Welcome once again to all of you to our very first annual Investor Day as a publicly traded company. Before we get started, I'd like to remind you that today's presentations include forward-looking statements, industry data, and non-GAAP numbers. Please refer to our cautionary statements included in our presentation materials. Let me also walk you through this morning's agenda. We'll start today's presentation with our CEO, Micky Pant, in a moment. We're going to have Joey Wat, our President and COO, to give you a business overview and also an update on the Pizza Hut business. Johnson Huang, General Manager of KFC, will talk about KFC's strategy. Next, Joey will come back to the stage to present our digital and delivery strategy. Finally, Jacky Lo, our CFO, will talk about our financial perspectives.
We'll open the floor for Q&A at the end of the presentations. Before Micky comes to the stage, I'd like to show you a video covering our theme for this year, which is Stay True, Aim High. It covers our history in the past 30 years in China. For your information, the video is in Mandarin with English subtitle. I hope you enjoy it.
Thank you. First, let me start by welcoming all of you to Shanghai. For those of you who are able to travel tomorrow to see our stores in Hangzhou as well, I really appreciate on behalf of all my team that we have got such excellent participation. I was talking to John Glass earlier.
The room is really full. It's great to see this level of interest. I hope that we can add to your knowledge and to tell you more about our business. I'll try to stay brief in my opening comments. As you heard from Elaine, we will have Joey and others, Johnson and Jacky present to you more details. The reason is that we do want to allow time for Q&A at the very end, because I'm sure you've got a lot of questions. We'd be very happy with my team to answer them. A quick word about Christy Zhu, who's our Head of Investor Relations. She apologizes could not be here today because she's on a short medical leave of absence. She's just fine, but I just thought I'd mention that.
Elaine and Joyce and other members, Michelle, of the Investor Relations team will be available to take good care of you. We've already been through Elaine's opening cautionary note, as we always do with the Safe Harbor statement. Just to reiterate a couple of points. The first, obviously, we will be making forward-looking statements, not just today in the presentation, but also in the course of your visits to our restaurants in Hangzhou and in other interactions that you have. Obviously, we expect these to be covered by Safe Harbor provisions.
The second is that we are giving a lot of estimates about the future. You've all been around the block. You know our company very well, and you know how these things work. Those are estimates. The estimates could vary materially from the reality, because they depend on market forces, competitive actions, et cetera, which are completely outside of our control. Lastly, we do use third-party sources for a lot of industry information, and they will be at the cruise tonight. You'll have a chance to hear from Bain & Company about delivery and digital and other aspects. We will also give some estimates of size of companies, et cetera. That's all third-party information, so please verify that on your own. Lastly, we will be, Jacky and myself, a number of us will be making several statements which have non-GAAP information.
Obviously, we stay very true to GAAP in all our reporting. There will be some non-GAAP measures used. With those few words, let me start by an introductory slide. We are very pleased as management to report a lot of progress, I think, in the company. The delightful thing about Yum China is that it's, at the same time, a very established company with 30 years of operations in China, as you saw in the opening video. At the same time, it's also a very young company, having just embarked on this journey of becoming a public listed company.
If I was to take you on some of the key bullet points on this slide, starting from the top left, the first is something you're aware of, that our company is a dominant leader in the markets for both quick service restaurants, as well as in casual dining restaurants. It's unusual to have that in a single company in a single country. We're very pleased with that position. On the left then, going further down, you can see the reasons why. We have more than 7,700 stores in over 1,100 cities in every province and every region of greater China. To the left, again, on the bottom, we are the number 1 restaurant operator in two critical aspects, and you'll hear this a lot. Have already heard this over several meetings in the past, you will hear a lot more of it, is digital and delivery.
Digital and delivery. Our delivery sales have been steadily increasing. The last quarter, Q3, we announced that our delivery sales are about 14% of our total sales. I think that was up from the previous quarter was 12%, the previous quarter was 11%. That's been growing rapidly. You'll hear a lot more about digital, where we are pleased with the progress that we've made. If you look on the right-hand side, we did debut on the Fortune 500 listing, the most recent Fortune 500 listing, where we came in at number 399. That, of course, is ranked by way of sales. The company achieved sizable market value as well, with a market cap exceeding $16 billion. Of course, that varies on a daily basis, but that was as of last count.
A statistic on the middle, on the right, related to our digital success, you heard this before, is that we are now clocking at a rate of a total of about 120 million members of our loyalty programs for KFC and Pizza Hut. Lastly, on the bottom right, is that the company is a very large employer. We employ directly about 420,000 people in our business in China. In fact, on the same Fortune 500 listing, we were ranked number three of U.S. 500 corporations in terms of number of employees. We also have a strong management team, I'd like to take this opportunity to introduce a few members of the leadership team that are present here. Due to reasons of time, I won't have the time to introduce every one of them.
I will introduce some key members so that you can interact with them during the break and ask any questions. I'll start with my left. I'll start with Angela Ai. Angela, if you don't mind getting up. Angela is a 20-plus year veteran of the company has been responsible for a lot of the development success that we've had. She leads a very large department that builds all our new stores. I'll go to Sheila. Sheila is our general counsel, also our board secretary. Sheila, again, is a 20-plus year veteran of the company has been with the company at every crucial turn, not just in our past history of spinning off from Yum Brands, but also things like the acquisition of Little Sheep, of course, our recent spinoff and the formation of our new board of directors.
Ted Lee is the general manager for Little Sheep, which is our own brand doing very well. Mark Chu is a person who you might have seen in the video more than once that we played a little while ago, because Mark is one of the founders of the company and was here right from the beginning, so well over 20 years. Mark has been previously President, Chief Operating Officer. He's just a fantastic operator is responsible for a lot of the success that we've had historically. I'm delighted that he plays the role of senior advisor to me and to the leadership team. Jeff Kuai, I think you met, several of you met, is the general manager for Pizza Hut Home Service, you'll hear more about his business from Joey when she presents.
Sunny Sun is our Chief Growth Officer, an M&A specialist with considerable experience in CVC, Daimler, and Danone before that. She led the acquisition and partnership with Jeff of Daojia earlier is helping us at the moment with crucial aspects of our future capital deployment, et cetera. Very quickly, Alice Wang is our head of public affairs does a great job with establishing a brand image across the country. Christabel Lo is our Chief People Officer. Again, a 20-plus year veteran. I jokingly say that she recruited every one of the 420,000 people, it's no exaggeration to say that she's responsible for a lot of the cultural success. Danny Tan. Sorry. Danny is the head of several functions, including he's Chief Supply Chain Officer as well as head of quality assurance, food safety, and food innovation.
Danny, again, is a 20-plus year veteran of the company. Johnson Huang, you will hear a lot more from later. Johnson is a 10-year veteran of the company and is the General Manager for our largest brand, KFC. His background is in IT, and that makes it particularly exciting. Joey Wat, I will have a chance to say a few more words later as I introduce her, is going to be the next speaker following me, and I will introduce her properly at that time. Jacky Lo, our Chief Financial Officer. Jacky has been with the company since prior to the spin, and was responsible for filing our Form 10, getting the approvals. He has 17 years with Ernst & Young prior, where he was a partner for about five, and is an expert, particularly in SEC reporting and U.S. GAAP.
We are delighted to have him as a CFO. You can see that the management team has a very good combination of extremely tenured people who have been right there from the beginning, as well as fresh, new talent that has got expertise from outside of our company, so we can meet all our obligations for shareholders. This slide we have been using internally and tracking because even though we are only principally a one-country operation, really, we are focused on Greater China, with the exception of Little Sheep, where we have about 100 restaurants outside of China. Our business focus really is in China. We have, as I said, about 7,700-plus restaurants. Our market value positions us in the top five of all publicly listed restaurant companies. In fact, all restaurant companies, because most of large restaurant companies are public.
I think this is a very good reflection of the power of China. It also is encouraging for us because it represents a considerable amount of focus. What I love about this company is that it is very focused on the opportunity in China. China becoming the world's largest economy is almost a mathematical certainty. It is a question of only when that happens, not if. We are very pleased with that. Also our business model, which is where we own and operate the restaurants mainly ourselves, is a proven success, and that is reflected again in the post-offer valuations that you can see on this chart. One of the heartening factors, many of you have tracked our company for several years, even prior to the spin, was that in becoming a public company, we were able to achieve considerable success in a few areas.
Number one was the smooth appointment of a very powerful and competent board of directors. This was done obviously on November 1 when we spun off as an independent company. They provide governance, and on behalf of all of you shareholders, represent to management good governance practices, aside from being functionally very competent in their individual areas. In quick succession, since November 1 when we spun off, we have been able to achieve a few things. A, continued strong financial performance. B, authorization to purchase our own shares. We got initial authorization at the start of the year for about $300 million to purchase back. As you saw at the end of Q3 results, most recently at our board meeting, we got authorization to spend another $250 million. That takes our total authorization to $550 million by way of capital return by purchasing our own shares.
Even though it was small and not material to our company in terms of its financial size, we did an acquisition, which was an aggregator company with two brands, Daojia and Sherpa's. We're in the process of integrating that. We did that principally to get more experience in this rapidly growing area. We feel optimistic about prospects. Lastly, very recently, as you know, we initiated our dividend. This was a question from many of you for several quarters. I'm pleased that even though we are two weeks away from our first anniversary as a public company, that on three critical aspects, which is share purchase, acquisition, and buyback, our board of directors has been very forward-looking. We are delighted with the progress that we've had so far. This is a summary of our highlights for the first three quarters of 2017.
That is our performance in Q1, Q2, Q3, which is all public information. On the first one, system sales, this is our total sales. As you know, we have certain joint ventures in about five cities. Some of them we have a minority interest in. Our total system sales are about CNY 6 billion in the first three quarters, which represented, if you were to take away the effect of exchange, about a 7% growth rate in sales. Our restaurant margins have been healthy. They're up from last year. Of course, as everybody knows, in 2016, June, the government of China introduced a simplified taxation system loosely called VAT. That gave us considerable benefit, both last year as well as this year for the full year. That had an impact, our restaurant margins have been good.
Q3, where we were lapping VAT from last year, we were able to still show a modest growth in margins and maintain them at the 20% level in Q3. Our net income has grown well. You're very well aware of those numbers. Adjusted EBITDA for the first three quarters alone crossed CNY 1 billion. Our diluted EPS is a topic of considerable technical concern and analysis. You're aware in Q3, we did announce that there was a significant dilution in our share base on account of warrants of our minority shareholder coming in the money, the effect of share issues that we made after spin-off, et cetera. You can analyze this in more detail, our total earnings have grown, as you can see on the top right, very substantially.
On the bottom right, I think Jacky will make more references to this, is probably the strongest indicator of the health of the business, is that our net cash position is very strong. When we spun off, we had about CNY 1 billion. At the moment, we have about CNY 1.6 billion as of the end of Q3 in terms of cash and cash equivalents, short-term investments and cash that we retain. Overall, in terms of financial performance so far, the going has been good. I'll cover a few other factors that will set up the stage for how we are looking at the future. The first is that we have a very wide footprint. In China, as you saw in the market cap slide that I put up, the two biggest companies worldwide are also present here.
We have more stores in China than those two put together. In fact, even the number three local competitor put together. This is an unprecedented position to be able to be present in every single province. The large gap on the top, on the left-hand side, we have a lot of stores there as well, for example, in the autonomous region of Tibet. These are reflecting where we have offices, as well as presence. It's well distributed in terms of our brand presence. Also, the, you'll hear references to this later, we have extensive delivery service where we deliver in about 800 cities, which is far more than any other competitor. Many of you will visit our logistics center in Shanghai later today, we have 17 of those, and I'll make some references to that in a minute.
Let me come to the first forward-looking slide, this is the one where we've explained this before, I think we can now, with the heat of the spinoff and the last one year's experience behind us, talk about it with some more insight. We believe that the number of stores in China can increase quite dramatically based on a number of factors. The most simplistic is per capita number of stores, which is represented on this slide that we only have, although we have 7,700 stores. If you divide that by 1,400 million people then or the other way around, you see that we only have five stores for one million people. One store for about 200,000 people. That number, even in several developing markets, is higher, significantly higher.
The more important perspective that I'd like you to take away is that there is no reason why Yum Brands' restaurants in China should have fewer restaurants than we have in the U.S. In the U.S., Yum has well over 15,000 restaurants. The reason is that China will be a bigger economy, aside from the economy, just the population is so much bigger. Our market share situation is strong. Now, of course, this traveling is a long-term phenomenon. The reason I'm putting it up is that we see virtually unlimited headway of runway for growth in this market. Now, the physical infrastructure of stores is one thing, as you'll hear from Joey and Johnson later, what's also growing rapidly is delivery. That might cast a new perspective on this entire business as we are seeing with retail all over the world.
We see that we can still continue to build out our new restaurants at a very healthy pace. The reason is that on the right-hand side, we've listed the three major factors. The first is development capability. It's not easy to build 500-plus restaurants in a year for any newcomer. For those of you who are visiting China on this trip, if you travel around the biggest cities, Shanghai, Beijing, Hangzhou, et cetera, retail is not easily available. This, we have, we believe, quite a competitive barrier to entry. We have a very large department that does the entire range of activity from site locations, mapping to intelligent forecasting of traffic, to, of course, commercial negotiations, the engineering fit-out, the build-out, commissioning. These are not easy. Of course, the labor required in order to open new stores.
There's a lot of internal know-how that goes to that success. Lastly, we have a very disciplined process. Please remember that we always build one store at a time. We are not that driven by numbers as to what number we can build out, but we are very driven by returns that we get on those stores. We allocate capital to new store builds based upon our ability to get good returns. What the most encouraging thing has been that even in the last two or three years, when we had a lot of other activities going on, our build rate has been very healthy. I think it's a tribute intrinsically to the Chinese economy. A few headwinds that you're aware of, but I just thought I'd make a couple of comments.
One is we do live in a politically charged environment around the world. In Q3 of last year, for example, there was an agitation against the South China Sea controversy, and that caused our sales to get impacted last year in 2016 Q3. These factors can happen at any time. We feel great about our business. We feel very optimistic about the future, but that always remains. Inflation has been, I must say, reasonably moderate over the last couple of, at least the last one and a half years. Labor inflation was sizably higher. It moderated a bit, although it's still reasonable. Food inflation around the world has been reasonable, but that could spike at any time. Although at the moment, I think Jacky will give you some insights, we feel reasonable about those two factors.
The currency is always subject to change, and for a five-year period, the RMB was weakening. At the moment, it appears stable. We can't really forecast the way it'll go. What makes our company particularly interesting is that we do have our entire business conducted in RMB, both our sales side as well as our cost side. Of course, our shareholders invest capital in U.S. dollars, so that rate does have an impact. Lastly, the tax. You're very well aware that tax is an ongoing factor, that tax rates in the United States are under review. We'll see where that goes. The more capital we spend in China, the more capital we deploy in China, and the more we grow here, the lower our tax rate.
The more capital we move to the U.S. for buybacks of dividends or other activity, we pay a higher tax rate. Those are all nuances, and we should keep that in mind as we model our business going forward. Now, a few good elements that I feel particularly positive about, having been in this business before and looked at it around the world, is that I think the KFC team has done a superb job over the last 18 months in particular in refurbishing stores and trying new activities. It is critically important to have a very healthy real estate portfolio, because it's very easy to lose sight of it, and then if you don't invest for several years, you see an impact on sales quite dramatically.
I think we are very pleased with the progress that's been made, in every aspect of store build-out, in technology, as well as on the look and feel. Not just on KFC, but on Pizza Hut as well. More and more activities are being done on a regular basis to see that we can experiment and take this going forward as well. You'll hear from Joey that Pizza Hut is work in progress, and you'll hear some cautionary comments about when we expect that to turn around. We feel good about the quality of the estate. I've referred to this already, just a very quick summary. The national supply chain aspect, which allows us to open in very remote areas, with good food safety guarantees, and to open up new concepts like Taco Bell.
It's not easy to do unless you have very good control of supply chain. I referred to development capability already. Our marketing scale and coverage, you'll hear more about this, but we are the largest spenders in our industry on marketing and also in the rapidly emerging new digital area. We believe our operations to be the best in class, by Yum standards globally as well as in China by competitive standards. Lastly, a very robust IT infrastructure that allows us to put all those digital activities into place. In closing, just a couple of slides and then I'll hand over to Joey. The first is that, aside from all of this, we feel very pleased to be responsible corporate citizens in China.
This country has given us a lot in terms of operating freedom, consumer response, the ability to operate such a large-scale business. We do our best to give back. We do give back money by collecting funds and then matching them, this year for donating to people that are in need. We also have programs, and maybe Joey, you could refer to this briefly, by which we are able to help out in this case by, would you believe, selling potatoes in an area which finds it difficult to market them using our digital power. That's not the only tool. There are many others. For example, we have a program in the top middle called the Angel Restaurants, where restaurants are run entirely by hearing-disabled and other disabled people. That allows us to productively employ them and add to their skills as well.
There are several other programs like this. Recently, we covered a host of strategic thoughts in our board meeting, I'll summarize those four very quickly on this slide. The first is that we are very focused on China as a business. We see that as a strength, because it allows us to single-mindedly focus on what we believe is the largest emerging opportunity in the world. We intend to invest locally in China for growth as far as possible. The second is that we want to strengthen our core business, so the two major brands, KFC and Pizza Hut, are subject to considerable attention. We are not swayed by new brands and new acquisitions, et cetera, as much as by improving our stores, innovating menu, improving quality and value consistently. We believe that's our best passport to get consistent good returns.
The third I mentioned already, digital and delivery. There'll be several references to this. Last is innovation. I hope you'll see, especially those who are traveling to Hangzhou tomorrow, where in one mall across from each other, you can see a Pizza Hut and you can see a K Pro, which showcase our abilities to take this business forward with innovation at the retail level. With that, just a quick mention of our theme, which is Stay True, Aim High. The reason we chose this theme was that we believe passionately that our existing business is capable of considerable growth. We intend to invest behind that core business to grow. At the same time, we believe that in our existing business and very closely allied areas like digital and delivery, that we can aim very high and take this business to the next level.
With that, I'd like to hand over the stage to Joey. As was announced recently, Joey, I'm delighted to say, will be the next Chief Executive Officer of Yum China, taking over from me. It's been an absolute delight to watch Joey in action. As you know, she was the General Manager for KFC, then took on both KFC and Pizza Hut. Most recently was elected to our board of directors. Just an exceptional leader, so it gives me great pleasure now to introduce Joey Wat. Thank you, Joey.
Thank you. For those who travel from far away, welcome to Shanghai and welcome to Yum China Investor Day. Good morning. Thank you. Good morning.
Good morning.
Thank you. That's the way to start. Okay. Before we go to the Pizza Hut update, I will just spend a few pages on the sort of very high-level industry update. Okay. Let's recap the ever-changing consumer needs. As a brand builder, we are brand builders. Our number one job is to stay connected, stay relevant with the customers. What our customers are most concerned of, this is a sort of a cloud map because it's quite hard to really have a bar chart to do this. The rise of premium. It's basically consumption upgrade. We see huge trend of consumption upgrade in every aspect of life. Food, for sure, clothing, traveling, whatever, you name it, everything. The demand for convenience, the quality, the health, information-hungry, digitally-savvy, et cetera.
Among all, the number one thing we recognize that we, and also we respond to the customer change, is the consumption upgrade. What are the reasons? There could be many reasons, and as we can all understand, our customers right now are traveling everywhere. When you have the comparison, the value for money, et cetera, they start to ask for more. Rightly so. However, the number one reason behind the upgrade, we believe, is the income growth. If you look at the chart, the chart suggests that the income growth between 2010 and 2020, we're talking about 20% CAGR for the decade, and that's a lot compared to places like Hong Kong and Taiwan, where middle class, the income is pretty stagnant. That certainly fuel the consumption upgrade.
On top of that, what we also understand is the key driver for such increase of the income is the dual income, double income in a family. The chart right here also show that the women's share of the labor force is huge. It's very high compared to the other country, and that is a very quick way to have more income. At the same time, it also explains why delivery business is growing so fast in China, because when you have two working people in a family, it's quite hard to find time to cook, so therefore, let's order. It all makes sense. What happened to the catering industry? What's the growth? We still see double-digit growth, and we also understand a key growth driver is from delivery.
If you look at the 2015 to 2018, even between 2015 till now, we're talking about double the whole delivery business. It's going to continue to grow and grow. You will see why Micky earlier pointed out digital and delivery is a key strategic direction for us other than our core brand. At the same time, something anecdotally, we also understand that while there are many new restaurants opening everywhere in China, because data is quite hard to get, but we can see that everywhere, the survival rates might not be too high, because we also see huge change, turnover of the restaurant business. As Micky mentioned earlier, this is a tough business. The barrier of entry is quite low, but it's quite hard to survive as well. Fortunately, in this case, we have survived, and we continue to build 550-plus store a year.
In terms of the entire industry, if we look at the ratio between the chain store versus independent restaurant, we realize we still have quite a bit of opportunity, because even compared to place like Hong Kong or Taiwan, our ratio of the chain restaurant is still relatively low. We also understand there's a gap between the top-tier city and lower-tier city. We got that. Still, there's opportunity there. In this market, fortunately, Yum China is in very good position to succeed because over the last 30 years, thanks to many of my colleagues sitting here and many staff in the last 30 years, we have built some very key success factor for Yum China. Number one is attractive unit economics, good food, good operation, consistent service.
The other, even more importantly, is the scale, because it's not difficult to build one successful restaurant, but it's very difficult to build the scale to 100, not to mention 5,000 and 2,000 respectively. We have the skill set and know-how, and the depth of talents to do that. The culture and talent. Our shared service function are world-class across all the brands. Last but not least, which we're going to spend more time, is the digital capability. Today, I would also like to share with you what we believe is the magic formula, because from many source of information, you know very well about what do we do. In today's occasion, given we are all here, it's probably very good to talk about what do we believe. We believe in this magic formula.
We believe in happy employees plus happy customer equal to shareholder value, and the priority come with that as well. Our staff, our customer, if they're happy, they will make our shareholder happy. A simple but magic formula. We also tend to spend a lot of time to talk about customer needs, or how to create a shareholder return. What I believe is we probably don't spend enough time to talk about our employee. What are we doing to make sure our employees are happy other than good financial compensation? Three core thing, fair, care, and pride. Over 30 years, the company has done a lot, and we continue to do that. We continue to evolve. When our business model change from one simple model to multiple model, we adjust our bonus system for our store manager so that they are fairly compensated for the effort that they put in.
We put in the effort, we put in the investment to have heavily subsidized staff meal to make sure we care about our employee. Many people are part-time staff. We make sure they have enough to eat, because there's one thing in common for our 420,000 staff is most people, I would say 98, 99 people, are from pretty humble family. That staff meal matters. Pride. For shareholder, for customer, the store, the nicer store, the heavy investment of the store is very pleasant to come in and consume. However, whenever we renovate a store, we know, we understand the group who's the happiest group actually is the staff, because they work there every day, and nobody want to work in a shitty store. No matter how wonderful the brand is, if you work in a shitty store, it's just not good enough that you don't feel proud about.
It's something very simple, very common sense, but we believe these are important. In a nutshell of how to talk about how to really make sure we don't lose how important our employees are to ourself is the RGM number one culture. It is something I mentioned back to 2014 when I just joined the company, when I just first time get on the stage in New York. I talk about this is one of the very key reasons why I joined the company. As a retail company, as a QSR company, if we forget about RGM is the most important group of people for a company, then we lose the key success factor, the most key success factor. We want to celebrate that, and we want to keep that, and we want to even spend such valuable time like today to talk about that.
With that, let's move on to Pizza Hut. Pizza Hut, we started in 1990, 27 years from now. Over 27 years' time, we have built over 2,100 stores. As you can see the split, the little block here is the home service business. Before this year, we run the home service, which is the delivery business separately. This year, early the year, we have decided to put them together. All together is over 2,100 stores. The build-out has been very aggressive, especially for casual dining restaurants. In the last three years, we have had some tough time with all the reasons that we understand about the competition, the delivery, et cetera. We have three years of consecutive negative comp growth. Fortunately, in the last few quarters, last three quarters, with the hard work of everyone in Yum China, we have stabilized the sales.
It's still not easy because turnaround is a long journey. It doesn't happen overnight. Our biggest challenge of the brand is being outdated. This picture is very hard to find. This is what our customer told us. They describe us, if Pizza Hut is an individual, we will be [nuannan beitai . There's really no best English translation for the term. I think the closest translation is my reliable backup boyfriend. He's nice. Seems nice, eating noodles, right? He's nice. However, the problem is he's not very desirable. Our customer thinks of Pizza Hut, or goes to Pizza Hut, probably won't be the first restaurant to come to their mind. It's good to have a laugh about it, and we have a laugh about ourself because a few years ago, what customers told KFC was, KFC was a middle-aged security guard. Zhongnian baoan dashu. Today, we are xiaoxian rou.
Not bad, huh? Xiaoxian rou is, the two translations, depending on which one you like. The direct translation was a fresh piece of meat. That's not the meaning. The meaning means very yummy, attractive young man. We transform from middle-aged security guard to a young man, probably desirable. Within a few years, we believe that if we work really hard, we can transform this image to someone more desirable for our customers. In a nutshell, that's our challenge, is being outdated. No, we don't want to be there. We have to do everything we could to get ourselves to be more relevant. You're familiar with these four levers because I think we shared it in the earning release call. Fix the fundamental, the product, the menu, the service. Enhance the digital capability, particularly with the new Super App launch, the members, the CRM member push.
Optimize delivery network and experiment new models. One by one. This is an important page. I hope you can take a good look of this page. I hope you feel the sincerity of our Pizza Hut team. The best thing a Chinese family can do to show our hospitality to our guest is good food. Here, this is the new product that we just launched Monday this week. Our new autumn menu. There are about 20 new products in the menu. From pizza to pasta, to vegetable, to soup, to dessert, to drinks. We have invested in the ingredients. We understand the P&L impact when we invest in the ingredient, but we believe that is absolutely the right thing to do. We might even price it a bit too low, to price at such almost a liter big fruit tea at CNY 21.
We believe in the long term, that is absolutely the right thing to do because that brings customers back to our store, and that is the most important thing. Good food, got to be the right thing to do. We will continue to be as sincere as we could to give the best food to our customer. It will take some time because nothing change overnight. It is hard work. We will continue the journey. For the October menu, we also have a little focus on the healthy theme. For vegetable, other than salad, we have roast vegetables. Why? Well, because of our team's learning insight that Chinese, we like vegetables, but actually not everybody like uncooked vegetables. They are called salad. We like cooked vegetables too, and they are very healthy, even less oil. We try it. Seems good. We will put it on.
The Italian theme pizza is something completely new to us in the last 27 years. It is the first time we did it. Customer, particularly in top tier city, has clear demand for it. We push ourselves to do it, and we tried it in nine pilot stores. As of this week, we launch it in Shanghai and Beijing only. We will see how it go. We will continue to learn, we will get the customer feedback, and then we will continue to improve. Menu. We know our menu is too long, but how to solve the problem is another story. It is quite easy to cut the menu. It doesn't solve the problem, because that is not the problem. The problem is lack of very strong product. By cutting the menu without changing the product, you just lose sales. They are two different things.
By cutting the menu, simple cutting the menu, it doesn't address the problem that the menu, whether it is short or long, is relative to what they part. To what product. The way that we attack it is from multiple angles. For example, you can see this is the working day lunch. This is the menu will be given when you come in. Even though the print are small, I hope you can see at least two things. It should be CNY 35 minimum, starting from 15 minutes. We guarantee 15 minutes, we will get the food on your table, and the minimum is CNY 35. Good value and speed. Lunch is not a fancy depart, it is speed, it is value. We understand that. This is the menu for Bistro. It is only one page. Our normal menu is quite thick.
Fortunately, the October menu is half of what the August menu right now. Bistro, we give it one page. I will talk more about the Bistro. For different format, different depart, different menu, it makes sense. What else are we doing? We try to do something fun. Why? It might go a bit extreme with the color yellow like this in a tip station when you go by in the morning, you might be like, "Wow." We even have durian perfume for the durian window. Now, we are not going to torture you with the durian perfume this morning. It actually smell quite all right. It is more like fruity. We tried it on our app, and it was sold out very quickly.
Even for something as quirky as this, we want to be a bit quirky, a bit edgy, remember, because we want to be a bit more desirable. We need to continue to do that over time again and again in order to change the perception, because the perception also follows the reality. One quick way we hope we can start to change the perception is to bring a celebrity to advertise for our products. For this particular video, I want you to put down your phone because we will not air the video until next Monday. If you could put down your phone when we show the video. Just we want to show you the beginning of our journey to make ourself a bit more desirable.
If this is not handsome enough for any lady in China, then we have some more work to do. I think the million show is at the last Anyhow, you got it. It is the beginning of the journey, and we will continue to work on it. Have a bit more fun, if you know our brand well, in the past, a lot of this advertisement is more about food and food and food. What we try to get into is the attitude towards life. Have a little bit of attitude, because that is what young people like, and that is what young people are about. Have that little attitude. Other than young people, there are other Because we have 2,000 store with business for a wide group of customers. So we have kids who are definitely our customer. Very loyal kids customer.
We have the kids menu for them. It is called in a very sweet way. The kids call their meal 飞机餐, the airplane meal because of the plate. We also invest too in our future customer, these are the university students. If they come to our store with their university card, we give them 20% off. Because for students, usually, the wallet is a bit tight. What else? Operational. We cannot talk about fixing the fundamentals without talking about the operations. We always focus on operations. I guess what I try to bring out is, what are we going to do differently? What have we been doing differently? A big challenge in operation is the increase of labor cost. Every year, bum, bum. However, this is our business. We have to do something about it. What are we trying to do is to simplify the service process.
That's what we can do. Make our place simpler, make the job slightly easier for our staff to reduce the level of service, but still have very good customer experience. We change their uniform. Of course, even the simple thing, because retail is detail. Simple thing. In the past, the lady has to wear shoes with a little bit heel. Right now, we just let them wear whatever shoes they want. Very comfortable shoes, so they can run around, feel comfortable, relaxed, and more productive, funny enough, because they can run right now. We definitely are investing in digital technology to enhance the digital experience. We are doing big and small thing to improve the management and crew retention. To be perfectly honest, when the business is going through three years negative comp growth, it's really, really hard on the staff.
It doesn't mean that the staff can work less. No, they have to make work harder in order to keep the sales. We have to recognize that, and we have to help them. With a lot of good things going on, that also help to retain staff. Better retention of staff, better service. For a lot of these initiative, we have a very systematic way to go after it. This is our way. Win and scale. We find a way to make sure whatever we are doing is the right thing to do. We scale it up. We have nine stores in Shanghai that we carefully chosen. They are very, very good. Their managers are superb, and they help us test almost everything. Whether at the same time or not, it doesn't matter.
Whatever we are ready to test something, they are ready to take it. We work on it, and if it doesn't work, we drop it. It's okay, because it's a test. We can afford to make mistake. We should be able to afford to make mistake. If it work, we take it to selected city, and if that work, we take it national. For example, the roast vegetable that you saw is launched this week, not across the country. It's only from tier 1 to tier 3 cities, but still a big scale. For the thin pizza, because of a lot of technical challenges we are handling, it's only launched in two city. It's okay. We continue to learn, next step, roll out. These are all my wonderful staff who work very, very hard since March this year on the pilot.
Number 2, Super App. Other than fixing fundamental, let's move on to digital. Super App is a platform for full digital ecosystem. We launch our Pizza Hut Super App, pizza brand Super App, July earlier this year. It was very, very quick. Our IT team, our digital teams in Yum China is amazing. We basically took the system of KFC, we changed the skin, and we launch it out very quickly because we want the market, we want customer to educate us how to do it better. It has a key element that you would think. It has the delivery function. You can order food there. It has K GO, so it's a KFC thing, CLM, K GO point. Members' Day, exclusive offer, gift card. We have seen very promising results so far.
You can see in terms of member, right now we are at CNY 30 million compared to first quarter of 2016, CNY 3 million. The middle number is the number that is the first time we share. The percentage of sales from members in Pizza Hut is 19%. A lot of it has to do with the Super App launch. Mobile payment, right now we are at 35%. Obviously compared to KFC, this is a bit behind, but it's okay. We just started this year. Membership and digital engagement, I think I mentioned it before in the earnings release call, is about one more visit. That is a very magical point for us. From CRM to digital experience to the cooperation with aggregators, we want our customer to visit us one more time. In terms of delivery, number 3, delivery.
Here is a very clear chart to show that we have started delivery business a long time ago in the Pizza Hut home service stores only in the past. Until 2015, we let the other casual dining store to start the delivery. This is the number of stores doing delivery. By today, over 2,000 stores are doing delivery, and Home Service, historically, we have been using our own rider, and the casual dining store have been using the aggregator. With the quick expansion of the store, it results in very nice sales growth in terms of delivery business. For the brand, this quarter, Q3 of 2017, is 45%, but the portion from the casual dining is a lot bigger, because it's the expansion of the store. Right now, as of third quarter of 2017, 21% of our brand sales is from delivery.
As I mentioned earlier, in the past, there are two business. It naturally brought one challenge for us right now, which is, in the short term, we are still in the process of putting the two brands together, consolidating. Well, not two brands, two business together. Pizza Hut Home Service and dine-in. Why do we do that? Because it's the right thing to do. We are unifying the brand, the logo, the menu, the packaging, marketing, et cetera. Because in the past, because they're run in separate team, they're slightly different. By putting them together, customer will have very clear view of what this brand is offering. Even in terms of the packaging, the branding as well, is good thing to do for the customer. Internally, of course, that creates some challenges, while we are turning around the brand as a whole.
The store network optimization, that's something in the process right now. In the long term, we want to have one brand with consistent image and message. We have standardization for high-quality execution and efficiency. Number 4 is accelerate, remodel to rejuvenate the brand image. Our asset actually for Pizza brand is quite new, because a lot of store are built in the last five years. However, Chinese customer are very demanding, and they already find some of the designs a bit dated. Even though the quality is good, the design is, can we do something more to bring the nice modern feel? Of course, we can. We are going to do that. This year, we are doing some remodeling.
By end of this year, we should be able to do 145 store remodeling, and two-third will be partial remodeling, so it won't be the total store. It's the same thing that we did for KFC. The investment is relatively low, and we don't have to close the stores too long. The result is very good. Angela's team is very experienced because she led the new development and also the construction team. We're going to continue to do that. This is the look of a Bistro store. We will have 30 of them in 10 city to test different city, different trade zone. I guess my little friendly reminder is that this is still a testing process. That's why we are doing it in so many cities and different trade zone.
The footprint is smaller, slightly smaller than the normal store, might be less than 300 sq m. The format is fast casual. You go in, there's a counter, you pay first. So that you can see here the picture. You come in, you pay first, and then you get your drink, and then the salad, whatever, then for the hot food, we'll deliver to your store. It's more efficient in terms of labor cost, and young people like it a bit more. It's more relaxed. Quite a flexible model, and then the kitchen is half open, and even some of the sort of the pizza area, the customer can see how do we do the pizza dough as well. Pizza Hut, and I think some of you might have visit one in Shanghai last night.
For those who are going to Hangzhou, this is the look of the Hangzhou store. We only have two in our system right now. It's a way to learn about what customers want or the changing needs of customer. As a brand, we need to stretch ourself in order to really learn as far as we could about the customer. To summarize, Pizza Hut is still in the early stage of putting down a solid foundation for future growth. Our focus is on the fundamentals, which is about the menu, the product, and services. Supported by digital capabilities, new models, and delivery network.
With that said, I'm going to ask Johnson, our General Manager for KFC, to come out here to give you an update on KFC. Thank you.
Thank you, Joey. Good morning, welcome everybody. I feel privileged to be on the stage to share with you KFC China's business update. More exciting is that this is a special year for KFC in China that KFC entering in China for the 30th anniversary. All of the story starting from this particular restaurant. In 1987, October, we opened the very first KFC restaurant in Beijing, Qianmen Street. It was a sensational event. At that time, the American ambassador to China and Beijing Deputy City Mayor went to open this restaurant together with us. We find out there are many Chinese citizens in Beijing. They queue outside of restaurant. They want to taste the very first Western style of chicken.
Since then, we step-by-step solidly build our internal capacity and capability in terms of our operation, our development, construction, IT, digital, as well as our external supply chains network, logistic network, and our innovation capability. 30 years passed. We have built more than 5,000 restaurants here in China. In each and every province and major cities and tier cities. With this restaurant, we provide convenience location as well as comfortable ambience and service for our customers. They can happy and enjoy our incredible food and service in our restaurants. KFC rooted in China for 30 years. It also embedded in Chinese people's heart, becoming part of daily life in Chinese people. Right last month, in the 7th of September, in Shanghai, Oriental Pearl Tower light up for KFC to celebrate our 30 years anniversary. Lots of our customers, together with our employees, we join this celebration.
We witness that. We feel so proud, so touching. Let me use one video to share with you how did KFC China grows in the past 30 years. Please. Thank you. All of us in our brand in Yum China, we feel proud and pride for this brand. We work together with the brand, grow the brand to serve our customer. Another 30 years ahead that we feel we have more responsibility and feel strongly how do we continue build and enhance the brand to become a welcome part of Chinese daily life. Let's look into the business. In the past four quarters, KFC in China continue growth in the same-store sales. In the past quarter, we have enjoyed excess 7% of same-store sales growth. There are many factors to contribute our continued success in the past few quarters.
Our ambience, our service, our digital, our food, and our technology, and also communication way. These are the key reasons to support us to our continued growth. I would like to mention that in this quarter is higher than last year's same quarter, as Micky already mentioned. Some of the factor is because of the softness of sales in last quarter because of the South China Sea's impact. Overall, the brand continued growth with a very strong sales momentum. As I mentioned, food is our critical part of business. In this year, we did several disruptive innovation. Chizza is one of the most successful items that we launched. Chizza is called chicken pizza. It's made by chicken thigh on top of the toppings like a pizza. This is a very special format, and it's also not only delicious but a subject of talk.
This is a very word-of-mouth product on the internet and also in our restaurant. We starting a warm-up launch event, invited our KFC World membership to test our new product, and they love it. They share with their friends and social medias. During the launch, we find out a lot of people coming to order that, to enjoy that, and they share on their network. The sales was tremendous well, and it's sold out ahead of our schedule. Another good example is the Angry Burger. It not only tastes good, spicy, but also you can see the richness of the color, the freshness, the vegetable. On top of the burger, we have dried meat floss. This is also attract a lot of customer coming in to eat, to share, and then to continue to buy it.
Not only drive the traffic into our restaurant, we also continue to think about how do we increase our ticket average. In the beginning of this year, we put in some ingredient, which are fresh, are premium, to lift our product. Avocado series on the burgers and twister is one of best examples that we lift our ticket size. Other than the main windows, we continue to innovate some others dessert and drink. Starting from this last year, and particular for this year, we launched an internet popular product. It's called Cremia ice cream . It was very popular in Japan, but you can now eat in our KFC restaurant. It's a premium item, but we receive a lot of very good feedback and repurchase. It's RMB 25. It is very premium product. With that, we build up our ice cream's image.
We also enhance our ice cream with a lot of different time and seasonal LTO, like green tea ice cream, mango ice cream, as such. With good product, customers, they also like value. Value is a topic always embedded in customers' heart. If you have value on top of abundance, build it together, that's a treat. Occasionally, we use abundant value to attract our customer coming to enjoy our signature product, like our chicken on the bone, our wings. This is also a very successful tool that we attract customer coming to our restaurant. We all understand that KFC now is young, fun, and attractive. Other than our communication, our digitals event, as well as our new products, that suitable for young generation. We also leverage celebrities that they like our brand, they embrace our brand culture, our food.
With their publicity power and their fans, they come together with us to share with our new product with customer. Some of celebrity, they even feel strongly want to embrace our product during they are shooting the video. They have a lot of idea how to creative to share with their fans. With that, I want to share with you one of the video that not only attract our customer from their friends, but also our product is still the key and the major role of the video. Please. Right. We all know that with good product, that we can build a lot of data. In the breakfast time, it's also our range of business driver. We all know that breakfast is people who wants to have confidence food with convenient location and speed.
With our more than 5,000 restaurant convenient location, we think about how do we further enhance our operational process and leverage the system to help us to easily let customers take an order and pick up their food easily. Our pre-order and our internal system, that was the secret weapon to help us to let customers easily get their breakfast quickly, and then within our store, they can just grab and go. That created a lot of business opportunity for us and high customer feedback and satisfaction. Furthermore, other than our panini, Chinese dough, congee, soft drink and coffee, we also invented the Chinese-like cold rice roll. This is a very successful and signature product for our breakfast, too. Coming to delivery, this is also another major growth driver for KFC in China.
We all know that there are so many brands, they leverage third party to drive their delivery. KFC in China, we are among the first to invent our own application for customers. They can order from PC or from mobile for their food. We have built a very strong mobile app. Together with the payment and also customer information, customers can take the order from there and we can simply deliver from that. Our percentage through our own platform is the highest among the restaurant chain. We also have a very high percentage of our own channels orders. With that, we also try to add on the coverage of the store in different tiers of city, as well as add on the density of our restaurant. That our business was growing very fast in the past few years.
We are observing that we will continue to expand the business. Another exciting news that never ever in high speed rail in China, you can eat other brands of products other than the high speed rail bureau's product. In this July, you can simply take an order from your mobile phone and order KFC. You just need to tell them which train you are taking and which station you want to have the KFC product. Our restaurant in that particular railway station will produce, prepare the food, deliver it to the coach via high speed rail bureau, and the coach attendant will dispatch and deliver the food you ordered to your seat. Think about it. If you are sitting within the coach, the train coach, and you open the smell, so nice KFC chicken. How about the other seats people?
If they don't order, you will create a lot of trouble. As of now, there are around 20 rail stations that already joined this service. The high-speed rail will continue to expand that. This is a very good opportunity for us, not only to expand the business, but also to enlarge our coverage and provide our service and food in a different occasion outside of our premise and customer premise to enjoy our food and our service. For KFC coffee, we relaunched our coffee for about 2 and a half years ago. The coffee enjoyed very good feedback, the taste. Also in this year, we have more than 30% growth in the coffee business. In this summer, we launched another new product we call iced coffee. The coffee itself is good. We receive very good feedback. Also, we leverage our colonels to communicate.
The colonels not only sell the best chicken, also there is only one item probably can compete with the chicken, it's our coffee. It was very success in the summers to enhance our coffee's business. Children is the lifelong value for our customer. We treat it the most valuable of our customer. We are not only designed to suitable for kids menu. We also partner with Chinese Nutrition Society to design to fit kids' meal requirements menu dedicated for our children. Above all, we partnered with famous IP to design our campaign and our premiums to attract our young customers. Furthermore, we nearly host over half million party in our restaurant by end of August this year. With that, a lot of kids, they enjoy our meal, enjoy the atmosphere in our restaurant to celebrate and the joyful moments with their friend and parents.
That embedded in their mind as a long-term guest. We also partnered with China's Children and Women's Foundation that to select suitable for year 3 to year 9 book, that we bought it, we buy it and put into our restaurant as a reading corner for children. They are not only enjoy food, they can enjoy reading over there, too. This is the serious action and program that we did for our children's customers. Digital is very important part of our business. If I would say in the future for KFC, there are three Ds. What are the three Ds? We call data, digital and deliveries. Before, when we do business, customer come into our restaurant, we don't know who are them, what are they buy. Now, with nearly 100 million customers in our world membership, we can understanding who are they, we can reach them.
They can communicate with us. We can interact with them. We know what they buy, we know what their behavior or their interest. This is a very powerful data assets that we have. We can further digest and learn from that to better and easier to communicate our customer. Now those our membership already contribute 33% of our sales by August this year. For the digital part, I believe that Joey will share with you more. In here at KFC, we left our membership to do our first wave of 30 years anniversary series programs. In March of this year, we launched a campaign that our membership, they can use 30 years ago, our mashed potato price at RMB 0.8, and also our Original Recipe chicken, RMB 2.5 to buy the product.
It create a lot of customer coming in to buy that, enjoy that, to memorize. This is a very powerful tool. We also use the free trial for our membership, as I mentioned, the Chizza product, to warm up our new product. Each and every Tuesday is our KFC Membership Day. If you look into your mobile phone, in your KFC app that you can open, you have a coupon or you have a Tuesday special offer items. In that particular day, it's also a higher sales day for us in the day, that we create another small weekend on the Tuesday. For a member, if they are particular day for their birthday, that we also offer a half price chicken bucket for them. A company not only invent for food ambience operation, we also care about the customer's lifestyle.
We partnered with national marathons. We did a nine marathon across China city in these years, and we also hosted part together with the Chinese Basketball Association that we enter into the 10th years of supporting three by three basketball. In this year, there are more than 4,500 high school and also 300,000 youngsters, they play three by three basketball in our program. As Micky and Joey mentioned, we are a company with a huge heart. KFC, we have many different charity program. Not only to do because we want to do, but more important is each of these kind of people that we need to pay our special attention to for the care. Like our Little Bird Migration Fund, the children, their parents, they work outside of their hometown, so the family can't see them very often.
We offer in their hometown for them to work opportunity that they can work in our restaurant, so they can easily to have a income and also to take care of their children. The yuan donation that Micky mentioned, I will not repeat again. The First Life Foundation was to help those universities children that they don't have enough money to attend the school. We give them not only for the cash, but also provide opportunity for them to work into the nearby restaurant. Certainly, the Angel Restaurant, what we mentioned already. In this year, we built another five Angel restaurant for those people that they have hearing or other issues on hearing, that they can confidently work in our restaurant, communicate with our customer, so they live more confidence in the society. Certainly, we do care about the local community for elder and children.
We continuously enhance our restaurant. In these years, by August, we already remodeled nearly 400 restaurant, but we will continue to do that. Up until by the end of this year, we will have more than 80% of our restaurant been remodeled. The age of our assets are very new, around 3.5 years. In KFC, we are big, but we don't want to let people see that we are very similar and we are no different. Other than different model, we also think about in the local history or culture, can we build those restaurant who are in line or tied up together with local culture? Like in Nanjing, we have, we call Susu, a Silk Restaurant that with a local decoration.
In Beijing, Wudaokou, we have a restaurant that nearby the universities, that people they can sing and also enjoy the food and live band over there. Those kind of cultural specialists that we are continuing to promoting that, and you will be more and more with this type of restaurant in our KFC brand. Lastly, I would like to do a summarize. In the past two and three years, that KFC is a brand that continue enjoy a new innovation, younger image, fun, and more important, it's a trustworthy brand. With that, we feel strongly that in the next 30 years, we will continue to build KFC brand with a strong connection with our Chinese customers that we want to be and we are confident we will have another 30 years growing in China. Thank you very much.
Thank you again. We have about 30 minutes for this session, digital and delivery. Again, you will know a lot of the sort of initiative Yum China has done and will do. For the half an hour, I would like to focus more on what we believe and the thinking behind a lot of these initiatives. Start with digital, then we'll go to delivery. For the digital effort, we believe in the future of building a digital ecosystem across all points of consumer journey. Everything we do is around the entire consumer experience. Let's start from the before store. Before customer come into the store, our mobile pre-order, our virtual store geotargeting use LBS, to have the last mile communication between that closest store to wherever the customer is.
When the customers are in the store, we focus on the enhanced experience, in terms of ordering experience, in terms of the menu board, in terms of the pickup, in terms of payment and entertainment. I don't know how many do you know if you have a KFC app right now, if you want to listen to some music, go to our app, click. We have many, many songs there. If you really don't like the store music in that particular store, you can change that music too. You need to burn some of your K Gold to do that. It costs you very little money. All our intention is to get you to use the K Gold. The entertainment.
After store, of course, it's about the membership and also the customer feedback because we also use our in-store digital capability to collect customer feedback ourselves, and that itself is a treasure. The belief behind is actually not very technical nor digital. It's very common sense and basic. Of course, all these happen with the enable of the membership program Super App. What do we believe? I'm thinking about how to describe this. I think it's about when you look at a 30-second or 15-second TV ad. For customer, you just look at it as 30 second. Boom. Very fast happening. For us, the way that when we create this 30-second ad is we look at every inch of the film. Right? For the 30 second, we break it down every inch of the film.
This is the entire customer journey, and we look at little minute details of the every inch of the film of the customer experience, which in the past, I'm sure we have been doing it for a long time. However, we believe right now with the new technology, we can use many, many different type of technology to change, transform that original customer experience. The customer experience is the same. Before you come to the store, you stay in store, after you left the store, it's the same. We want to change the experience with the technology. I hope that makes sense because we are very good at breaking down the entire process into minute detail and how to increase the speed, et cetera. We applied that discipline and focus on detail to the customer journey with our digital capability. That's what we believe.
Even though we are not a technology company, we have many different little gadgets and different little fun things for customer. The entire journey goes like this. I explained it before the store, in the store, and after that. What I want to focus everyone is on the key focus area, which is pre-order, in-store digital ordering, payment, and after-store membership. Today I'm going to spend a bit more time on pre-order because I believe that's something we have not talked about it before in public domain. We started the pre-order from the first quarter of this year, and we've do it quietly because we are learning. We don't know. We might be making mistake. Once you're in the store, you can order with the kiosk. If you go to Hangzhou K Pro, you will see a row of them.
If you go to some other store, in [Non-English content] , the transportation hub, you will see some of them. Of course, the signage called the order, right? You can still use the traditional way to order, you can also use your mobile phone and the whole digital menu board. Even the digital menu board, it seems such a simple thing because we always have menu board. To have menu board right now with different-- We have slightly different menu. We have slightly different price for different type of store, and we have 5,000 store. You can do the math. The combination itself is not a small number. We are talking about thousands of version of them. Even though we have only 5,000 stores. We can manage it now. We can manage the complexity, and we can react very quickly.
In the past, we might need two weeks to print and to send. No, we don't have to do that now. The mobile payment, 45% of the sales, we have the 97 million members. On top of that, we have the gifting. The gift card, we sell the gift card as well. The entertainment, that's the music bit that I talked about earlier. I'm going to talk a bit more about the pre-order, in-store payment, and after store. Pre-order. Here's the numbers for yourself. We start the pre-order first quarter this year, we started with 2% of our sales is in pre-order. As of today, we are at about 15% of the sales come through pre-order. The increase is actually quite fast, probably a bit more fast than we expected.
Going back to our needle focus on the minute detail to understand how customer, in Chinese, we call it 场景. The way the customer use our service. Here are the potential 场景, the way the customer use pre-order in real life. Surprise, surprise, we find out a lot of customer, they order when they wake up. Think about it. You might have done the same thing. I don't know. When they wake up in the morning, they order first before they brush their teeth and make themselves look respectable. The other one is when they're in a store, there's a long queue, you use your mobile phone to order to jump the queue in a official way. You can jump the queue by doing pre-order.
Because there's a separate line for the pre-order people to pick up their food, you don't have to get in the normal queue. That's the beauty of KFC store. There's always a KFC store nearby, not too far away from you. On your way to work, before you get to the store, you start to order when you are in tube station, whatever, in a car. You order. A few minutes later, the food will be ready. You can even decide if you want the food to be packed before you arrive or not. You have a choice. If you're really in a hurry, you want the food ready-packed, you pick it up. If you're not, you want the food to be really perfectly warm with the perfect temperature, then you ask for the option to prepare the food only when you arrive.
It's very simple process. When you get in the app, you choose one of the restaurant. It's always restaurant-based, then you order, you pay, then you go to the special lane and pick it up. Because of the rise of pre-order, Johnson and our team has done an amazing job to transform the counter, because we have to transform the counter to have a separate lane just for the pre-order orders. In a store, you can see now this is the place where you do the normal ordering, and this is the place that you pick up the pre-order and other takeaway, et cetera. Then you can do the mobile ordering in a store, outside a store. You use a mobile payment, K-music, and then of course, the in-store Wi-Fi.
The mobile payment, I just want to sort of clarify one number which sometimes not sure which one is which, is we always talk about the mobile payment is 45%, but actually the other cashless payment is 15% as well. Add together is 60% of cashless payment. What are the other cashless payment? Here's the list. Of course, when you order internet through the aggregator, it will be cashless payment. Our gift card and other methods of payment, they will be cashless as well. 60% cashless. This is a huge contrast to before 2015 summer, because we only launched the mobile payment 2015 summer. Before that, 100% of our business is cash-based because we did not accept credit card in our entire KFC history. We jumped from cash to mobile directly. Okay, KPro. KPro has many elements.
I'll show a video, but one thing that I would like to point out is KPro is an experiment, because we are a big portfolio and we know, we understand we need to stay ahead of the curve. It's very difficult for the entire 5,000-plus store to just jump, right? Because you don't know where are you jumping to. We like to have some, one or two store, whatever, as experiment to try something different, a bit ahead. Maybe two steps ahead, maybe too far ahead, we don't know. Because we know for the entire 5,000-plus store for KFC, when we move, we probably should only move half of one step ahead, not two step ahead, because customer won't be able to follow. However, we always need one or two store to be ahead, so KPro or Pizza Hut to learn, just for the learning.
We prepare for a lot of the failure, et cetera. Actually, K Pro is a very low-profile project going on for a while already. We try different things and we learn different things. One key thing that we push to the extreme here is actually almost 100% is pre-order. We only have one tiny little counter. The screen, you won't see the normal till. It's flat. You cannot see the screen. There's always some customer who really, for whatever technical reason, cannot use the pre-order, then we can still use the traditional way to take your cash, whatever. This is the entrance. You walk in, there'll be one, two, three kiosks.
You can use the phone to order outside, or you go into the store, you scan the code first, because that will tell our system where are you, where do you sit, and you order. Over 95% of our order are through pre-order in this particular store. That's how we learn. We push it to the extreme. Of course, we also try the Smile to Pay, right? Smile to Pay. This is the first commercial store of Smile to Pay technology being used in China. Commercial application, the technology is being used in other area. You will see a video about it as well. For those who are going to Hangzhou, please share your feedback with us because it's still a learning experience. For those who cannot go, here's the video about the K Pro. We have two videos.
One is about the store, one is about the technology. Just a gentle reminder, the Smile to Pay technology is only for mainland Chinese citizens. If you have a mainland Chinese ID card. If you don't, I'm sorry. There's nothing we can do at this point. If you are twins, sorry, that's beyond the technology's capability for now. Okay. Hopefully that give you some idea about this restaurant. Of course, for brand builder to have a brand that is so rare for 30 years in China, suddenly have one green store itself is a bit of a crazy move. Hey ho, I'm so pleased that customers like it and we'll continue to learn from this very meaningful experience.
I'm not going to dwell on the details about all the little things that we try behind, because behind the scene, in terms of technology-wise, we try many things as well, see how can we speed up the process. One very quick example is because of the growth of the delivery, we realized, it's almost a bit like virtual traffic jam in the store because with the pre-order and delivery, et cetera, come to our POS system. In this particular store, we try something new is what about if we have a separate highway? We have one highway for the traditional way, and we have a separate highway for delivery. How does it work? It worked. It really speed up the process.
Things like that make us more, how to say, more willing to try new things because it is something we only learn when we are in the process of trying. Let us move on. What else? What is next? We are working on a lot of fun little things, but unfortunately, we cannot really share it until it is getting close to be launched. This particular feature will be available by the end of the year, pretty soon, is you and your friend can order at the same time. You can easily go Dutch in the KFC ordering in a party, whatever. Something fun, and you can agree what to order, what not to order, what is too little, too small. That also will be helpful for our catering business as well.
Among the delivery business, that one subset of catering business that we realized we can do more to serve our customer. We are getting a bit more detail, more specific towards different type of occasion. Come to the membership, after the preorder. By the way, just one last comment for preorder. We love preorder. Because why? Because we are using our competitor edge. Our stores are everywhere, and customer can pick it up, and they do not have to pay for the delivery fee. That is good. It is very good for our business, good for the business, and good for the customer as well. Membership program. The key enabler of the digital experience. 120 million, so obvious you can do the math. So far, we find out it is about 10 million overlapping of the customer. Actually, it is a bit less than we expected.
We will continue to work on it. As we expand the Pizza Hut one, the overlapping might be a bit more. We will see. We actually, both brand, we actually started the CRM program about the same time. You might ask why the KFC program is growing much faster than the Pizza Hut, other than the fact that KFC is a bigger business. Well, there is little thing called Super App. KFC launched Super App lot earlier than Pizza Hut. Super App, we only launched the Super App July this year. The Super App really is an enabler to recruit members, and then keep them. Therefore, we put in so much effort to launch Super App for Pizza Hut so quickly this year. For the KFC system, the members is 33% of the sales. And if you remember, Pizza Hut right now is about 19%.
I think you can see that for Pizza Hut, we have more opportunities to further push the members, and we will. We also launched member exclusive campaigns, and Johnson talked about it already. Among all these campaigns, this year, 30 years is a very special year, so we really go heavy on it. Because of one unique advantage of KFC brand, which is history. I am sure many of you guys here have your own first KFC story if you grew up in China. Usually, it is about if you do really well in school and exam, then mom and dad will bring you there. That moment, that first moment, was always special in many Chinese heart until today, and we want to capture that. We want to remind you 30 years ago, many of you guys are still very young, probably, less than 30 years ago.
We want to bring back that good feeling. That good feeling, long time ago when you went to KFC. The first time your parents paid two and a half RMB for that Original Recipe chicken. Many family, many kids, or many young people today still remember the kid, yourself, was the only one who can eat the chicken. Your mom and dad were just watching because the price was too high. It was very expensive. Anyway, today, you're doing very well. You can afford many of them. But we still only want two and a half RMB. What are we doing here? What's the thinking behind? We want to thank customer. We want to thank you for your loyalty. We want to thank you for your support. We want to talk to you.
We want to give you the value. We want to give you the 情怀 as well. We want to give you the value in a meaningful way. Giving value, everybody can do. As long as you have money, just give the value. No, we want to give you the 情怀. We want to give you the good memory of your childhood. That's what we want to do. What are the thinkings about the member exclusive campaign here? We believe that when it come to doing value, because of size, it actually is a disadvantage if you think about it. Why? If you're a small business, if you have one store today, if I run the promotion, very deep promotion, it cost you this much. Today, we have 5,000 store for KFC alone. If we want to give our view of the value that it costs so much.
When it come to value, we become less agile compared to our competitor actually, because we are so big. It's okay. We have a way to address it, we believe. Which is, if I only focus on our members, then suddenly I'm not talking about 300 million customers that we are targeting. We are only talking about 100 million customers. Then we can afford that value. Suddenly, the value campaign become more affordable. I hope it makes sense. We've been doing that again and again, and we do find that the value perception towards our brand among our members is a lot better. Lot better now because we focus on giving member exclusive value, because we want to spoil our members. If you are not our members yet today, download our app. Lot of good stuff there. We also have customized offers.
Johnson talk about Tuesday is KFC day. I also want to talk about Monday is Pizza Hut's day. We have quite a few brands. Maybe in the future, Wednesday and Thursday for other brands as well. Right now, Monday and Tuesday are the members day for two big brands. We also do free trial, and Johnson talk about it. You know what's really fun and exciting about it is we only give away 2,000 portion for trial for new members. The cool thing is you can have it before everyone else, before all the customers in China have it. You can try. We give away 2,000 free Chizza. The really cool number is we got 1 million customers sign up for it. That's pretty cool. We like it. We'll continue to do it. Now we have enough numbers of members.
In the earnings call, I talk about now we have the quantity, we want to achieve quality. How are we going to do it? This is pretty straightforward. I don't think there's anything sort of that special about it. I think, it's just the normal sensible next step is we're going to segment our customer from fans or mass customer. It's about the reach, a lower cost of reach. Right now, we can reach them at very low cost, to frequent user, to heavy user, and to brand lovers. We have slightly different program for different type of customer. Again, very common sense that for the welcome member, the product launch. When you join, I give you some data-driven coupon and product launch or interaction via K-Gold. This is a very fun game.
If you have our app, there's always a little game that all you need to do is just press it and shake. You try your luck today. It's a silly, little, funny game, but somehow it's so popular. It burns so many or so much K-Gold that we couldn't believe. It's about just a little entertainment. Just light up your day a little bit, right? For the privilege member, we focus on the lifestyle. For the brand champion who was very loyal, we want to talk to you. You give us feedback, we want to reward you with K-Gold. We want to talk to you directly. Please come talk to us. Don't talk in Weibo. Whatever negative comment, we want to know, come to talk to us directly. What about Pizza Hut? I talk a lot about KFC.
Pizza Hut, the direction is very clear. We launched the CRM and delivery for the July version, here come to the November version. The November version, what's the difference? I hope you can see the difference. It look a bit more stylish, right? The design is a bit more trendy. Also, we are going to add the mobile self-ordering, too. I mean, self-ordering for casual dining is slightly more complicated than the fast food restaurant because the menu is a bit longer. We believe it still can be done, the picture and the layout, we are learning. Also what else? If I have to make one more point about the Pizza Hut Super App is the same idea that when we do KFC digital, we divide up the customer service experience into a very small little point and focus on it.
We're going to do the same thing for Pizza Hut, it's going to be slightly different experience, isn't it? Because it's a casual dine-in. Let's say for the app that coming, we're going to add a little feature, which won't happen in KFC, which is called, you can wait for your table via your phone. You don't have to come in to register with a lady standing in the front. You can just register your table before waiting for a table. Just something very simple, just take the stress away from the customer. KFC will continue to push ahead and try as many cool new things as possible. Pizza Hut, we're going to learn diligently after that, while making some changes to fit the different casual dining business. That's the digital session. Let's talk about delivery.
Let's spend a little bit time on the delivery. Delivery is important to both KFC and Pizza Hut. That's very clear to both brands, and the teams are pushing for it. However, we believe this is a huge business for Yum China. We need to support the growth of delivery business in the brand at Yum China level as well, by having some thoughts about how to do it consistently across the brand, by learning from each other. It's a bit like, this is a very promising young man. He's independent, but parents do want to help a little bit in our own way. Not too much, but in our own way. That's the sort of the relationship. KFC and Pizza Hut are the number one delivery brands in our respective categories with key value differentiators.
What are the key differentiator we want to defend and protect? Food. Quality of food. Our delivery menu is not the same as casual dining. For a long time, KFC did not deliver french fries because by the time it reach you, it won't taste good. Until we figure out a way to do the french fry, the more chunky one, so by the time it reach you, it still taste nice, then we start to do it. We just don't compromise on food quality, and that's number one. Even it means no business. Service. Why KFC have all our own riders? Because of service, reliability of service, especially during bad weather when the demand suddenly surge. That's how we make sure that we meet the customer demand. Network, 5,100 delivery units, over 800 city. I think that footprint is pretty big.
Even compared to. It's not as big as aggregators, obviously. For two brands, for one single company, that's a pretty big network. Again, for delivery business, we apply our same similar discipline to look at different segment of the customer experience and ask ourselves, how could we do it better? From the brand itself, that's one of the reason why we put home service and Pizza Hut casual dining two unit together, because from customer point of view, they want one brand. They don't want to be confused. They don't want to be mistaken by it. Then we have our own delivery-only value promotion, only for delivery platform, not for dine-in, not in the stores. We can order it anywhere, everywhere. Johnson already gave you an idea that right now you can even order it for the high-speed rail.
I have to remind you have to do it when you buy the ticket, I think. Before the journey might be a bit too late. That give us ideas. What are the other occasion that's outside our store that they can order? Something for us to think about and to work on. Easy to order, the touch point. What about the package? What can we do with the package? We have delivery specific packaging design, and we need to continue to work on it. Even this particular food drink for Pizza Hut, this is designed for delivery. In the past, we always serve the drink in a glass. For this particular product, it comes in a plastic cup. Nice one. Even in-store, come with plastic cup. It help the delivery business as well.
Even for some particular festival product, like this is the Christmas, the Kaoji, the whole roast chicken for KFC, it was very popular. It's only for delivery. It's not available for the store, and you have to reserve in advance. Delivery right now, we look at it as a separate business with a bit different customer need, that's just a bit different from dine-in. The delivery network expansion, as you can see here again, the massive increase is mainly driven by the Pizza Hut casual dining restaurant that add to the network in the last 2 years. It has driven our growth. We have 2 business model. One is the KFC one, 3,000 delivery store use KFC riders only. Pizza Hut one, 2,000 store use both third party and own rider.
As a company, the delivery business is 14% of Yum China right now. The growth for the third quarter compared to the previous year is over 50% for 2 business combined. If we looked at it as a separate business across all the brands, what can we do? Well, in the future, we're going to focus on 4 areas. One is campaign innovation, the other one is digital innovation, data innovation, and network expansion. Campaign innovation, for example, this is the platform, what we call the platform for KFC delivery called Wow Bucket. It's only for delivery. If you buy, you can buy whatever you want up to CNY 80, CNY 100, then we give you 20% off. It's very simple mechanism. It's brilliant because it's customization. It's very simple customization that's driven by yourself. It's very difficult for the store to do.
On the delivery platform, it's very easy to do. Customer got it right away. For each campaign, when we run certain massive campaign, we might utilize it for the delivery, or they can have their own campaign designed just for delivery. When we use Lu Han for the fried chicken and for a long time, the Wow Bucket used Xiao Zhan, who's a comedian. It's a different way to tackle the campaign innovation. Value. We'll have value program just for delivery business as well for both KFC and Pizza Hut. We have the everyday 1 CNY. Why we can do that but not in the store? For example, KFC, because the ticket average for KFC delivery is like twice as those in the store.
For that alone, we can afford to run a 1 CNY promotion for 1 product because you will buy the other product and it still works. It works here, it doesn't work in the stores. They will have their own value program. Digital. Digital innovation, obviously, because 90% of our order coming from digital. This is, in terms of marketing campaign, everything is through the digital. This is the way to go. At the same time, we invest quite heavily behind the scene in the IT system to help our delivery rider to shorten her delivery speed, to improve the customer satisfaction. Data. Delivery has their own data as well. It's a bit different from the dine-in too. The breakfast. The convenience makes a huge difference. It's the habit. We will sell the breakfast business, we call breakfast coupon.
You buy 10 breakfast coupons, or 20 or 30. Why? Because while for dinner you want to try something new each evening, for breakfast, you want to have something similar every morning. It's okay if we sell you the 10 coupons for the breakfast business while delivery. Afternoon tea, mainly for the urban professional, very target. Coffee, very good for delivery as well, iced coffee in particular. The special occasion, because you have to go into our website to reserve it. We have very clear sort of campaign program for delivery business themselves. Johnson talk about it already, high-speed railway, we're very excited about it because the food tastes so much better than whatever the bureau provide. I think we all have enough experience. Come back to the theme of Stay True, Aim High.
Let me summarize the delivery session with the 2 following points. Point 1 is, other than all these campaign innovation, digital innovation, et cetera. Naturally, what else are we thinking? We are thinking about it, we are planning, not ready to have a concrete plan to be shared with all of you guys here. We're starting to think about, we have the delivery rider for KFC, we have the delivery rider for Pizza Hut, we also have the delivery rider for [Non-English content] and [Non-English content]. What can we do better? How can we get more efficiency out of it across different brands? It's a natural and logical question. We are certainly thinking about it. By the time we have a concrete plan, we'll come back to you guys. The last point is, what I want to say is I'm very excited about the brand.
I'm very excited about the business. The brands, I should have said the brands. I'm very excited about the business and I'm very excited about the team. I think this is a fantastic business. In the short term, the role might not be that straightforward. We have a lot of challenges, particularly in Pizza Hut. However, the long-term opportunities are good because the foundation is so solid and unique and special. I don't only say about this now. Actually, when I joined the company 3 years ago, September 15, 2014, the vibe of the company was very different because KFC was having double-digit negative comp growth. For a brand like this, double-digit negative comp growth was very difficult. However, even with double-digit negative comp growth, it could not take away my excitement towards this particular very special and wonderful company.
With that said, I'm going to ask Jacky to come up here to share with you some numbers. Thank you very much.
Thank you, Joey. Good morning, everybody. Before I get started on our financial update, I would like to take this opportunity to quickly introduce myself since this is my first time speaking at Yum China's investor conference. As you have heard from Micky earlier, I joined Yum China in mid-August last year before the spin-off from Yum Brands. Prior to that, I worked for Ernst & Young, including five years as a partner and the last two years as the deputy head for their capital markets group for the whole Asia Pacific region. Out of my 17 years in the public accounting profession, 10 of those years were based in China, including five years in Shanghai and five years in Shenzhen. Throughout my professional career, I have had extensive experience working with U.S.
Listed company, advising them on SEC reporting and compliance as well as capital market activities. I was really excited to have the opportunity to join Yum China last year. Apparently, my two kids were even more excited than I was because you see, they used to have trouble explaining what my job was. After I joined Yum China, they simply just tell people I sell pizza and fried chicken. Let's get started on our financial update. As you have heard from Micky and Joey earlier, our theme this year is Stay True, Aim High. In the first part of my presentation, I'll talk about the core of our business model, how we stay true to our priorities and how we create value for our shareholders. In the second part of my presentation, I'll talk about what we aim to achieve from a financial perspective.
Let's begin with how we stay true to our core. Many people ask me why I decided to join Yum China. Let me start off by summarizing what I think make Yum China unique. First and foremost, the management team here is one of the most experienced team of restaurant operators out of the whole China. Because of these exceptional leaders, we are the top restaurant company in China with over 7,700 restaurants, and we have about 80% of which is equity-owned. For years, two to three decades, we have been successfully operating two major global brands in KFC and Pizza Hut. Late last year, we were very excited to introduce a third global brand in Taco Bell to China.
Another unique strength of Yum China is our nationwide supply chain, which was built from the ground up, and we have been fine-tuning that over the last 30 years. This is a competitive advantage that is very difficult to replicate in a short period of time. Last but not least, Yum China is a unique investment opportunity for investors because our shareholders get exposure to China growth through a U.S.-listed company with a long history of Western corporate governance. Going forward, we have a very clear plan on how to create value for our shareholders. We'll stay true to our four top priorities. First, we'll continue to drive system sales growth by building net units, by adding net units. Second, we'll continue to focus on growing our same-store sales, which is always our number one priority.
Third, we'll aim to keep our restaurant margin as well as G&A costs under control. Finally, we'll be disciplined, but at the same time, we'll be strategic with our capital allocation. I'll elaborate more on each of these priorities throughout my whole presentation. Let me start with development. To date, we have more than 7,700 restaurants present in over 1,100 cities. We have committed to opening 550 to 600 new restaurants on a gross basis this year. This means, on average, every day, we open about one and a half restaurant. On top of that, or the new openings, we continue to upgrade our existing restaurants to refresh our brand image. Since January 2016, we have remodeled over 1,200 restaurants across China. That's equivalent to remodeling two restaurants a day.
Under Angela's leadership, I think we have the largest development team unmatched by any other restaurant company in China. Our 1,000-plus team members, they basically cover every province in China with extremely valuable know-how at the local level. We have invested heavily in their training so that they are well-equipped to operate effectively. Aside from our people capability, local intelligence is also very important. Since many of you are experienced investors in the China market, I believe you will agree with me that reliable data is not always readily available. At Yum China, we have built up our own database with every single one of our site selection decisions, so we can easily reference to for our future new builds. Despite our large scale, we still take a vigorous bottom-up approach to our development.
We evaluate our site selection proposal one by one. We get input from our development team, brand team, finance team to ensure we make informed decisions on every single site development. Also, we actively monitor the performance, the financial performance of our new units. This creates a cycle of learning that helps us to make better and better decisions on future unit development. Now moving on to our new unit economics for KFC and Pizza Hut. Our average unit volume is typically higher in the higher tier cities. At the same time, our operating costs are also higher in the higher tier cities. Net-net, in the end, our cash margin are quite consistent across city tiers. Our average pre-tax cash payback period is about two years for KFC and less than four years for Pizza Hut casual dining.
For both brands over the years, the size of the restaurants has gone down because of delivery. Cash margin has improved. Also our development team has made a concerted effort to lower the cash investment amount. This is why we were able to sustain and even improve on the pre-tax cash payback period for both brands. Finding the right locations and maintaining a consistent return profile in China is not an easy feat because traffic patterns are evolving as new trade zones develop. How do we manage our return profile? This is where our local experience and scale give us a competitive advantage over our competitors. I already touched on these aspects on the previous slide. I want to give you some background in terms of how we define our city tiers.
We classify China into 6 tiers based primarily on the size of the population and the affordability of our brands. The Tier 1 cities are the well-known regional centers, but the Tier 5 and 6 cities are the county level townships that have been urbanized not long ago. Our geographical mix is gradually shifting from Tier 1 to the lower tier cities. We will continue to invest in Tier 1 because there continues to be opportunities where new trade zones and transportation infrastructure are built. For the lower tier cities, we see even more room for development in the future. Many people have asked us whether we will consider switching to a franchise-led model like our peers in the U.S. Our response to that is we'll continue to drive growth by building mostly equity-owned stores.
This is the right model for Yum China, because we believe China continues to be an extremely attractive market for capital investment. I also believe that our equity store model represents how strong our management capability is, our commitment to quality, and also our financial strength. We will continue to capitalize on the fantastic growth opportunities in China. Let's take a look at Yum China's leading position in China's restaurant industry. KFC has a 2 to 1 lead over its nearest competitors in terms of store count, and Pizza Hut has almost five times as many stores as its nearest competitor. Because of our development capability, we believe we are able to enter into new markets way ahead of our competitors. Also, we are able to open multiple formats across different brands, city tiers, and trade zones.
Our supply chain is another key capability that allow us to stay so much ahead of our competitors, and you'll hear more about this from Danny, our Chief Supply Chain Officer, later this afternoon. In terms of how many more units we can add to our system in the future in China, you have already heard about this from Micky earlier. We believe we still have a long run rate for growth in China because of our penetration rate and also the macro environment here in China. Our current restaurant penetration rate is about five restaurants per million people. That compares to about 55 to 60 restaurants per million people in the U.S., and about 25 to 30 restaurants per million people in other Asian countries.
Even at a modest penetration rate of 15 restaurants per million people, we still have room to grow our store count by about three times to over 20,000 restaurants. One thing that China is experiencing right now is an unprecedented rate of urbanization. China's urban population is already bigger than the entire population in the U.S., and it is still growing. We believe China continues to present a great opportunity for unit development, and we'll continue to capture these opportunities with discipline and focus. Now, moving on to same-store sales growth. We have recently reported on the third consecutive quarter of increasing same-store sales growth for Yum China and for KFC. The trend is very encouraging. We are definitely moving in the right direction. For Pizza Hut, same-store sales growth was actually positive for all three quarters in 2017.
We'll continue to invest in upgrading the products and services at Pizza Hut restaurants, which may create some pressure on our margins and our operating profit over the next few quarters. We believe this is the right thing to do for the long-term health of the brand. We believe Pizza Hut still has great potential in the casual dining category in China. Let's take a look at how we plan to drive same-store sales growth. Since most of our restaurants are equity-owned, we must focus on driving transaction and same-store sales to achieve sales leverage. On traffic growth, we use a combination of product innovation as well as marketing campaigns to attract customers.
We launched over 70 new products across our brands. We are already planning on our new product calendar for 2018. We believe they will be just as exciting as this year's. Our view on marketing is that we do not want to be overly promotional, because we think that excessive discount on our core products will eventually compromise our margin and brand value. Instead, we want to attract customers by giving them great value offers. This is how we define it, is a five-star dining experience at a three-star price. These value offers really help us build traffic across our day parts this year. Let me give you an example. I'm sure most of you have looked at the Rebecca commercial videos earlier.
We launched this high-quality coffee product. We aim to offer this product basically to all of our stores in the future. For CNY 20, you get 16 oz or about 468 ml of very high-quality coffee. This is freshly brewed latte. The price is extremely competitive in the market. In fact, our coffee business has expanded so rapidly, I believe we are now one of the leaders in the coffee category in China based on the number of cups sold. On digital and delivery, you have already heard from Joey earlier, this is a powerful tool to drive same-store sales. Also, our loyalty customer program give us a great source to gain insights into the consumption behavior of our customers, and we will harness the information and data to create incremental sales in the future. Let's take a look at our restaurant margin.
In the second half of 2016 and the first half of 2017, there was a positive impact from the retail tax structure reform or the VAT reform in China. This is no longer a tailwind since quarter three this year. Going forward, we have to focus on system sales, cost control, as well as productivity initiatives to improve our margins. The single biggest driver of our margin improvement is transaction leverage as we drive same-store sales growth. We have already touched on this extensively on the previous slide. The second most important factor is inflation. Whether we can keep our restaurant margins stable depends on our ability to offset inflation through pricing and also productivity gain. As a general rule of thumb, we will look to price out inflation.
When we decide on the timing and magnitude of our pricing actions, we will take into account the momentum of our same-store sales growth, the consumer sentiment, as well as the general macro environment in China. For example, in the first half of this year, food and commodity inflation was about 4%, but we took minimal pricing. The reason was we wanted to return the value to our customers and to create core value for our brands. Our supply chain teams also work extremely hard with our suppliers to negotiate price and to identify cost-saving opportunities whenever possible. I think our procurement strategy is one of the best, if not the best here in China. Also, I believe as we continue to grow in scale, our bargaining power will increase as well. Finally, on labor efficiency.
Depending on the momentum of our same-store sales growth, there are potential opportunities around productivity initiatives, particularly on operating efficiency. Wage increase is an inevitable nature or reality in our business. We have to adjust the salary of our restaurant crew based on the minimum wage requirements set by the government. What we can do is, we can work on scheduling to help our staff work more efficiently. You have already seen some of the in-store technologies in Joey's presentation earlier. For example, like pre-order, the mobile payment, face to pay, et cetera. These technologies are tools that help us reduce the workload on our staff and also help to speed up our services. We are absolutely committed to improving our labor efficiency without compromising on the quality of our product or service. Now, let's talk about G&A.
We are currently in our first full year as a public company listed in the U.S., we incur additional G&A costs to support our governance, reporting, and compliance requirements. For 2017, we expect G&A increase will be about low teens% year-on-year in local currency. This sets the new base of our public company G&A cost going forward. As management, we will actively manage the increase of our G&A costs. We are working across functions to analyze and also enhance and optimize our G&A cost structure. We are committed to identifying G&A cost opportunities whenever possible. Let me give you an example. We set up a shared service center in Wuhan, where some of our back office and also the more routine processes are located. The labor cost in Wuhan is much lower than the labor cost here in Shanghai.
Wuhan has over 40 universities, there's a pool of very well-educated young talents that we can recruit from. We are always looking for ways to do things better here at Yum China. This is a very well-established culture here. In the longer term, our goal is to keep the increase of G&A below our revenue growth. This will be our aspiration going forward. One of the most powerful aspects of Yum China's business model is our capability to generate substantial cash flow and the fact that our balance sheet has zero debt. Between 2014 and 2016, our free cash flow actually grew at a CAGR of 26%. In the first eight months in 2017, we have generated close to $1 billion of cash from our operations.
As a restaurant company that operates mainly equity-owned stores, I think this is quite an achievement. At the end of August, we have almost $1.6 billion in cash and short-term investments. You all know we generate enough capital to reinvest into our core business and also support our new unit development, but we also have extra cash to return to our shareholders. So far in 2017, share buyback has been the primary method we use to return capital to our shareholders. Our board of directors authorized us to buy back shares at about $550 million. By the end of August, we have executed $128 million. This quarter, we declare our initial quarterly dividend at $ 0.10 per share for a total of $39 million. Last but not least, I think most of you have already heard about this presentation yesterday from Sunny.
Back in May, we acquired Daojia for strategic reasons. As a public company that is not even one year old, we have successfully executed on all three aspects of our capital allocation plan. Most importantly, we deliver on our promises to our shareholders. We are very confident in the long term in our cash flow generation capability and also in the strength of our core business. For 2018, and as you have heard from Joey and Micky earlier, we'll continue invest into our core business. This is our top priority. We have existing authorization under our share buyback plan. We aim to buy back more shares in the most opportunistic and cost-effective manner. Also, we aim to pay higher dividends on a per share basis, subject to our capital needs.
Finally, we'll implement various strategic growth initiatives that leverage on our core business and our unique strength in China, and the focus will be here in China, as you heard from Micky earlier. Now, I would like to share with you what we aim to achieve from a financial perspective. To recap, our ongoing financial targets are high single-digit system sales growth, a long-term restaurant margin of 17%, and also double-digit operating profit growth ex FX. Over the last two or three quarters since we have become a public company, we have been encouraging our investors to focus more on our long-term operating profit growth. Although year on year, this is never predictable, so there may be a year here or there that we may miss the long-term target. In the long term, we are confident that Yum China will achieve double-digit operating profit growth.
Over the next couple of years, we'll encourage you to focus more on our overall operating profit instead of our EPS. The reason why you should focus on operating profit growth instead of EPS growth is because there are multiple factors that cause volatility to our EPS. Let's take 2017 as an example. There are two factors that cause significant volatilities to our EPS growth. The first factor is our effective tax rate. Well, our current effective tax rate comprises two components. The first component is the China corporate income tax rate, which is 25%. The second component is the 10% withholding tax whenever we repatriate cash out of China. The more cash we repatriate, the higher the effective tax rate will be. The impact on our annual effective tax rate depends on the amount of cash we plan to repatriate in a given year.
As you can see on this slide, for the first eight months, our effective tax rate was already higher than the effective tax rate for the same period last year. For the full year, we expect our effective tax rate to be no higher than 30%. The second factor that caused significant volatility to our EPS growth this year was our diluted share count. If you look at our diluted share count at the end of August this year versus our diluted share count at the end of August last year, there was a 9% increase. It was mainly due to the common shares, as well as the warrants we issued to our strategic investors upon spin-off on November 1st, 2016.
Also, some of the share-based awards we granted to Yum Brands employees earlier that were carried forward after the spin-off, as well as share-based awards we issued to our own employees. Going forward, as the share price increases, the dilutive impact from the warrants and the share-based awards will also increase, which will lower our EPS growth. However, our buyback program will offset some of this dilution impact. This concludes my presentation for today. Thank you.
Thank you, Jacky. Now I would like to open the floor for Q&A. Because of our time constraint, I would appreciate if you keep to one question and one follow-up. We welcome the first question.
Take the question any order that you like, but I expect that a lot of the questions will be directed towards the speakers who spoke today, which is Joey, Johnson, Jacky, and myself. Just as a reminder, our entire leadership team is present here. We also have people like Connie, who is our Head of Central Planning. We have Melissa, who heads up our tax. We will be happy to take your questions. I think it might be best, Elaine, if you can pick the order of the people asking questions, and then we can answer them to the best of our ability. We have about 40 minutes, so we should have plenty of time.
The gentleman at the back, please.
Is this working? Okay. Since most of the KFC stores have been remodeled about 80%, what would be the run rate for maintenance CapEx over, I don't know, the next five years or so as a percentage of total CapEx that we see in the investment part of the cash flow statement?
I don't know whether we've given that number up. I think we may have issued some directional numbers with regard to maintenance capital as a percentage of total CapEx. I don't want to give you a wrong number off the cuff. I don't know, Jacky, whether you can help or Joey with some information. The essential point is that a lot of refurbishment was done over the last couple of years. To get an estate up to 80% refurbished is quite a good achievement in our industry. I will remind you that it can never be at 100% because many leases expire with one or two years remaining, and there's no point redoing those stores. In other cases, there are technical reasons why refurbishments cannot be done. I think we are in a pretty decent position as of now.
As regards the total CapEx, I think we've given some numbers out before, Jacky, of the total amount of CapEx on existing stores. I think it was the order of about CNY 400 million, as I recall. Approximately 25% of that also would be towards maintenance. Don't quote me on that. I mean, you can quote me, of course, but we have to verify those numbers and get back to you with exact. The bulk of the total CapEx is towards new construction. Joey, you want to add anything?
Without talking about the number, maybe it's helpful to talk about our thinking behind the remodeling. Even though the estate will be 80% remodeled by year-end, we will and we need to continue to invest. Because with the bulk of our estate, the store actually age quite quickly. Because every year there will be some store that reach certain age that we need to reinvest. In the past, we look at seven years as the time to reinvest. Right now, we look at five years. Because customer want the new store, our store cannot wait for five years. Actually, five year is the total remodeling. We also have the partial remodeling. Every three years, we do it. Actually as the estate grow bigger, we need to continue to do that. Otherwise, they age very quickly. Johnson talked about three and a half years.
Three and a half years, after three years, really hard. Kind of go down to the path that we don't want it to see.
What would be the average cost to remodel a store and how long does it take to remodel?
We have a range. Typically, a full remodeling costs about CNY 2 million plus. However, we have partial remodeling as low as CNY half million or CNY 1 million or CNY 800,000 is the range. The way that I looked at it is, the parent quite rich. We can say that we are quite rich. We have a lot of cash, but each kid need to be on his own. How much are we going to put into each store? Well, how much can you afford? Each store. That drive the decision more than there's a standard formula. Also there's a variety of reason. Like a busy store like Beijing, even though the kid can afford full remodeling, but we won't do it because the full remodeling will shut the store for 30 days.
If we do partial remodeling, in between the holidays, the busy time, we have little gap, we do some remodeling. Maybe two months later, we do another bit. Quite flexible. The key thing is, do the right thing to give the customer best experience with minimum impact on the sales. Because the biggest cause of remodeling is not the remodeling cost. The biggest cause of remodeling is the lost sales. We weigh against the time and the cost, we have a flexible model to address it. Our key goal is nice stores for the customers and for the employees.
Okay. Let's take the next question.
Christine.
Hi, management. I have two questions for Joey. I guess, early this year when you were appointed as president, you did mention 18-24 months of time span for turnaround Pizza Hut. Given the time you have spent with the brand, what's the target now? Is that still on track or can we expect it to be sooner than the timetable? I think that's the first question for Pizza Hut. Follow-up question is, you mentioned that the integration of delivery platforms among three brands, obviously you have Pizza Hut, KFC, and now you have Daojia. I know right now it's a bit too early to talk about concrete details, but is there any timetable we can hope for? Thank you.
Thank you, Christine. For the first question, 18-24 months is still roughly the schedule. We believe that we're still on track. Obviously, we set the initial target, when we start to go down the road, turn around, there are many new things that we are learning, will maybe push back here or push up ahead a little bit more. We believe that it's still sort of the schedule we are shooting for. If we, at the point that we learn that, okay, we need a bit more time in certain area, we certainly will communicate in the right place and right time. For your second question, what we are doing right now is, take the practical approach. What is the practical approach is between Pizza Hut casual dining and Pizza Hut home service, we are consolidating the rider operation.
We are working on the system integration because we need to make sure the system talk to each other between the two business. This is a very intricate process, and we're doing it carefully, in a solid and robust way. On the other side, Daojia and Sherpa's, I'm sure there are some learning between Daojia and Sherpa's in terms of rider operation that we can learn from each other and consolidate. These are happening at the same time right now. Is there a timeframe about the further integration of KFC? We don't have a timeframe yet. We always push ourself, but in this particular case, the technical capability and technical process matters. It's okay. We can do it with good pace. Right now, they are sort of happening at the same time. KFC is left alone. KFC is doing very well.
Obviously, this is our most important business.
Okay.
If at the time that we can see there's opportunity for further integration, we'll certainly think about it. Let's take the practical approach about the Pizza Hut and Daojia and Sherpa's first. Yep. Thank you, Christine.
John, at the back.
Thanks very much. I wanted just to follow up on the pace of development. You said 550-600 gross units. Is that a long-term target? Micky, you talked about sort of the inefficiency in tax leakage of spending your money by exporting it to the U.S. Is there a goal to accelerate that process at some point? Better use the cash here than saying, the tax leakage. Can you talk a little bit about current trends in development? For example, are malls still a good idea in China from a development standpoint? Are rents becoming prohibitive on high streets that's changing the way you, where you open and how you open and sizes of stores, if you could comment on those.
Yeah, sure. Thanks, John. I think my mic is still working.
Yeah.
Okay. A couple of things, John. One is, this question came up during the break to me as well. The more we can spend on new store development, the more we will spend. That's our first priority. If we could accelerate our new unit build rate, of course we will do that. The thing is, the criterion for doing that is not just a target for the sake of a number, a round number of 20,000 or 10,000 or whatever. It's based upon the returns that we are getting. Now, the world over development tends to be a lagging indicator. If you get strong same-store sales growth, the pipeline enriches and vice versa. I think on KFC, as you saw, the cash and cash payback numbers are better than what we had revealed before because the sales have been very good.
Pizza Hut is behind KFC, but it's still respectable. At the moment, I think you should look at 550-600 as kind of shorter-term guidance. Thereafter, it depends. Taco Bell is a lucky strike extra. If that happens, I think it's, at the moment, we're in no position to say how big it'll be because we've just got one store. We're building out some more now in the next couple of years, and we'll see how the response is. We could do other brands, which we could theoretically do under our new status as a public company, independent. We can do those. I just want to reassure you that a question kind of related came up to me in the break was, why are you returning capital to shareholders? Well, why don't you spend more on the existing business, especially because of the tax advantage?
Of course, we'd love to do that. We'd love to prioritize to do that. We did a very detailed reckoning of our cash flows for the next several years and concluded that even with the most ambitious of new build targets as well as really good refurbishment programs, that the cash flow in this business was so strong that we felt comfortable initiating a dividend. We felt very comfortable with our existing cash because we're sitting on CNY 1.6 billion of cash, and that typically dilutes your returns because you know what the interest rates are like. We don't want to hang on to that money. We would love to. We've got authorization now to spend over half a billion on buyback. The dividend is relatively modest. It's CNY 0.10 a share. Even at the current yield rate, it'll be relatively small. We've got significant dividend cover.
To your original question, John, if we can accelerate the new unit build rate in some stage, then we will definitely do that. The criterion for that will be returns. It is really very good quality returns. The other is kind of related to the first question that was asked, is that we significantly operate on leases here. We don't own property. Significantly leases. Now, going forward, that could change. It depends on new lease laws are coming. There's new accounting standards coming on the way leases are treated. Anything is possible, but our first preference would be to use as much capital as we can in China as physically possible for practical.
I'm sorry, just the type of formats in terms of in-line stores, standalone, drive-throughs, malls, is there a change in that?
There are nuances. I think all channels are pretty productive right now in China. Unlike the U.S., malls are still attractive because malls are very flexible here. They're moving rapidly into entertainment and to other food and other formats so that the traffic continues. I think in general, in developing markets with the air conditioning in the summer and everything else, malls continue to be a destination. We are building in malls, and our experience has been pretty good. I think the one that is really standing out is high traffic locations, high-speed rail, for example, which is very productive for us, very good returns, as well as a rapid build-out in the infrastructure. We are, and I think as Jacky referred to, just the physical size of China's development, the tier 4, 5, 6 cities will be a faster rate of growth.
However, I think one of Joey's biggest contributions was turning around Shanghai and Beijing, and we're seeing newfound signs of being able to invest productively in these markets as well. Broadly speaking, we're investing across the spectrum in malls, in line, high-speed traffic locations, as you can see in delivery very aggressively. I think long-term, probably lower-tier cities will take a greater share as we go along. Yes, sir.
Hi, this is Hui Shao of Citigroup. I have two question for Joey. I think the first question is about your plan of revitalize Pizza Hut business. You talk about initiatives. In your mind, what are those most difficult job to do, and what are the easiest part or the low-hanging fruit? A follow-up question to that is, we are seeing that as you are integrating the home service with casual dining for Pizza Hut. If you in the long term, you are seeing your basic or your foundation for your business is you have a great number of KFC loyal members. Have you thought of taking advantage of that resources to help Pizza Hut in the long run? I know that it is a different positioning, different business model, but what is on your roadmap to that business?
Thank you. For the Pizza Hut initiative, turnaround is challenging. I don't know whether that's a really quick and obvious low-hanging fruit. However, we do see attractive opportunities in working-day lunch daypart. That was therefore one of the first initiative we test in Shanghai. Why? Because it is about speed, it's about value. We test it very quickly in Shanghai, nine store, and then we already roll it out to Beijing and Shanghai. Our goal is to get the customers back, and that seems to be the most exciting daypart. Because KFC, the breakfast business is very big, and it's a good way to build traffic. Pizza Hut, our breakfast business is not so big. Our working-day lunch daypart actually is quite sizable. We are obviously working on it. We invest. We give very good value.
For Pizza Hut, Shanghai or Beijing, the starting point of working-day lunch is only CNY 35. You can get a main course, which could be spaghetti or pizza with a salad and a drink for CNY 35. That's very good value. Your second question, in terms of the most difficult part, food. We have very extensive menu because it's a casual dining restaurant. Compared to KFC food is quite focused, target fried chicken, right? We're good at fried chicken. We come up with different flavors of fried chicken, and there's a such loyal group of fried chicken customers. With Pizza Hut, our menu range is quite big, although pizza is the biggest one. There are more challenges to fix the more extensive menu than a shorter menu, put it that way. We will continue to work on it with our utmost sincerity.
Because I use the word sincerity a lot because I do believe food is about sincerity. I love food. It's hard not to like your friend who always give you good food. We will do our very best to put in the best ingredient that we can do and we can afford to our customer to invite our customer. In terms of integration, there are things that we can leverage from KFC, for sure. For the digital technology, the Super App, that's a very good example. Without KFC's learning capability success of the Super App, we won't be able to come up with the Pizza Hut Super App back to July so quickly. It was very quick launch because of KFC. We'll continue to leverage on it. Obviously, KFC has much bigger member base, 97 million.
The 流 量 , the traffic flow from big to small, I don't think we need to explain it. It will be helpful, and we will use the family's help, put it that way. Thank you.
Lillian. In front, please. Thank you.
Thanks for the management, the great presentation. I have two questions. First is on the integration of Pizza Hut home service and Pizza Hut dining-in. When we evaluate the existing stores or locations, is there anything that significant we need to look at the store locations right now? Are there going to be big closure, or are we going to see some impairment that's significant in fourth quarter next year? Second question is a follow-up question on Joey comment on breakfast, because we noticed that during yesterday's store tour, it's quite a highlight of breakfast, even every store. Basically on the door of the store. Can management share with us about the breakfast contribution right now for both formats? Thanks.
For the integration. First of all, let me point out the store portfolio. Pizza Hut home service store portfolio focus on two places, Beijing and Shanghai. It's not a national phenomenon that we have to tackle. Within Beijing and Shanghai, we also, of course, given our retail background, we look at it store by store basis. It shouldn't be a surprise. We look at the trade zone, because it's just like KFC, right? We have many stores in the trade zone, and then we look at it as a trade zone. Can we support the trade zone with our existing store portfolio? We'll take a decision. Your question about the impairment. We always optimize the store portfolio, whether with the integration of the two brands or not. It's a healthy move, by the way.
There's always 3%-5% sort of the change of the mix in any retail business. We look at the closure, we look at the potential opportunity, whether we can serve the trade zone, and then we'll take a decision on a store-by-store basis. Would that be a bit more than the past? Possibly. Depending how do you look at the impairment number, because this particular 2017, we have a little bit of benefit, which is KFC's impairment numbers should come down a little bit. We have already gone through the cycle, because it's a cycle, of sorting out the negative UC store, negative CO store. KFC should have a better saving that allow us the little opportunity to take impairment for Pizza Hut if we need to. Net year-on-year shouldn't be a surprise, I would say. In terms of the breakfast.
The specific number, I think the finance team can get back to you guys. What I can say is breakfast has been a highlight of growth this year, which is lovely. We don't make a lot of money from breakfast because breakfast is about value. Your budget for breakfast is slightly different for lunch. We don't have the same profitability for breakfast compared to lunch per se. It's a very good business this year, for a variety of reason. Coffee helps, but the rice roll that you guys saw, that helped massively. Because how many
Yes.
That rice roll, we end up having a lot of fun about it. At the beginning, that was a hell of a product to do for QSR, because it involves seven steps to get the rice roll. It's done with your hands. It's not machine-made. We have to train our staff, each restaurant to do it properly, and we even launch competition how to be a master of doing the rice roll. Rice roll, this is a little trick that we learn about the breakfast. Rice roll is not a national phenomenon, isn't it? Most of China don't eat rice roll. They eat „daping." They eat "juan," the roll, not rice roll, but the other roll. When it's regional, when it's popular, it's rice, there's opportunity nationally.
Even though breakfast is quite hard to introduce breakfast item because we are so loyal to whatever we are eating. If it's something that is popular enough regionally, there's opportunity. There's opportunity to bring it to the customer nationally. Rice roll is a very good example. We're very happy with the growth. We strongly believe and we see that it built the transaction, which build a habit. In retail business, I probably talk about in many previous occasion, building a habit is so important. Once your habit is formed, I got you. Pass to the middle to Zach, please.
Hi. Thank you very much for the presentation. This is for whoever management decides would be best. The question is about the aggregators, and your strategy in terms of partnering and working with them on the delivery side. Maybe just some detail in terms of how you take your competitive advantage in other spaces onto what's much more of an egalitarian platform that's kind of just ranked in a way that I don't know how much control you have over it. The follow-up would be if you could give us any type of breakdown in terms of the share of your delivery, how much is coming from the aggregators and how much is coming from your own app. That would be really helpful. Thank you.
Okay. I'll ask Joey and Johnson maybe to give you some color on, because they've been very actively dealing with all the aggregators. I think our net judgment is that the aggregator business is here to stay. It's good. It's powerful. As you know, there was a recent consolidation where number 2 and 3 kind of merged and become one. There really is now two aggregators operating in this market. We see them as a channel that we should actively use but not get dependent upon. I think that's been the operating philosophy. KFC was far ahead of the game because KFC always delivered the last mile themselves. Even if the orders came through the aggregator, the delivery was done by us, which gives us control.
The other part I think the team deserves a lot of credit for is that we keep the data in all cases. We are able to keep active data for all the transactions that are being done. Now, there are a lot of nuances between KFC and Pizza Hut, I'll let Joey and maybe Johnson, you could talk about your dealing with the aggregators.
I'll talk about the share, and then Johnson can comment or context. In the recent earnings call, we talk about the share of traffic from the aggregator is a bit different between the brands. KFC, the share of the traffic, not the delivery, the share of the traffic from the aggregator is about 50%-60%. The rest is from our own app. Whereas for Pizza Hut, could be about 70%-80%. It really depends on whether we run promotion. It has quite a few factors impacting the numbers. That's sort of the rough cut for the content, Johnson.
Thank you, Joey. For aggregator, we work together with those major players in the market for quite a long while. Even before they launch, we maintain a good relationship with them. In KFC, we have a strong power on building our own and also distinguish between ours and aggregators. Although they have around 50% of the stake, but again, that is because of we have our own power on the pricing, on the marketing funding, as well as what product we want to select to launch in our platform or their platform. Again, we are not entirely upon the aggregator. More we are cooperate with the aggregator to build our brand in delivery business. We work together for a new product, new customer. On that angle, we are quite healthy in KFC.
For Pizza Hut, mainly it's because of buy-in, it didn't have their own app. The percentage on the aggregator are higher. Now we are building our own channels. You can see the Pizza Hut portion for our own application will continue to increase. I think that's the healthy percentage, what we currently see. We are different from the other brands. All of our customer, no matter whether they order via our own app or via aggregators, we own the data. We own each and every of the customer data. We know what are they ordering, from where. That easier for us to understanding customer and serve our customer better. That's the differentiate between us and the other brands. Thank you.
Before we wrap up the morning session, maybe we can have the last two questions. To the left side, please, Betty.
Thank you. Management . This is Chen Luo from Bank of America Merrill Lynch. I have got two questions. First of all, I noticed that just now during the presentation, management commented that we are focusing on turning around Pizza Hut, but this may create some margin pressure in the coming few quarters. Can we elaborate more on that front? Is it more because of store impairment-related charges or more because of investment in food and other part of our businesses? The second question is on competition, because we also noticed that for some of our long-term competitor globally, they have done a pretty good job in China as well over the recent few quarters with pretty decent same-store sales growth. They also announced to accelerate their store expansion in China.
Would that have an impact on our own operation or have an impact on our own decisions such as the new store build decision? Thank you.
Well, on the second question first, obviously, just like yourself, we respect our major competitors a lot, and we hope they do really well because that helps to expand the market. At the moment, from all that we see, we do not expect that to have an impact on our announced plans or the rate at which we are going to be building stores, especially in the lower tier cities. We are in several hundred more cities than our competitors are present. Obviously, this remains an item, like I said at the start, that is subject to change. I mean, the competitors get very aggressive. We have to react accordingly. From what we have seen right now, we have seen the same press releases that you have. When they translate into reality, we react appropriately, but we do not see that as an extraordinary competitive pressure.
As regards the margin question, I will let Jacky answer that on Pizza Hut so that you can have an idea of what we were talking about. But you saw from Joey's presentation that one of the big priorities in Pizza Hut is to make the food more attractive. You saw that we are, for example, giving larger sizes of products and not taking pricing. The impact on the food cost for Pizza Hut is the one that is significant. We will see. That should have an impact eventually on the consumer franchise and the ability to get customers back, but that will be the more immediate pressure. I think on the impairment question, Joey already answered that yeah, there may be some higher impairment on account of rationalization of the estate. Although I would not right now draw too many conclusions till we are able to announce our results.
Overall, as a company between KFC and Pizza Hut portfolio, we'll find a way to manage that. Jacky, any color on that?
Yeah. Thank you for the question on the margin pressure. Basically, as you heard from the presentation earlier, our focus will be on revitalizing the brand through investment in products and service and also promotion. You have seen throughout the presentation, we'll improve the size of our drinks, for example, or like for Pizza Hut, it will be the sauce of our pizza. These are costs that will probably impact our COS. In terms of impairment, I think we have a very rigorous impairment assessment here, and we strictly follow the accounting standard. We are still only one and a half month into the quarter, so we are still assessing the whole Pizza Hut store network. After we have more details on that, we will get back to you. We don't anticipate the impairment will impact the margin that much.
It will mainly come from the COS investment.
One last comment on the impairment, sort of related but not directly related, but still very important and dear to our heart is we are not going to lay off any staff because of store closure. Not going to do it. We are opening many new stores. We can absorb this staff. These staff are very, very good to us, and we'll do everything we could. If we have to find them another job, we take each of them individually, and we'll do our best to find them a new job within our company. No layoff.
Thank you, Joey. We'll take one last question and then Okay. There.
Thank you. Jacky, if the U.S. enacted tax reform and the statutory tax rate dropped from 35 down to something lower, probably something presumably closer to China, would that change your thoughts on capital redeployment across the board, given that it would likely be a higher impact form of a capital return than it is now if you didn't have that 10% withholding?
Do you have any other questions?
Well, thank you for the question. We're still waiting for some clarity in terms of the details of that whole tax reform. At this point, if the tax rate is below, let's say, the China corporate income tax rate, then yeah, definitely, our priority is always to reinvest in China to grow our core business. If the rate is below, then we can definitely look at our whole tax structure, and that may impact the whole cash deployment plan. I think at this point, we don't have visibility to the details of the whole reform. Once we have more details on that, we will definitely discuss with our board of directors, like, what's the best approach to our cash deployment.
Got it.
Yeah.
The second one is on kind of gross unit growth-
versus net unit growth.
For a couple of years, especially on the KFC side, you've had reasonably good % growth rates as it relates to the new unit growth. You cleaned-
Some of the stores up in 2014, 2015, and 2016, you had higher net closures. This year, it's reasonably high, though, still on the KFC side. Is there an obsolescence rate or something that we should assume? I would've thought that given the closures last year, that that gap would've narrowed more significantly. I mean, you're 80% remodeled now. Should we still expect I don't know, is there some rule of thumb or some net number that we should expect that would be closed every year?
We don't. Relative to last year, we can assume we have a lower number of impairment for the store. Impairment come from closing the store or the store, for whatever reason, still running, but being impaired for some reasons. The store closure after we've gone through the changes will come down a little bit. As Joey mentioned, we really look at it on individual store basis. We don't set a target, whatever, but we have very rigid accounting rule. If it doesn't pass the test, then we impair. It's not something that we can have some room for maneuver. We don't play that game.
Do you use impairment and closure as the same thing? Are you using impairment and closure as the same word, or do you mean like an impairment, like you take a financial impairment, but you'll keep the store open?
There's very few example. There's some technical reason why we cannot close the store, but there are very few example of that, but there is example. I just want to give a complete picture of that. In terms of the classification, they are the same. For impairment, we assess that semiannually. Closure, it happens throughout the year then. It is reflected on the same line in the income statement.
Okay.
Sometimes the closure we are forced closed, landlord needs to redevelop. It might be a profitable store we need to close. Sometimes it's not our own decision. Therefore, the closure we cannot say do it. It's sort of ongoing because it's a moving situation.
Got it. Thank you.
Thank you very much.
Thank you, Joyce.
for all your questions. I'd like to wrap up the Q&A session. I am sure some of you didn't get a chance to ask any questions because of time constraint, but IR is always available for discussion afterwards.