AI into store-level workflows, Yum China is aiming to reduce inefficiencies, improve food safety compliance and support staff training in real-time. If successful, Q-Smart could be scaled across thousands of locations.  Further reading: How Yum China is building growth on thin margins.