#China #Shenzhen #Pizza Hut #Yum China #KFC

Yum China's Ambitious RGM 3.0 Strategy

Yum China Holdings, Inc. hosted its 2025 Investor Day in Shenzhen, revealing a robust strategic initiative dubbed RGM 3.0, designed to spearhead its growth trajectory and solidify its market leadership in the ever-evolving restaurant landscape. As Yum China continues to thrive with its impressive portfolio of brands, including KFC and Pizza Hut, insights shared during the event highlighted plans that aim for an unparalleled expansion of up to 30,000 stores by 2030.

Overview of the RGM 3.0 Strategy

At the forefront of this initiative is a commitment to resilience, growth, and creating a competitive moat through innovation and operational efficiency. CEO Joey Wat articulated that the guiding principle of RGM 3.0 focuses on enhancing customer offerings while consolidating operational resources to maximize synergy across various locations and brands. Despite the scale of operations, the company aims to double its store footprint in an astonishingly short period, seeking to add 10,000 new locations from its existing base.

Juggling multiple revenue streams, the strategy emphasizes catering to a diverse customer base with innovative dining experiences, from casual quick-service to more formal options, all while maintaining cost efficiency. This multifaceted approach is expected to enable Yum China to not only sustain its market position but to expand aggressively in both high- and lower-tier cities.

Key Financial Targets

Yum China set ambitious financial targets outlined for the next three years under the newly presented strategy. The company forecasts:

• - A high-single-digit growth in operating profit,
• - A double-digit increase in Diluted Earnings Per Share (EPS),
• - An expected rise in free cash flow per share.

With these projections alongside a substantial commitment to return approximately 100% of free cash flow to shareholders post-dividend from 2027, Yum China aims to deliver sustainable shareholder value and cultivate long-term profitability.

Brand-Specific Growth Plans

KFC: Reinforcing Market Leadership

KFC, a flagship brand for Yum China, continues to thrive with plans to increase its total store count to over 17,000 by 2028. The quick-service brand is banking on its solidified reputation, diverse menu, and innovative store models to penetrate deeper into the Chinese market. Aiming for a compound annual growth rate (CAGR) of mid- to high-single digits in system sales until 2028, KFC is well-positioned to maintain its competitive advantages in the fast food sector.

Pizza Hut: Transformational Growth

Pizza Hut is poised for a significant turnaround, expecting to double its operating profit by 2029 and expand its number of locations to over 6,000. By penetrating areas not currently serviced by the brand, specifically in lower-tier cities, the company can attract new customers through innovative operational models and menu diversification focused on accessibility.

Lavazza: The Path to Accelerated Growth

The Lavazza coffee brand is also set to enter a new growth phase, targeting 1,000 coffee shops and elevating retail sales to $60 million by 2029. Leveraging its Italian heritage, Lavazza is dedicated to providing a unique café experience tailored to local tastes while expanding its retail reach across both online and offline channels.

Embracing Technology and Innovation

A significant component of Yum China's strategy involves leveraging technology to boost operational efficiency. By integrating AI solutions from 2019 forward and now eyeing the implementation of agentic AI—designed for proactive interactions and data-driven decisions—the company is set to enhance customer experience and food safety measures across its supply chains.

Furthermore, digital capabilities throw enhanced support in transforming operations, ensuring that the company maintains a competitive edge as it evolves with market demands.

Conclusion

In summary, Yum China's RGM 3.0 strategy promises to revolutionize how the company operates moving forward, focusing on extensive growth, innovative customer engagement, and sustainable profitability. As the company targets 20,000 stores by 2026 and aims to exceed 30,000 by 2030, all eyes will be on their execution of these ambitious plans. With ongoing support and empowerment of their restaurant general managers (RGMs), Yum China looks poised not just to meet but exceed expectations in the coming years.