Focus on operational efficiency, product innovation and increased penetration in lower-tier cities to stay ahead
Fast-food giants Yum China and McDonald's China expanded rapidly in 2024, opening record numbers of new stores and deepening their market presence.
With a focus on operational efficiency, product innovation — especially in coffee — and increased reach in lower-tier cities, both companies continued to capture growing consumer demand despite an increasingly competitive landscape.
The expansion aligned with a growing trend in China's restaurant industry.
According to the National Bureau of Statistics, total national catering revenue reached 5.57 trillion yuan ($762.37 billion) in 2024, up 5.3 percent year-on-year.
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Zhu Danpeng, an independent food and drink analyst, said there are a few big reasons why Western fast food has grown quickly in China.
"A steady stream of younger consumers means there's always a strong customer base, and with life getting busier, more people are looking for quick and easy meal options. These chains offer good value for money, making them an attractive choice," he said. "On top of that, their brand power, large-scale operations and loyal fan base have only gotten stronger, keeping them ahead in the game."
Yum China Holdings, the operator of KFC, Pizza Hut, and Lavazza in China, posted strong financial results in 2024, achieving record expansion and profitability.
The quick-service chains saw revenue grow 3 percent year-on-year to $11.3 billion last year, a record.
Same-store sales index reached 97 percent of prior-year levels, while core operating profit grew 12 percent year-on-year.
It opened a record 1,751 net new stores, up 12 percent, bringing its total store count to 16,395. Delivery sales grew 14 percent year-on-year.
KFC remained the company's primary growth engine, with revenue rising 5 percent to $8.5 billion last year.
The brand expanded aggressively, opening 1,352 net new stores — the most in its history — bringing its total footprint to 11,648 locations across more than 2,200 city and county-level regions in China.
Around 30 percent, or 402 of these new stores were franchised. The total proportion of franchised stores in KFC is 13 percent.
"They help us unlock incremental opportunities in lower-tier cities, remote areas and strategic locations such as highways, campuses and tourist areas," said Adrian Ding, CFO of Yum China. "KFC's growth potential in China is huge."
Product innovation played a key role in KFC's success.
Its flagship offerings, original recipe chicken and juicy whole chicken, saw double-digit sales growth, while new items, such as the handshaken Americano with frozen pear, a traditional snack for people living in the northern part of the country, generated strong consumer interest, according to the company.
Coffee is a key growth driver for KFC.
KCOFFEE, the brand's coffee arm, sold 250 million cups in 2024, a 30 percent year-on-year increase.
The brand also expanded its cafes from 50 locations in 2023 to 700 in 2024, with plans to reach 1,300 by the end of 2025.
"The synergy between KCOFFEE and KFC stores generated incremental sales and profit growth," Ding said.
Joey Wat, CEO of Yum China, referred to last year as "an inflection point" for Pizza Hut.
Its revenue rose 2 percent to $2.26 billion and profit stood at $157 million, up 19 percent. The brand opened a record 412 net new stores. Among these, 42 are franchised stores. Total store count reached 3,724 locations.
Pizza Hut's repositioning toward a mass-market offering delivered strong results.
The brand expanded its pricing range, with sales of pizzas priced under 50 yuan surging 50 percent year-over-year. The introduction of Pizza Dough Burgers in April gained traction, contributing to a low single-digit percentage of total sales, according to the company.
The WOW model, designed to attract younger consumers with a streamlined, lower-cost format, continued its rollout, surpassing 200 locations in 2024.
Lavazza, Yum China's high-end coffee brand, pursued a dual-track growth strategy through physical stores and retail sales. Retail sales grew over 30 percent and turned profitable for the first time, according to the company.
Wat said the company remains excited about the significant growth opportunities in China. "With tailored store models, we are expanding through both company-owned stores and franchise stores and are on track to achieve our goal of 20,000 stores by 2026," she said.
Meanwhile, McDonald's China opened 917 new stores in 2024, bringing its total store count to 6,820. It means at least two new stores on average every day in the past year.
McDonald's China accounted for about 70 percent of all new store openings in the company's international licensed markets, up 3 percentage points from the previous year. More than half of McDonald's global new stores were opened in China last year.
In the fourth quarter, McDonald's International Developmental Licensed Markets segment, which includes China, recorded a 4.1 percent increase in comparable sales, while the United States market saw a 1.4 percent decline. For the full year, the international operated markets segment decreased 0.2 percent, while the US market increased by the same percentage.
Looking ahead, CFO of McDonald's, Ian Borden, said at its fourth-quarter earnings call: "We expect to open more than 1,600 restaurants in our IDL segment, including about 1,000 in China."
"Globally, we plan to open about 2,200 restaurants this year," he added.
The company expects a net addition of nearly 1,800 stores globally, contributing to an overall unit growth of 4 percent.
McDonald's is also making a strategic push into China's coffee market.
Starting Feb 5, about 7,000 McDonald's restaurants nationwide will upgrade their brewed coffee offerings to freshly extracted coffee, accompanied by a one-week free beverage giveaway campaign. The upgraded coffee will use 100 percent Arabica beans, said the company.
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The initiative represents a major upgrade to McDonald's coffee business and a competitive move in China's evolving coffee market, said industry experts.
By leveraging its extensive store network and strong brand influence, the company aims to expand its presence in China's coffee sector.
Consumer demand for coffee in breakfast consumption continues to rise. According to research from consumer insights firm GenBridge Capital, the penetration rate of coffee in breakfast beverages has increased significantly in China's urban markets.
In new first-tier cities, coffee's share of breakfast beverages rose from 9 percent three years ago to 15 percent in 2024.
"As more Chinese consumers develop a taste for coffee, their expectations are shifting toward higher quality," said analyst Zhu Danpeng.
"McDonald's is making a smart move by upgrading its coffee to meet this rising demand. It's not just about better coffee — it's about strengthening customer loyalty and standing out in an increasingly competitive market. This step will be key to McDonald's positioning in China's fast-growing coffee scene."
