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KFC China: Exploring the 1,100 Untapped Cities

At 10,000th store opening, KFC China highlights ambition to reach half of China’s population by 2026

Last week, KFC China opened its 10,000th store, a feat no other Western QSR brand has so far been able to achieve in the country.

Currently serving roughly one-third of Chinese consumers with more than 1 billion annual transactions, KFC emphasized its goal to reach at least half of the country’s 1.4 billion people by 2026. Having already established an extensive presence in over 1,900 cities as of the end of Q3 2023, KFC China continues to actively expand its addressable market, with 1,100 untapped cities on the brand’s radar for entry.

The Chinese character for 10,000, 万 (“wan”), often used in Chinese proverbs to express a great or significant number, was prominently featured in a ceremony commemorating the milestone. KFC China’s 10,000th store is located on the bank of the 1,776 km-long Beijing-Hangzhou Grand Canal, a vital waterway connecting northern and southern China. According to the company, the site reflects KFC’s ambition to transcend the Chinese market and appeal to consumers of all walks of life.

“KFC China’s 10,000th store opening is a proud moment for all of us, demonstrating the brand’s deep bond with Chinese consumers across generations,” says Joey Wat, CEO of Yum China, which operates KFC in China along with Pizza Hut and several other restaurant brands.

When the first KFC store arrived in China in 1987 in Beijing’s Qianmen neighborhood, it became a national phenomenon, breaking KFC’s global records for sales volume within its first year of operation. More than three decades years later, KFC China is the country’s largest QSR brand in terms of system sales. Leveraging a world class supply chain built over the past three decades, the brand is catering to an increasingly diverse range of tastes and customer needs as it continues its rapid pace of expansion into the far reaches of the country.

Over the past five years, the brand has seen particularly remarkable growth, with average annual growth in net new KFC stores exceeding 22% while maintaining an average store payback period of approximately two years. The brand plans to further accelerate its annual net new store openings to exceed 1,200 in the next three years, aligning with Yum China’s overarching goal to reach 20,000 stores by 2026. Franchise stores are an increasingly important part of this strategy as KFC expands in strategic, high-traffic locations such as gas stations, highway service centers, hospitals, and college campuses.

“Strategically positioned for sustained growth, KFC China stands to benefit from its large and rapidly expanding store network, substantial economies of scale and access to an even broader customer base,” Wat says.

At the same time, the brand is continuing to accelerate its store openings in China lower-tier cities while increasing store density in higher-tier cities. To do this, it is deploying a diverse range of store models and modules – including futuristic store designs as well as drive-through restaurants, to-go windows, food trucks and mini stations. This approach underscores KFC China’s commitment to innovation-empowered growth and adaptability in the dynamic Chinese market.

“KFC China remains at the forefront of pioneering new formats and groundbreaking concepts to accelerate store expansion into untapped cities, while also staying ahead of evolving consumer preferences and emerging consumption trends,” said Warton Wang, General Manager of KFC China.

Through the introduction of innovative products and development of new categories, KFC China is proactively broadening its consumer base and catering to the evolving needs of Chinese consumers. Recent successes include the Juicy Whole Chicken and Beef Burger categories, both of which have generated annual sales exceeding US$100 million.

The brand also recently announced that it is widening its menu to introduce more entry-level price point offerings, ensuring its products better cater to the needs and preferences of a broader range of consumers.

KFC China also continues to expand its in-house coffee brand, KCOFFEE. In 2023, KCOFFEE is expected to sell 180 million drinks, representing a roughly 30% year-on-year increase. Plans are in the works to open more than 300 standalone KCOFFEE stores by the end of 2024.

“Going forward, KFC China will continue to offer a diverse array of innovative meal choices across price ranges, ensuring that consumers can enjoy KFC anytime and anywhere,” Wang adds.

The post KFC China: Exploring the 1,100 Untapped Cities appeared first on FinanceBrokerage.

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