Yum China Holdings (YUMC) Q2 2026 earnings call transcript

Thank you, operator. Hello, everyone, and welcome to Yum China's second quarter 2026 earnings conference call. With me on the call are our CEO, Ms. Joey Watt, and our CFO, Mr. Adrian Ding. Before we begin, I will remind everyone that our remarks and investor materials contain four looking statements. These are subject to future events and uncertainties, and actual results may differ materially. Please refer to these four looking statements together with the cautionary statement in our earnings release and the risk factors included in our SEC filings. We will also be talking about non-GAAP financial measures. We encourage you to review the comparable GAAP measures along with the reconciliation of non-GAAP and GAAP measures provided in our earnings release, which is available on our investor relations website at ir.

yumchina. com. You can also find both the webcast replay and a PowerPoint presentation on our IR website. Please note that all year-over-year growth rates discussed today exclude the impact of foreign currency unless we mention otherwise.

With that, I will now turn the call over to Joey Watt, CEO of Yum China. Joey.

Hello everyone and thank you for joining us. We delivered strong second quarter results. For the ninth consecutive quarter, we achieved system sales growth, operating profit growth, and OP margin expansion at the same time. I would like to thank our team again for making this possible. Revenue grew 13 percent. Operating profit increased 14 percent, and diluted EPS rose 21 percent year over year. Partially supported by favorable foreign exchange impact. Excluding foreign exchange impact, system sales grew 6% in Q2, up from 4% in Q1, and continued to outperform the catering industry. Same-store sales growth also improved sequentially to 1%, driven by the 14th consecutive quarter of same-store transaction growth. We opened 560 net new stores, with expansion accelerating year-over-year across both equity and franchise stores.

With our dual focus on innovation and operational efficiency, Q2 restaurant margins and OT margins stayed resilient despite significant cost pressure from a higher delivery mix. Our breakthrough side-by-side modules are scaling rapidly, especially in higher-tier cities. KFC's K-Coffee Cafe and K-Pro are effectively capturing new customer occasions. Pizza Hut's new burger bar was well received by our customers. At the same time, KFC's small town model and Pizza Hut's WOW are helping us penetrate lower tier cities quickly. Together with innovation in our core menu, these initiatives are unlocking new opportunities for us.

Let me start with Pizza Hut, which makes significant progress in quarter two. Pizza Hut same-store sales growth returned to positive at 1%, while new store openings accelerated, almost double what we did in quarter two last year. This brings net new store openings to 381 in the first hut, nearly matching our 2025 total. In April, we launched Fuhita and Shashukas on the spring menu to enrich Pizza Hut's protein platform and enhance the dying experience. In May, we extended our pizza category into lighter meal occasions with a new multigrain crust and new protein and vegetable toppings, Duogu Wu Ren Lian Pizza. The pizza's colorful look, nutrient-packed profile, and grain-rich texture make it a best-selling crust since launch in June.

We also introduced an individual-sized multi-grain pizza with less than 500 calories, helping us attract more solo and light meal diners. Beyond pizza, we are taking Pizza Hut's burger category to the next level with a new side-by-side module, Pizza Hut's Burger Bar. In just six months, it has expanded to more than 200 locations, contributing double-digit incremental sales and meaningful profit to parent stores. Pizza Hut's burger bar features a tight menu centered on made-to-order burgers from an open kitchen. Our buns are baked, fresh-in-store, everyday, xien-cow mian bao, and our patties come straight off the griddle, releasing a rich, savory aroma. Great-tasting burgers, amazing value for money, and a quick-service model have proved very appealing to young consumers and solo diners.

With light investment and by utilizing space in existing stores, we believe Pizza Hut's burger bar can unlock significant growth opportunities for Pizza Hut. We plan to accelerate the rollout in the second half, reaching 500 to 600 locations by the end of 2026. That would represent around 10% of Pizza Hut's nearly 5,000 store portfolio. And we are about to reach a major breakthrough by becoming the owner of the Pizza Hut brand in mainland China. After operating the brand in the market for 36 years, in the near term, the savings in license fees will enhance store economics and make Pizza Hut's restaurant margin closer to KFCs. This will enable more potential new stores to meet our payback requirement of two to three years.

Over the longer term, brand ownership will give us greater strategic flexibility and allow us to respond more nimbly to market opportunities and consumer needs. While we are still reviewing our growth plan, our initial assessment points to accelerated store openings beginning next year. In 2027 and 2028, we now expect net new openings to exceed 800 per year, up from our original target of over 600. As we step up our efforts at Pizza Hut, KFC continues to be our number one growth driver, delivering strong results. In quarter two, both system sales and core operating profit grew 7% year-over-year. Same-store sales grew 1%. In the first half, KFC opened nearly 800 net new stores, around 200 more than in the first half last year.

KFC's hero products and their extensions continued to drive strong sales and repeat purchases. Whole chicken has become a major platform for at-home consumption, generating over 2 billion yuan in sales last year. This category has delivered double-digit growth every year since its launch in 2021 and remains on track for double-digit growth in 2026. In April, we add the aromatic paper-wrapped roast chicken, Xiang Ju Zi Bao Ji, to the permanent menu.

It's super juicy and high in protein, appealing to consumers seeking lighter meals. Zinger is another top-selling platform for KFC. In quarter two, we introduced the limited-time-over, more fragrant, spicier Zinger, Geng Xiang, Geng La Jitui Bo. The extra spicy chicken thigh, secret sauce, and toasted sesame aroma attracted younger customers. Sales were especially strong in spicy-loving provinces such as Jiangxi and Sichuan.

With more regional flavors to come, we see strong potential for the Zinger category to exceed 5 billion yuan in sales by end of 2026. KFC's side-by-side modules, K-Coffee Cafe and K-Pro, continue to gain momentum and deliver incremental sales and profits. K-Coffee Cafe grew to more than 3,300 locations, and we are on track to reach 5,000 locations by the end of 2027. In addition to coffee offerings, K-Coffee Cafe is broadening its tea and food options, including more egg tart flavors and breakfast pairings to expand its addressable market. K-Pro has expanded to over 450 locations and has proven more promising than we expected. Earlier this This year, we raised our year-end rollout target from 400 to 600 locations, and we now expect to reach around 800 locations.

Following its success in higher-tier cities, we are expanding K-PRO into select lower-tier cities. Beyond increasing its footprint, we are capturing We bring the growing demand for lighter meals through manual innovation. In addition to our signature energy bowls, we recently launched sandwiches featuring whole wheat buns and chia seeds and high protein ingredients. The sandwiches became an instant hit with good repeat purchases. In fact, more than 80% of K-Pro cells came from KFC members. Showing the power of cross-selling and membership. Combined with our trusted food quality standards and strong value for money, Kpro is well positioned to become a leading player in China's light meal business. Aside from new modules, KFC is also rolling out car-side pickup service to improve convenience for customers who drive.

More than 8,000 KFC stores now offer either drive-through or car-side pick-ups, where our restaurant staff bring orders to designated pull-up areas. While customer awareness and habits are still in the early stage, the service is gaining traction, supported by strong repeat purchases. Over 7 million members have used this service this year, yet that still represents only 3% of our active member base, leaving significant room for growth.

Let me now turn the call over to Adrian.

Thank you, Joey. Let me update key highlights by brand, starting with KFC. In quarter two, both KFC's same-store sales growth and system sales growth improved sequentially. System sales grew 7%, up from 5% in quarter one.

Same-store sales grew 1%, the fifth consecutive quarter of growth. Same-store transaction grew 4%, more than I offset the ticket average decrease of 3%. Ticket average was 36 yuan, lower year-on-year, mainly due to incremental smaller orders from new customer segments and locations, such as K-Coffee and K-Pro.

Despite significant rider cost headwind, KFC's restaurant margin expanded 20 basis points to 17.1% in Q2. OP margin also expanded by 20 basis points. Once again, demonstrating KFC's strong execution and nimble operations at scale. KFC's side-by-side modules continue to drive incremental sales and profit, while improving store economics through model iteration. K Cafe delivered around mid sales uplift to its parent stores while K delivered around 20 CapEx for both K-Coffee Cafe and K-Pro has come down by around half from earlier modules last year, and both are showing solid margin improvement.

Now, moving on to Pizza Hut. In Q2, system sales grew 6% year-over-year, accelerating from 4% in Q1, proven by the sequential improvement in same-store sales growth to 1%. Same-store transactions grew strongly by 13% in Q2, marking the 14th consecutive quarter of growth, offsetting an 11% ticket average decrease. Ticket average was 68 yuan, moving closer to our target range of 60 to 70 yuan in line with our mass market strategy, mainly driven by better value for money and incremental smaller orders, including those from solo diners and burger bars. Pizza Hut restaurant margin was down 40 basis points, mainly due to the increased cost associated with the higher delivery sales mix, Fairtrade value for money and expenses related to the launch of the Pizza Hut burger bar.

The new initiative successfully drove incremental sales and profit with a modest margin investment. In the first half, restaurant margin was up 10 basis points year over year.

OP margin expanded by 60 basis points, mainly driven by lower closure and impairment expenses, reflecting improved store performance. In the second half, we expect greater year-on-year improvement versus the first half in Pizza Hut's restaurant margin, as efficiency continues to improve and rider-cost headwinds soften.

Moving on to store opening. We opened around 1,200 new stores in the first half, about double the pace of the same period last year, and entered more than 200 new cities. Both equity and franchise store openings accelerated year over year. In the higher-tier cities, we continue to densify our network, primarily through equity stores, to sustain our powerful brand momentum and operational mode. At the same time, franchisees, which accounted for 40% of total annual opening in the first half, are unlocking incremental opportunities for us. They provide additional resources to help us expand into lower-tier cities, remote areas, and strategic locations. With franchise stores accounting for only 18% of total stores of Yum China, we're confident there are significant opportunities ahead.

Let me now go through our Q2 P&L. System sales grew 6% year-on-year. Same-store sales grew 1%, sequentially improved from quarter one. Our restaurant margin was 16.1%, in line with the prior year level. Improvements in occupancy and other costs offset growth in cost of sales and cost of labor. Cost of sales was 31.5%, 50 basis points higher year-over-year, mainly due to better value for money offerings, increased packaging costs due to a higher delivery sales mix, and Pizza Hut's new menu items, which have higher COS and are still being optimized. Commodity prices remain favorable, though the benefit was smaller than before. We also improve our procurement efficiency through menu innovation and dynamic price management. Cost of labor was 27.6%, 40 basis points higher year on year.

Rider costs continue to increase year on year in quarter two, proven by the strong growth in delivery sales mix, which rose from We went from 45% last year to 54% this year. The margin impact from rider cost was 140 basis points, slightly lower than in quarter one, and we offset most of that through enhanced rural operations. Occupancy and other was 24.8%, 90 basis points lower year over year. The rent ratio improved through lease renegotiations and more favorable rent in lower tier cities. We also implemented other initiatives to enhance operational efficiency. Our OP margin was 11.1%, 20 basis points higher year-over-year, achieving the ninth consecutive quarter of OP margin expansion. Savings in GNA expenses helped improve OP margins.

Offering profit was $348 million, a second quarter record, growing 7% year on year. Net income was $244 million, up 6% year on year. Excluding our investment in Meituan, net income grew 3% year on year. Our investment in Meituan had a negative impact of $6 million in Q2 compared to a negative impact of $14 million in Q2 last year.

As a reminder, we recognize $13 million less in interest income in Q2 this year due to a low cash balance resulting from the cash we return to shareholders and lower interest rates. Diluted EPS was $0.70, 14% higher year-on-year, or up 10%, excluding our investment in Meituan.

Now, moving on to our 2026 outlook, let me start with sales. Since June, we have been lapping a higher delivery sales base, and that tougher sales comparison will continue through the The second half. That said, given our discipline execution last year and multiple growth drivers, we remain confident in our ability to lead the catering industry in China. July tracked broadly in line with our expectations. We are working hard to maintain positive same-store sales growth in quarter three and deliver the 15th consecutive quarter of positive same-store transaction growth.

Moving on to margins. Before considering the impact of the Pizza Hut deal, we expect Q3 restaurant margin to be stable to slightly positive year-on-year. Relative to the first half, incremental rider cost pressure is expected to moderate slightly, as delivery sales mix already increased to 51% in Q3 last year. Our continued efforts to improve operational efficiency and optimize store costs, including rent, labor productivity, and capex, are expected to support margins, giving us room to reinvest in growth.

We expect OP margin to be roughly in line with quarter three last year. There was a positive margin impact of about 20 basis points from some ad hoc government subsidies in Q3 2025 that are not expected to repeat in Q3 this year. Some similar subsidies were already recognized in the first half this year, though in smaller amounts.

For the full year, without considering the impact of the Pizza Hut deal, we're confident in meeting our 2026 targets. which are consistent with the range we shared at our investor day last year and in February. These include same store sales index of 100 to 102, mid to high single digit system sales growth, high single digit operating profit growth, double digit EPS growth, and a slight improvement in restaurant and OP margins from Yum China. Additionally, we remain on track to reach 20,000 stores by year-end.

Now, let's turn to the Pizza Hut deal, which is on track to close in August. We plan to fund this transaction primarily with debt. We expect to borrow an offshore bridge loan of around $1.2 billion equivalent for up to 12 months. For longer-term financing, all options remain on the table. We'll proceed in the best interest of our shareholders and execute financing when market conditions are appropriate. We'll provide an update once our financing plan is finalized.

The savings in the 3% license fee payments to Yum brands are expected to add 2.8% to Pizza Hut's restaurant OP margins after taking VAT into account. This translates to approximately 60 basis points for Yum China overall. For Q3, we expect around 30 to 40 basis points positive impact to both Yum China's restaurant and OP margins, and for the 2026 full year, around 20 to 30 basis points.

After accounting for deal-related costs, financing interest expense, tax, and without considering the potential higher growth of Pizza Hut, we expect the deal to be accretive to dilute EPS. Slightly accreted in 2026, and mid-single-digit accreted in 2027 and 2028. In terms of capital returns to shareholders, we remain on track to return $1.5 billion to shareholders in 2026, equivalent to around 10% of our current market cap. In the first half, we returned $718 million, including $515 million through share repurchases and $203 million through quarterly cash dividends.

We stepped up share repurchases in quarter two, reflecting what we believe was a relatively attractive share price. From 2027 onward, we remain committed to returning around 100% of annual free cash flow after subsidiary's dividend payment to non-controlling interests. This translates to an average of $900 million to $1 billion plus in 2027 and 2028, and exceeds $1 billion in 2028 and beyond. With ownership of Pizza Hut brand supporting faster growth, we also see potential upside to our future free cash flow.

With that, let me hand it back to Joey for her closing remarks.

Thank you, Adrian. Looking ahead, we are firing on all cylinders to drive south and expand our addressable market. A number of our initiatives have each reached or are about to reach the meaningful milestone of 1 billion yuan in sales or around 1% of Yum China sales. K-Coffee Cafe generated around 1 billion yuan in sales last year. We target to double that to nearly 2 billion yuan this year. Kpro is expected to call triple in sales year-over-year this year and exceed 1 billion yuan in sales next year. KFC's drive-through and car-side pickup are gaining strong momentum. We target to reach 1 billion yuan in sales this year. Pizza Hut burgers, a category we introduced two years ago, is also gaining popularity.

We now target over 1 billion yuan in sales this year, or around 5 to 6 percent of Pizza Hut sales. We remain confident in the strength of our brand and our ability to deliver sustainable growth, even in the current dynamic environment. And we continue to see significant long-term growth potential in China. Together with our team, I look forward to achieving our growth targets for 2026 and beyond.

Now, let me pass it back to Foran.

Thanks, Joey. Now we will open the call for questions. In order to give more people the chance to ask questions, please limit your questions to one at a time. Operator, please start the Q&A.

And since we know we have an easier base on margin so still want to your thoughts on how to balance this pricing trend and promotion activities to drive the sales growth Thank you Thank you, Michelle. We are encouraged to see the rebound in June retail sales compared with May, actually. As Adrian mentioned earlier in prepared remarks, July trapped broadly in line with our expectations. There was some extreme weather, but it was temporary and it had certain regional impact in July. Coming back to the few trends, there are a few things here worth noting. Consumers are still willing to spend on certain occasions. They are still growing nicely and present attractive opportunities such as coffee, light meal, and they're willing to spend money on innovative products.

and experiences, strong value for money, and emotional value. And then an additional interesting trend is we see some stabilization in pricing trends. More players are willing to take pricing, reflecting a stable consumer environment, and the competition between the delivery platform is more rational. So these are positive. And on top of that, we continue to see ongoing increase, what we call chainification. China restaurant chain, the percentage has grown from 20% to 30% plus. And it's still relatively low compared with 60% plus in mature market. And there's also another one little trend going on is since April, the government has tightened oversight of the food delivery related to what is called Gold's Kitchen. We view this as a positive environment, raising the standard of the industry, and we expect to benefit from our well-established food safety, which is a strategic mode for us.

Thus, Michelle, Yum China team, we are working hard to drive traffic, sales, and profits all at the same time, and we target to maintain positive same-source sales growth in quarter three and deliver 15-quarters of same-source transaction growth as well.

Sure. Thank you, Luacheng. So indeed, as I mentioned in the prepared remark, we expect to take a bridge loan of approximately $1.2 billion equivalent of up to 12 months to close the transaction first. And by the way, the closing will take place in August, as I mentioned. The bridge loan interest rate will be approximately 2%, so it will be quite favorable. And your question actually focuses on the takeoff financing or the long-term refinancing. Indeed, we think all options currently are on the table, including syndicate loans, including bonds, including CBs, et cetera, et cetera. And given you specifically asked about CB, you know, although it's actually pretty preliminary and we don't have any inclination on which instrument we take, But speaking for CB specifically, let's say even if we choose to take CB as the takeout financing option, there are different ways to minimize or reduce the dilution meaningfully, potential dilution meaningfully.

For instance, the issuer can take a cap call option, thereby to increase the conversion premium from 20-30% to as much as 70 or 80%. That means, you know, the share price, when it only gets to 70, 80 percent premium versus, you know, the time when they issue the CB, then the dilution will occur. In which case, the shareholders will be pretty happy, right? The share price, you know, is 80 percent up.

And even at that point in time, there is still an option to use net share settlement, meaning that only the indie money portion of the CB will be used, will be issuing shares. So the dilution all in all will be very limited. So that's about CB. And you can see some of the other big technology companies actually did quite similar things as what I mentioned to minimize the dilution impact. Again, we're still studying the different long-term refinancing options, and all the different options are on the table. But I just want to share more color giving you a lot about the CB.

Yeah, I'll take the question first, Lillian. So on the clarification question, obviously our guidance, as we mentioned in prepared remarks, is disregarding or without taking into account the Pizza Hut deal. We do expect the restaurant margin for Pizza Hut in the second half will enjoy a greater extension compared to the first half. And the key reason is the moderation of rider cost pressure. Obviously, in the second half of last year, the delivery sales mix in the base was a bit more normal or comparable to what we see currently. Obviously, in the second half this year, there will still be a delivery sales mix increase, but the delta year-over-year will be much less, meaning the rider cost pressure will be more manageable in the second half.

In other cost line items, I think the trend will be kind of similar. For COS on the second half for Pizza Hut, it will be broadly stable year-over-year. In our last earning release, we guided a full year, approximately 34% COS for Pizza Hut. I think we should be able to deliver consistent results compared to our guidance on Pizza Hut COS. On the long term, COS for Pizza Hut will be 31 plus or minus 1%, as we always commented. All in all, we do see opportunity for expansion there. So that's on the first question. The second part of the question is the relationship between store opening and comp sales for Pizza Hut specifically, as I think you mentioned.

And I think over the past few quarters or even the past few years, we have always tried to balance the different factors, right? Like account sales, store opening, margin, profit growth. And hopefully it's fair to say that we successfully delivered a right or proper balance in most of the quarters or hopefully, you know, in the past few years in a consistent manner. And indeed, we see lots of untapped opportunities for Pizza Hut here in China, obviously for KFC too, but you asked about Pizza Hut. So we will open the stores. We will not slow down the store opening. And in terms of store opening, we do open stores across different tiers, high tier city, low tier city.

For pizza particularly, the low-tier city penetration, there are actually lots of opportunities, right? We are kind of underrepresented there compared to where we are for KFC and compared to some of the local Chinese QSR brands there. And for higher tier city, we will also continue to defend our market leadership and open stores in higher tier city. And I think you focus on the relationship between store opening and comp sales. There are different ways where we can manage or reduce the sales transfer by store opening. For instance, when we open stores in strategic channels like hospitals, university campuses, the sales transfer will be rather limited, right? Because it's kind of a closed trade zone. For instance, when we open stores in lower tier cities, because there are lots of white space, the sales transfer will be rather limited.

And also that's similarly true for outskirt areas in high tier cities too. So as always, we'll try to balance the different metrics and hopefully deliver a set of results that's satisfactory to our shareholders.

Cannibalization with what, Anne? With the existing... FIBA. Yeah, okay. So, and the overall market of the burger, first of all, is growing very nicely. So that's a good starting point. And when we decided to launch the Pizza Hut burger, it's very clear among our team that the products need to be very unique. So it's unique compared to KFC to start with, that the bun are baked fresh in the store. So that is very unique not only compared to KFC but many other incumbent players in the market. And then the paddy will prepare based on order. So the quality of product is fantastic. And I think after learning from over 200 locations, we can see we are probably competing with business.

They focus on beef broker. So given KFC's beef burger share is a single digit, and the burgers are quite unique and different, so KFC is not the target, but from other beef burger focused brands. And then in terms of cannibalization with PISA, we see incremental sales because it's always good to offer choices to customers by offering a new category.

And we can see that in our number. I mean, it's double-digit sales to their parent stores, and the margin is nice. Therefore, within a few months, we built over 200 locations, and now we are targeting to increase to 500 to 600, and we are talking about a billion yuan sales, which is 5 to 6 percent of the Pizza Hut sales. So that is pretty fast, and fundamentally, it's the quality of the product that matters most.

It tastes really good. Yeah, I hope you like it. I'll try.

I suppose we feel like we need a separate meeting just for that topic. Let me try to answer at the high level here. You are asking about the challenges in revitalization and then with acquisition of the brand, any additional sort of changes, if that's what I heard you. We start the Pisa Hut transformation back to 2017. By 2024, we share with our shareholders that we've reached a inflation point. So it has been a long and committed transformation. And, you know, I am very honest to say this, the transformation is mainly fundamental. We built the core capabilities from the product. For example, the CRUST, the Dole Master, the CRUST technology and know-how. We just launched the multi-grain crust in June, and it became an instant hit.

And this will not happen if we have not built our core capability in the dough in the last many years. We built our menu. Pizza right now is only 40% of our sales, which is significantly different from the rest of pizza business outside China. We also recently launched burger business, and I think with this burger story, I would like to answer your question about What is the benefit of the brand ownership? In the past, because we did not own the brand, even when we had this brilliant idea of doing pizza burger bar, you can imagine there were a lot of conversation behind the scenes. Yum has been very, very good partner, but still, the communication takes time.

The explanation, the logic, and how would that impact the overall pizza brand globally, all these conversations take time. And, you know, there are many benefits for the brand ownership because not only we are buying the brand, but we also are going to own the recipe, the trademark, and many other things. And with that, we will have better ability to react or to respond to the market changes. Our action will be faster and sharper. And that strategic independence and speed is quite valuable. So among the many other benefits, this is one. And additionally, if I could highlight, it does help us to open stores even faster. You are very good at numbers, you are probably aware that for quarter one alone, the Pizza Hut China new store opening is more than 100% of the global opening, put it that way.

And we could open the store even faster. Why? Because you will understand and fully appreciate when we open the store, we want the quality first. That means we would look at what other store reached two to three years paper first, and then we open the store. So now, with the additional margin of 2.8 into our restaurant margin, more stores will meet our requirement, and thus, we are increasing the guideline of next year new store opening to 800. On the condition that they will meet our two to three years payback. So I think with that, I'm going to pause about what are the benefits. And again, I think, yeah, we need more time to go through this particular topic.

Thank you, Christine. We want to be more specific about the growth of new initiatives, because given KFC's size of business, it's quite hard to highlight the scale of the initiatives. But once we point out, you know, they are actually quite big already, like K-Coffee is 1 billion US sales, and then we're going to double it to 2 billion, and then K-Pro, we are called triple.

I mean, the growth is 4X, it's not even 2X, and then we're going to reach 1 billion US sales. And all these are very sizable if it's a standalone business. So we highlight that for that reason. And come to your question about the diet, I would like to point out that KFC and Pizza Hut both offer a very healthy diet, too. Protein is very healthy. Chicken is very nice protein. What we talk about for K-Pro is light meal, and that's the important concept. Light meal is growing very nicely, as you can see, because the concept is good, both in terms of food and also drink. So the light meal is about protein again, and that also includes Pizza Hut, our reason light meal platform of the multi-grain crust pizza with protein topping, like the chicken, the egg, and then mixed with vegetables.

And then on the drink side, the drink come with protein again, is getting very popular. So certainly an area growing nicely. So for K-Pro, it's not something that new. We start to open the first cable, that was 2017, actually. So we've been working on the menu year after year, year after year, year after year, until we get to the menu that customers like, with the right balance of the protein, the calorie, and the vegetable, etc. And then when it comes to the supply chain, the key thing about supply chain in China and for us is food safety. And we are absolutely committed to it. And everything we produce, we provide in K-Pro and then also the light meal option for Pizza Hut is from our supply chain.

And we share the suppliers between the two brands and our smaller brand as well. And again, the key thing is get committed food safety. That's the focus. And that's our strategic mode as well. So we are very confident about the light meal option because it's not only is light, the concept is great, but customer trust our food safety.

You can see paper, we have little bit unseen, six promise. If we go a bit deeper and make one more comment before I conclude my answer here, is food safety for light meal, the requirement is even higher than fried chicken. It's much harder to achieve food safety for salad, whether the Chinese salad or Western salad, than fried chicken.

Thank you, Yvonne. You know us quite well already. I'm sure you are aware that whatever we do, the execution is always very disciplined, and that applies to K-Coffee as well. For K-Coffee, last year we get to the sales of 1 billion yuan sales, and for 2026, we are going to get to 2 billion yuan pillars. And it's still contributing about a mid-single-digit thing-soil sales to the parent stores.

And the ticket average or the price per cup is still at a similar level compared to last year. So, you know, I'm afraid I'm going to give you a boringly stable answer, which is sort of our style here.

Adrian, anything else to add? Sure, sure. Indeed, Ethan, so we don't separately discuss the comp sales for K Coffee Cafe as a module, but what we can say is, obviously, the daily sales is higher than the pre-delivery reward period of time, right? That speaks for the consumer mindshare improvement. And we have always been making the comment that KCoffee Cafe does somewhat benefit from the delivery war and increasing consumer mindshare, thereby helping us do a lot of new location extension. Now it's more than 3,300 locations, and we've got more than 5,000 locations end of next year, which is two years ahead of schedule. And one of the key preconditions for us to do that is really the daily capsule that has to be increasing in a very healthy way.

And we're very happy to see. And now the delivery wall idea is very rational, particularly for beverage sector, but the daily capsule is higher than the pre-deliverable period of time. So we are pretty satisfied with that.