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KFC Outlets To Be Opened At Chinese Gas Stations By Yum China

KFC Outlets To Be Opened At Chinese Gas Stations By Yum China
Amidst a slowing domestic demand, Yum China Holdings is aiming to take advantage of a new growth area and has decided to tie up with two biggest state oil giants of China to open up fast-food outlets at the gas stations across the country through the franchise route.
In the next three years, gas stations owned by Sinopec Corp and China National Petroleum Corporation (CNPC) would be the sites for opening up of more than 100 outlets such as KFC restaurants. There are over 50000 gas stations that the two Chinese gas companies operates across China.
"It's something quite new for both of us, we're going to open some stores and figure out the economics, once we figure out the economics then we can be more specific on the financials," Yum China's Chief Executive Joey Wat told the media in an interview. "We only have a very modest goal in the coming three years."
Pizza Hut, KFC and Taco Bell arte the three brands in China that are owned by the New York-listed firm which was created from the spin off of Yum Brands Inc in 2016. It is also the largest fast-food operator in China and has over 4800 outlets and has plans to increase the number to 10,000 by 2021.
The company is now trying to adjust to a slowing Chinese economy with recent growth  rates falling to lowest in 28 years, Wat said. for example, With an eye on customers seeking greater value for money, the company is offering more value promotions.
Yum China said that the profit margins of KFC's restaurant margin could come under pressure because of these promotions and other factors. It also added that there was enough gas in the company to return back $1.5 billion to shareholders in the next 3 years.
Yum China is now trying to revamp sale performance of Pizza Hut in China which has reported just three quarters of positive same store sales growth in China since the start of 2014, even though the company claimed that it has more or less reached stability in the sale at its KFC chain after a period of lipid performance.
While on the over all, Yum China reached a growth of 6 per cent year-on-year in total system sales for the fourth quarter, which was primarily driven by increased sale at KFC, there was a 2 per cent drop in the sale at Pizza Hut in the same period.
It could take two years to see the results of turnaround plan that was put in p[lace in 2017, Wat said. A new store design and a series of promotions have been implemented as a part of that plan so far. Next week, the company would introduce a new menu that would have 15 per cent less products.
While the company is yet to see a revival in same store sales, she said that traffic growth in the stores had turned positive in the fourth quarter which is a milestone for it.
"When we are turning the ship, when we work hard to get the momentum to turn, it's not easy, there are many forces at work, but we certainly feel like we are on the right track and doing all the right initiatives," she said.
"At the time we set out a very aggressive time frame ... but management does not have a crystal ball either," she added. "We still have a little bit of time."

Christopher J. Mitchell

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