Welcome to Shanghai, and welcome to Yum China's Investor Day 2019. My name is Florence Lip, and I'm from the Investor Relations team. Let me walk you through the agenda of today. In a minute or so, our CEO, Joey Wat, will walk us through Yum China's innovation powering growth strategy. Our General Manager from KFC and Pizza Hut, Johnson Huang and Jeff Kuai, will go into more details of the growth levers of our core brands. It will be followed by our Chief Marketing Officer, Steven Li, and Chief Technology Officer, Leila Zhang, who will take us through how digital transform our business in a disruptive way. We'll have a coffee break. After the coffee break, Steven will come back on stage to talk about Yum China's coffee strategy.
We'll wrap up today's presentation by our CFO, Jacky Lo, talking about some finance update and how we grow with discipline. We'll have a Q&A session at the end of the presentation, open to the floor. This afternoon, for those who have signed up for site visit, we'll bring you to our latest innovation center, as well as seeing our latest stores in Shanghai, including KFC, Pizza Hut, Taco Bell, and COFFii & JOY. Tomorrow we will have another store visit. We will bring you to a little bit further away and see some of our other store formats for Pizza Hut and KFC. Before we get started, I need to get onto this page. I would like to remind you that our Investor Day presentations contain forward-looking statements, which are subject to future events and uncertainties.
Our actual results may differ materially from these forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statement in our presentation decks and the risk factor included in our filings with the SEC. Our management presentation this morning will be live webcast, and archived webcasts, and the presentations will be available on our IR website as well. Without further ado, let's get started.
China is rapidly growing. How can Yum China capitalize on this opportunity? Innovation powering growth. Going where no one has ever been means taking the road never traveled. Taking on challenges and sharing what we have learned to deliver better results. Disrupting ourselves in our quest for innovation and growth. Feeding our customers' curiosity. Always aiming high. Driven by our strong team of cutting-edge innovators. Sharing new creations with more customers every day. This innovative spirit runs through every single cup. Yum China, innovation powering growth.
Good morning. I hope this video wakes you up. Good morning.
Good morning.
Thank you. I hope you have a cup of our coffee, enjoy coffee with you already. If not, enjoy a cup of tea. It's equally good as well. Very warm welcome to all of you, our friends, our investors from over the world to our Yum China Investor Day 2019. Lovely to see many friends and lovely to have the opportunity to meet many friends later on the day. We are delighted to see you. I'm Joey Wat, for those who we have not met. I joined Yum China 2014, to lead KFC, and then I became the COO and joined the board 2017, and then I started to serve as the CEO of Yum China from March last year. When I joined Yum China, the most popular question I was asked was why? What excited me most to join?
The answer that time I gave was the RGM number 1 culture. Is the fact that as a retail company, we put our frontline staff, our restaurant general manager, as the most important group of people. I find it very exciting because a good company align our strategy with our frontline staff to work together. I'm very happy to say that and to report that after five years, I'm still equally excited and I still think this is one of the most amazing thing for Yum China, and we're going to continue to hold on to it very tightly. I'm excited today to showcase Yum China's promising future and a future that will continue to deliver superior value to shareholder over the long term. This morning, we'll take you through the key aspects of our business, the brand, the financial, the digital strategy, the coffee strategy.
At the end of this presentation, we'll have a question and answer session. I brought you a old picture. Some of you might know what this picture is. This is our first KFC store in Shanghai almost 30 years ago. This store was opened 1989, December. For some of you who know this picture, you will know that today, this Dongfeng Hotel has a new name called Waldorf Astoria, exactly where you are today. What a sweet coincidence. As you can see from the picture, in the last 30 years, a lot has changed in China, and so has Yum China. What has remained the same is our commitment to China market and our devotion to bringing the best food to our customers. Let's get started. The first thing I would like to do is to introduce our leadership team.
It's both an honor and a pleasure to lead this team. I find this a very unique team. On one hand, our team is very experienced in retail, in consumer industry. On the other hand, they are so young. They're almost as innovative, as young as some Silicon Valley 20-something in spirit. We all hope for, right? Today you will hear a presentation from Johnson and Jeff about the brand update, and then Steven Li and Leila on digital, and then coffee from Steven. Then, we'll have a financial update from our CFO, Jacky, as well. The entire leadership team is in the room today, and you can meet them during the coffee break and lunch. Can I ask my team to stand up just to say hello to our friends and investors from everywhere? Look for them during the coffee break. Thank you.
I would like to take a moment to recap our vision to be the world's most innovative pioneer in the restaurant industry. Apparently, the most important word on this page and in this statement is the word innovative. Why? I strongly believe that is the most important thing that we should look for in our statement, because only through innovation that we'll be able to maintain our leadership and create a business that will deliver sustainable return for our shareholder over long time. We are deeply committed to this vision. Today you will hear about many of the innovations that are powering our growth. We are one of the top 6 restaurant companies in the world in terms of market cap. Obviously, we are the biggest restaurant company in China.
From the first KFC store in Beijing back to 1987, we have grown to around 8,500 in 30 years. It has been quite a journey because effectively we have gone from a startup company to a large company. Right now we have a presence in 1,200 cities. You can see all the red dots. These are the cities where we have stores. The footprint extends right across China. From the north to the south, all the way to Hainan, Sanya, it was about 5,000 km. From the west to the east of Heilongjiang, is about 6,000 km. On top of all these stores, we were an early innovator in delivery as well. We offer delivery services already in 1,100 cities. All of these is supported and made possible by our best-in-class supply chain.
We have our own trucks, et cetera, but also have 20 logistics centers all over China to serve our stores. We have proven that we can continue to grow rapidly and grow profitably at scale. Today I would like to highlight just a few numbers that really demonstrate the progress that we have made over the past few years. With around 8,500 stores, as of right now, we have passed that number already. The number is larger than the next two biggest players combined. You will see the word nine. We have achieved nine consecutive quarters of system sales growth since spin-off. We have built, in the last few years, probably the largest database or CRM in our industry. We have, right now, 160 million CRM members in our KFC system and then 50 million for Pizza Hut.
Delivery is an important part of our sales and business. Between 2014 and now, the business has grown three times. The CAGR was about 37% over these three years, while the market is growing at about 20%. Our delivery business is growing ahead of the market. Last but not least, 48%, which is the operating profit growth from 2016 to 2018. We believe that we are on the right track. You might ask, that's where we are. What's next? The next is, I have no doubt that the best is still ahead of us. We believe that we have a long runway for growth, and we have the unique competitive advantages that can support us to achieve the growth ambition we are aiming for.
I would like to walk you through why Yum China has a long runway for growth and how we can deploy our capabilities at scale to capture this opportunity. First, it's simply the incredible growth opportunity that China can offer. By 2023, as you can see in the chart here, China's restaurant market size is going to surpass the U.S. by 2023. On top of that, the market remains fluid and evolving. We witnessed the incredible growth in delivery business. As you can see, the delivery business is growing twice as fast as the average market. Which highlights the importance of this delivery segment that we have been growing 3X since 2014. For Yum China, that's the huge headroom for further growth. Why?
You can see on this chart, our number of restaurants, both for KFC and Pizza Hut per million people in China is only 5.8. It's about less than a quarter of the density or penetration in the other mature market like the U.K. and U.S., et cetera. Even within Yum China, where we have presence in 1,200 cities, the density of stores is rather different between tier 1, tier 2, and then tier 6 cities. Even within these 1,200 cities, we still have headroom to increase the density of our restaurants in the lower tier cities and even first-tier city. Because in first-tier city right now we are slightly less than 20 stores per million people, which is still lower than the more developed market. If you come to the other side, what are these green spots for?
These green spot shows you the greenfield market that Yum China does not have any store in China. We're in 1,200 cities, but we still have all these markets that we have not opened a store in. China's urbanization and GDP per capita are growing. These opportunities will continue to come up. I would like to mention, which I will emphasize probably a few times in my presentation, is the beauty is, you can see in this map these greenfield opportunities over China and our supply chain capabilities are already there to support the new stores in any of these cities. The infrastructure is available, it's built. But growth is only part of the story. This is quite an important page, because it summarized the strategy, our strategy for profitable growth.
If growth is to be rewarding to our shareholders, it has to be profitable growth, which I believe all of you will agree. More defensibly profitable growth, and that is a matter of strategy. Our strategy is to build a platform of unmatched competitive advantages and capabilities that can be deployed at scale to deliver profitable growth. In China, we say, When something important, we say it three times. I'm gonna say it three times. For the most important message of my presentation here. In our business, advantage lies mainly in capabilities that can be deployed at large scale. Second time. In our business, advantages lies mainly in capabilities that can be deployed at large scale. One more time, finally. We all remember, in our business, advantage, which we worked very, very hard for over 30 years, lies mainly in capabilities that can deploy at large scale.
I feel I've finished my presentation already. What are the capabilities that are so important to us that we are so eager to share with you, that are so important to our future, to our past, and also to our future? This include our leading development and supply chain capabilities that we have built over the past 30 years, as well as our newly acquired digital delivery capabilities that enable us to respond to very rapidly changing consumer preferences. There are four competitive advantages I'm going to cover. There are 4 category. First, the unmatched operational capability in areas such as supply chain development and digital. Second, amazing talent and a unique culture. Third, high impact partnerships to create value. Fourth, but not the least, with disruptive innovation at our core. Let me walk you through some of the capability that I'm really excited about. First, development.
We have really strong development capabilities to say the least, that enable us to identify and secure the highest potential site, build and revitalize our stores. We remodeled 900+ stores last year, continuously look for ways to reduce the cost of building new stores. We have around 1,000 development and asset managers covering 32 provinces and 1,200 cities. On average, they have more than 10 years experience, which is really, really valuable. They remodeled our stores as well. Over the past years, they have brought down the total cost of building new store by as much as 30%. If we take the equipment cost away, because equipment cost, we can move them around, the sunk cost of building a new store has decreased even more than 30%.
With that effort, obviously, we are able to increase our shareholder return of the capital that we invest in new stores. You can see the result of such capability by looking our store expansion in the last three years. In the past three years, the number of new stores has grown about 20% per year, and it outpaced the market. As of 2018, we opened two stores per day. In total, we opened 819 stores. Our second advantage is our supply chain. Supplying around 8,500 stores in such vast geography with fresh food is a huge commitment. With 20 logistic center and a comprehensive network of trucks, our supply chain is equipped to supply all our current portfolio as well as the 1,000 greenfield cities that we are tracking. You can see, can supply to Lhasa in Tibet.
We have worked out the system, how to do it. One of the most impressive feature of our supply chain is our cold chain storage and infrastructure. Using technology, we monitor our trucks in terms of real-time location, but also real-time temperature 24/7. This safeguards our quality and food safety, both are very, very dear to our hearts and very important to our business. In addition to the greater control and oversight of supply chain, our infrastructure is also much more cost effective, which is important, as we estimate our logistic cost is roughly 50% lower than the industry average. Other than the two capabilities that we've built over 30 years, this capability, we have worked very hard to acquire in the last few years, digital.
Digital has completely transformed the restaurant industry over the past five years, and I'm very proud to say that Yum China has been leading the charge. With the very large membership database in the restaurant industry and our analytical capabilities, we are able to generate valuable consumer insight and operation insight that inform everything we do. For example, with the mobile order, pre-order, customer can order the breakfast before they leave their house and then pick up the food close to their office. It's not a problem. For 600 of our stores, customer can use face recognition to pay for the food without even using their mobile phone, just use your face. On the operation side, with a smile, that's always good. On the operation side, we are able to use our AI forecasting to optimize store stock and reduce wastage.
Other than the three capabilities, come back to the core of our capabilities is the innovation. Innovation is in our DNA. Yum China has been innovating nonstop in the last 30 some years. That's the way that we survive and we lead in this ever-changing market. The innovation has brought us closer to our customers and enabling us to improve every aspect of our business. I have few examples here to share with you how do we innovate at all levels in every way that we could. First, start with product. This is the Xiang Gu Ji single bone chicken. What is different about this particular product is we use a new technology, innovative technology, to assess different parts of the chicken. You would think that after 30 some years selling fried chicken, we know every part of chicken.
No, there's still something that we can learn. This is a new part of chicken that we never sold before, and we turn it into a very compelling value offer, and customers love it. This becomes one of the best-performing products in our Crazy Thursday promotion and enable us to drive significant traffic, even better. Suppliers benefit from it too. It's a very good win-win-win situation. Supplier, customer, and us, we all win together. What's not to like? Second example, digital. This is a snapshot of our AI order recommendation. The traditional menu ordering is one size fits all. We have one menu, and it's good for all the customers. The thing about our business right now is very different. Almost 50% of our customer orders are via digital, either through delivery or their mobile phone pre-order.
Actually, the exact number is 46, 47, but it's very close to 50 now. That allow us to have a very exciting one-to-one interaction with our customers. Now the menu pop up is tailored, is custom-made for that particular customer because we know the customer already. In particular, we also have very high percentage of the sales are from our members, almost half too. That allow us to improve our service to our customer. Of course, we also take the chance to do some recommendation for customer, maybe to buy one thing or two more. It is AI recommendation. When we did the trial, about 10% of customers actually accept the recommendation, which increased the ticket size of the order, which is good. It's still early day, but we are excited about it.
Obviously, this year, we'll continue to optimize the algorithm this year and to improve our understanding about how to do it even better. Another example, store model. Over the past year, we have talked about how we are embracing the smaller asset, faster service, and delivery-friendly models to ensure that our portfolio is optimized for our customers' preferences. Like this hub and spoke model is the latest iteration of the principle. At Pizza Hut, we are right now developing much smaller delivery store. They are connected to the original dine-in restaurants. How does it work? Why this is a viable option? Just imagine if we have a trade zone, right? Like this, rectangular shape. In Pizza Hut, we have maybe four stores, five store in the middle, mainly serving the customer in city center.
With the hub and spoke model, we can leverage our retail store that are already there to build some smaller store around, and that smaller store would allow us to be closer to customer and cover the trade zone better. How does customer benefit? The distance, the delivery time is shorter, and the food is better because when food is hot, it's better. As simple as that. Make sense? Yeah. This is our hub and spoke model. Why this is important, because with this hub and spoke model, it will allow us to leverage our current 2,200 dine-in restaurant and drive growth. Our current 2,200 dine-in restaurant, they are hubs that we have built already. The next step, we just need to build a spoke. I've talked about the competitive advantages, that include the operational capability and innovation.
One of the most exciting point about our operational capabilities is that they are brand agnostic. We can leverage all these capability to accelerate the growth of our smaller brands. Last year, we expand the store count of all of our smaller brands, the first time since 2013. For example, Little Sheep alone had over 70 new builds for 2018. In a coffee strategy session later on, Steven will give us an example of how we make use of our existing resources to incubate a new brand. One of the competitive advantage that I mentioned earlier is partnership, high-impact partnership. We have done it for many years and will continue to do it, is we always look to leverage our scale and expertise to forming high-impact partnership with our industry-leading players. Such partnership will allow us to enter new geographies and areas faster and more efficiently.
Also push us to innovate the way that we do business, to understand our customers. Past example, what are the past example? You know it already. We deliver. We work with the high-speed railway company in China. We deliver all the way to high speed railway to your seat, our KFC food. We also work closely with the delivery platforms such as Meituan-Ele.me to grow our own delivery business. Today, I'm very pleased to announce that we have entered two new partnerships that will provide us with further opportunities to grow our business. We have signed a strategic agreement with both Sinopec Sales Company and CNPC, [Foreign language], to collaborate in developing the gas station retail business.
By bringing together best-in-class assets and our know-how, this partnership will create huge value for partners and enable us to build brand presence and reach a previously underserved segment of the market. As always, we'll take a disciplined and prudent approach to learn and verify the business model. We're targeting to open 100 store plus in the coming three years in the gas station channel to make sure we got the right business model. Once we get the right business model, as you know about our capability in replicating the business model, that's the next phase, but we need to get it right first. Now, let me turn to our people. Our employees and our culture are the core of our success. Our policies are centered on the idea of care, fair, and pride, which all of our employees love.
Another principle is our commitment to the RGM number 1, which I mentioned at the very beginning. We have rolled out many initiatives to make sure that our RGMs have the support they need to lead our business on the front line. Nothing is more important than that. For example, we offer family insurance program to our RGMs, to our restaurant general managers. Right now, more than 5,000+ RGMs' families are covered, including their spouse, their children, and the most exciting part of the health insurance coverage is their parents' health insurance coverage until their parents reach 75 years old. This is probably one of the most, I won't say popular, but most valued and treasured benefit of our RGMs, if you're familiar with the health insurance situation in China. Gender equality is also important to us.
We are very happy that we are recognized for being one of the three Chinese company in the Bloomberg Gender-Equality Index 2019, because we have 60% staff are women, nearly half of our executive team are female. We are also recognized for being the top employer for 2019, we'll continue to try our best to create a diversity program for all the young talents in Yum China. Last but not the least, we care about the people who live and work in the communities in which we operate. We see every opportunity to give back to society whenever we could. These are just very few example about what did we do or what have we been doing.
One Yum donation, we have been doing that for over 11 years, we have donated more than $30 million in the last decade to help kids in poor areas, focusing on nutrition meals. The Grow Local initiative, that is very Pizza Hut, we just started it, the focus is to help farmers on best practice truffle farming. We also leverage our supply chain to help farmers bring their truffle to Chinese consumers, of course, through Pizza Hut restaurants. Truffle pizza. Last but not least, I would like to highlight the KFC Angel restaurants. We have over 22 restaurants over China right now in which we provide jobs. More than half of the full-time staff will have some kind of special needs, probably hearing, et cetera.
We modify equipment, we truly believe in the full potential of our staff with or without special needs. We even are celebrating the first manager who has special needs after a few years' effort. While these initiatives, of course, they don't contribute to the bottom line, they're incredibly important to us and underline the impact that Yum China has. In closing, I hope you can see from this overview of how Yum China is uniquely positioned to grow and continue to have a track record of success. We have wonderful leading position in China, hard-to-match capability, disruptive innovation, high-impact partnership, a unique culture and talents, a long runway for growth. I'm incredibly excited to be leading this team, I'm committed, together with my team, to excellence and to creating shareholder value.
Through the rest of the day, you will see a lot more examples of how we are leveraging innovation, powering our growth. With that, I would like to now hand over to Johnson to talk about KFC in China. Thank you very much.
Thank you, Joey. She shared with us how Yum China built up a solid foundation for our brand to grow in scale. Hello, everyone, and good morning. My name is Johnson Huang. I am the General Manager of KFC since 2017. I joined Yum China in 2006 in IT function and became Chief Information Officer in 2013. Additionally, Marketing Supporting Officer by 2014. With my IT and inside marketing background, together, we developed the IT infrastructure and digital innovations that you will learn later today that are driving our business growth as well as our operation efficiency and our experience for our customers. I am very excited today that I am here to share with you KFC and how do we plan to grow this brand. Today, I would like to leave you with three key takeaways from my presentation.
Firstly, KFC is the number one QSR in China in terms of number of stores and revenue. Last year, we added more than 550 restaurants in a year. It is driven by our strong supply chain capability and development team. We are not satisfied where we are now. We still have more than 800 million customers we can serve and more than 1,000 cities that we haven't entered yet. With our digital delivery and menu information, we can grow further. Lastly, we evolve not only our menu and our marketing, but also operations to improve our menu operation efficiency and drive our margin continually as well as to increase our customer service. Before I go into this detail, I would like to share with you a highlight reel of KFC operation. Please.
I hope you are as excited as I am to see KFC assets and our menu innovation, productivity, as well as our long-term growth. How do we take our number one position today to grow into the future? Menu innovation for all segments and day parts, integrated marketing for seamless online and offline experience, plus our asset growth and modernization for expanding our footprint and stay connected with our customers. Lastly is the operation excellence that is driving our product quality and service experience in an efficient way. Menu innovation is key to our positive same-store sales growth. We have seen that our customers want exciting new products to keep coming back to our restaurants. They are willing to pay more for perceived interesting and tasty food. Last year, we introduced around 60 new products across all our day parts and categories.
Refreshing the menu through limited-time offers are key to driving the frequency and also our ticket average. For core products, the key is to make it accessible to all consumers with a high degree of perceived value. Chicken leadership is driven by new and innovative products at a competitive price point. Our ability to execute value is strong. With our supply chain and our procurement power that we are able to source better innovative products at a good price. There is a large addressable market for premium offers at higher price points. Top-tier markets are less sensitive, the right product allows better price and better revenue. Our signature wing bucket at the [$6] together with our core product that drives a base traffic into our store.
The ability to build a high degree of perceived value with strong products makes us the number one provider of chicken to Chinese consumers. I would like to highlight one signature product for our LTO, the crayfish and burgers product you see on the right-hand side. We launched in January last year and this year. It performed extremely well. There are a few reasons why this product drove sales. Firstly, crayfish is a popular product among young consumers. We combine it with our signature chicken and add its distinctive flavor. Secondly, with a RMB 20 price point, customer perceives that has a good value, and it sells so well across all city tiers. Furthermore, crayfish in China typically is served in summer, and we made crayfish available in winter, chilled, and in a burger form, a truly innovative product.
KFC is unique being able to do this with our supply chain capability to get us the volume and quality of season product and our operation team executed flawlessly. Our core product innovation across all of the data and category, certainly including our breakfast. KFC was the first fully adopt and localized menu with congee and dough stick in early stage. In the past 2 years, we introduced rice roll and also Chinese pancake, so-called dabing, with abundant filling inside. That was well received by our customers and increased our ticket average. KFC's density of store offers convenience to our breakfast customer. Together with our food innovation, digital, and delivery convenience, we drive our breakfast day part to grow faster than overall our business. Beginning in August last year, we started our Crazy Thursday, and it is a series of value promotion on Thursday to drive traffic into our store.
Disruptive value innovation require a strong relationship with supplier. The product, as Joey mentioned earlier, one bone chicken, is a cut of meat between breast and shoulder. Working with our supply chain, we were able to secure this meat, previously unused, at a volume. The right price point that drive profitability. 6 pieces of this chicken sell at RMB 1.5, 15 for RMB 3]. That is disruptive price. That to drive people in from street. Our competitor will struggle to profitably beat this price point. Even at this price point, we drove incremental operational profit dollars. Crazy Thursday transaction was all incremental, with no sales transfer across the date. We see large potential in premium burger category, particular over RMB 20. We have launched premium price product such as Beef Wrap, Cheese Stick, and Hokkaido Creamers. Our customer respond with buzz and excitement, driving both traffic and ticket average.
This year, we will launch I Love Messy Burger series, and we believe this premium series of burger will have the potential to meaningful to increase our sales. KFC leverage technology to unlock our growth, and we have developed a whole ecosystem revolving around our customers from our app and join our memberships. We evolve to provide our customer for digital ordering, delivery, prepaid membership, and loyalty program, incorporate with our e-commerce. Our CMO, Steven, will elaborate more shortly. More importantly, we will close the loop shortly. As you may already be aware, we are going to launch Yum China Pay so that we are knowing our customer better and we can serve them better. The KFC store you will visit in the next 2 day is fundamentally different from what we used to growing up all in the other country.
The store picture here you see used to have six point-of-sale system, but now has only two. This change has been driven by increasing digital ordering, including pre-order, mobile pre-order, and delivery order. Digital orders allows customer spend more time on menu and our offers, so that increase customer experience and ticket average as well as our productivity. With the 85% of digital payment, we can get this information and knowing our customer better and serve them better, Does increase our sales. The 160 million KFC members who are driving nearly 50% of our sales, and they spend more money than non-member on average. The target members increase sales and traffic consistently. Cost to reach these members are lower, speed of promotion are faster. As our app download increase, we see the better engagement will build our brand loyalty.
Our prepaid membership privilege program is similar to Amazon Prime. For example, a RMB 3 delivery members that allows our customer to have up to two free delivery every day for the 30 days. Delivery users more than doubled their frequency in a month for their purchase and resulting in positive revenue and OP dollars per member sold. Through CRM analytics, we know that 25% of our delivery members have never ordered breakfast, and this is opportunity for us to do cross-sales. Even if we know them are our chicken lover, we can do some other sales and promotion. All of this represents a huge opportunity for data drive our upsales and cross-sales. Improving the frequency and ticket average. We offer delivery in more than 1,100 city in China.
We also have a fleet with our dedicated delivery riders wear our KFC uniform to provide quality food and service to customers. The network expansion has the major growth driver in the past four years, with a 40% sales compound average growth rate. To offer a unique privilege and engagement on our own platform, app, which allowed us to deliver our own channel traffic and maintain our margin, which is critical to us. We are now the number one in terms of our own platform delivery sales. Improvement in delivery quality will drive future growth. KFC's sales and store density means we have the network to reach our customer quickly. We investment in our delivery technology and operations to reduce the fulfillment time. We therefore can serve hot food, hotter food faster, leading to better customer experience and increased frequencies. Dynamic delivery unlock further efficiencies.
Currently, each order and each rider are allocated to a single store. We will now move from the single store-based delivery to a trade zone-based allocation. Meaning more efficient order and more efficient rider allocation. Less canceled order, less delayed order means a more happier customer and more sales. The significant competitive advantage. As we are entering into a new market, our delivery service will more profitable and sooner. Coffee is a large opportunity for growth. KFC today already sell 90 millions cup coffee in a year, one of the largest in China. We invest in upgrade our coffee packaging with a industrial leading leak-proof lid to ensure better customer experience. We also leverage our digital and delivery to double our coffee delivery revenue in last year. Our CRM information showed that only 15% of our KFC member have ever had coffee.
This is also a huge potential that we can target. In last year, we utilized the information to do cross-sales, driving over 10 million new coffee users to our KFC. Many information through a new product, like a carbonated coffee or flavored coffee, is also a key to contribute our sales growth. The huge upside for coffee is they are more profitable and growing fast than overall food category. We are focused on profitable growth based on a highly disciplined model to build our model for both new city and existing market. In 2018, we speed up our new build in the right area and also considering the macro and competitive factors. We have unmatched ability to develop new store with our nationwide store development capability, supply chain, and operation team.
That with also with a deep connection and relationship with major developers. Our hit rate and IR maintain very strong and healthy. We upgrade our brand through remodel. This means our store are young and relevant to our target customers. Through remodel, we are able to put latest technological upgrades to improve efficiency. Over 5,000 store, we have split our order and pickup counter and which is driven by a digital ordering. This split counter reduce the front of house congestion, increase delivery time and customer satisfaction. Also, the size of our store are getting smaller as we improve the back of house layout. Remodel allows us to continue realize the efficiencies.
As we enter multiple geography and city type, we evolve our store model to better suit the trade zone economics, like in the lower tier city. The igniting model allowed us to use smaller footprint with a more variables orientation to penetrate and expand our restaurant more and better, and that has positive impact our same store in the past few years. In a community store, increased density of our store per city through delivery, as well as smaller footprint. In 2018, we roll out our new format of dessert kiosk, which drove significantly result. This new kiosk provide us to enter a new trade zone and higher end mall, also added same store sales. Kiosk also a important outlet for us to do our menu innovation, such as our new ice cream, our waffle, and the other new desserts to increase our ticket average.
We have now only 1,100 kiosk on our 59 restaurants. Roll out and network expansion will be continuous to contribute our same store sales in this year and beyond. Transportation store are a key strategic asset. They generate an outsized profit and revenue to us. They are also offering an interesting source of growth. Three years ago, we did not do delivery in these hubs, but now we are the largest QSR offering high-speed rail delivery to U.S. cities. There are another 800 million customer we can serve and over 1,000 city we can enter. Our supply chain development and operational capability will help us to penetrate these additional markets. Our pipeline continue to grow as new city developed and as our new store format become suitable for an existing city. As Joey mentioned, KFC China was still far fewer restaurant per capita than the other developed countries.
For China, KFC as a whole, we have only four restaurant per million persons. Our density will increase significantly as GDP per capita grows, with Tier 1 over three times than the national. They highlight the huge incremental potential as GDP continue to grow. To manage the 6,000 restaurants, we rely on over 300,000 of frontline staff. We have a young and digitally savvy staff, a pool of potential managers to help us grow our business. The culture of innovation directly from restaurant are also a critical points, and commitment to invest in technology to reduce non-customer-facing hours. Our manager are committed to store level P&L day in and day out. Through this commitment to store level profitability, our staff has helped to drive 15% increase in productivity over the past five year.
Much of this is rely on technology as we invest in reporting automation, in tracking customer experience, and increase employee workflows. Looking forward, we will deploy technology into improve labor efficiency, inventory management, as well as store level reporting. All of our technology is in-house proprietary and continual upgrade driving our productivity. Our KFC business today is strong. We are the clear number 1 market leader. We have strong supply chain development capability that will help us to grow further in terms of sales and asset objectives. We will continue to innovate new product and develop and utilize technology to improve our business and our service to customers. Our workforce is passionate about our brand with a culture of innovation. Our digital and delivery will help us to provide a massive platform to tailor our offering and introduce more and better customer to KFC.
Innovation and technology is at heart of KFC growth. We have a huge growth potential in front of us. We are more than prepared to execute that. I look forward to having you together with us to the long runway growth. Thank you. Next, let me introduce Jeff, the GM of Pizza Hut. Thank you, Jeff.
All right. Thank you, Johnson. Good morning, everyone. Welcome to Shanghai. I hope you all enjoy the presentation from Johnson. My name is Jeff Kuai, General Manager of Pizza Hut. I'm thrilled to have this opportunity to share with you the progress we have made in the past 12 months and our plan for 2019. Before I get started, I would like to have a brief introduction of myself. I've been with Yum China for 16 years. I spent first eight years in IT. Then I moved to Yum U.S. digital innovation team, and moving back in 2011 and start to lead our call center and e-commerce team for both our KFC and Pizza Hut delivery business. Then I went to Chicago Booth in 2013 and returned to head our Pizza Hut Home Service brand in early 2015.
In late 2017, I had honor to lead one of the greatest restaurant brand in the world, Pizza Hut, and work with a very strong team to revitalize the brand. For those who are not very familiar with the Pizza Hut story in China, I would like to share with you a short video to showcase the brand and some of the exciting developments we have made over the last year. Please.
Come on, girl. Let's go. I won't crowd you, baby. I won't rock the boat. I make promise, baby. I give you what you want. I'm fine, baby. I'm just over here. I won't make this loud. Make it down instead. We all there. Everybody here want to be your friend. Count it, we fired up. Everybody in here fired up. We fired up. Fired up. Woo. Fired up. Hey, hey. Fired up.
All right. Hope you all enjoyed the video. Today, there are three key points I want to leave you with. First, Pizza Hut is the unrivaled leader in China West casual dining market. The strengths that have made Pizza Hut the largest player in China are very hard for others to replicate. Second, 2018 was a transition year for the brand. We have already witnessed initial success from our revitalization strategy. Finally, building on our improved core capability, we have a solid plan to scale up the initial success and revitalize the brand. China West casual dining market is estimated to be more than RMB 250 billion in 2018, with around 20% of growth over the past several years, showing incredible growth potential for us. Pizza Hut is the leader at scale in this market with four times more store than the next largest player in China.
Pizza Hut is positioned as a family-friendly, modern West casual dining concept with great value for money. Our core competitive edge lie in a range of areas. First of all, we have a very strong and well-rounded product portfolio. We are not only the number one pizza player in this market, but also dominant in steak and appetizer categories. As a matter of fact, pizza as a category only accounts for about 30% of our sales. Our strong product portfolio give us the chance to seize the opportunity in multiple categories and give our customer the variety of choice they want. Second, the food and experience we provide are very attractive to family customers, which is a large consumer group in fast-casual dining market and also in growing China middle class.
And third, we have more than 2,200 stores opening in high traffic locations, with more than 240 million customer visits every year. Over the past several years, we built on our offline strengths with digital and delivery, accumulating over 50 million members and building our own strong delivery footprint in more than 500 cities. Last but not least, we have a world-class operation team with almost 30 years' experience and know-how to run this business and to continue to dominate this market. Our strong product portfolio, our deep understanding of family customer, our strong offline presence, digital and delivery capabilities, and world-class operation team are the foundation of Pizza Hut's strategic position in China, and the backbone that allow us to be the number one player in this market. We are very confident that we can continue to grow this brand by reinforce its strengths.
As we shared with you before, we believe we can win this competitive market and build the core capability needed for long-term growth by focusing on these four strategic pillars. To fix our fundamental, to improve our food service and value perception, to enhance our digital capability and continue our offline to online transformation, to grow our delivery, to capture the fast-growing segment of the market, to upgrade asset, refine our business model, to capture opportunity in different locations, improving our new build success rate, and return on investment. Next, I will highlight some initial success in 2018 and our priority in 2019 for each of the four strategic pillars. First and foremost, food innovation. Over the last year, we have systematically improved our menu through simplification, testing new products through LTO, and moving the most popular one onto our permanent menu.
For more than 20 years, we use the same two dough type, our pan pizza and our stuffed crust. But just in the past 12 months, we successfully launched two new dough types to capture the trend of thin pizza. We also created a lot of buzz-worthy on-trend food in other categories. Product like almond rice, crayfish pasta received very good customer feedback during the limited time window, and now become one of the signature product on our permanent menu. Last year, for the first time, we work with Forbidden City. During the Lunar Festival period. We launched Pizza Hut and Forbidden City mooncake, and the result is very encouraging. We also upgraded our signature matcha cake and tiramisu. The new matcha cake was even ranked as top five best matcha cake in Shanghai by customers on Dazhong Dianping, an application like Yelp.
We also upgraded our ice cream category and introduced a lot of buzz-worthy, attractive new flavors like this salty egg yolk ice cream and durian ice cream. Last week, we launched traditional Chinese sweet rice wine ice cream and matcha ice cream. They taste very good. You guys should try it during your store visit. Our customer actually love our creativity on ice cream very much. This is our new matcha series. Look premium, tastes very good. Also, received a lot of positive feedback after launch. Last spring, we launched a new menu and received quite a lot of good feedback from customer, as well as a lift in ticket average. We are on track to roll out and improve the 2019 new menu next Monday, March 18th.
The new menu will be 15% smaller than our current one, and 55% of the items on the new menu will have been upgraded or will be a new introductions. We have brought some new menu to the meetings, feel free to flip through it during the coffee break. I think someone already got the new menu. Feel free to pass the new menu. In 2019, we'll continue to focus on innovating in our signature categories. We'll provide more attractive pizza selections to strengthen our pizza expert image. We'll enhance our leadership in steaks through our scale, cost advantage, and deep know-how in this category. We will continue to upgrade our desserts and appetizers. For value, we have listened to the feedback from our customer and been very focused on improving value for money perception.
We adopt a multilayer value campaign, including everyday low disruptive value, high-low pricing in a coordinated sequence. Our strategy is working very well. The value for money score from the customer survey has been steadily improved over the last year. Earlier this June, after extensive pilot test, we launched this disruptive value campaign, Scream Wednesday, and have already seen a positive result. We are continuing to build this Scream Wednesday platform and introduce new products with disruptive value in 2019. For service in 2019, we focused on operation efficiency improvement. As you know, our efforts start to pay off second half of last year. Our labor productivity improved significantly without compromising our service quality. In 2019, we'll continue to focus on enhanced core operation capability by improving production and service speed and enhancing frontline crew team.
On top of that, we're focused on building, we call this memorable signature service. The signature service could be a sweet surprise along with your check or remembering customer ordering habit empowered by in-store CRM system. For digital, we have been focusing on recruiting new users from offline and online channels, improving engagement with our members so that we can communicate with our customer more effectively. Fortunately, there's a huge amount that we can learn from KFC's digital initiative, and we have made great progress on this front over the last year. By the end of 2018, our total member increased by more than 40% to over 50 million. Our cumulative download increased by 1.7 times to 60 million. It's very exciting to see the sales coming from our members reached 45% last year.
We also expanded our function on our own app and launched tableside ordering to improve in-store digital experience. In 2019, we plan to systematically enhance our digital outreach in different part of customer life cycle. Our priority is to scale up annual family privilege program. The program that can be purchased for RMB 90 to get a gift, birthday coupon, and dozens of coupon privilege that family customer can enjoy. We have already seen great potential with new customer acquisition and as well as traffic uplift from this initiative. Besides that, we are focused on building the ordering system for carryout business, which is still relevant more today, but we believe has great potential to grow in the future. Clearly, delivery is one of the most important growth driver for Pizza Hut. In 2018, we focused on two fronts to drive this business.
First is to simplify our operation and strengthen our core operation capabilities. We have already completed integration between Pizza Hut Home Service and Pizza Hut dine-in delivery to improve the speed and service level. We simplified our menu, reduced the number of items by 18%. Lastly, we took back 100% last mile delivery team from aggregator late last year. Now serving all of our customers with dedicated Pizza Hut delivery riders. This initiative allows us to improve overall customer satisfaction and increase rider availability, especially during the peak hours. We have already seen our overall delivery customer overall satisfaction rate increased significantly since this initiative. We believe all these factors are laying a solid foundation for us to have a high growth rate for delivery business. Our second priority is to attract more new customers to the brand and retain existing customers.
Offers like half day hot price on Monday, Tuesday, Wednesday, RMB 39, everyday RMB 1 offer, have proven to be very effective in driving delivery sales. We also launched a lite app for delivery on WeChat last July, we have been making continuous effort to improve online digital experience. Our conversion rate on brand app for delivery business has improved by 10% last year. We also tested delivery privilege program, as Johnson just mentioned about, and see a very promising result. The frequency of delivery privileged users increased significantly. We'll continue to roll out this program in 2019. This year, our priority is to further strengthen our core capability in delivery. We will upgrade our delivery branding with upgraded packaging and uniforms.
We will adopt a full-scale delivery calendar with different layers of initiative, we will improve customer engagement with the privilege program, we will enhance our operation capability with better support for delivery. We actually plan to build a specialized delivery room for better food quality and fast speed in all the dining stores with delivery business. By the end of this February, we have already completed the construction of more than 1,200 stores in plan. We are actually very excited that our customers can get even hotter food and better service from us going forward. I cannot emphasize more, for casual dining business, the importance of store ambience. In 2018, we developed our new facade and interior design and optimized our remodel investment for different store types to be more cost-effective. Following the small store remodeling, we received encouraging customer feedback as well as positive sales uplift.
We're actually very excited that we have quite a lot of stores that can be renovated. These are some of the new design for our stores. We have remodeled 225 stores in 2018, we will take even more aggressive steps on asset upgrade and remodel 500 stores this year. We target to refurbish all of our assets by the end of 2021 and bring our average store age to less than three years. We are also making continuous effort to be more cost-effective in our assets, making them smaller and more efficient over the years. We have developed the solution and the plan to reduce the kitchen size by a further 30% in 2019 without sacrificing capacity and efficiency. We have also piloted a hub-spoke model, as Joey just mentioned, to adapt to the evolving customer needs.
We're leveraging our dining asset as a hub to build spoke stores to improve the coverage, of service speed, and also at a much lower capital investment. This is a very exciting new concept. We are closely monitoring the result before rolling out more widely. As I mentioned, with all the efforts I mentioned above, we are pleased to see the customer perception to our brand has improved, from previously, my reliable backup boyfriend. You know, it's warm, it's reliable, but it's not your first choice. To now, obviously it's not in line with the image of the brand GM, right? Thank you. Now, our customer actually think we are an energetic and determined young man and try really hard to survive. Customer tell us that Pizza Hut is really, have finished a lot of things. It's not like the Pizza Hut before.
Which is good to know. Actually, our customer are recognizing our efforts on rejuvenating our brand, and we are also pleased to see same-store traffic recovery during the fourth quarter last year . In the first two months of this year, we continue to see encouraged growth in same-store traffic. To recap, 2018 was a transition year for the brand, laying a solid foundation for the revitalization of the brand. We have made substantial improvement in our menu. We rebuild our value for money perception. We refocused on our family user who are our core customer, who made a substantial improvement on digital capability. We brought back 100% of last mile delivery riders for better delivery quality. We developed a new asset design and accelerated asset upgrade.
We are pleased, we are encouraged by the same-store traffic recovery during the first quarter last year, and improvement in the customer perception. In 2019, we plan to further scale up and optimize the initiative that have shown positive result in 2018. Our focus area will continue to revolve around our four strategic growth pillars, to fix fundamental, to roll out disruptive value campaign, drive digital and delivery, and aggressively upgrade our asset. As you can see, there's a lot going on at Pizza Hut. There's a lot to be excited about. We are very confident that we have the right strategy and great innovation to revitalize the brand and have a long-term sustainable growth at Pizza Hut. Thank you. Next, I would like to invite Steven Li, our Chief Marketing Officer, to share with you our digital transformation journey. Thank you, Jeff.
Good morning. Well, I see we're all awake when we see this handsome and energetic General Manager of Pizza Hut, right? Who tried really hard to survive, and he did survive. I'm Steven Li, and I'm the Chief Marketing Officer of Yum China. I joined Yum China in 2011. I have worked on KFC, Little Sheep, Pizza Hut, most of brand before being appointed Chief Marketing Officer in 2017. I have more than 20 years of building brand experience, including 19 years in China, two years in the U.S. I will be leading marketing and digital team during the transformational journey of building up our membership base and digital capabilities. Today, I'll give you an overview of our digital assets and how we are monetizing these assets to grow the core brand and to build new brands.
Later, I will invite Leila Zhang, our Chief Technology Officer, to talk about impact on operational efficiency, as well as the technology behind the whole system. For those of you who have followed Yum China for a while, you will know that Yum China was an early adopter of digital delivery. Today, I will give you a full picture of the powerful and invaluable digital ecosystem we have created, an overview of how this is impacting our business today, and how our disruptive innovations extended runway for growth in China. This slide shows a few of the key milestones on our journey of digital. We launched our very first super app for KFC in 2015, and we started accepting Alipay digital payment at same year. We were the first chain store to do so.
We now also accept WeChat Pay and Yum China Pay, partnership with UnionPay. We launched KFC Digital Membership program in 2016 nationally, and for Pizza Hut program in 2017. In less than three years, or perhaps less than two years for Pizza Hut, we have achieved a big amount. We have over 160 million members and 50 million members respectively for KFC and Pizza Hut. We believe we have the world's largest restaurant membership program. Later in the presentation, I will explain how we are using this membership to build our growth. Yum China was a pioneer in digital, but also in delivery business. We started our delivery, our own-channel back to 2007, and long before aggregator entered market in about 2014. Since then, we have been practically work with aggregators, but we also believe that it is critical to maintain our capability in this area.
It will be central for our future growth. We made a significant improvement in our delivery dispatching system in 2018. Later in the presentation, we'll introduce our next evolution of our system, which we call Delivery 3.0. This initiative has gained significant tractions across our business. There are few stats I would like to share with you to demonstrate the growth. Last quarter, 46% of our sales came through digital ordering, which including mobile pre-order, kiosk order for KFC, a table side order for Pizza Hut, as well as delivery orders through our super app and aggregator apps. 86% of sales last quarter was digital payment. With our massive membership base, nearly half our sales are now from our members.
We have transitioned 60% of our marketing budget to digital, as this significantly increased the effectiveness of our marketing, which again, I will share with you more details later. By now, we have created a very powerful digital ecosystem for the entire customer journey across various of dine-in locations. From before they enter store to ordering, receiving delivery, subscription for privilege program, or the earning and spending loyalty points. There are some new items, which we just added over the last six months. The first one is table side ordering for Pizza Hut, as well as online queuing. These two are essential feature for casual dining service. We recently launched Yum China Pay, which created another convenient digital payment option for our customers by partnering with UnionPay. We have ended our privilege program, which targets specific customer group to drive loyalty and to increase the frequency.
We believe we are very few companies in China having this complete digital ecosystem, rather than one or two digital features. In addition to our ecosystem, we have also integrated this ecosystem with the third-party internet open ecosystem, such as Tencent, Meituan, Alibaba, and NetEase apps, from mobile payment to in-store entertainment, to calibration of marketing programs. For example, we partner with Koubei and Tmall, in the past Double 11 and Double 12 days, we successfully drove online traffic to our physical stores. The big portion of the traffic came from new customers, online customers. Another example is last summer, we launched a co-branded privilege program with iQiyi, a leading video platform in China. The program was loved by students and young customers during the summer holiday period. How do we do all of this? It is underpinned by four very powerful digital assets.
The first is our super app and the lite app or apps within apps. So far, we already have nearly 90 million downloads of our super apps. Between our super app and lite app, we have over 60 million monthly active users. We are like an internet company. Our unique data bag, which is our second big digital asset, contains the transaction history of our members. We already have 180 million unique member IDs as Yum China total. We know our customer preference, and we know their purchase behavior, such as where, when, and what do they buy. We have two payment options specific for Yum China. WeGo, our redeeming loyalty points, and Yum China Pay. Finally, we have our super powerful delivery platform, which we will talk with more details later. The super app is at the core of our ecosystem.
Now I would like to show you a very short video to demonstrate our KFC super app. Video, please. Pizza Hut leveraged the framework of KFC, in 2017, we were able to launch Pizza Hut super app fairly quickly, and later on, we still tailored the super app for Pizza Hut to meet casual dining customer needs, such as adding features of table-side ordering and online queueing. Now, I have shown you all the great assets that we have developed. I just want to show you how we actually monetize this asset. I believe this is very important for us. Through targeted marketing and personal offers and through customer engagement, we have been tracking our customer value for Yum China total system. Let me use a term, ARPU, annual revenue per user. We have tracked the annual revenue per user.
We have increased the annual revenue per active members by nearly two times for both Pizza Hut and KFC between 2016 and 2018. Notably, we increased spending, not only at restaurants they are members of, but also at other restaurants in Yum China portfolio. I am just showing you the KFC and Pizza Hut data. It also applies to our smaller brands. This gave us huge and unique advantage to nurturing and growing our smaller brands by leveraging the established capability from big brands. Our privilege program is something I am really excited about because we have seen a really positive response from our customers in big scale. Let us look at the privilege program, which is our most popular, the delivery privilege program, which is the most popular privilege program we have so far.
Our customer pays up-front fee of $2.5 for free delivery for a month. We have sold almost 2 million subscriptions at KFC and 1 million for Pizza Hut. These now account for 32% and 17% of our two brand transaction respectively. We also observe a significant increase in monthly frequency and monthly spending. We are also seeing passive growth from our other privilege programs such as coffee and breakfast privilege for KFC and the family privilege at Pizza Hut. Well, we'll not stop here. Once the most valuable opportunity from our membership program is ability to cross-sell dayparts . For example, a member may have previously bought lunch at KFC. Through very targeted marketing, personalized offer, special content to engage the customer, we encourage them to try a new delivery service or a new category such as breakfast, delivery, coffee.
Just look at our members' delivery participation. In 2017, 15% of our member participate in delivery service, and in 2018, it increased to 31%. This gave us huge opportunity to sustainably increase our transaction in future. We have seen material increase in the proportion of members that now utilize additional departments and see significant further opportunity to expand this. Remember, we got 160 million members. Well beyond China's core advantage is our ability to seamlessly integrate our online and offline stores with an AI satellite model. Over last few years, we have built virtual stores on most popular portals. For example, our membership service store at Tmall, Koubei, and our KFC group buy store at WeChat Lite app. We utilize our virtual store to drive traffic to our physical stores.
One example which I just shared is our Double 11 and Double 12 sales. From our interaction with our members and customers, we use their custom preference and we feedback this innovation to the personalized offers on the virtual store. A customer will increase their visit frequency to the physical store after they buy those personalized offer. We definitely see the traffic from online to offline, and we definitely see the customer preference, data and habits is fully integrated when we design the whole program. This will be a continued effort as a sustainable growth driver for us. Okay, one fun example here is our Pocket KFC stores at WeChat Lite apps. This is a great example of social marketing and social commerce. KFC is here for 30 years. Many of us want to own a KFC, but it's just not easy.
Today, just scanning this barcode, you can create your own KFC with your own decoration and the different look of yourself are KFC Pocket stores. You can promote your store to your friends and encourage to buy KFC through your stores, and you got reward with your friends buying your stuff. Even your friend might not buy in your store every day, but we have some social activity, like give you a candy every day to have some interaction with you. Please show a short video to understand how it works. Well, we launched this just 4 months ago, November last year, and now we already have 1.5 million Pocket Store opened by our customers or small business owners with peak daily active user of 2 million. It's really easy.
I hope to see all of you signing up to create your KFC Pocket Store today. Many people say that KFC or Yum China is a tech company happened to selling fried chicken and pizza. That's probably one great example. We are building digital capability not just to drive sales. We also want to improve our customer experience at retail store to let them have fun. This is my favorite example, QQ Music. Through our QQ Music portal on super app, our customer can choose their favorite song and change the background music of that store. Now you can enjoy your favorite fried chicken while listening to your favorite song. This is a very popular feature. Every month, especially for young customers, every month, we have over 800,000 songs being requested.
We have more than 100 celebrity or young artists working with us to provide the content. It's probably become a bigger offline billboard music something. The ecosystem we have built has allowed us to move to a data-driven intelligent marketing. We said that we have transitioned our marketing budget to 60% digital versus 40% two years ago in 2016. Because of that, we're able to track awareness, media interest, and last month behaviors. In part of our data pack, we have our membership system, where we can understand membership behavior and their visiting frequency. We have customer tag to understand our customer better, serve them better. Combining these two sets together, this increased the effectiveness of our marketing spending. As Joey mentioned in her opening, we have recently rolled out nationally our AI menu recommendation in KFC for mobile orders.
We're really excited about this powerful tool, although it just launched in a short period of time. Now we understand our customers. We can offer a personalized menu before they see the regular menu. A featured product which they most likely to be interested in. For example, the bucket for Amy, who is a family member, or the snack platter for Jack, who is a college student. After that menu, we then come up with additional personalized at discounted trade-up opportunity, such as dessert, drink, and side items. The initial results have shown a positive impact on our ticket average and customer satisfaction. With more data analytics capabilities and machine learning of Yum China, we will continue to fine-tune these powerful tools. This is very encouraging for us to drive substantial growth from our digital assets. Now, I will have Post here.
Let me invite Leila Zhang, our Chief Technology Officer to stage to discuss about operational impact as well as the technology behind the whole system. Leila.
Thank you, Steven. Thank you. Call Yum China as a technical company. I'm Chief Technology Officer of Yum China. I joined Yum in 1996. I have worked building ERP system, store system, logistics system, and data bank for all brands before I'm being appointed as Chief Technology Officer. Today, I help team build the data and AI capability to support business growth and help brands to control operation costs. Today, I am pleased to discuss with you the real impact our digital initiatives are having on our operation beyond just more effective marketing, like Steven said a lot about marketing. Let's start with digital ordering. Like Joey and Johnson mentioned, we have moved the majority of our KFCs to incorporating digital ordering in store layout. This is Metro City store in Shanghai, next to our office. In 2015, it had six point of sales machine on the counter.
All of order come from cashier and 100% of the orders we need made by cashier. Today, 75% of orders come from digital ordering, including kiosk and mobile pre-order. POS have been reduced only to two. Space and labor have been relocated from cashier to assembly area and service. In turn, customer service time have improved, leading to improved customer experience and higher sales. We are also driving operational efficiency with improved forecasting. We are able to use data to better forecast sales at very detailed level through AI forecasting. We have finished the 1st stage roll-out of this project. Such as we are incorporating data such as sales, promotion, holiday, weather, and location.
The accuracy of the forecast for transaction count and product unit sold improved by a material amount. This has a meaningful impact on operation by reducing food wastage, lowering the risk of product shortage, and improving labor scheduling. Let's review and look forward delivery capability. Delivery backs up a key growth engine for Yum China, as you well know. Start from 10 years ago, we implemented Delivery 1.0 version to provide a delivery-capable restaurant, which had exclusive riders to provide a restaurant-based delivery. Later on, we upgraded the version to 2.0 to build automatical dispatch capability. Today, we now have the Delivery 3.0, which is tri-zone based and multi-brand support capability. This means we have the capability to shift rider across restaurants within the tri-zone to balance demand and maximize efficiency. What are the key benefit of this system? We are able to increase delivery transaction per ride per hour.
Second, we have improved delivery times to consumers, a key driver of customer satisfaction. We also reduce the number of orders that are rejected due to capacity limits. All of these benefits are key enablers to drive delivery business growth in future. In additional to having significant efficiency benefits for KFC and Pizza Hut, this system also bring a huge advantage for our smaller brand, helping them grow and achieve great scale. Finally, we are able to go one step further and create disruptive retail innovation, a fully automated ice cream store. You can get ice cream from robot Colonel Sanders directly. We will go and see it in Suzhou tomorrow, and here is a video of it for action. Our digital and AI strategy encompasses our entire business. Today, we talk a lot about the first two part, intelligent marketing and intelligent store.
We also utilize our digital assets on back office functions include intelligent services, such as we provide customer service and intelligent enterprise, ranging from risk management, supply chain management, to site finding. Combined, this drives efficiencies through the business, lower costs, while improve sales quality and customer satisfaction. All of the system we talk about in the morning about the digital and the delivery solution is empowered by Yum Digital Operating System, an enormous data bank and the latest technology development. We had 1.4 billion transactions in our system in 2018, and we handled 300 million customers. We take data security very seriously. Across our system, we have invested heavily in different levels to protect our data. We will improve the digital system capability and make it more reliable as we fully understand how important it is to future business growth.
To conclude, Yum China is innovating to power growth. We have one of world's largest restaurant membership, a powerful digital ecosystem, and industry-leading data and AI capabilities. We have very clear priority in 2019 to continue monetize all of these great assets. That's all. Thank you.
Thank you. Thank you, Leila. I'm sure there were lots of information to digest. Our presentations, just to remind you, will be available on the IR website. Some of them are already available for those presented. We now have coffee break. Please enjoy our coffee and some food served outside. We also have exhibition outside, which we encourage you to take a look. Please come back here at 11:40. Just a kind reminder that this is an extended coffee break because we won't be serving another lunch after the session afterward. Right after Q&A, we will bring you to our latest innovation center and the stores, which you will get the food sampling there. Make sure you feed yourself during this coffee break. Please come back at 11:40. Thank you.
Hello, welcome back. I hope you've experienced some of really innovative foods over the break. It's just perfect that after the coffee break, we talk about our ambitions in coffee. Perhaps some of you are holding a cup of COFFii & JOY. I'm sure that will keep you awake during my presentation. Why are we talking about coffee? Coffee is a large, growing, and attractive market in China. Today, I will share you some statistics to show you the incredible potential of this market. You may be sitting there enjoying COFFii & JOY, but thinking, "Sure, it has got big potential, but what does that have to do with Yum China? How can we win in this highly competitive segment?" We are already a leader in coffee market in China.
In 2018 alone, Yum China sold over 90 million cups of freshly ground coffee. made us to a leadership coffee retail last year. By leveraging our existing and already heavily invested physical and digital assets, we have planned to meaningfully grow our coffee business. Yum China mission is to be a coffee powerhouse, adding to our dominant position in QSR sector and casual dining sector. Now, let's talk about the market. The coffee market in China is big and growing rapidly. In 2013, the total coffee shop sales was about $2.3 billion. 4 years later, the market had nearly doubled. Looking forward, it is expected to continue grow by double digit and it will be over $7 billion by 2022.
Despite the rapid growth in the market, China coffee market is still very small compared to U.S. or other markets in Asia, like South Korea. In China, annual coffee consumption per capita is only a little bit more than 1% of the U.S. and South Korea. There is less than one coffee shop per 100,000 people in China, compared to eight in U.S. and nearly 30 in Korea. As our experience from KFC over the last 30 years, the penetration can increase rapidly towards developed countries' level because the consumers' preference changes and income rise in China. The Chinese market also has huge upgrade potential because today only about 16% of coffee consumption in China is from freshly ground coffee . The rest is from instant coffee. Globally, this percentage are reversed given the improved taste offered by the freshly ground coffee . What has been driving this growth?
First is from demand side. There is a generation shift with our rising post-80 and post-90. They have growing disposable income. They have increased willingness to spend, as these customers are much more likely to choose coffee over tea. Initially, this drove a shift towards entry-level coffee. As this market has continued to mature, specialty coffee has been introduced primarily in tier 1 and tier 2 cities. Finally, coffee drinking in China is still considered cool and trendy. Coffee consumption is highly related to a social status. That creates aspirational demand for coffee in China. Secondly, on the supply side. As demand grew significantly, coffee shop store network is expanding from tier 1 and 2 cities to tier 2 and tier 3 cities.
When the range of innovative coffee format is introduced to the market in China from convenience store offering okay quality coffee but with very attractive price, to ultra-convenient based model, which very much focused on coffee delivery. The specialty coffee shop who are providing a premium quality, and much better coffee shop ambience with a higher price point. There is now a bigger range of coffee products that cater to different needs. From sweet and milky coffee for the beginner, for new drinkers, to the roasted coffee for more seasoned and sophisticated users. Probably it's enough for the market. Now let's talk about how Yum China is doing. We have already significantly invested in coffee offline assets. Since the company decided to move to freshly ground coffee in 2015. Our coffee b eans are 100 Arabica from premium quality coffee regions.
Yum China now uses 1,600 tons of domestically roasted coffee beans every year. Why does that matter? Because the freshness and the flavor of the coffee are heavily impacted by time from roasting to serving. By roasting domestically, the supply chain is shortened, and in our case, it's about perfect one month from roasting bean to cups. The flavor is improved and the quality is improved. Finally, we have already invested in high quality and imported coffee machine. Since 2015, we now have over 8,000 European imported coffee machines over the China. We have heavily invested, and it's opportunity for us to monetize those assets. Besides existing assets and supply chain capabilities, in coffee. We have other significant advantage stemming from Yum China's capability and ecosystem.
We already have presence in 1,200 cities with very bold local store development team and the knowledge and our supply chain necessary to supply these stores. We mentioned 180 million unique Yum China members, and among them, 30 million are already trying and consuming coffee from Yum China system. We can market directly to our members and coffee drinkers. In Yum China system, including KFC Pizza Hut, we already have 6,000 locations or stores across 1,100 cities providing delivery service. It is relatively easy for us to build coffee delivery network. All of this puts Yum China in an ideal position to rapidly grow our coffee in a cost-effective manner, and to ensure a fast service to our customer anywhere. We are very proud of where we are and what we have gotten so far.
With our best-in-class capability of local store development and supply chain and our digital ecosystem and our massive membership program, however, we are not stopping here. Our vision is to become coffee powerhouse in China. What exactly do I mean by building a coffee powerhouse? Sorry. Our strategy is twofold. First, we'll grow K COFFEE business aggressively. This has been expanding with double-digit rates since 2015. Second, we are going to grow our standalone coffee concept, which we introduced second half of last year, COFFii & JOY. These offers are targeting very different segment in this market. K COFFEE targets value for money and mass market. COFFii & JOY targets handcrafted, high quality, and what we call friendly price. Let's dive into these two brands with more details. K COFFEE is all about super convenience. It's everywhere. Very attractive price, really good value for money.
It targets mass audience, the quality is pretty good because it's freshly grounded, we're using high quality beans as well. As I mentioned at beginning, we already sold 90 million cups last year. It already generated RMB 1 billion revenue last year. We offer K COFFEE at all our KFC locations. That's almost 5,900 stores. This number will continue to grow because KFC will continue to expand footprint in China. For K COFFEE, we have been growing for many years, and we really got a successful winning recipe. The first is our beverage food innovation. We have innovated around our product format and flavor. I think one of the great examples is sparkling coffee. We are very first few. We have other significant advantage stemming from Yum China's capability and ecosystem.
We already have presence in 1,200 cities with very bold local store development team and the knowledge and our supply chain necessary to supply these stores. We mentioned 180 million unique Yum China members, and among them, 30 million are already trying and consuming coffee from Yum China system. We can market directly to our members and coffee drinkers. In Yum China system, including KFC Pizza Hut, we already have 6,000 locations or store across 1,100 cities providing delivery service. It is relatively easy for us to build coffee delivery network. All of this puts Yum China in an ideal position to rapidly grow our coffee in a cost-effective manner, and to ensure a fast service to our customer anywhere. We are very proud of where we are and what we have gotten so far.
With our best-in-class capability of local store development and supply chain and our digital ecosystem and our massive membership program, however, we are not stopping here. Our vision is to become coffee powerhouse in China. What exactly do I mean by building a coffee powerhouse? Sorry. Our strategy is twofold. First, we'll grow K Coffee business aggressively. This has been expand with double-digit rates since 2015. Second, we are going to grow our standalone coffee concept, which we introduced second half of last year, COFFii & JOY . These offers are targeting very different segment in this market. K Coffee targets value for money and mass market. COFFii & JOY targets handcrafted, high quality, and what we call friendly price. Let's dive into these two brand with more details. K Coffee is all about super convenience. It's everywhere. Very attractive price, really good value for money.
It target mass audience, and the quality is pretty good because it's freshly grounded, and we're using high quality beans as well. As I mentioned at beginning, we already sold 90 million cups last year. It already generated RMB 1 billion revenue last year. We offer K Coffee at all our KFC location. That's almost 5,900 stores. This number will continue to grow because KFC will continue expand footprint in China. For K Coffee, we have been growing for many years, and we really got a successful winning recipe. The first is our beverage food innovation. We have innovated around our product format and flavor. I think one of the great example is sparkling coffee. We are very first few. COFFii & JOY is positioned as handcrafted and a trendy specialty coffee brand. Targeting young professionals, it offers higher end of quality coffee at a friendly price.
I should highlight, however, it's at early days and we are further testing and refining our model before we decide to go back to a large scale rollout. Our strategy for COFFii & JOY is very much focused. First, handcraft is core of this brand. From bean selection to handcraft technique, every step is carefully designed to brew the best of coffee. Of course, we also provide Italian espresso-related products such as latte and cappuccino for the efficient convenience. They are always good quality and carefully tested formula with different milk and coffee beans. We also offer innovative coffee-inspired drinks such as dirty coffee and pouring coffee. We are creating a great food menu to accompany our super quality coffee across different departments. We know the convenience is very important for coffee customers, so we are focused on improving our delivery coverage by leveraging Yum China's capability and network.
We have got a new brand in China. How can we leverage our Yum China capability to fast-track brand development to speed up the brand life cycle in this digital age, digital time? We leverage many of Yum China's capabilities. The first is our new store opening. We carefully select our first location as we test different models in different tier cities at different trade zone. Secondly, we have got a great innovation capabilities in Yum China. We have been able to develop some really distinctive product to create buzzworthy and to create strong word of mouth. The picture here, we call it dirty coffee. It's a single shot of espresso with cold milk and some chocolate powder. It got appealing flavor and Instagrammable look for young customers.
It become popular and create huge buzz for this new brand. Finally, but naturally, we decided to leverage our membership program to do our targeting and the marketing, versus a traditional way. We will be able to leverage our massive membership base to acquire agile customers for our new brand. We have leveraged our ecosystem to spread those word of mouths and great product to more customers. It's very different marketing model. How does COFFii & JOY store look like? Well, we are testing and refining our model. We have got three models in the market to test. The first is our concept store. Large store, which about 150 sq m. It is a full service coffee shop with very distant seating arrangement. We got our compact store. They are smaller. It is about 40 to 80 sq m.
Very much focused on takeaway and delivery service, but with some nice seating still. Finally, our express store. It is a really flexible model. It is about 20 to 30 sq m and primarily designed for takeaway and delivery at any location, anywhere. As you can see from all of the pictures here, our interior design is modern and funky. It's very different from others. It has very unique art decoration, stylish hand wall art, and well-designed furniture. We partner with young artists in China to create some unique elements of decor. Our music is very different. We use all the electronic music, which is much more energetic and perhaps sometimes it feels noisy. Lots of energy in our coffee shop. In short, we are creating the environment for our target audience, which let them feel inspired and trendy. It's early days.
Again, it's early days for COFFii & JOY brand. We have already accomplished some within just seven months. We have opened 13 stores across four cities in east of China. It's very important to mention that we have brought aboard and trained 127 baristas already. They are our key assets, the core of our business, to enable us to expand and test different model in different city tier, different trade zone quickly. Everything we have achieved has been enabled by the core capability we can leverage from across Yum China groups. Well, we are also working on a number of other opportunities, or different opportunities. There is a model I just shared with you. I want to highlight just one today. We have come up with an interesting value proposition. We call it the boutique in-office coffee shop. What does that mean?
Well, very recently, we have created a partnership with WeWork. This is a case study of WeWork. WeWork is one of probably the world's largest co-working space providers. I'm sure all of you know WeWork. We are testing the concept of boutique coffee shop in WeWork office with nine buildings in Shanghai. We will quickly expand to more offices in Beijing by end of June, and probably other cities. Those are pictures, a real picture. We leverage our coffee knowledge, but we also leverage the ambience of those pretty good, decent office environment. Well, we have been very much focused on building a portfolio of brands. Our very important priority is to build an integrated coffee value chain. Why? Because to differentiate the quality in coffee, supply chain capability is a critical factor.
Our existing coffee business has allowed us to grow some really strong competence in the coffee supply chain, but this is just the start. We plan to increase the specialist knowledge within our coffee chain. We are getting more involved in upstream sourcing with some unique strategy to support specialty coffee brands. We are getting a greater cooperation with great coffee trading groups. I think it's very important to mention that because of Yum China, we want to implement the process throughout the supply chain to drive product quality and consistency. These are our standard operating process in the QSR segment, but not our large scale in the coffee supply chain. We can apply our existing expertise from QSR safety standard, quality assurance, and consistency perspective to further drive innovative disruptions in the coffee value chain. This is essential to our coffee vision.
Well, I hope with this very short presentation, you are as excited about the coffee market as we are. We are really excited with growth opportunity in coffee in China. Our red flag, K COFFEE, is already leading brand in most cities and provinces in China. KCOFFEE is already the leading brand in term of number of location to providing coffee service and to provide the coffee penetration in this market. Our blue flag, our COFFii & JOY, just started in four cities in Eastern China. Very soon, probably in few weeks, you will have chance to experience COFFii & JOY in Beijing, in north of China, and in Guangzhou and Shenzhen, in south of China. To conclude my presentation, we see enormous growth opportunity here.
With Yum China's best-in-class capability, our local store development
Thank you, Steven. Thank you, Steven. Good morning, everybody. My name is Jacky Lo. I'm the CFO of Yum China. It's great to see a lot of familiar faces in the room today. It's been almost two years since I became the CFO of Yum China, and my focus has always been on maintaining an open dialogue with the investment community. I have had the opportunity to meet with many of you in person to share with you the excellent growth potential of Yum China and our commitment to create long-term value for our shareholders. We have been successfully operating two iconic global brands with KFC and Pizza Hut in China for over 30 years. We have four other exciting emerging brands in our portfolio.
As the number one restaurant company in China with almost 8,500 stores, Yum China has enormous scale, but we still have a long run rate for growth. Yum China represents a unique investment opportunity, providing investors with exposure to China's growth through a U.S.-listed company with Western corporate governance. In today's presentation, I'll walk you through our plan to continue to grow with discipline. As we look back, Yum China has made significant progress since our spin-off from Yum Brands in November 2016. We had slightly more than 7,400 stores at the time of spin-off. Over the 26 months between the spin-off and the end of 2018, we expand our store network by over 1,000 units to reach 8,500 stores, an increase of 14.5%.
Our system sales grew by 13% over the two years between 2016 and 2018, or 7% CAGR, mainly driven by same-store sales growth and net new unit development. The 7% CAGR is in line with the long-term financial target of high single-digit system sales growth that we committed to at the time of spin-off. Strong sales plus disciplined cost control result in our operating profit growing by nearly 50% in the past two years, or 22% CAGR. Not only are we focused on generating value, we are also committed to returning capital to our shareholders. With our healthy cash position and significant cash generated from our operations, we have returned a total of $640 million to our shareholders since the spin-off, including cash dividends of $200 million and share repurchases of $440 million.
Last but not least, we have seen robust share price performance since our first day of becoming a public company. Our share price grew by 59% from November 1st, 2016 to February 28th, 2019. I would like to take a moment to talk about the significant cash flow generation I mentioned in the previous slide. In 2017 and 2018, we generated $469 million and $863 million of free cash flow, respectively. We returned $166 million in 2017 and $473 million in 2018 to shareholders in the form of cash dividends and share repurchases. In addition to returning capital to shareholders, this cash flow enable us to strengthen our cash and short-term investment position from just under $1 billion at the end of 2016 to almost $1.4 billion at the end of 2018.
With the current cash on our balance sheet and the amount of cash that we generate from our business each year, a natural question is, how are we going to deploy the capital going forward? We expect to take a disciplined capital allocation strategy to drive both growth and returns, which I'll discuss further shortly. We are confident in our plan to deliver compelling returns to our shareholders. Let me share our disciplined growth model of sales growth and diligent cost control, which has remained consistent since the spin-off. The formula is straightforward. Increasing sales plus managing restaurant margin, plus controlling G&A expenses is equal to growing operating profit. The long-term financial target behind this growth model is the double-digit operating profit growth rate that we committed to at the time of spin-off.
Of course, there will be certain years where one-off items or non-recurring events may impact the operating profit growth rate in a particular year. Let's go through the three levers in our growth model at a high level. First, we'll use a combination of net store openings and same-store sales growth to increase sales. Second, we'll continue to leverage innovation and scale to lower our operating costs and manage our restaurant margins. Third, we'll strive to optimize our G&A cost structure so that the increase in G&A expenses is slower than our revenue growth rate. As we move through today's presentation, I'll elaborate on each lever one by one. Let me start off with net new unit development. Due to the tremendous potential of the China market, we expect to maintain our accelerated store opening strategy and target to reach the 10,000 stores milestone by 2021.
Note that COFFii & JOY is currently not included in this target. As Joey mentioned earlier, there is significant opportunity to expand within China, and we intend to focus our efforts on increasing our geographic footprint in both existing and new markets. Over the last two years, we have entered into 100 new cities, but our pipeline of potential new cities has remained stable at 1,000, mainly because new cities have grown sufficiently to enter into our formal tracking radar. Our new store development is driven by opportunities to sustainably grow our business while meeting our disciplined profitability standards. The key for us is to remain agile enough to respond to new opportunities and changing circumstances. All of this can only be achieved by our unrivaled platform, including our strong development team and extensive local expertise, our nationwide supply chain capabilities, and our positive brand recognition.
Now let's take a look at the new unit economics of KFC and Pizza Hut. Our average pretax cash payback periods remain extremely healthy. This is partly driven by the lower cash investment per store due to smaller store sizes and better efficiencies. Despite accelerated store openings, KFC maintained its two years cash payback period on the back of strong average unit volume and an improved cash margin of 23%. For Pizza Hut, both average unit volume and cash margins for new stores have fallen in line with the overall portfolio. However, the significant reduction in cash investment for each new store, by around 34% since 2015, has more than offset these declines and result in continued cash payback periods of less than four years. Our new unit development not only helps to drive continuous business growth, it creates tremendous value and returns.
The remarkable cash payback period and the overall returns on this investment are the reasons why the top priority in our capital allocation strategy is always to reinvest in our core business. In addition to store expansion, we increase sales by driving same-store sales growth. You have already heard from Johnson, Jeff, and Steven about the four key pillars of our same-store sales growth strategy. Let me quickly recap here. First, menu innovation. We are aware of the strength of our core menu items, but we also seek to continue to introduce innovative products and enhance our daypart and product category offerings to meet evolving consumer preferences and local tastes, while maintaining brand relevance and broadening brand appeal. Second, great value. Consumers are now focused on smart value, not necessarily the lowest price, but the best value.
In a more value-conscious market, both KFC and Pizza Hut rank very well on the value for money perception. We strengthen this perception further through recent value campaigns such as Crazy Thursday at KFC and Scream Wednesday at Pizza Hut. Third, digital. We continue to focus on seamlessly integrating our online platforms with offline stores to extend our digital ecosystem and maintain engagement throughout the customer journey. Our loyalty programs and privilege membership programs have been effective in increasing customer loyalty and order frequency. Customer experience has also improved as a result of ease of ordering from innovative technology. Fourth, delivery. We have adopted a hybrid delivery strategy that involves collaborating with aggregators to source traffic while fulfilling all orders using our own dedicated riders. This strategy enable us to simultaneously drive volume and leverage our extensive network to control delivery speed and service quality.
We'll continue to explore new levers and fine-tune existing ones as we move forward. Now let's move to restaurant margin. Our restaurant margin is currently under pressure because of inflation, food investment, promotions, and accelerated new unit development. We are confident that by implementing the strategies we have in place, it will gradually improve to reach the long-term target of 17% blended restaurant margin. In order to achieve this, we'll aim to maintain KFC's restaurant margin near its current level, while increasing Pizza Hut's restaurant margin towards its pre-revitalization levels. Any upside from the efficiency initiatives at KFC will be reinvest to drive further growth. Our focus is on improving our unit level economics and overall profit, while also making the necessary investments to support our future growth. There are a number of initiatives in place to manage costs and drive efficiency and productivity.
Our digital initiatives have allowed us to optimize staff scheduling, ease the workload of our restaurant crew, and reduce wastage. Our supply chain team works extremely hard to leverage our economies of scale to negotiate with suppliers and identify cost savings opportunities whenever possible. We'll pursue additional opportunities to improve profits over the long term by continuing to focus on fiscal discipline and leveraging fixed costs while maintaining the quality customer experience that our brands are known for. G&A control is the final component of our growth model. In our first full year as a public company in 2017, we incur additional expenses to meet our compliance, reporting, and governance requirements. This result in the year-over-year increase of 17% in G&A expenses. In 2018, we achieved a year-over-year reduction in G&A costs of 9%. This was a result of a mix of one-off benefits and ongoing cost controls.
When excluding the one-off benefits, underlying G&A expenses were up by about 1% in local currency. Oops, sorry. We work across functions to analyze and optimize our G&A cost structure. We actively control G&A costs by simplifying the organization structure, optimizing the procurement of different services, and tightening expense policies. These efforts started to pay off in the second half of 2018. We will continue to maintain a strict focus on G&A cost controls in 2019, although we anticipate a tough lap of those one-off benefits we enjoyed in 2018. Our long-term G&A goal is very clear. We want to maintain a G&A growth rate at less than our revenue growth rate. There will be years where one-off benefits or expenses may change the profile of G&A growth versus revenue growth. We will clearly explain to you when that happens.
Let's talk about our thinking around strategic capital allocation. It starts with our strong cash position and the amount of cash we generate from our business. As of the end of 2018, we had almost $1.4 billion in cash and short-term investments. In the last two years, we generate an average of just above $1.1 billion in operating cash flow per year. Our capital generation comes primarily from our operations. Our priority is to deploy our capital for the long-term growth of our core business, with investments in new stores, remodels, and technology. We anticipate spending approximately $500 million per year on CapEx for the next three years. We are committed to returning capital to our shareholders. Over the last two years, we have returned a total of $640 million to shareholders in the form of cash dividends and share buybacks.
With our current dividend level and the existing share repurchase authorization, we have the capacity to return about $1.5 billion to shareholders over the next three years. We will continue to look at strategic options, including joint ventures and strategic investments. Given the changing industry landscape, we will assess the M&A environment and evaluate all options in a disciplined manner to maximize shareholders' values. As you have heard today, we are really excited about the Yum China growth model. We are confident that this model is sustainable for the foreseeable future. The measures I have just talked about will enable us to achieve our three long-term financial targets. Number one, to grow system sales by high single-digit %. Number two, to achieve an overall restaurant margin of 17%. Number three, to deliver double-digit operating profit growth from increasing sales and disciplined cost control.
Achieving these three goals will give us the capacity to return around $1.5 billion cash to our shareholders over the next three years, based on the current share buyback and dividend level. We will keep you updated on our progress as we move forward. I would like to provide an update on our outlook for 2019. Let me quickly reaffirm the guidance that we provided for 2019 in conjunction with our fourth quarter 2018 earnings call. We plan to open 600 to 650 new stores, not including COFFii & JOY. We expect to spend about $450 million-$500 million on new stores, remodeling, and technology investment. With significant progress made on reducing the tax rate on cash repatriate out of China, our best estimate of the 2019 effective tax rate is around 28%. I would like to talk about our 2019 profits in greater detail.
We highlight some of the accretive and dilutive factors on this slide. First, on the accretive side, growing store count and strong delivery growth will help drive system sales, and efficiency gains through technology and innovation will work to offset inflation pressure. Also, our investments in digital are expected to lower marketing costs, improve customer frequency, and increase ticket average. The lower tax leakage from reduced withholding tax on cash repatriation will improve the flow-through to the bottom line. Now, on the more challenging dilutive side, we continue to see wage and commodity inflation, in particular poultry cost inflation in the first half of the year. While Pizza Hut's revitalization is making progress, it's still ongoing and will put some pressure on our margins. With the intense competition and soft trading condition, we intend to continue making investments in value throughout the year.
The higher-than-average KFC new store openings in 2018 will put some pressure on margins near term as the stores mature. Probably the most challenging one is the higher impairment charges we'll report due to the new lease accounting standards that we implemented at the beginning of 2019. When you net it all out, our 2019 operating profits may be lower than that of the double-digit growth rate in the growth model. We are managing all of these factors very carefully, and we are confident that 2019 will be the exception, not the rule. Before we conclude, I would like to briefly touch on our performance in January and February.
In the first two months of this year, KFC maintained solid growth momentum due to its resilient business model, well-prepared campaigns, and excellent execution, and successfully lapped the strong performance of Chinese New Year in the previous three years. The restaurant margin is expected to come under some pressure, primarily due to increase in chicken prices and ongoing value promotions. As for Pizza Hut, the brand showed meaningful improvement, and we were pleased to see ongoing positive traction in traffic. As you know, our first quarter results are subject to trading in March and quarter end adjustments. We look forward to sharing with you the full update on our first quarter 2019 earnings call. In summary, we are continuing to grow in China to reach the 10,000-store milestones in the next three years. We have a robust plan to drive increased revenue and profit through disciplined cost controls.
With our strong cash position and cash flow generation, we remain committed to returning capital to our shareholders through a mix of dividends and share buybacks, with the capacity to return around $ 1.5 billion over the next three years. All of these are enabled by Yum China's best-in-class people and capabilities and our unrelenting focus on disruptive innovation to power continuous growth. We are confident that the strategies and initiatives we have shared with you today will help us realize Yum China's growth potential and deliver the financial results that we have just talked about. With that, I conclude the presentations from Yum China management this morning. I'll pass the stage back to Florence before we open up for questions. Thank you.
May I now invite our speakers today to come on stage for Q&A session? For those who would like to ask a question, please raise your hand, and before you ask the question, please introduce yourself by stating your name and company. Anyone wants to start first? Xiaopo?
Hi, thank you, everybody. I'm Xiaopo Wei, analyst from Citigroup. I have two questions for Joey. Today, we are very impressed with two words. One is innovations, the other is digital. In the past year, in 2018, I'm seeing the company have done a lot in terms of investment into infrastructure, especially on delivery side. Shall we say that 2019 will be the year we are going to see better monetization on the innovation and the digital, especially on the speed up of delivery growth? That's number one question. Number two question is about Pizza Hut. In the last year, as you remember on the presentation of Joey, you're showing us the picture. The biggest challenge of Pizza Hut is the image of the brand, which is a spare tire.
We are glad to see on today's presentation of Jeff that the image have been changing from spare tire, bay tire, to become a energetic and determined young man. In the road ahead, in your journey of your revitalization, what it is the second biggest challenges after changing of the image? Thank you.
Thank you, Xiaopo. Innovation, digital. As I mentioned in the presentation, innovation has been always the core of Yum China's success in the last 30 years. Given the market is changing so fast, the only way to survive, to lead, is you just keep learning new things. It's always in our core DNA. Whether we say it in such a loud way is a slightly different story. We'll continue to learn new things. In terms of food, in terms of operation, in digital, in terms of new store opening, business model, you name it.
In terms of digital, we start the digital and delivery team back to 2015. When we started, we have one person in the entire team. At the time, we see this as opportunity, we start to learn. Even though the background of KFC, obviously we are a traditional retail company selling fried chicken, but we do believe the future of retail is the combination of online and offline. Along the way, we learn. And in the last few year, we have learned a lot, and we have built very good digital assets. I think all I can say is we'll continue to learn. The key thing about the innovation in our culture right now is we are very cautious that, one, we need to invest. Resources is important.
Investment is important. Two is, even more importantly, we create a space and mindset to allow ourself to learn and make some mistake. That's really hard. I think in the last few year, we can see along the way, we can do that, and we shall continue to do that in the future. Come to the second question, Pizza Hut. It's sometimes good to make fun of yourself. The [Foreign language], the backup boyfriend, is something that the customer told us, and they were brutal. It's good to face the brutal reality sometimes to remind ourself where we are. In the coffee break, one of the very smart young man asked me whether do I think customers are aware of the changes. My answer is absolutely yes.
When the customer come to the store, they can see it, they can feel it. They don't talk to you about it, but they can see it, and they like it. The way that they reward ourself is to come in more often. That's the way that they told us. They vote with their feet. Other than the brand image, what else? Analytically, we always talk about four areas to improve: fundamental, delivery, digital, et cetera. Here's the brutal truth in revitalization. We have to fix everything. You can't write everything in your report. At least we have to prioritize and group them into four areas. I'll give you one example. Menu. We always know that, oh, the menu is too long. No. The problem is not the menu is too long, it's the food on the existing original menu is not good enough.
We have to go through our process, to launch LTO one by one and only keep the best, and then put together a permanent menu, painfully and patiently in the last 18-24 months. We create a menu. Oh, okay, you got a menu issue. What? No. We have to change our photography agency because the photography is not good enough. How good the picture need to be in order to get the customer to come in? We call it they need to be as good as until the customer want to lick the screen. That's how good it need to be. Oh, now we got the photography. We need to change the agency who print our menu as well because they were too slow before. Three, four week too slow. We need to make last minute change. We keep improving.
The brutal truth is everything, you cannot write about everything, we group them into four areas. If we really have to pick, say, other than a brand image, what is the other next big challenge? Big challenge also big opportunity. I'll probably pick delivery. 2018 was tough year for delivery transformation because 2017, our delivery rider were with the third-party rider. Then it come to a point we realized that customers' requirements are changing. Other than price, now they want quality too, as we can see from the KFC operation. We are not one store operation. We are 2,200. In order to be better in operation, we need to full visibility of the operational detail, we've realized we need to do the last-minute ride delivery ourself. We have to consolidate the Pizza Hut dine-in store, Pizza Hut home service.
We have to upgrade the IT system. We have to integrate the system back to our system. We have to build the rider team, you name it. We did it for 2018. Now for 2019, we believe, it's still a challenge because we need to build a hub-and-spoke store. We need to increase the delivery network, it's also opportunity. Jeff, do you have more to add?
All right. I can add a few. In terms of the challenging, I think, first of all, we still need a time because the revitalization is never going to be a linear process. Especially for their business to scale our Pizza Hut with over 2,000 stores. We know what to do, we needed time to scale up the initial success. In the long run, I think, at least from my perspective, the biggest challenge we need to face is we are competing in a very competitive market. The China West casual dining market. We need to continuously to evolve, to innovate, to stay relevant. That is actually our key objective, our revitalization strategy. Having said that, at the end of the day, what customer really looking for is great food at good value, with good service in a pleasing environment.
These are the area that we are working on right now.
Lillian?
Thanks a lot for management. I'm Lillian from Morgan Stanley. I have two question. One is actually still on Pizza Hut. Thanks for the very detailed explanation of the revitalization planning. Right now, can we have a kind of updated roadmap of a turnaround? I think things definitely are evolving, and we're doing a lot. Could you give investors a little bit clarity in terms of the time frame that you might need for us to see a more significant improvement? What kind of indicators that investor need to watch out for, such as same-store sales growth or restaurant level margin? As Jacky mentioned that the restaurant level margin to achieve 17% long-term goal, the key driver is Pizza Hut. What time actually we can see that? That's the first question. Second on coffee.
I think definitely that's a new focus for the next couple of years, despite that right now it's still in the early stage, especially for COFFii & JOY. What kind of capital investment we are planning for the next couple of years on coffee, and what type of contribution to revenue and the profit we're looking for?
I'll make few general comment, and then I'll invite Jeff and then Steven to make few comments on this. For Pizza Hut, we have aggressive timeframe to start with. We still on the journey, and I think probably in the earning release, we have talked about the way that we see that is we want to see the positive traffic first, which we saw in Q4. Jacky also mentioned that we continue to see the positive traffic in Q1 this year. Next is the same-store sales positive, next is profit. In reality, when we are going through the turnaround journey, we are doing this bit by bit in every aspect. It's just different KPI take different timeframe to turn. For example, last quarter, Q4, we already see some improvement in the profit margin. Bit by bit, I think it's a bit like you catch the fish net.
Instead of pulling one thread, you just pull little bit by bit, and then at the end you get to where you want to be. For coffee, as Steven has mentioned, we want to look at coffee from Yum China's point of view. It's not only from one brand, but from Yum China's point of view, we strongly believe that we have the infrastructure. Actually, we have been doing coffee. We have been growing and committing to the growth of coffee since 2015 because those coffee machines are really expensive when we start to buy them back to 2015. Now we have the infrastructure, we have learned a little bit. Now we want to progress to the next stage by expanding, looking at opportunity in KFC and COFFii & JOY, and build a supply chain team.
In Chinese we say, "Sān jun wèi zhòng liǎng cǎo xiān xíng." Before the army move, the supply chain has to be there first. Similar idea. We have ambition in coffee business. We are not hiding it, but at the same time, we are aware we need to build a supply chain at the same time. As Yum China style, different company have different philosophy, and our philosophy is to believe in discipline and prudent business model before we replicate it. Because I don't think anybody would doubt our ability to replicate a successful business model. We have the scale. We must get to the right business model first. Again, different philosophy. You can say that until the kid is very big young man, and he's fine.
You try to help the kid when the kid is small, three years or five years, make sure he's a good kid, and he'll become a good young man for sure. Two different philosophy, I suppose. Jeff and-
All right. First for the timeline for Pizza Hut turnaround. As I said before, it's not going to be a linear process for the size of the business like Pizza Hut. We start a revitalization program with a relatively aggressive timeline. Since then, we have made steady progress on each of the four strategic pillars. Our key measurement of our success, as Joey just said, are restoring traffic first, and then same-store sales, and then margin. Soft trading, as a matter of fact, has slowed down our revitalization progress.
We are pleased with the improvement in the customer perception improvement and also the same-store traffic recovery during the first quarter last year, which give us the confidence that we have the right strategy in place. We know there is a lot of work to be done, and it's not easy, but we know how to do it because we've done it before with an even larger business, KFC. We learn from our successful turnaround of KFC, that there is a time, there's a lag from the time that we made improvement to the business, to the time that we see the result in the form of higher sales and profit.
Well, just few points to build up about coffee. As you mentioned too, coffee market in China is still at very early days of the category development cycle. There are many opportunities and many models. Like what I said in the presentation, if we could, or someone could upgrade instant coffee to freshly ground coffee, the market would be five times bigger. If a brand can move faster, a figure on a model to penetrate the delivery net to have a huge delivery network, it'll be a much bigger market as well. For COFFii & JOY today, our priority and focus really to build brand and to test and refining different models in different city tier and different trade zone. It's hard to project, but as Joey mentioned, we have all the heavily invested physical and digital assets there.
We just need to figure out a model to leverage those assets. We are very confident that Yum China is very good at scale up once the model is confirmed.
Thank you. To allow people more chance to ask question, may I ask you to limit your question to one at a time, and then we can come back if we have more time. That gentleman there.
Thank you. Joey, Yum Management. I'm Chen Luo from Bank of America, Merrill Lynch. Just one question on KFC. Just now, we are glad to hear that the year-to-date momentum for KFC has been very strong. At the same time, the margins are under some pressure because of the rising chicken cost. I believe that people are always asking what kind of measures we are taking to balance same-store sales growth and margins. Can you actually share with a bit more color on that front? Also, we also know that sometimes margins is also a function of same-store sales growth. What kind of same-store sales growth can actually ensure relatively stable margin despite rising chicken costs? Is there any rule of thumb number that you can share with us? Thank you.
I think Johnson Huang is probably more suitable to answer this question. Again, I'll provide some sort of more background information for yourself, Chen Luo. First of all, Jacky Lo made a comment that the margin is under pressure, particularly last quarter and this quarter because of the chicken price. Quarter by quarter, it could be different. That's point one. Point two is, this has a lot to do with the philosophy of Yum China. How do we work with our partners? Over the last 32 years, we have something very simple, but it has worked very well, is our belief in a win-win relationship with our suppliers. When the chicken price is very low, sometimes even lower than the input price, we will pay supplier higher than the market price. Why? Because we want to help our supplier when the time they need a help to survive.
In the long term, if we don't think this way, the price is bad, they go out of business, it's not good for us in a long term. However, at the time when chicken price is very expensive, that's when we need the help. For the same philosophy, we work with supplier to give a price slightly lower than the market price. I help you help me. Over long term, our number one chicken supplier 32 years ago is still our number one chicken supplier now. That is, I would say, the philosophy, just the business philosophy help us navigate the up and down and the challenges to a certain extent, and that's very important.
Now come to the short term, there are many ways to do that, actually Johnson Huang has mentioned some way, like how to manage the margin, I'll leave Johnson Huang to give you the comment.
Thank you, Joey Wat. As we all know, poultry price increased probably starting from end of second half of last year. This is some kind of like each quarter is different. Firstly, to mitigate the possible downside of our poultry cost, we imported outside of China too, other than what Joey Wat mentioned. We build up strong relationship with our supplier for a longer term and better price. Secondly, we are clever enough to, by using alternative protein, which the cost is lower than poultry, that we will launch shortly. Secondly, the different part of cut as we introduced today, the one bone chicken. That is also a very cost-effective part of COGS to us.
Thirdly, we are going to leverage our strengths on our KOL, trying to use our KOL and equipment advantage to cook and to sell large and efficiently product like our COB, like our WING and One- Bone Chicken. Also, I share with you how do we leverage our digital in terms of technology to help us to drive the productivity enabled to mitigate this possible cost downside. All in all, our supplier network connection, our food innovation, our CL air control, and our digital and our technology help us to mitigate all of that. In terms of the scale that Joey mentioned, we are better managed than the other brand or the other industry's competitors in terms of cost components. Thank you.
I just want to also point out something that Johnson did not say. It's always interesting, sometimes you listen to someone and realize, what did he not say? He did not say price increase. Right? I just want to celebrate this. The fact that we have such strong conviction, even though we have cost pressure from labor, from cost of sales, from everywhere. It's in our DNA that we'll do everything we could to save, to be more efficient, to be more flexible, whatever we do. Try our best not to pass on the saving, at least not 100% to the customer. You can always do that. Yeah. It's very easy to do that. The much harder way is we try every way. We achieve saving, then we pass on the saving back to the customer.
That's much harder, we believe that's absolutely the right thing to do. Of course, we do take pricing every year, in a very modest way. Particularly when the time, the value matters so much, this is important, and we'll continue to commit to that. Okay. Maybe someone from that side. That gentleman there.
Hi. Thank you. John Zoidis, Covalis Capital. I have a question on capital allocation. You outlined a plan for double-digit EBIT growth, $500 million in CapEx per year, and $1.5 billion in cumulative shareholder capital return over dividends and share repurchase. You also noted you have $1.4 billion on the balance sheet right now. Using a very rough estimate, I project almost an additional 1 billion of cash flow generated over and above the $1.5 billion you outlined as a return. My question is, why wouldn't the capital return be larger?
Thank you for the question. That's a very good question. Let me first explain how we came up with the RMB 1.5 billion first. At the current dividend level of RMB 0.12 per share each quarter, over three years, that adds up to be about RMB 550 million. Then we have currently outstanding, under our share repurchase authorization, of RMB 960 million. You add those two numbers up, that gives you RMB 1.5 billion over three years. As I've mentioned a couple of times during my presentation, the thinking around our capital allocation is our top priority is always to reinvest in our core business. I've talked about it because it helps to grow our business, but also it creates a very good return. The top priority is always in core business reinvestment.
Because I mentioned the industry landscape is changing, we are constantly evaluating the M&A market. We evaluate a lot of options. The amount and the pace that we return to investors ultimately comes down to our cash needs. In terms of share repurchases, we have always said it's a long-term commitment, we'll just take an opportunistic approach. If there's a good M&A opportunity, we won't hesitate to jump into it. It really comes down to our cash needs over that three-year window.
I just want to make a comment to our investor, also to our management team. First of all, it's not a problem. It's a great thing. Isn't it? The fact that we generate such huge amount of cash. Also for the development page that Jacky Lo show, the average cost of a new build right now is RMB 2.6 million. Back to 2012, the average cost is about RMB 3.6 million. Within few years, we have reduced the average cost roughly by about RMB 1 million per store. If you think about it, last year, we opened 819 stores. Rough math, simple, we have saved RMB 819 million in terms of capital. Despite our ability to generate such good amount of cash, it's still in management's DNA that how can we generate even more cash to our shareholders? It's not a problem.
It's a great thing to have, I encourage our management team continue to think creatively. How can we use our cash even better? Right now, with a similar less than RMB 500 million, not only we build 819 stores. Because back to 2012, we built 869 stores, we use over RMB 500 million. At that time, we've renovated about 200 stores. For 2018, we built 819 stores and we renovate 900 stores, we invest in digital. It's still RMB 500 million. We have sweat the cash investment very far, I encourage our team continue to do that despite the challenge from our shareholder to ask us what to do with the cash. It's a great problem to have. Michelle?
Hi Joey, management. This is Michelle from Goldman Sachs. My question is about the upside for delivery efficiency. In Johnson and Steven's presentation, we hear that delivery is very profitable. We are evolving our delivery model from Delivery 2.0 to Delivery 3.0. I'm wondering how much of the efficiency has been realized in our very strong, impressive margin control last year, and how much upside we can expect into the next few years. Thank you.
Thank you, Michelle. As I shared during my presentation, the efficiency realized before, probably more of them are following by our trade zone coverage. Nearly 90%-92% of our China KFC operated restaurants already cover our delivery. That contributed to our past 4 years' growth. Looking to the future, other than our continual growth into a new city, we also penetrate in the existing city. This is one that we are continuing to do. Secondly, is increase the density. As I mentioned, to build up the quality of service and food delivery is critical to customer. None of any competitor like KFC that we are able, within a certain trade zone, we can increase our density to shorten our delivery time. That results in faster to deliver food and hotter. That customer satisfaction is increased, and then their frequency will coming back.
As you mentioned, Delivery 2.0 to Delivery 3.0, that is a technological way to help us to unlock our drivers' efficiency from stick on one store to becoming a trade zone-based. It's just like Uber Eats type of a system. Furthermore, customer now is allocate to a particular store for delivery. In the future, for example, rainy day, this particular store is full of orders, they have to shut down the order, reject our customer. With this system, we are able to connect this user to a nearby store where they have cooking platform available. That they can take in the order by leveraging our trade zone driver to deliver the food to the customer. That means we have less order being canceled, we have more happy customer, and we have more profitable. This is the second thing.
Lastly, is because of what we are seeing for the drivers' efficiency we realized before. With this Delivery 2.0 to Delivery 3.0, the drivers' efficiency will largely increased from an efficiency point of view. This is overall we are looking into for the future possibility for growth. One is increased density, shorten the delivery time to increase the customer satisfaction, and then increase the frequency. Secondly is to free up the customer abide to one store into a trade zone. Lastly is riders' efficiency. Thank you.
Christine?
Management, this is Christine Peng from UBS. I have related questions for delivery. Obviously, you mentioned about Delivery 3.0. Can you share with us the delivery cost right now, and what's your potential to drive down the delivery cost in the next one or two years? I think a related question to Jeff is that you mentioned that since end of 2018, Pizza Hut has pretty much shifted to internal delivery. How has that contributed to your profitability in terms of delivery cost and savings? Thank you.
I would just like to make a comment that quality is absolutely important to us because simple understanding, food after 30 minutes become bad food. The quality of delivery is something that we know is important, and interestingly enough, we can see it's getting more and more important to our customer as well. That's one of the key reason why we focus so much on the operation, and one of the reason why we take back the last mile delivery operation back to our own. I think with that, I'll let Jeff make further comment about the cost bit.
For Pizza Hut, actually, after we brought back the last mile delivery team, there is a couple of important upsides. One is what Joey mentioned, that the quality getting better. Delivery speed getting shorter. The second is the rider availability, especially during the peak hour for our own platform. Before, because we have very limited rider available there, the resilience of the team is limited, especially during the peak hour. After we get all the order back, we have more orders so that we can allocate the rider resource better. Third, just a short answer to your question is the cost. The cost is getting better.
After we move all the orders back from aggregators.
Well, I have two points to build up. The first is Delivery 2.0. We changed from manual dispatch to 100% automatic dispatch system. That, of course, will save on labor. Delivery 3.0 is planned to have a shared rider for multiple brands, and Chaser was a store-by-store. That would definitely increase the delivery rider at per hour, and will also reduce or lower the order rejection during peak time. That will increase the sales as well. The whole system will become smarter and more intelligent with all the data of our riders and of stores and customer purchase behavior. The efficiency will be further improved.
I guess, to summarize our team's comment on the delivery rider, we want better quality, we want good cost, but we also want higher sales, particularly during the peak hour. Not only peak hour, peak trading season, that means holidays. I'll take a question from the back. Maybe that gentleman all the way back.
Hi, Kunal Desai from Mobius Capital Partners. Firstly, congratulations on a very excellent set of presentations. Very detailed and powerful. A lot of the presentations focused on how you're strengthening your back-end infrastructure. Logistics, supply channel, procurement, improvement in food quality, et cetera. It now seems like your digital and delivery ecosystem is falling into place. Would you be able to talk through the medium-term opportunity of franchising, and how you think that could unlock value, both in terms of incremental growth, but also in terms of your existing store network as an unaccounted source of cash? Thank you.
Thank you. Franchise remain a part of our strategy. Maybe I have not spent enough time on it to make it a bit more clear. Little Sheep, our general manager of Little Sheep is sitting in front here. Little Sheep is mainly growing through franchise, not only in China, but also internationally, Australia, Cambodia, Singapore. We'll continue to leverage franchisee system to grow Little Sheep. For core brand, it's still not a big part of our portfolio yet. It's 10%, partly because the payback of a KFC store is so good, two year, and partly because we have very strong cash flow. If we leverage franchisee to grow the store, I think the gentleman's question on the cash flow will be even bigger, right? We don't need RMB 500 million a year to build a store.
The number is smaller. The question is what to do with the cash. We have the cash right now. We can grow the store. In my presentation, maybe I should have made it a bit clearer. The partnership that we agree with Sinopec Sales Company and CNPC, particularly CNPC, it could be our own store, it could be franchisee. Particularly with CNPC, other than the first right of refusal in terms of new store opening, we also are very happy to have the exclusive franchisee agreement with CNPC as well. The franchise is still part of our strategy, but it has to have the strategic element in it. Does that make sense? The CNPC's gas station, these are very valuable asset. We can combine the asset and the know-how, and we're going to explore and verify the business model, our discipline approach, et cetera.
We do look forward to finding out a new franchisee model with CNPC going forward. Thank you. Another question from that lady in the middle.
Thank you. I'm Sijie Lin from CICC. Thank you all for your excellent and exciting presentations. I have a question on Pizza Hut, but more about its market. I'm wondering, what is the status of pizza segment in the whole catering industry? Is it grabbing market share from other type of cuisines, or is it losing market share? Within the pizza segment, what is the competitive landscape? We're seeing the increasingly fierce competition for this both offline and online. Offline we can see more smaller, but mid to high-end target brands in the shopping malls. Online, we can see more brands offering lower prices, although they are not famous brands. Where is the competitive landscape moving forward? Thank you.
I can take this question. First of all, pizza as a category still remain very attractive. They're growing at a very fast speed in the past several years. For the Pizza Hut, in the market, we are the biggest player at scale. We are four times more stores than the next largest player. Probably the rest of player combined
are still smaller than us. So definitely the number one player. But what I want to point out is that, Pizza Hut is positioned very differently in China than many other part of world. So as a front position this morning, that you can see that we offer a much more diversified menu, where pizza as a category only account for 30% of our total sales. So also dominating in steak and appetizer category. So in China, Pizza Hut is more than just pizza. We are more a casual dining concept. Thank you.
Just to build on Jeff's comment. As a category, the fact that we see competitors opening up more pizza store is good thing. Of course, it make the space more competitive, but also verify the fact that it is still a growing market. All right. What we are facing in China right now is the slightly different issue, is the overall value for money issue. Because KFC is very resilient with the price point of 30 RMB or below per person. Very few company can achieve the scale to deliver amazing food with good service, good convenience, good food safety and yummy food at such price point. But pizza's price point is already higher, 50, 60 RMB, and this is very competitive segment. So our overall challenge, which I think the team has done a great job last year, is to improve that price perception. Right?
The value for money, which we have seen improvement from customers' feedback. And we can do it not only through pizza, but also through steak. So the pizza, steak, dessert. So the overall good value for money offer to our customer. Okay. Sorry, a thought at the back. Can't see. Oh, Dylan. Right at the back in gray, I think. Yep.
Well, thanks very much. Thanks, Florence. This is Dylan from CIBC. Just a quick question, going back to the payback period for incremental new stores. Joey just mentioned that sort of the CapEx investment has been declining. Incrementally, the new stores have also been getting smaller in terms of size as well. In terms of going forward, not only this year but I guess a couple of years forward, would you think that the new stores going forward will continue to get incrementally smaller and then the payback period will stay relatively stable? Alternatively, would you think the store size will probably stabilize and then payback period could potentially lengthen a little bit? Any thoughts around incremental return investment would be very helpful.
Thank you. I missed a part of the question. Let me try. If I did not answer your question, please clarify that. The question is about the size of new store and then the payback period. For KFC, you can see, on average, the store size getting smaller. For a variety of reasons. One is delivery is a big part of business now. If we factor that in, our store does not need to be as big as before, and we can still produce the same level of sales, then why not? More importantly is, if we look at KFC case, Johnson has shown eight, 10 different models on the page. Why? Because we are more flexible. Back to the old time, one-size-fits-all, one store size, one store model, we put it everywhere, is the most efficient way to replicate. It's great.
We are at the stage of development that we need more than that. We have transportation hub, we have dessert kiosk, we still have the big beautiful store. We still build that. Just on average, the store size getting smaller and smaller. We want to have that flexibility. We can build a very big store, and we can build a very small store, with some kind of tweaking, depending on the customer. A customer decides what kind of store they could. To a certain extent, the landlord decides, because it depends on how big the store is. Sometimes the store is only 130 sq m and the location is good, then we make it work. I think on average, it's getting smaller, but it is more because of the strategy that we want to be more flexible, for different customer occasions.
As a result, we drive sales through delivery and other ways, and we keep the sales, and then we keep the payback period. It's a great thing. Pizza Hut is still going through changes. We're still exploring different models and then the number might still fluctuate a little bit. For KFC, I think the payback period is relatively stable. With that said, when we go more aggressive into lower-tier cities, for strategic reasons, we might relax our sort of payback requirement a little bit because we see slightly longer time required for the stores to mature. Overall, net net, we are comfortable with the payback so far. Any further comment?
No.
All right. Okay, we'll take two more questions. Kevin?
Thank you. This is Kevin from J.P. Morgan. I have a question for Pizza Hut. Currently you have about 10.3% restaurant margin. Long term, probably you need to have 13%-15% restaurant margin to bring up the group level margin to 17%. How much traffic you need to deliver to have 14%, 15% restaurant margin? The short question is the sensitivity between the traffic and the restaurant margin. To follow that is, where is the traffic growth coming from? Can you quantify, like in the fourth quarter last year and the first two months this year, what percentage of the traffic recovery for Pizza Hut is because of delivery or the menu design change or anything else? Thank you.
For Lycia.
It's really hard to come up with the hard number. What we have seen is, at least from the KFC experience, and I used to do turnaround back to U.K. as well, similar trajectory. Positive traffic, and then when we get more people coming in, then you start to work on the ticket average, TA, right? When we have more people and then per person, the TA just lift a little bit, then you get a positive same-store sales. Now when the positive same-store sales happen, that's good. That's the good time, then we really look at the margin. It's very hard to say that, oh, put aside everything else, how many more percent of traffic will get the margin. From analytical point of view, I used to be analyst too. From operation point of view, it does not really work that way.
We get more people in. I almost hesitate to say that, but it's true as we run the business, the hardest thing to do actually is to get more people into the store. That's by far the hardest thing. Because you need to build a brand, you need to have the good value proposition, good product, et cetera. Once you get the people in, they are already in your store. If you ask them to spend 1% more, 2% more, that just seems slightly easier. Not easy, slightly easier. It's like you have a good meal. What happens if I tray up, have an ice cream or have a tea with this same price? That's when you get TA. When you get the TA up, positive same-store sales then you get the leverage, then you work on the margin.
That's how operationally how we drive the total performance instead of just one driver, because it's never really good enough. We need to work on multiple levers.
Okay. I'll take the last question. Yeah, that lady in the middle.
Jeanine Thomson from MFS. Thank you for the presentations today. I thought it was interesting that there wasn't a lot of talk about the relationship with aggregators, it seems very much that this focus is on doing the last mile yourselves and having that direct relationship with the customers. Does it follow that your relationship with aggregators should diminish over time? Maybe just a follow-up question, any thoughts on the increased promotional activities you're seeing from the aggregators? Do you benefit from those, do you think? Is it good for the industry or is it bad for the industry? Thank you.
Well, I think this is a very important question. The delivery market in China is booming since 2014. It's grew rapidly. It's a high double digit. That's a result and contribution by the whole ecosystem, including brand like us, a big chain restaurant, but also the aggregators. We all together to acquire new users to this segment. That is what has happened. Yum China was the very first chain store to work with Meituan, Ele.me back to 2014 and 2015. In fact, we together created the automatic order system between the merchants and aggregators. To say that because I would like to use that we have very good relationship with Meituan and Ele.me along the way when we build up the whole delivery category in China.
We're still working together to acquire user for category, also pretty much we are focusing on marketing cooperations to increase delivery frequency, to increase the average ticket size, and also to increase the customer experiences. We are having a hybrid model. We know maintaining a strong own platform capability is important for us. At same time, we are working closely with two aggregators.
Okay.
Can I just say thank you?
Yeah.
I just want to take the opportunity to thank everybody coming from near and far. Really appreciate that. Appreciate all your support, your question, and appreciate the fact that you. Hope you enjoy our presentation this morning with our lovely Chinglish essence in our management team. I look forward to talking to you and feel free to ask questions, before you head off to enjoy a really good food innovation center in our store. Thank you so much. Thank you. Yes.
Thank you. That concludes our Q&A session. I just have a few housekeeping items to do. For those who are joining our site visit this afternoon, please move to the main lobby, near middle Sichuan Road, Sichuan Zhong Lu, by 1:45. Please remember to bring your name badge because we have two teams, one team red, one team yellow. Your badge actually helps to identify which team you are. For store visits tomorrow, we'll leave also at the same place at this hotel at 8:45 A.M. If you have any change of plans, like if you decide not to join visit today or not to join our visit tomorrow, please let our IR team know as ASAP or just let me know or the other IR colleagues. All right. Thank you very much for everyone for your participation.
We look forward to receiving you again sometime in the future or meet you in the conferences. Thank you.