Yum China Holdings, Inc.
For the period ended Dec 31, 2025. Filed Feb 27, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 27, 2026
YUMC$49.95+0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-27.
0000950170-25-029134
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-27.
0001193125-26-082824
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 187 previous paragraphs and 172 current paragraphs.
125 unchanged; 38 reworded; 7 added; 24 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 25 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
In 2025, the increase in G&A expenses, excluding the impact of F/X, was primarily driven by higher performance-based compensation costs.
Current report
In 2025, the increase in Operating profit, excluding the impact of F/X, was primarily driven by the increase in Restaurant profit, partially offset by higher G&A expenses.
Current report
Investment (Loss) Gain
Current report
The Company plans to return an average annual return of approximately $900 million to over $1 billion in 2027 and 2028, and to exceed $1 billion in 2028.
Current report
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets(“ASU 2025-05”), which provides the option to elect a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. ASU 2025-05 is effective for the Company from January 1, 2026, with early adoption permitted. We will adopt this standard in the first quarter of 2026, and do not expect that the adoption of this standard will have a material impact on our financial statements.
Current report
In September 2025, the FASB issued Accounting Standards Update 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software" (“ASU 2025-06”), which better aligns the accounting guidance to how software is developed by eliminating project stages from capitalization criteria, and further clarifies the threshold entities apply to begin capitalizing costs. The amendment also enhances the disclosure requirements for internal-use software. ASU 2025-06 is effective for the Company from January 1, 2028, with early adoption permitted. We are currently evaluating the impact the adoption of this standard may have on our financial statements.
Current report
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities(“ASU 2025-10”) to establish guidance on the recognition, measurement, and presentation of government grants received by business entities. The new standard leverages the principles in the accounting framework for government assistance in International Accounting Standard 20. ASU 2025-10 is effective for the Company for annual period from January 1, 2029, with early adoption permitted. We are currently evaluating the impact the adoption of this standard may have on our financial statements.
Removed paragraphs (24)
Previous report
The Company's operating results in 2024 demonstrated the resilience of our business and the effectiveness of our strategy in improving sales and profitability amid challenging market conditions. With a dual focus on operational efficiency and innovation, the Company transformed its organization from the new perspectives of its RGMs and customers and delivered growth in both total revenues and operating results.
Previous report
Details of Special Items are presented below:
Previous report
In February 2020, the Company granted Partner PSU Awards to select employees who were deemed critical to the Company’s execution of its strategic operating plan. These PSU awards will only vest if threshold performance goals are achieved over a four-year performance period, with the payout ranging from 0% to 200% of the target number of shares subject to the PSU awards. These awards vested as of December 31, 2023 with a payout in the first quarter of 2024. Partner PSU Awards were granted to address increased competition for executive talent, motivate transformational performance and encourage management retention. Given the unique nature of these grants, the Compensation Committee does not intend to grant similar, special grants to the same employees during the performance period. The impact from these special awards is excluded from metrics that management uses to assess the Company’s performance.
Previous report
Tax effect was determined based upon the nature, as well as the jurisdiction, of each Special Item at the applicable tax rate.
Previous report
Details of Items Affecting Comparability are presented below:
Previous report
In relation to the effects of the COVID-19 pandemic, the Company was granted lease concessions from landlords. The lease concessions were primarily in the form of rent reduction over the period of time when the Company’s restaurant business was adversely impacted. Such concessions were primarily recognized as a reduction of Occupancy and other operating expenses within Company restaurant expenses included in the Consolidated Statement of Income in the period the concession was granted. See Note 10 for additional information.
Previous report
(b)
Previous report
In relation to the effects of the COVID-19 pandemic, the Company received government subsidies for employee benefits and providing training to employees. The temporary relief was primarily recognized as a reduction to Payroll and employee benefits within Company restaurant expenses included in the Consolidated Statement of Income. See Note 2 for additional information about our government subsidies.
Previous report
Pursuant to the tax policy issued by relevant government authorities, general VAT taxpayers in certain industries that meet certain criteria are allowed to claim an additional 10% or 15% input VAT, which will be used to offset their VAT payables. This VAT policy was further extended to December 31, 2023 but the additional deduction was reduced to 5% or 10% respectively. VAT deductions were primarily recorded as a reduction to Food and paper and Occupancy and other operating expenses within Company restaurant expenses included in the Consolidated Statements of Income. Such preferential policy was not extended in 2024. See “Significant Known Events, Trends or Uncertainties Expected to Impact Future Results” session within MD&A for additional information on VAT deductions.
Previous report
(d)
Previous report
As a result of the acquisition of our previously unconsolidated joint ventures of Hangzhou KFC, Suzhou KFC and Wuxi KFC, $66 million, $61 million and $61 million of the purchase price were allocated to intangible assets related to reacquired franchise rights, respectively, which were amortized over the remaining franchise contract period of 1 year, 2.4 years and 5 years, respectively. The reacquired franchise rights were fully amortized as of March 31, 2023. The amortization was recorded in Other (Income) Expenses, net included in the Consolidated Statements of Income. See Note 6 for additional information.
Previous report
(e)
Previous report
The F/X impact on Core Operating Profit and Total revenues is presented only for the current year in relation to the immediately preceding year presented. When determining applicable growth percentages of Core Operating Profit, the Core Operating Profit for the current year should be compared to the prior year Operating Profit adjusted only for any prior year Special Items and Items Affecting Comparability. When comparing Core OP margin, Total revenues excluding F/X for the current year should be compared to the prior year Total revenues.
Previous report
In 2024, the decrease in G&A expenses, excluding the impact of F/X, was primarily driven by lower performance-based compensation costs.
Previous report
G&A Expenses
Previous report
In 2024, the decrease in G&A expenses, excluding the impact of F/X, was primarily driven by lower performance-based compensation costs.
Previous report
In 2024, the increase in Operating profit, excluding the impact of F/X, was primarily driven by the increase in Restaurant profit and lower G&A expenses.
Previous report
(a)
Previous report
Investment Gain (Loss)
Previous report
Pursuant to Circular [2019] No. 39, Circular [2019] No. 87 and Circular [2022] No. 11 jointly issued by relevant government authorities, including the MOF and the STA, from April 1, 2019 to December 31, 2022, general VAT taxpayers in certain industries that meet certain criteria were allowed to claim an additional 10% or 15% input VAT, which were used to offset their VAT payables. Pursuant to Circular [2023] No. 1 jointly issued by the MOF and the STA in January 2023, such VAT policy was further extended to December 31, 2023 but the additional deduction was reduced to 5% or 10% respectively. Accordingly, we recognized such VAT deductions of $44 million in 2023. The VAT deductions were recorded as a reduction to the related expense item, primarily in Company restaurant expenses included in the Consolidated Statements of Income. Such preferential VAT policy was not extended in 2024.
Previous report
(a)
Previous report
(b)
Previous report
(c)
Previous report
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures(“ASU 2023-09”), requiring public business entities to provide additional information in the rate reconciliation and additional disclosures about income taxes paid. ASU 2023-09 is effective for the Company from January 1, 2025, with early adoption permitted. We are currently evaluating the impact the adoption of this standard may have on our financial statements.
Reworded paragraphs (38)
Previous wording
Yum China Holdings, Inc. is the largest restaurant company in China in terms of 2024 system sales, with $11.3 billion of revenues in 2024 and 16,395 restaurants as of year-end 2024. Our growing restaurant network consists of our flagship KFC and Pizza Hut brands, as well as emerging brands such as Lavazza, Huang Ji Huang, Little Sheep and Taco Bell. We have the exclusive right to operate and sublicense the KFC, Pizza Hut and, subject to achieving certain agreed-upon milestones, Taco Bell brands in China (excluding Hong Kong, Macau and Taiwan), and own the intellectual property of the Little Sheep and Huang Ji Huang concepts outright. We also established a joint venture with Lavazza Group, the world-renowned family-owned Italian coffee company, to explore and develop the Lavazza coffee concept in China. KFC was the first major global restaurant brand to enter China in 1987. With more than 35 years of operations, we have developed extensive operating experience in the China market. We have since grown to become the largest restaurant company in China in terms of 2024 system sales, with 16,395 restaurants covering over 2,200 cities primarily in China as of December 31, 2024. We believe that there are significant opportunities to further expand within China, and we intend to focus our efforts on increasing our geographic footprint in both existing and new cities.
Current wording
Yum China Holdings, Inc. is the largest restaurant company in China in terms of 2025 system sales, with $11.8 billion of revenues in 2025 and 18,101 restaurants as of year-end 2025. Our growing restaurant network consists of our flagship KFC and Pizza Hut brands, as well as emerging brands such as Lavazza, Huang Ji Huang, Little Sheep and Taco Bell. We have the exclusive right to operate and sublicense the KFC, Pizza Hut and, subject to the agreed terms, Taco Bell brands in China (excluding Hong Kong, Macau and Taiwan) and own the intellectual property of the Little Sheep and Huang Ji Huang concepts outright. We also established a joint venture with Lavazza Group, the world-renowned family-owned Italian coffee company, to explore and develop the Lavazza coffee concept in China. KFC was the first major global restaurant brand to enter China in 1987. With more than three decades of operations, we have developed extensive operating experience in the China market. We have since grown to become the largest restaurant company in China in terms of 2025 system sales, with 18,101 restaurants covering over 2,500 cities primarily in China as of December 31, 2025. We believe that there are significant opportunities to further expand within China, and we intend to focus our efforts on increasing our geographic footprint in both existing and new cities.
Previous wording
KFC is the leading and the largest quick-service restaurant (“QSR”) brand in China in terms of system sales. As of December 31, 2024, KFC operated 11,648 restaurants in over 2,200 cities across China. KFC primarily competes with western QSR brands in China, such as McDonald’s, Dicos and Burger King, among which we believe KFC had an approximate two-to-one lead over its nearest competitor in terms of store count as of the end of 2024.
Current wording
KFC is the leading and the largest quick-service restaurant (“QSR”) brand in China in terms of system sales. As of December 31, 2025, KFC operated 12,997 restaurants in over 2,500 cities across China.
Previous wording
Pizza Hut is the leading and the largest casual dining restaurant (“CDR”) brand in China in terms of system sales and number of restaurants. As of December 31, 2024, Pizza Hut operated 3,724 restaurants in over 800 cities. Measured by number of restaurants, we believe Pizza Hut had an approximate four-to-one lead over its nearest western CDR competitor in China as of the end of 2024.
Current wording
Pizza Hut is the leading and the largest casual dining restaurant (“CDR”) brand in China in terms of system sales and number of restaurants. As of December 31, 2025, Pizza Hut operated 4,168 restaurants in over 1,000 cities.
Previous wording
We have two reportable segments: KFC and Pizza Hut. Our non-reportable operating segments, including the operations of Lavazza, Huang Ji Huang, Little Sheep and Taco Bell, our delivery operating segment and our e-commerce business, are combined and referred to as All Other Segments, as these operating segments are insignificant both individually and in the aggregate. Additional details on our reportable operating segments are included in Note 16.
Current wording
We have two reportable segments: KFC and Pizza Hut. Our non-reportable operating segments, including the operations of Lavazza, Huang Ji Huang, Little Sheep, Taco Bell and our delivery operating segment, and for 2024, also including e-commerce segment, are combined and referred to as All Other Segments, as these operating segments are insignificant both individually and in the aggregate. Additional details on our reportable operating segments are included in Note 15.
Previous wording
In 2024, the Company’s total revenues increased 3%, or 5% excluding $200 million F/X impact, mainly attributable to 7% of net new unit contribution, partially offset by same-store sales decline resulting from lower ticket average offset by same-store transaction growth. Operating profit increased 5%, or 8% excluding $28 million F/X impact. Further excluding the lapping impact from the VAT deductions and temporary relief from landlords and government agencies received in prior year, the increase in Operating profit was primarily driven by the increase in Total revenues, operational efficiency improvement, favorable commodity prices, lower advertising expenses and lower performance-based compensation costs, partially offset by increased value-for-money offerings and wage inflation in the low single digits. Net income for 2024 increased 10%, or 13% excluding the impact of F/X, mainly due to the increase in Operating profit and increase in fair value of our investment in Meituan, partially offset by lower interest income and higher income tax expenses in line with the increase in pre-tax income.
Current wording
In 2025, the Company’s total revenues increased 4%, including or excluding the impact of F/X, mainly attributable to 3% of net new unit contribution and 1% same-store sales growth. Operating profit increased 11%, including or excluding the impact of F/X, primarily driven by the increase in Total revenues, favorable commodity prices and efficiency improvement from streamlined operations, partially offset by increased delivery cost associated with higher delivery sales mix in the current year and value-for-money offerings. Net income for 2025 increased 2%, including or excluding the impact of F/X, mainly due to the increase in Operating profit, partially offset by the decrease in fair value of our investment in Meituan, less interest income due to lower investment balance and interest rates and higher income tax expenses in line with the increase in pre-tax income.
Previous wording
KFC delivered resilient performance in 2024 with increases in both total revenues and core operating profit. With flexible store models, KFC is expanding through both equity and franchise stores. Franchisees enable us to expand into remote areas, lower-tier cities and strategic locations previously beyond our reach. KFC continued to focus on innovative products, creating abundant value for our customers, updating ingredients and tastes to meet Chinese consumers’ needs, as well as on introducing entry price point products. Our breakthrough business models, such as KCOFFEE Cafes, have enabled us to broaden our addressable market and capture new customer demand. KFC also continued its digital and delivery initiatives to enhance the customer experience. KFC’s loyalty program members exceeded 490 million at year-end 2024 and contributed approximately 65% of system sales at KFC in 2024. Delivery sales accounted for approximately 40% of Company sales at KFC in 2024 with store and city coverage of 86% and 98%, respectively, at the end of 2024.
Current wording
KFC delivered strong performance in 2025 with increases in both total revenues and core operating profit. With flexible store models, KFC is expanding through both equity and franchise stores. Franchisees enable us to expand into remote areas, lower-tier cities and strategic locations previously beyond our reach. KFC continued to focus on innovative products, creating abundant value for our customers, updating ingredients and tastes to meet Chinese consumers’ needs, as well as on introducing entry price point products. Our side-by-side modules, such as KCOFFEE Cafes and KPRO, have enabled us to broaden our addressable market and capture new customer demand. KFC also continued its digital and delivery initiatives to enhance customer experience. KFC’s loyalty program members exceeded 550 million at year-end 2025 and contributed approximately 61% of system sales at KFC in 2025. Delivery sales accounted for approximately 48% of Company sales at KFC in 2025 with store and city coverage of 92% and 98%, respectively, at the end of 2025.
Previous wording
In 2024, the increase in Company sales, excluding the impact of F/X, was primarily driven by net unit growth, partially offset by same-store sales decline. Restaurant profit increased, excluding the impact of F/X. Further excluding the lapping impact from the temporary relief from landlords and government agencies and VAT deductions received in prior year, the increase in Restaurant profit was primarily driven by the increase in Company sales, operational efficiency improvement, favorable commodity prices, lower performance-based compensation and lower advertising expenses, partially offset by increased value-for-money offerings and wage inflation in the low single digits.
Current wording
In 2025, the increase in Company sales, excluding the impact of F/X, was primarily driven by net unit growth and same-store sales growth. The increase in Restaurant profit, excluding the impact of F/X, was primarily driven by the increase in Company sales, favorable commodity prices and efficiency improvement from streamlined operations, partially offset by increased rider cost associated with higher delivery sales mix in the current year and value-for-money offerings.
Previous wording
Pizza Hut delivered strong performance in 2024 by accelerating store expansion with healthy returns and expanding profitability. We are transforming Pizza Hut into a more mass-market brand by widening price ranges, expanding the menu, and introducing breakthrough business models like Pizza Hut WOW. During 2024, we continued to focus on investing in value-for-money strategy, strengthening digital capabilities, fortifying delivery, expanding into new occasions and consumer segments and enhancing our asset portfolio to drive growth. Pizza Hut’s loyalty program members exceeded 180 million at year-end 2024 and contributed approximately 64% of system sales at Pizza Hut in 2024. Delivery sales accounted for approximately 39% of Company sales at Pizza Hut in 2024 with store and city coverage of 92% and 92%, respectively, at the end of 2024.
Current wording
Pizza Hut delivered strong performance in 2025 by accelerating store expansion with healthy returns and expanding profitability. We are transforming Pizza Hut into a more mass-market brand by widening price ranges, expanding the menu, and introducing new store models like Pizza Hut WOW. During 2025, we continued to focus on investing in value-for-money strategy, strengthening digital capabilities, fortifying delivery, expanding into new occasions and consumer segments and enhancing our asset portfolio to drive growth. Pizza Hut’s loyalty program members exceeded 210 million at year-end 2025 and contributed approximately 59% of system sales at Pizza Hut in 2025. Delivery sales accounted for approximately 47% of Company sales at Pizza Hut in 2025 with store and city coverage of 96% and 96%, respectively, at the end of 2025.
Previous wording
In 2024, the increase in Company sales, excluding the impact of F/X, was primarily driven by net unit growth, partially offset by same-store sales decline. Restaurant profit remained flat, excluding the impact of F/X. Further excluding the lapping impact from the temporary relief from landlords and government agencies and VAT deductions received in prior year, the increase in Restaurant profit was primarily driven by the increase in Company sales, favorable commodity prices, operational efficiency improvement, lower advertising expenses and lower performance-based compensation, partially offset by increased value-for-money offerings and wage inflation in the low single digits.
Current wording
In 2025, the increase in Company sales, excluding the impact of F/X, was primarily driven by net unit growth and same-store sales growth. The increase in Restaurant profit, excluding the impact of F/X, was primarily driven by the increase in Company sales, favorable commodity prices and efficiency improvement from streamlined operations, partially offset by value-for-money offerings and increased delivery cost associated with higher delivery sales mix in the current year.
Previous wording
In 2024, the increase in Operating profit, excluding the impact of F/X, was primarily driven by lower G&A expenses.
Current wording
In 2025, the increase in Operating profit, excluding the impact of F/X, was primarily driven by the increase in Restaurant profit.
Previous wording
All Other Segments reflects the results of Lavazza, Huang Ji Huang, Little Sheep and Taco Bell, our delivery operating segment and our e-commerce business.
Current wording
All Other Segments reflects the results of Lavazza, Huang Ji Huang, Little Sheep, Taco Bell and our delivery operating segment, and for 2024, also the e-commerce segment.
Previous wording
In 2024, the decrease in Operating loss, excluding the impact of F/X, was primarily driven by the decrease in Operating loss from certain emerging brands.
Current wording
In 2025, the improvement in Operating loss, excluding the impact of F/X, was primarily driven by the decrease in Operating loss from certain emerging brands.
Previous wording
In 2024, the decrease in Corporate G&A expenses, excluding the impact of F/X, was primarily driven by lower performance-based compensation costs.
Current wording
In 2025, the increase in Corporate G&A expenses, excluding the impact of F/X, was primarily driven by higher performance-based compensation costs.
Previous wording
In 2024, the decrease in interest income, excluding the impact of F/X, was primarily driven by lower investment balance during the year.
Current wording
In 2025, the decrease in interest income, excluding the impact of F/X, was primarily driven by lower interest rates and lower investment balance with cash used in return to shareholders.
Previous wording
The investment gain (loss) mainly relates to the change in fair value of our investment in Meituan Dianping (“Meituan”). See Note 3 for additional information.
Current wording
The investment (loss) gain mainly relates to the change in fair value of our investment in Meituan Dianping (“Meituan”). See Note 3 for additional information.
Previous wording
Our income tax provision primarily includes tax on our earnings generally at the Chinese statutory tax rate of 25% with certain Chinese subsidiaries qualified at preferential tax rates, withholding tax on planned or actual repatriation of earnings outside of China, Hong Kong profits tax, and U.S. corporate income tax, if any. Our effective tax rate was 26.7% and 26.9% in 2024 and 2023, respectively. The lower effective tax rate in 2024 compared with that in 2023 was primarily due to the impact from fair value change of our investment in Meituan.
Current wording
Our income tax provision primarily includes tax on our earnings generally at the Chinese statutory tax rate of 25% with certain Chinese subsidiaries qualified for preferential tax rates, withholding tax on planned or actual repatriation of earnings outside of China, Hong Kong profits tax, and U.S. corporate income tax, if any. Our effective tax rate was 27.2% and 26.7% in 2025 and 2024, respectively. The higher effective tax rate in 2025 compared with that in 2024 was primarily due to higher withholding tax associated with higher planned repatriation of earnings outside of China and the impact from fair value change of our investment in Meituan.
Previous wording
Effective May 1, 2016, a 6% output VAT replaced the 5% business tax (“BT”) previously applied to certain restaurant sales. Input VAT would be creditable to the aforementioned 6% output VAT. Our new retail business is generally subject to VAT rates at 9% or 13%. The latest VAT rates imposed on our purchase of materials and services included 13%, 9% and 6%, which were gradually changed from 17%, 13%, 11% and 6% since 2017. These rate changes impact our input VAT on all materials and certain services, mainly including construction, transportation and leasing. However, the impact on our operating results is not expected to be significant.
Current wording
Effective May 1, 2016, a 6% output VAT replaced the 5% business tax (“BT”) previously applied to certain restaurant sales. Input VAT would be creditable to the aforementioned 6% output VAT. Our new retail business is generally subject to VAT rates at 9% or 13%. The latest VAT rates imposed on our purchase of materials and services mainly included 13%, 9% and 6%, which were gradually changed from 17%, 13%, 11% and 6% since 2017. These rate changes impact our input VAT on all materials and certain services, mainly including construction, transportation and leasing. However, the impact on our operating results was insignificant.
Previous wording
On June 7, 2022, the Chinese Ministry of Finance ("MOF") and the STA jointly issued Circular [2022] No. 21, to extend full VAT credit refunds to more sectors and increase the frequency for accepting taxpayers’ applications. Beginning on July 1, 2022, entities engaged in providing catering services in China are allowed to apply for a lump sum refund of VAT assets accumulated prior to March 31, 2019. In addition, VAT assets accumulated after March 31, 2019 can be refunded on a monthly basis.
Current wording
In June 2022, the Chinese Ministry of Finance (“MOF”) and the STA jointly issued Announcement [2022] No. 21, to extend full VAT credit refunds to more sectors and increase the frequency for accepting taxpayers’ applications. Beginning on July 1, 2022, entities engaged in providing catering services in China are allowed to apply for a lump sum refund of VAT assets accumulated prior to March 31, 2019. In addition, VAT assets accumulated after March 31, 2019 can be refunded on a monthly basis. In August 2025, the MOF and the STA jointly issued Announcement [2025] No. 7, amending the VAT refund policy. Effective September 1, 2025, certain industries (including the catering sector) are only eligible for a partial refund of VAT assets, subject to additional criteria stipulated in the announcement.
Previous wording
As of December 31, 2024, current and non-current VAT assets of $117 million and $8 million and net VAT payable of $8 million were recorded in Prepaid expenses and other current assets, Other assets and Accounts payable and other current liabilities, respectively, on the Consolidated Balance Sheets.
Current wording
As of December 31, 2025, current VAT assets of $142 million, non-current VAT assets of $14 million and net VAT payable of $6 million were recorded in Prepaid expenses and other current assets, Other assets and Accounts payable and other current liabilities, respectively, on the Consolidated Balance Sheets.
Previous wording
We have been benefiting from the retail tax structure reform since it was implemented on May 1, 2016. However, the amount of our expected benefit from this VAT regime depends on a number of factors, some of which are outside of our control. The interpretation and application of the new VAT regime are not settled at some local governmental levels. On December 25, 2024, China enacted the prevailing VAT regulations into the VAT Law, which will come into effect on January 1, 2026. In terms of tax rates, the VAT Law maintains the existing rates of 13%, 9% and 6%. We will monitor the regulatory developments and evaluate the impact, if any, once the detailed implementation rules are released.
Current wording
We have been benefiting from the retail tax structure reform since it was implemented on May 1, 2016. However, the amount of our expected benefit from this VAT regime depends on a number of factors, some of which are outside of our control. The interpretation and application of the new VAT regime are not settled at some local governmental levels. On December 25, 2024, China enacted the VAT Law, which came into effect on January 1, 2026 along with its implementation rules. In terms of tax rates, the VAT Law maintains the existing standard rates of 13%, 9%, and 6%. The Company will continue to monitor regulatory developments and evaluate any potential impact on our financial statements as further guidance becomes available.
Previous wording
Net cash provided by operating activities was $1,419 million in 2024 as compared to $1,473 million in 2023. The decrease was primarily driven by working capital changes.
Current wording
Net cash provided by operating activities was $1,466 million in 2025 as compared to $1,419 million in 2024. The increase was primarily driven by the increase in Operating profit along with working capital changes.
Previous wording
Net cash used in investing activities was $178 million in 2024 as compared to $743 million in 2023. The decrease was mainly due to the net impact on cash flows resulting from purchases and maturities of short-term investments, and long-term bank deposits and notes.
Current wording
Net cash used in investing activities was $5 million in 2025 as compared to $178 million in 2024. The decrease was mainly due to the net impact on cash flows resulting from purchases and maturities of short-term investments, long-term bank deposits and notes, and the decrease in capital spending.
Previous wording
Net cash used in financing activities was $1,636 million in 2024 as compared to $716 million in 2023. The increase was primarily driven by the increase in share repurchases and repayment of short-term bank borrowings.
Current wording
Net cash used in financing activities was $1,689 million in 2025 as compared to $1,636 million in 2024. The increase was primarily driven by the increase of cash dividends paid on common stock, the decrease in the net proceeds from short-term bank borrowings, partially offset by the fluctuation in share repurchases.
Previous wording
Our ability to fund our future operations and capital needs will primarily depend on our ongoing ability to generate cash from operations. We believe our principal uses of cash in the future will be primarily to fund our operations and capital expenditures for accelerating store network expansion and store remodeling, to step up investments in digitalization, automation and logistics infrastructure, to provide returns to our stockholders, as well as to explore opportunities for investments that build and support our ecosystem or strategic acquisitions. We believe that our future cash from operations, together with our funds on hand and access to the capital markets, will provide adequate resources to fund these uses of cash, and that our existing cash, net cash from operations and credit facilities will be sufficient to fund our operations and anticipated capital expenditures for the next 12 months. We currently expect our fiscal year 2025 capital expenditures to be in the range of approximately $700 million to $800 million.
Current wording
Our ability to fund our future operations and capital needs will primarily depend on our ongoing ability to generate cash from operations. We believe our principal uses of cash in the future will be primarily to fund our operations and capital expenditures for accelerating store network expansion and store remodeling, to step up investments in digitalization, automation and logistics infrastructure, to provide returns to our stockholders, as well as to explore opportunities for investments that build and support our ecosystem or strategic acquisitions. We believe that our future cash from operations, together with our funds on hand and access to the capital markets, will provide adequate resources to fund these uses of cash, and that our existing cash, net cash from operations and credit facilities will be sufficient to fund our operations and anticipated capital expenditures for the next 12 months. We currently expect our fiscal year 2026 capital expenditures to be in the range of approximately $600 million to $700 million.
Previous wording
On November 4, 2024, our Board of Directors increased the share repurchase authorization by $1 billion to an aggregate of $4.4 billion. Yum China may repurchase shares under this program from time to time in the open market or, subject to applicable regulatory requirements, through privately negotiated transactions, block trades, accelerated share repurchase transactions and the use of Rule 10b5-1 trading plans. During the years ended December 31, 2024 and 2023, the Company repurchased 31.3 million shares of common stock for $1,242 million and 12.4 million shares of common stock for $617 million, respectively, under the repurchase program, excluding transaction costs and excise tax.
Current wording
On December 11, 2025, our Board of Directors increased the share repurchase authorization by $1 billion to an aggregate of $5.4 billion, of which $1.2 billion remained available as of December 31, 2025. Yum China may repurchase shares under this program from time to time in the open market or, subject to applicable regulatory requirements, through privately negotiated transactions, block trades, accelerated share repurchase transactions and the use of Rule 10b5-1 trading plans. During the years ended December 31, 2025 and 2024, the Company repurchased 24.7 million shares of common stock for $1,136 million and 31.3 million shares of common stock for $1,242 million, respectively, under the repurchase program, excluding transaction costs and excise tax.
Previous wording
The Company paid a cash dividend of $0.16 and $0.13 per share for each quarter of 2024 and 2023, respectively. Total cash dividends of $248 million and $216 million were paid to stockholders in 2024 and 2023, respectively.
Current wording
The Company paid a cash dividend of $0.24 and $0.16 per share for each quarter of 2025 and 2024, respectively. Total cash dividends of $353 million and $248 million were paid to stockholders in 2025 and 2024, respectively.
Previous wording
The Company plans to step up its capital returns to shareholders from $3 billion to $4.5 billion between 2024 to 2026, representing an increase of 50%. The Company returned $1.5 billion in share repurchases and dividends in 2024, and plans to return $3 billion to shareholders from the beginning of 2025 through the end of 2026. On February 5, 2025, the Board of Directors declared a 50% increase in the cash dividend, raising it to $0.24 per share, payable on March 27, 2025, to stockholders of record as of the close of business on March 6, 2025. The Company has entered into share repurchase agreements in the U.S. and Hong Kong for an aggregate repurchase amount of approximately $360 million through open market transactions for the first half of 2025. The share repurchase agreements include approximately $290 million under Rule 10b5-1 trading plans in the U.S. and approximately HK$550 million ($70 million) for a similar program in Hong Kong.
Current wording
The Company plans to return $1.5 billion to shareholders in 2026, adding to both $1.5 billion it delivered to shareholders in 2025 and 2024 in share repurchases and dividends. On February 4, 2026, the Board of Directors declared a 21% increase in the cash dividend, raising it to $0.29 per share, payable on March 25, 2026, to stockholders of record as of the close of business on March 4, 2026. The Company has entered into share repurchase agreements in the U.S. and Hong Kong for an aggregate repurchase amount of approximately $460 million through open market transactions for the first half of 2026. The share repurchase agreements include approximately $350 million under Rule 10b5-1 trading plans in the U.S. and approximately HK$880 million ($110 million) for a similar program in Hong Kong.
Previous wording
Our plan of capital returns to shareholders is based on current expectations, which may change based on market conditions, capital needs or otherwise. In addition, our ability to declare and pay any dividends on our stock may be restricted by our earnings available for distribution under applicable Chinese laws. The laws, rules and regulations applicable to our Chinese subsidiaries permit payments of dividends only out of their accumulated profits, if any, determined in accordance with applicable Chinese accounting standards and regulations. Under Chinese laws, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. As a result, our Chinese subsidiaries are restricted in their ability to transfer a portion of their net assets to us in the form of dividends. At the discretion of the board of directors, as an enterprise incorporated in China, each of our Chinese subsidiaries may allocate a portion of its after-tax profits based on Chinese accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends.
Current wording
Our plan of capital returns to shareholders is based on current expectations, which may change based on market conditions, capital needs or otherwise. Our ability to return capital to shareholders in the future is also subject to the factor described above under “Forward-Looking Statements.” In addition, our ability to declare and pay any dividends on our stock may be restricted by our earnings available for distribution under applicable Chinese laws. The laws, rules and regulations applicable to our Chinese subsidiaries permit payments of dividends only out of their accumulated profits, if any, determined in accordance with applicable Chinese accounting standards and regulations. Under Chinese laws, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund statutory surplus reserve, until the aggregate amount of such a fund reaches 50% of its registered capital. As a result, our Chinese subsidiaries are restricted in their ability to transfer a portion of their net assets to us in the form of dividends. At the discretion of the board of directors, as an enterprise incorporated in China, each of our Chinese subsidiaries may allocate a portion of its after-tax profits based on Chinese accounting standards to discretionary surplus reserve. These reserves are not distributable as cash dividends.
Previous wording
As of December 31, 2024, the Company had credit facilities of RMB8,790 million (approximately $1,204 million), comprised of onshore credit facilities in the aggregate amount of RMB6,600 million (approximately $904 million), offshore credit facilities in the aggregate amount of $100 million and a credit facility of $200 million that can be used for either onshore or offshore.
Current wording
As of December 31, 2025, the Company had credit facilities of RMB10,495 million (approximately $1,502 million), comprised of onshore credit facilities in the aggregate amount of RMB7,700 million (approximately $1,102 million), offshore credit facilities in the aggregate amount of $200 million and a credit facility of $200 million that can be used for either onshore or offshore.
Previous wording
The credit facilities had remaining terms ranging from less than one year to three years as of December 31, 2024. Our credit facilities mainly include term loans, overdrafts, letters of credit, banker’s acceptance notes and bank guarantees. The credit facilities in general bear interest based on the Loan Prime Rate (“LPR”) published by the National Interbank Funding Centre of the PRC, or Secured Overnight Financing Rate (“SOFR”) published by the Federal Reserve Bank of New York. Each credit facility contains a cross-default provision whereby our failure to make any payment on a principal amount from any credit facility will constitute a default on other credit facilities. Some of the credit facilities contain covenants limiting, among other things, certain additional indebtedness and liens, and certain other transactions specified in the respective agreements. As of December 31, 2024, we had outstanding short-term bank borrowings of RMB929 million (approximately $127 million), mainly to manage working capital at our operating subsidiaries. Such bank borrowings are due within one year from their issuance dates. As of December 31, 2024, we also had outstanding bank guarantees of RMB258 million (approximately $35 million) mainly to secure our lease payments to landlords for certain Company-owned restaurants. Our credit facilities were therefore reduced by outstanding short-term bank borrowings, adjusted for unamortized interest and collateral, and outstanding guarantees. As of December 31, 2024, the Company had unused credit facilities of approximately $1,041 million.
Current wording
The credit facilities had remaining terms ranging from less than one year to three years as of December 31, 2025. Our credit facilities mainly include term loans, overdrafts, letters of credit, banker’s acceptance notes and bank guarantees. The credit facilities in general bear interest based on the Loan Prime Rate (“LPR”) published by the National Interbank Funding Centre of the PRC, or Secured Overnight Financing Rate (“SOFR”) published by the Federal Reserve Bank of New York. Each credit facility contains a cross-default provision whereby our failure to make any payment on a principal amount from any credit facility will constitute a default on other credit facilities. Some of the credit facilities contain covenants limiting, among other things, certain additional indebtedness and liens, and certain other transactions specified in the respective agreements. As of December 31, 2025, we had outstanding short-term bank borrowings of RMB210 million (approximately $30 million), mainly to manage working capital at our operating subsidiaries. Such bank borrowings are due within one year from their issuance dates. As of December 31, 2025, we also had outstanding bank guarantees of RMB296 million (approximately $42 million) mainly to secure our lease payments to landlords for certain Company-owned restaurants, as well as outstanding bank guarantees of RMB360 million (approximately $52 million) to secure the balance of prepaid stored-value cards issued by the Company pursuant to regulatory requirements. Our credit facilities were therefore reduced by outstanding short-term bank borrowings, adjusted for unamortized interest and outstanding guarantees. As of December 31, 2025, the Company had unused credit facilities of approximately $1,378 million.
Previous wording
These obligations, which are shown on a nominal basis, relate primarily to over 13,800 Company-owned restaurants. See Note 10 for additional information.
Current wording
These obligations, which are shown on a nominal basis, relate primarily to approximately 15,000 Company-owned restaurants. See Note 9 for additional information.
Previous wording
We have not included in the table above approximately $23 million of liabilities for unrecognized tax benefits related to the uncertainty with regard to the deductibility of certain business expenses incurred as well as related accrued interest and penalties. These liabilities may increase or decrease over time as a result of tax examinations, and given the status of the examinations, we cannot reliably estimate the period of any cash settlement with the respective taxing authorities. These liabilities exclude amounts that are temporary in nature and for which we anticipate that over time there will be no net cash outflow.
Current wording
We have not included in the table above approximately $24 million of liabilities for unrecognized tax benefits related to the uncertainty with regard to the deductibility of certain business expenses incurred as well as related accrued interest and penalties. These liabilities may increase or decrease over time as a result of tax examinations, and given the status of the examinations, we cannot reliably estimate the period of any cash settlement with the respective taxing authorities. These liabilities exclude amounts that are temporary in nature and for which we anticipate that over time there will be no net cash outflow.
Previous wording
We evaluate indefinite-lived intangible assets for impairment on an annual basis or more often if an event occurs or circumstances change that indicates impairment might exist. We perform our annual test for impairment of our indefinite-lived intangible assets at the beginning of our fourth quarter. When we evaluate these assets for impairment, we have the option to first perform a qualitative assessment to determine whether an intangible asset group is impaired. If we believe, as a result of the qualitative assessment, that it is more likely than not that the fair value of the intangible asset group is less than its carrying amount, we will then perform a quantitative assessment. Fair value is an estimate of the price a willing buyer would pay for the intangible asset and is generally estimated by discounting the expected future after-tax cash flows associated with the intangible asset. The discount rate is our estimate of the required rate-of-return that a third-party buyer would expect to receive. These estimates are highly subjective, and our ability to achieve the forecasted cash is affected by factors such as changes in our operating performance and business strategies and changes in economic conditions. Our indefinite-lived intangible assets had a book value of $123 million and $127 million as of December 31, 2024 and 2023, respectively, representing two material indefinite-lived intangible assets, which are our Little Sheep and Huang Ji Huang trademarks.
Current wording
We evaluate indefinite-lived intangible assets for impairment on an annual basis or more often if an event occurs or circumstances change that indicates impairment might exist. We perform our annual test for impairment of our indefinite-lived intangible assets at the beginning of our fourth quarter. When we evaluate these assets for impairment, we have the option to first perform a qualitative assessment to determine whether an intangible asset group is impaired. If we believe, as a result of the qualitative assessment, that it is more likely than not that the fair value of the intangible asset group is less than its carrying amount, we will then perform a quantitative assessment. Fair value is an estimate of the price a willing buyer would pay for the intangible asset and is generally estimated by discounting the expected future after-tax cash flows associated with the intangible asset. The discount rate is our estimate of the required rate-of-return that a third-party buyer would expect to receive. These estimates are highly subjective, and our ability to achieve the forecasted cash is affected by factors such as changes in our operating performance and business strategies and changes in economic conditions. Our indefinite-lived intangible assets had a book value of $128 million and $123 million as of December 31, 2025 and 2024, respectively, representing two material indefinite-lived intangible assets, which are our Little Sheep and Huang Ji Huang trademarks.
Previous wording
Our goodwill of $1,880 million as of December 31, 2024 was related to the KFC, Pizza Hut, Huang Ji Huang and Lavazza reporting units. In the year ended December 31, 2024, we elected to perform a qualitative impairment assessment for each of our individual reporting units of KFC, Pizza Hut, Huang Ji Huang and Lavazza. Based on our qualitative assessment, the Company concluded that no changes in events or circumstances have occurred that indicated impairment may exist and it was more likely than not that the fair value of the reporting units exceeds their carrying amount and therefore no quantitative assessment was required. No impairment charge on goodwill was recorded in 2024 and 2023.
Current wording
Our goodwill of $1,963 million as of December 31, 2025 was related to the KFC, Pizza Hut, Huang Ji Huang and Lavazza reporting units. In the year ended December 31, 2025, we elected to perform a qualitative impairment assessment for each of our individual reporting units of KFC, Pizza Hut, Huang Ji Huang and Lavazza. Based on our qualitative assessment, the Company concluded that no changes in events or circumstances have occurred that indicated impairment may exist and it was more likely than not that the fair value of the reporting units exceeds their carrying amount and therefore no quantitative assessment was required. No impairment charge on goodwill was recorded in 2025 and 2024.
Previous wording
We estimated the fair value of stock options and SARs at the grant date using the Black-Scholes option-pricing model (“the BS model”). PSUs have market conditions that are based on the closing price of Yum China’s stock or relative total shareholder return against selected indices or the constituents of the indices measured over the performance period. The fair values of PSUs have been determined based on the outcome of a Monte-Carlo Simulation model (the “MCS model”). It should be noted that these pricing models require the input of highly subjective assumptions. Changes in the subjective input assumptions can materially affect the fair value estimate and, as a result, our operating profit and net income.
Current wording
We estimated the fair value of SARs at the grant date using the Black-Scholes option-pricing model (“the BS model”). PSUs have market conditions that are based on the closing price of Yum China’s stock or relative total shareholder return against selected indices or the constituents of the indices measured over the performance period. The fair values of PSUs have been determined based on the outcome of a Monte-Carlo Simulation model (the “MCS model”). It should be noted that these pricing models require the input of highly subjective assumptions. Changes in the subjective input assumptions can materially affect the fair value estimate and, as a result, our operating profit and net income.
Previous wording
We estimated the expected future volatility of the price of shares of Yum China common stock based on the historical volatility of the Company’s common stock and historical price volatility of the publicly traded shares of common stock of comparable companies in the same business as Yum China. The risk-free interest rate was based on the U.S. Treasury zero-coupon yield in effect with maturity terms equal to the expected term or performance measurement period of the awards. The dividend yield was estimated based on the Company’s dividend policy at the time of the grant. We use historical turnover data to estimate the expected forfeiture rate.
Current wording
We estimated the expected future volatility of the price of shares of Yum China common stock based on its historical volatility. The risk-free interest rate was based on the U.S. Treasury zero-coupon yield in effect with maturity terms equal to the expected term or performance measurement period of the awards. The dividend yield was estimated based on the Company’s dividend policy at the time of the grant. We use historical turnover data to estimate the expected forfeiture rate.
Previous wording
We are subject to reviews, examinations and audits by Chinese tax authorities, the IRS and other tax authorities with respect to income and non-income based taxes. We recognize the benefit of positions taken or expected to be taken in our tax returns when it is more likely than not that the position would be sustained upon examination by these tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. At December 31, 2024 and 2023, we had $19 million and $20 million, respectively, of unrecognized tax benefits related to the uncertainty with regard to the deductibility of certain business expenses incurred. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized may differ from the Company’s estimates. We evaluate unrecognized tax benefits, including interest and penalty thereon, on a quarterly basis to ensure that they have been appropriately adjusted for events, including change or developments with respect to tax audits, audit settlements and expiration of the statute of limitation, which may impact our ultimate payment for such exposures.
Current wording
We are subject to reviews, examinations and audits by Chinese tax authorities, the IRS and other tax authorities with respect to income and non-income based taxes. We recognize the benefit of positions taken or expected to be taken in our tax returns when it is more likely than not that the position would be sustained upon examination by these tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. At December 31, 2025 and 2024, we had $20 million and $19 million, respectively, of unrecognized tax benefits related to the uncertainty with regard to the deductibility of certain business expenses incurred. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized may differ from the Company’s estimates. We evaluate unrecognized tax benefits, including interest and penalty thereon, on a quarterly basis to ensure that they have been appropriately adjusted for events, including change or developments with respect to tax audits, audit settlements and expiration of the statute of limitation, which may impact our ultimate payment for such exposures.
Previous wording
We have investments in our foreign subsidiaries where the carrying values for financial reporting exceed the tax basis. Except for the planned but yet to be distributed earnings, we have not provided deferred tax on the portion of the excess that we believe is indefinitely reinvested, as we have the ability and intent to indefinitely postpone the basis differences from reversing with a tax consequence. The Company’s separation from YUM was intended to qualify as a tax-free reorganization for U.S. income tax purposes resulting in the excess of financial reporting basis over tax basis in our investment in the China business continuing to be indefinitely reinvested. The excess of financial reporting basis over tax basis as of December 31, 2017 was subject to the one-time transition tax under the Tax Act as a deemed repatriation of accumulated undistributed earnings from the foreign subsidiaries. However, we continue to believe that the portion of the excess of financial reporting basis over tax basis (including earnings and profits subject to the one-time transition tax) is indefinitely reinvested in our foreign subsidiaries for foreign withholding tax purposes. We estimate that our total temporary difference for which we have not provided foreign withholding taxes is approximately $3 billion at December 31, 2024. The foreign withholding tax rate on this amount is 5% or 10% depending on the manner of repatriation and the applicable tax treaties or tax arrangements.
Current wording
We have investments in our foreign subsidiaries where the carrying values for financial reporting exceed the tax basis. Except for the planned but yet to be distributed earnings, we have not provided deferred tax on the portion of the excess that we believe is indefinitely reinvested, as we have the ability and intent to indefinitely postpone the basis differences from reversing with a tax consequence. The Company’s separation from YUM was intended to qualify as a tax-free reorganization for U.S. income tax purposes resulting in the excess of financial reporting basis over tax basis in our investment in the China business continuing to be indefinitely reinvested. The excess of financial reporting basis over tax basis as of December 31, 2017 was subject to the one-time transition tax under the Tax Act as a deemed repatriation of accumulated undistributed earnings from the foreign subsidiaries. However, we continue to believe that the portion of the excess of financial reporting basis over tax basis (including earnings and profits subject to the one-time transition tax) is indefinitely reinvested in our foreign subsidiaries for foreign withholding tax purposes. We estimate that our total temporary difference for which we have not provided foreign withholding taxes is approximately $3 billion at December 31, 2025. The foreign withholding tax rate on this amount is 5% or 10% depending on the manner of repatriation, the applicable tax treaties or tax arrangements, as well as the interpretation in applying these treaties and arrangements.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Franchise Fees and Income/Revenues from Transactions with Franchisees
Current report — wording carried from elsewhere
In 2025, the increase in Franchise fees and income and Revenues from transactions with franchisees, excluding the impact of F/X, was primarily driven by acceleration of franchise store openings.