Ladies and gentlemen, I'm Florence Lip, Senior Director of Investor Relations. It's our great pleasure to welcome you to Yum China 2023 Investor Day. We have a full agenda today and tomorrow. First, our management team will update our latest strategies this morning, followed by site visit in the afternoon and tomorrow morning. Before we get started, I would like to go through some administrative items. Today's presentation materials will be in English, but some of our management team will speak in Chinese. Simultaneous translation from Chinese to English will be provided. For our guests here in Xi'an, you need a headset to listen to the simultaneous translation. If you need a headset and you haven't get one, please let our staff know. For our webcast audience, you can also choose the channel. Just follow the instruction online.
Our Investor Day presentation contain forward-looking statements, which should be considered in conjunction with the cautionary statement in our presentation deck and the risk factor included in our filings to the SEC. You can find a webcast of our presentation on the IR website. Without further ado, let's get started.
Yum China is the largest restaurant company in China. Our antifragile business model and agility enabled us to seize opportunities in good times and stay resilient in challenging times. We've been growing rapidly and healthily, driven by innovative and flexible store formats. We continue to expand. We delivered strong results quarter and quarter again through our relentless efforts to drive sales, rebase cost structure and improve efficiency, and we remain committed to creating long-term shareholder value. We swiftly adapt to demand shifts, offering the products consumers want wherever and whenever they are. Serving delicious, innovative food has always been at the core of our business. So is our commitment to providing excellent value to our customers. Collaborations with leading brands have engaged and delighted our customers with a wide range of toys and games. We're also expanding our reach outside of traditional stores to get closer to our customers.
Our in-house and digitalized supply chain empowers us to stay agile and efficient while ensuring excellent food safety. This also enables us to effectively manage food costs through full utilization of materials and strong collaboration with suppliers. Our end-to-end digital ecosystem allows us to attract and engage customers, unlocking sales opportunities. Digital has transformed every part of Yum China, from customer service to our kitchens and supply chain operations, significantly boosting efficiency. Most importantly, our people are united behind our mission to provide a wonderful experience for customers and serve the communities we work in. Looking ahead, China remains a vast market with tremendous untapped opportunities. When it comes to understanding and better serving Chinese customers, Yum China remains at the forefront of the industry. As we expand the coverage of KFC and Pizza Hut, we keep incubating our emerging brands.
As we work towards our next milestone of 20,000 stores, we look forward to serving even more customers, bring convenience and joy to everyone at every significant moment.
Welcome, welcome, welcome. It almost feel a bit emotional to see so many friends, after all these years. But, very big welcome to, to Yum China's 2023 Investor Day. On behalf of Yum China, a huge thank you to our 430,000 employees, our shareholders, hundreds of millions of our, of, of our loyal customer and shareholders, and of course, all of you today. It's just wonderful to see everyone in person. I hope you have a good time in Xi'an. Your trust and support got us through the three years pandemic, and we believe that we have emerged stronger and more resilient. Today's presentations will provide you an strategy going forward.
I'm excited to unveil our ambitious target for the next three years, which I will do in my closing remarks, so I'm going to make you wait a little bit. I'll do it after Andy's presentation. ...Let's start with a brief recap of our RGM strategy. RGM stands for Resilience, Growth, and Moat. It also pay tribute to the most important people in our company, the restaurant general GM strategy, actually back to 2021 Investor Day. Suiting the times, we put a very strong focus on resilience, and yet we did not back off from our commitment to growth and investing to deepen our strategic moat. The last three years were pretty tough, but our RGM strategy served us well. Over the last three years, we have transformed our business, actually.
We have more than 4,400 net stores. We opened a lot more than that, and we closed the underperforming one. But we add the net new store, 4,400, and we open these stores, and we improve the quality of these stores. And we are also profitable. We generate over $3.6 billion operating profit and profitable each and every quarter, and we return over $1.3 billion US dollar to shareholder over the three years. Let the good crisis go to waste. Indeed, there's very little to, very, very, very little good thing to say about the pandemic, but we make the most of it. And we strongly believe that every great company is the child of winter.
We would like to believe that we have worked very hard in order to get close to, to that great company. There are three areas I would like to highlight. First, we, we transform our store portfolio. There's a lot of focus on same-store sales compared to, 2019. However, we actually have expanded our store network by 55% over the past four years. So for our store portfolio right now, a lot of growth are coming from the store we opened after 2019. And at the same time, when we opened this many store, quality is still the most important criteria. We maintained a two-year payback for KFC for the new store open, and we reduced the payback, for new store open for Pizza Hut to three years.
Secondly, customers now enter 90% of their orders digitally, while off-premise consumption, which is a combination of delivery and takeaway, is over 60% of our sales. Why is this important to us? Because that is resiliency. We learned it from the pandemic. Even when some of our stores could not open, we still could keep our business going. And even when the dining business was not operating properly, there would be sales transfer from dine-in business to delivery. Therefore, even during the fourth quarter of 2022, which was a very difficult quarter, we still delivered profit for our shareholders. We also rebased our costs, and the focus here is fixed costs. You will hear a lot more about that today.
We reduced our top three store-level fixed costs by as much as 20%-25% over the past four years, which lower our cash investment per store by more than 35%. It will come back to the point why we can open so many store with such profitability, because the investment is, is lower. And as a result of our transformation, is you can only we avert the disaster, we performed during the pandemic. Compared to the first half of 2022, last year, our revenue grew 16%, only 16%, not 50%, because we did not lose, we did not lose 50% during 2022, right? So same-store sales is always a mirror of last year. Our restaurant margin, improved by 530 basis points, and our operating profit double.
Compared to the first half of 2019, we improved significantly on virtually every measure: store count, re... Going forward, we are shifting the emphasis of our RGM strategy from resilience to growth. I think that's very, very natural to do, because right now we are able to do business on daily basis, which we are very, very happy about. We are calling it RGM 2.0. It's end store footprint. Two, increasing sales. Three, boosting profits. History. We start our first store back to 1987. It took us 16 years to get to 1,000 store. Now, when we look at it, we feel it's a bit slower, but it's always very difficult for a, for a new brand to establish. And then another nine years to get to 5,000.
But from 2012, 5,000, it took a few years to get to 2020 in the middle of pandemic, and right now we are at, over 13,600 store. And that make us one of the world's largest QSR, operator by equity store count, because a lot of the restaurant company are actually franchise-based, and we actually run the business ourselves, which, has slightly different... And the interesting chart here is, while our store accelerate very, very fast in the last few year, the GDP growth actually came down, right? From double digit to high single digit, and then right now, sort of mid-single digit. However, let's remind ourselves, China still is one of the fastest growing economies in the world.
The big question in this room is: Can we continue the acceleration of store opening when the GDP is slowing down? How, how does it work? The answer is yes. We are actually, this is the first big news we're gonna share today. We are actually setting an ambitious goal of 20,000 stores by 2026, just three years from now. Because now, think about 1,800 net new store annually for the next three, next three years. Scale of the economy, as you can see, when it come to 2023, the scale of economy is something incredibly important to consumer industry, and in particular, for our business here. Right now, China is about 18% of global GDP. It's about $17 trillion, and of course, population 18.
With the combination of the scale economy, even with modest growth, is more than enough to fuel the growth of our business. Let's put things into perspective. 5% growth of China GDP adds nearly about $900 billion to our economy, and that is the size of two Vietnam GDP, more than two. So we are adding two Vietnam GDP to our China economy every year, even with 5% growth. 5% growth and $900 billion, it contribute about 30% of the total GDP growth worldwide. Your number - our number might be slightly different, but it shouldn't be too far off. And then secondly, we look at the urbanization. It's still happening.
The number of cities is still growing, and right now, China adds about 14 million people to urban area, and that's about 1.5 New York City population to China annually. And then when we look at the middle-class population, which is also addressable market, you can call it 450 million, 500 million, not too far off. And interesting enough, this number is quite similar to our total membership size of Yum China right now. Our membership stands at 445 million. So if we look at the glass half full and half empty situation, what does that mean? That means while we already have 445 million loyal customer, and KFC is a very accessible brand, I mean, it's affordable access to our store or find our price still beyond them.
To a lovely country, Japan, the food is very good. Chinese food is very good. But among all these wonderful Chinese food and Japanese food, there's still a big appetite for—for— The conclusion is the demand is still way, way bigger than the supply in our industry in China. Okay, after looking at the market potential, let's turn focus back to Yum China. The question is: Are we ready? Are we ready for that—for this aggressive, ambitious growth target? Absolutely. Let's look at the CapEx. This is over longer time period, from 2014 to 2022. Why 2014? Because I joined at that time, eh? So I'd like to look at just back to almost about 10 years ago.
We reduced the CapEx per store by as much as 50% or 60% for KFC and Pizza Hut corresponding in independently. What does that mean here? Remember, in the CapEx, it has the component of sunk cost and equipment. For the equipment that we invest, we can always move it around. The number is bigger than this over eight or nine years. The depreciation in our operating margin, and also strategically, it's lower cost of making mistake, which is very good. Secondly, each brand has developed their own primary store design and supplementary module, like a drive-thru to go, the coffee truck, even the pop-up store, during the holidays or night, like market. I mean, this approach ensure brand consistency with customization, and also it allow us to open store in locations where we could not open before.
It either. What does that mean? It's either in a store that we could not afford before, or the investment is too much, or the shape of the store is too odd, that didn't work before, but right now we can do it. As long as it's right location, it, the unit economic works, we can open store. So we make us more flexible to adapt to the market. Third, franchising. We plan to unlock opportunities in strategic locations with about 15%-20% of our new build from franchising. All of you here know that we were reasonably conservative about franchising before. Why? Because we are very protective of our food safety. And I'll talk about later, with the investment in the anti-fragmentation, right now, we have full visibility of inventory system in each store.
So now we feel that we can manage the food safety, including all the franchising store, and therefore, we are ready to have more franchise store. Here are the very interesting number, right? We've opened store in university, in Zhejiang University, in Fudan University, Shanghai Jiao Tong University. They're all coming. There are only 3,000 universities in China. Then highway service station, service center, we have signed quite a significant number of strategic agreement with our strategic partner to open store along the service center. If you have your self-drive tour in Hainan, you will experience how does it feel to stop at every single important service station to see a beautiful KFC store there, compared to the local store, that you might not want to put the food into your kids' mouth. I know right now.
There are 36,000 hospitals in China. We do really, really good business in hospitals, and there are many reasons for that. Doctors and nurses love our food because they're very busy. Our food is convenient and quick. During the pandemic, we actually deliver free food. Not for any particular reason, it's just because of being a good citizen. We deliver free food to thousands of hospitals in more than 30 provinces, and we have customized menu for patients, full day congee, which is the best thing for patients, at least for Chinese, eh? Accelerating store expansion builds system sales, but also have a little bit of challenge here. It has sales transfer of SSSG. You open more stores, sales will transfer from the old store to new store. So we have to work harder to protect our same-store sales growth.
How to do it? Amazing food at very big scale. We start with the classics, such as Original Recipe, back to 1987. Since 2000, the second row, you can see, Egg Tart, Dragon Twister, which is the famous 老 北京 鸡 肉 卷, huh? These localized food have driven growth. Since 2014, these are our new star products. Durian Pizza, surprise. Surprise to us, too. Who would think that this would be so big? Last year, we do it to make sure we have enough durian for the Chinese customer. Who would think the fried chicken company sell that many burger? Came to our permanent menu last year, actually, and that included the idea. And we developed this burger just for the Chinese people. So for the non-Chinese people here in this room, I'm sorry, that's not targeted for you.
Flavor of the beef burger is important, but for Chinese, very few of us have the luxury of having barbecue in our backyard. We love the juicy burger, and we did not cook the burger on the grill. We actually, you don't see this beautiful oven. They're imported from a very nice European country. You don't see these ovens in other QSR, but you see them in Michelin-star restaurants. They use the same brand. Whole chicken. We developed this product during the pandemic, targeting the at-home consumption, so you can eat the whole chicken at home.
But occasionally, you see young people who demolish the entire chicken in a store by themselves, and that's when you look at them, you feel like, "Wonderful to be young, isn't it?" We cook this chicken by steaming it in our oven, and then we go through it very quickly in the oil, so it has a little crispy flavor skin. It's doing very well, not only in the store, but at home, but holiday, weekend. Then the coffee. We upgrade to fresh ground coffee for KFC at about 2014, 2015, and coffee, sparkling coffee, big category, $200 million.
So when we do promotion, not only we want to bring the value to the customer, we want to build a big category, and we want them to survive and become classic over a long time, because the strategy has been proven to work. To further support the SSSG, we have to work even harder. That's one unique thing about China, is the rent is always high when you want good locations. So we have to work very, very hard. One single data is not enough to... Brands are powerful, and we can build from the fundamental phenomenon right now, every Thursday. And now, of course, we go even outside the store to having this pop-up store, and I think many of us here still remember the amazing Psyduck , and then the games, et cetera.
So with all this effort, not only we provide good food, but we provide the emotional connection with our customer. That's how to keep the brand alive and young. And the pandemic actually even prepared the emotional connection with our customer. Tying all together is our membership program, which I've talked a little bit earlier about. And here's one last thing I want to talk about membership is, for the most loyal one million customer of KFC, they visit our store around and more than 100 times a year, and that's our ultimate goal for our membership program. Of course, they are at the top of the pyramid, but we at least have a target. Our net store opening during the pandemic and before the pandemic. Warton, our General Manager , will provide you an in-depth overview of our expansion strategy.
Pizza Hut is revitalized and is ready to take off. Pizza Hut right now operates about over 300 new store openings. Before pandemic, 200 stores for three years. Over the pandemic, 600 stores, three times as fast, and we're going to continue to accelerate because we are ready. The focus, expansion of footprint, pizza leadership, because we, of course, are working on improving the profit margin. As an IT guy, see, the management team is from very diverse backgrounds. That is IT guy, will share more detail of the Pizza Hut whole operating profit. However, we are having a very—we'll elaborate our strategy. Taco Bell, the focus is local consumer. Not an easy task, but it must be done. Right now, we have over 100 stores.
Actually, we accelerated the store opening Taco Bell in the last two years compared to 2021. Huang Ji Huang is a pioneer in Chinese-style simmer pot. It's recovering well and comes profit during the pandemic. So it's actually quite a resilient business growth at scale. Leadership, we clarify the brand even during the first half of this year, and we'll have chance to take- Moving on to profit growth. A pretty significant inflation in chicken price, but well, a little bit in the short term. But the real trick of having good value campaign over a long time is to have very strong supply chain. Two different story. And you can see the gap actually widens significantly from 2020 onward. Well, that take more than just putting the standard procurement label.
That gap is a result of many innovative solutions throughout entire upstream value chain. Howard Huang, our Chief Sourcing Officer, another great homegrown talent, will provide you an overview of our surprising strategies. Rent. The focus on our rent is to shift from fixed rent to variable rent to enhance the business resiliency. I mean, maybe outside China, with percentage rent, our brand power, and particularly the credibility, one of the very few who can enjoy the full variable rent. Administrative burden for RGM and stores team by investing in, we're gonna simplify the management structure. The new management structure is called Mega RGM. That means one store manager, one RGM, that manage multiple stores. Not only to improve labor productivity, think about the RGM, actually, it's fixed cost to the store, right?
But it also solves our biggest bottleneck of aggressive new store opening, good RGM. The biggest bottleneck is always good people, not cash. Later, Jerry Ding, our CPO, would detail our approach to our most important asset, people. We complete our multiple year end-to-end digitization project during the pandemic years. It connect all parts of business together, from farm to table. We integrate the customer-facing functions with the restaurant back-of-house operation, allowing our AI-based inventory system to directly align with customer order. It provide a seamless customer experience, boost the operational efficiency, and facilitate so... We will continue to invest in technology and, and including, generative AI. We are very, very curious. Later, our CTO, Leila Zhang, will present our digital strategy. We strive to create a workforce where everyone gets employees with special needs and disabilities.
They are the up and vision, amazing ambassador for the brand and for our country. In addition to our competitive pay, we're proud to offer one of the leading employee care programs in China. Actually, during the pandemic, we upgraded medical insurance coverage of our RGM and their families, and that include their parents. I believe we are one of the very few companies that actually offer medical coverage for our store managers' parents. And think about this, if they want to leave their job, they need their parents' approval now, which is wonderful. There's no layoff during the pandemic. And then our business performance is a big source of pride for our team, particularly during the pandemic. So as a result, our RGM, they vote with their feet.
Only 9% of turnover rate in our company for the store manager, which is way lower than the industry. Then we'll provide the training and support from our supply chain expert. It's very aggressive target because we have to grow completely on renewable energy without increasing utility on our shareholder. Finally, let me introduce our management team on screen. I'm very, very grateful to our outstanding management team. The men look smart, the women look very smart, too. Okay? Without whom, none of the Yum China achievements would be possible. So thank you so much. And today, you-
I have served as the market manager of Harbin and Hangzhou Market in KFC Brand Operations. In 2020, I assumed the role of Yum China and Franchise Operations Expansion. Last May, I returned to KFC. Welcome to Yum China's Investor Day. Thank you for all the love and support for Yum China and KFC. Today, I would like to share with you on the brand in three parts. First, we are confident about KFC's growth potential in China. Second, we have identified resilience, growth, and moat as effective strategies for rapid expanding our business. Third, I would like to share our thoughts on the future development. KFC first came to China in 1987, and we've been growing with China ever since. So far, we have over 9,500 restaurants in more than 1,900 cities across China.
In December, we are going to celebrate 10,000 stores in Hangzhou. In our commitment to delighting consumers with delicious foods, while we continue offering KFC classic menu items, we never stopped innovating. In 2003, the Chicken Roll of Old Beijing was launched, which has been widely embraced and loved. Ever since that, original new product offerings such as the Egg Tart and our New Orleans Grilled Chicken Wings gradually became own delivery services. Today, our annual delivery sales are across In 2015, we rolled out digital service offerings amid the digitalization boom in China. As an industry pioneer in digitalization, in just six weeks, we made digital payment available in our 5,000 restaurants. Now, more than 90% of our orders are currently fulfilled via digital payment.
It is through our digital offerings, including loyalty program and Super app, that we remain a digital front runner in China's restaurant industry. KFC is, without doubt, one of the most successful restaurant brands in China. We boast over 9,500 stores, more than one billion annual transactions, over 400 million members, and our Super app MAU exceeds 28 million. As we all know, restaurant brands in China face intense peer competition. We would like to specifically note that the restaurant brands only survive for an average of less than two years, while KFC has been with China for 36 years. We've been parts of the rapid economic growth propelled by China's reform and opening up, and we successfully navigated the challenging pandemic business cycle. As an increasingly sophisticated mega brand, we continue our rapid growth momentum.
Considering China's population size and large number of cities, we see huge growth potential. KFC's market share in China's quick service restaurant market is around 5%, while the market share of the other top 10 brands combined is less than 10%. Yes, we already cover 1,900 cities, yet there are still 1,100 more cities that are ripe for our expansion goals, and we are in the process of identifying the right locations. In recent years, we've been expanding our brand to cover more strategically targeted scenarios, with openings across more highway service centers, hospitals, college campuses, tourist attractions, and gas stations. These are highly suitable locations, locations that have brought an increase in population concentration and business development capabilities. We are now seeing greater potential for opening new stores. We also have many exciting opportunities to expand our consumer base.
Our key target consumer groups are college students and small town youth. Building on our knowledge of these core development groups, we are actively gaining more insight by expanding our presence on college campuses and in small towns, though we are developing more cost-friendly products and could also decrease the associated prices of select products to extend our reach among this group. In addition, the aging population in China represents another growing demographic for us. We expect this increasing number of scenarios to have higher and more frequent demands for dine-in, delivery, and takeout. As long as we've got the right food, with our repeated scenario-based market for the growth. Another growth opportunity for us is higher consumption frequency. At present, the annualized frequency of new and activated brand is three, six for existing members, and 26 for privileged members.
For K friend, the top one million most loyal members, their annualized frequency is as high as 100. It is clear that there is a lot that we can achieve. Next, the second part of my update is our strategy. The benefits of our RGM strategy will allow us to expand rapidly and efficiently. We have been continuously accelerating the pace of our store opening, averaging 22% annual growth in net additional of KFC new stores over the past five years. We expect our annual KFC net new stores to exceed 1,200 in the coming years. Currently, we continue to optimize our investment in new stores. Over the past five years, we have reduced our average per store investment by 9%, and last year's single store investment dropped to CNY 1.5 million. The quality of our remaining at around two years.
So how have we managed to open so many? There are four different store models. Every size of standard stores is 180 sqm . Future stores are opened in special business districts, featuring customized designs that showcase our brand identity. Mini stores cover a more modest area, around 120 sqm . Due to their smaller size, investment in mini stores is about 1/3 lower than standard stores. Mini stores are mainly open to increase our restaurant density in higher-tier cities. Likewise, our investment in lower-tier stores is also relatively low. But unlike mini stores, the reduced cost of low-tier stores is mainly attributable to less equipment and decoration. As the name indicates, low-tier cities, though is efficient for holiday peaks, the smaller financial investments that enable us to get more higher success rate.
Modules, which can serve as add-ons to any of our store models. Option to our standard store, the drive-through is created. Building on this concept, To Go is a new module we launched this year. It is designed as a simple window in the wall with a counter inside, where a customer can pick up their food, avoiding the need to go into the restaurant. They have the option to order ahead, and you can also place your order and pay at the window, which people love. The quick-service window option is especially resonant with consumers grabbing a quick coffee or ice cream on the go. Moving on to our side-by-side module. This is our feature that it was designed to expand our coffee business in lower-tier cities.
With side-by-side, the seating area is separated from the parent store, providing our customers with an independent coffee shop, while the food production area and equipment are otherwise shared with it, which effectively reduced our costs. As for KCOFFEE trucks and mini stations, they both serve as a complement to their parent stores by maximizing customer traffic and expansion, the customer base for parent stores. As you can see, the variety of flexible models can easily combine with the design new stores. Modules can also be added to existing stores to meet evolving needs. Another major driving force to accelerate store opening is franchising. There are two primary franchise models that operate. The first is channel franchising, which we use primarily to achieve rapid store opening and expand in major business districts.
For example, to open stores in highway service centers due to limited resources and low availability of dedicated locations, it would be hard for us to engage in each store and open each store individually, not to mention the prolonged store opening process. So we reached out to Zhejiang Communications Investment Group, and they became our channel franchisee for highway service centers. In just a few years, we opened 32 restaurants in highway service centers across Zhejiang Province. We have partnered with resourceful channel franchisees for highway service in China provinces. Our channel franchisees also include universities, hospitals, tourist locations, gas stations, et cetera. Of course, if anyone here or you know, have access to these resources and interests, please let us know. The other franchise model we leverage targets lower-tier cities and remote areas.
Our goal here are to accelerate store openings in these markets and improve management efficiency. For example, our Tibet partner has opened 16 KFC restaurants in Tibet, and the restaurants are well managed with perfect KPIs. As you can see from the picture, Ngari, Tibet, we have the world's highest... It is located 1,500 m higher than the Lhasa. These stores directly and face low store efficiency, we will continue to work. Let's look at growth. There are several and foremost, especially our staples, the KFC restaurants brand's main thing is meals. The variety of food we offer not only affect our consumer base, but also impacts our consumption frequency, including our primary food offerings. We utilize multiple strategies. First, we continue to add new food categories to attract more consumer groups and generate new groups.
Leveraging our specialty as a chicken expert, we seize opportunities to address consumer demand for whole chicken dishes. With the launch of our Weekend Bonus scenario-based program, we have made more comprehensive group meals successful for family and friends. We launched in 2020. In 2022, it was added to regular menu, and it still exceeded $100 million this year. Beyond chicken, the Beef Burger category is crucial for KFC to diversify and offer our consumers protein choices while continuing to emphasize our brand sense of value. In 2021, the burgers secured a spot on our regular menu, and in 2022, its sales exceeded $250 million. The second aspect of our is to diversify two burgers that are cost-effective, but taste great. It is our Golden Spark chicken burger, leveraging the cost effectively with these two products.
We've combined the sale of both burgers, one fried, one grilled, into our weekday value combos, extending the price range of our combo meals options to below CNY 20. The initiative has meaningful implications, showing consumer ability, attract more consumers with lower purchasing power and boosting demand. Thirdly, we continue to research and development innovative food choices tailored to customers immediately. Living up our creative Taco hit the market in May, significant attention, promoting numerous social media, sharing the discussions via the Sunday Buy More and Save More program, attracting consumers with buy more, save more deals, as well as lucky draws, offering free cars and trips to Maldives. Consumers have a lot of fun and benefited from this deal. The program boosted our Sunday sales, and the sales is still growing at a faster pace.
Games and businesses, we continue. There are abundant opportunities in market campaigns with toys and games. Following the side extension last year, during this year's Spring Festival and both Tears of Themis and the Pokémon generated enormous traffic and notable sales growth for us. The Children's Day special cereal was available for sale on this 20's Valentine's Day, quadrupling the first-day sales volume of last year's side duck, setting new record high. In KCOFFEE, there are more consumers becoming coffee drinkers. The coffee market in China has expanded to lower-tier markets. We expect that in 2023, the sales volume of KCOFFEE will reach 180 million cups, an annual increase of 30%. This year, we will launch new models and new products, Zesty Lemon Americano and Carrot Americano. The...
Compared with other brand, number of new products, double our marketing spending, as well as a clear goal that there will be steady launch of high-quality products at friendly prices with a strong presence nationwide. That's the goal for our coffee business. Apart from these businesses, we also have some new businesses, including new retail opportunities. For example, the KFC Grandpa's Tea has launched eight pilot stores in Suzhou, and we are pleased with the excellent performance. As for KPRO, with our initial efforts in healthy light food over recent years, we have learned a lot, and I think that they will contribute to our brand identity and creativities. Now, let's move on to resilience.
I think over the past three years of COVID, we rebased our cost structure in order to reinforce the resilience of our brand, so that we can face more challenges in the future, and we can provide consumers with the best value for money. There are several important aspects. Firstly, we will transform fixed costs into variable costs. About 70% of new KFC stores implemented variable lease payment terms. We introduced the Mega RGM initiatives. Under the Mega RGM framework, an RGM would have originally overseen a single restaurant, will now gradually take on more responsibilities to oversee multiple restaurants, so changing fixed costs to variable costs. And secondly, we will also move certain in-store restaurant operations sections, so that restaurants can focus on customer services.... achieving with new technologies.
We have used in-store IoT, automatic cleaning devices, order refreshment systems, and shared labor scheduling systems to improve our operating efficiency. This will help us to serve customer demands for good food. It will increase our, our output value. Now is the delivery aggregators, such as Meituan and other markets usage. It is our own digital store, and where the most of generated on the app has increased to 30%. The number of downloads has exceeded 260 million. In other words, we have opened 260 million digital stores on the mobile phones of the consumers, a very encouraging achievement. How to manage the restaurant, our whole competitiveness, and there are two aspects to it. First, we continue to build our system and training infrastructures.
We have developed a customer-centric listening system, which enables us to hear the feedback from the customers across the board, including social media platforms. We have big data so that we can see what is favored and unfavored by the customers. We can respond quickly and make improvements. This is what we call Customer Mania 2.0. Another initiative is RGM 1. We must rely on our RGMs. They must manage their restaurant well, and their success means the success capacity for overseeing more restaurants. We have also built a platform for communications with RGMs, so that we can have more integrated management and quickly respond and address issues, and this will enable us to improve efficiency of management, as well as improve our services.
Turning to the third part of my presentation, KFC brand will be opening its 10,000th store in China very soon. As we approach this milestone, we have thought a lot about our future. I'd like to share some of these thoughts with you today. Looking ahead, we intend to maintain our position as the number one brand in China's restaurant industry. In order to do this, we must maintain our leading market share and continue to lead the industry's development in all aspects, including mindset, products, services, and innovation. To achieve this vision, there are three important aspects. First is for safety. We are a restaurant. If customers think our products are tasty, we are already halfway to our goal.
Our first priority is classics, classic menu items that customers like the best, and they accounted for more than 40% of our total KFC, and consumers will remember us. We will also continue to introduce customers. While preserving these classics, we will innovate our product offering, which is the foundation for a restaurant brand's ability to remain vibrant. The Taco, Double Down Burger, whole chicken, these items that we launched in recent years have been embraced by consumers and have the potential to become new classics. We will maintain rigorous quality control of our products from ingredient selection, sourcing, product development, to staff training. We will deliver the highest quality in every product, forever with you. KFC is not an aloof brand. As China can always enjoy our products and services, a lot of efforts to make sure that the products are at an affordable price.
We reduce the costs to drive through coffee shops and to go in order to improve consumers and employees. We respect the preferences and food culture for more than 30 years. We listen to consumer feedbacks and evolving needs. This is our shared mission. As for our staff and partners, we trust and support each other. In the most difficult years of the pandemic, we did not cut salaries nor laid off employees. We did not default on payables to our suppliers or our rent payments. It is because of a commitment and a passion for our brand that help us to come through these difficult times. I believe that we believe in the power of care and love. We believe in the power of vision sharing that fosters a team culture of encouragement and overcoming difficulties to forge ahead. We are also a socially responsible brand.
We have three main themes and five projects in public welfare and social responsibility. First, Red Heart Line, which includes Little Migratory Bird Program and Angel Restaurant, Green Eco-Friendly Line, including Little Green Shop and Food Station programs, and the Sports Line, that's the team's three-on-three basketball tournaments. We will lead our employees and inspire the consumers in order to help us reach our society's collective goals. Our team has produced a short video clip to provide a glimpse into our mindset and initiatives for the KFC brand.
By their side. We are constantly evolving. With each new generation of customers, we carefully listen to these young voices, constantly exploring new ideas and imagining our next creations at a brisk pace. From one era to the next, a constant bridge. We strive to resonate with customers of all ages and backgrounds. KFC is there for our customers at every step in their lives... We started from China's biggest cities and expanded to the farthest frontiers. Embarked upon lifelong journeys with true rain or shine, we are always on time, through an unexpected hello. With convenience that's everywhere, bringing smiles wherever we go. Through a warm smile and a helping hand, we are always there for our customers, striving to build a better world. From food to restaurants, and service to management, KFC continues to drive excellence in everything we do.
Our pursuit of joy, beauty, and love continues from strength to strength as KFC continues serving the people of China. This remains our most important goal to ensure these efforts help create a brighter future for all.
A few years ago, Joey led us in a reflection and discussion on KFC's development in China, KFC brand's journey of accompanying Chinese consumers as they grow. We salute everyone who appreciates life with positivity and optimism, and who strive to move forward in pursuit of a more joy-filled and a better life. Cherishing the beauty we possess and forging ahead with a heart full of love is part of our inherited brand identity and something that we will perpetuate. Looking forward, we will forge ahead with this spirit and continue to give our best in all what we do. Thank you again.
Highlighting some of the exciting development over the past-
From then to now, from our very first step, Pizza Hut has grown rapidly in various formats over the past 33 years, becoming the No. 1 casual dining restaurant in China, providing countless reasons that resonate with our customers. We continue to focus on innovative and delicious food as an industry-leading pizza expert, putting new twists on favorites, constantly disrupting and innovating with delectable creations. Exploring bold new ingredients, creating pizza trends that are beyond cool. We are leading with fresh, fun flavors. Whatever the occasion to get together, it's about sharing these times of... So the young at heart can be part of a trend or just be themselves. Our faith in winning is stronger than ever. Extra mile for our customers. Backed by seamless technology integration, real-time supervision, pizza taste tests, and smart controls, serving customers speedily, friendly, and with love.
- and delighted by the outstanding experience that's consistently won us rave reviews. From experiential that welcomes all, our new store design concepts emit coziness with a warm, youthful vibe. With privileges and technology-empowered features. Our digital focus extends to office efficiency and service quality. As we've grown, we've engaged to create a better world, connecting people to spread the... Creating, as we always have, moments that matter. This is, and always has been, the es-
Right? Today, there are three key messages I want to share with you. First, of the market. Next, I will elaborate on Pizza Hut stands as an undisputed leader in the casual—3,000 stores in more than 650 cities. We dominate in all of our core categories: pizza, steak, pasta. Over the past, 20 million steaks and more than 50 million pasta dishes in the first half of 2019, and our restaurant margin has climbed to 13.3%, which is higher than pre-pandemic level back in 2019. In addition, our operating profit outpaces the same period in 2019 by 14%.
Behind these strong numbers, patterns, and overall competitiveness, customers are acknowledging the improved taste of our food, as the resilience of our business is also more evident with off-premise sales mix up to 46% in 2019. Our business has also been transformed to be more digitalized. We now have over 145 million members, more than doubled the two-thirds of our total sales. From these figures, and ready to further accelerate our growth. Looking ahead, we see a huge runway for future growth for Pizza Hut. The casual dining sector in China is large, yet highly fragmented. As an absolute leader in the sector, our slice of the market is bigger than the next in China that have KFC, but have no Pizza Hut.
Second, on consumers, we are introducing new items such as burgers, individual meals, breakfast, and walk-in lunch, opportunity for us to further expand our business. Our growth focus agenda align with Yum China's overall RGM 2.0 strategy, which you heard about from Joey earlier this morning. Store development, drive same-store sales growth, and expand our restaurant margin. We have accelerated our new store development pace since 2021. Last year, we achieved our highest net new build numbers since spin-off, opening more than 300 stores. 2023 is going to be a record-breaking year for store development. About two-thirds of our recent deliver a stable payback period of two to three years, even during the pandemic.
The margin of these new stores surpassed the one that we built in 2019, and to add 400-500 stores a year, while maintaining a healthy payback period of two to three years. Our strategy to accelerate high-quality store development. First and foremost, we are deepening market. At the same time, we ask the payback period than the standard dining store model. The new compact store model will enable us to penetrate into more shopping malls and community centers, providing a good supplement to our satellite stores. And finally, we are upgrading our standard casual dining store model to a fast-casual model, which will, will provide us, you know, which will provide faster and lighter service in a comfortable setting. Our goal is to offer customer a relaxed, yet inviting dining experience while improving our labor efficiency.
The second part of the strategy involve, you know, low-tier penetration and franchising. We are expanding rapidly into new cities, especially those where our sister brand, KFC, has already built multiple stores and demonstrated strong sales performance. In addition, we are partnering with franchisees to enter into the locations that are not efficient for us to manage by ourselves, like remote areas or small towns. Reinforcing our pizza leadership position, expanding into new categories, occasions, and consumer segments, creating more affordable moments, driving delivery growth, and enhancing digital capabilities. I will elaborate on each of these key pillars in detail in next few pages. Let's talk about pizza first. Over the past few years, we've put in tremendous effort into strengthening our pizza category. Just a few examples, we introduced the Hand-Tossed Pizza, upgraded Stuffed Crust Pizza, and built up a Durian Pizza series.
In the first half of this year, our pizza sales rose 56% compared to the same period in 2019. This has been a leading factor in driving same-store sales growth. To continue reinforcing this leading position and driving category growth, we will focus on three key areas. First of all, we'll continue to strengthen our pizza expert reputation with improved taste and more choices. We are upgrading the dough recipes of our Pan Pizza and Hand-Tossed Pizza. At the same time, we are introducing a Neapolitan-Style Pizza for customers who are seeking an authentic Italian pizza experience. Second, we are upgrading our signature pizzas, like the Super Supreme, to drive repeat purchases. Lastly, become instant hits with our customers. I would like to share how we are expanding into new... First is product category.
We are preparing to launch where we have many advantages. A large making this a natural extension for us. Our burger will be made to order, ensuring unparalleled quality and flavor. We will do this leveraging our existing restaurant infrastructure and skilled workforce, keeping marginal costs low. We strongly believe burger will be a key engine for same-store sales growth going forward. Opportunity for us. Starting from this month, we are partnering with Lavazza to introduce premium grade supplement our current beverage offerings. Next, we are creating even more occasions for customers to love Pizza Hut. Our upgraded individual-sized pizza is a perfect choice for a single meal, fulfilling the needs of solo diners and office workers. We're also enriching our breakfast offerings, maximizing our store utilization, while catering to our customers who are craving for our, you know, food.
Finally, we are broadening our appeal into more consumer segments. We are strengthening our collaboration with and toys, you know, and pet toys to our customers. Our partnership with Genshin Impact, tremendous new customers and significant incremental sales, but also offered Genshin Impact gamers an opportunity to experience the game better and engage with other players offline better... We are also catering to a growing sector toy offerings. Our third growth pillar is value. At Pizza Hut, more amazing value for money. To create more afford, second, we'll continue to enhance our all-you-can-eat program to give our customer more reasons to visit. And lastly, we'll continue to create delightful surprises for customers. Our buy one get one free offers and 15 to 59 for two campaign have resonated very well with customers, generating huge social buzz.
Our fourth growth pillar, delivery, has been. We will continue the strong growth, giving that pizza a position to capture the growth of delivery market. On top of our natural fee for the delivery business, we're focused on two main areas to expand our delivery sales. First, we'll continue to improve our delivery experience. We have been improving our delivery speed. At present, we are able to deliver orders to customer within 25 minutes after they place order in 12 Tier 1 and Tier 2 cities. With that capability in place, we are ready to roll out our 30-minute delivery commitment in these cities. Moreover, a faster delivered food, hotter, and therefore tastes better, and in return, contributing to a higher rate of return customers.
Another focus here is to tailor-made our offers for delivery customer in different regions and city tiers, so that the overall attractiveness and repeat purchase of our products will be higher. Our efforts focus on three main areas. First, acquire new members to expand our member base. New members bring us incremental sales, and as customers become our members, we can communicate with them more effectively. Second, we will continue to drive member visit frequency through VIP programs and targeted offers based on their food and value program preference. And finally, we are constantly improving our customer ordering experience. With 92% of our order on digital channel, every bit of improvement on ordering experience will help us to boost online traffic conversion rate and bring us more sales.
Our approach involves improving system response speed, streamlining user interface, and providing real-time order tracking to ensure a best-in-class online ordering experience. To sum up our growth strategy, with continuing efforts on strengthening the core categories, expanding to more, improving value for money, driving delivery growth, and enhanced digital capabilities, we are, we have been launching these new designs on a yearly basis, our newly designed store, store design concept called Young and Modern. Here is another one called City Henan. With this new concept, we hope to create inviting spaces for our customers to have their own lasting experience with their friends and family. So far, are either new or refurbished with new designs in the past several years, helping us to give our customer a great dining experience and raise our brand equity. Lastly, I would like to share our plan to achieve margin expansion.
The first element is to reduce the work done in-store. We will reduce duty management and administrative workload significantly with centralized support. We are moving towards a shared management model, where one RGM is in charge of multiple stores, essentially like our satellite store management model, facilities in stores. Finally, we will streamline production procedure and move some of the more complex. With all the efforts I mentioned, we target to reduce the workload in-store by 30% over the next three years. Second, we'll continue to leverage the power of automation and AI to further improve labor efficiency. So far, we have deployed over 1,000 automatic store fryers and delivery robots in our stores.
We plan to double this number over the next three years, and we will also implement AI-empowered system to automate all major restaurant management tasks, from sales forecasting, labor scheduling, inventory management, to material replenishment. Lastly, we'll move as much fixed costs to variable costs as we can to enable our store to achieve higher margin, even in low seasons. We are substantially increase the percentage of working hour contribution from our flexible crew and proactively seek variable rents for new stores. We have a deep respect for our employee and RGM better. The culture of RGM number one will enable us to continue to grow big and grow strong. As we focus on back to communities and the society... Through our Grow Local initiative, we actively support training for local farmers and use locally grown ingredient whenever we can.
We're also collaborating with partners and other brands on initiatives across different, across more than 50 cities to help reduce food wastage, foster good reading habits among children, and take care of stray animals. We will continue to amplify these social responsibility efforts to make a meaningful impact beyond business. With our solid foundation, huge market potential, and a clear strategy in place, we are confident to further accelerate our growth. We are ready to take off and ambitiously to forge the most innovative pizza brand in the world. Let's just see you and embark on this exciting journey together. This concludes my presentation for today. Next, let's welcome Adrian Ding, our Chief Investment Officer and GM of Lavazza, to give you a quick update on our Lavazza JV. Thank you.
Thank you, Jeff. Hello, everyone. I'm Adrian Ding, the Chief Investment Officer of Yum China and the General Manager of the Lavazza JV. I'm very excited to provide you with an update of Lavazza JV's business development. I would like to first show you a short video which introduces Lavazza brand, the JV.
... Enjoy life. But how is such a brand created? Let's take a step back. Lavazza was founded in Italy and number one Italian coffee company. For development. However, icons aren't made overnight. Since launching its first flagship coffee shop in China, Lavazza has opened over 100 cafes across the country with a variety of store formats. Now present in 11 cities, it continues to offer differentiated store experiences. How? Extraordinary coffee, crafting a dedicated coffee journey for China with unmatched expertise through its portfolio of fine coffee beans. Enticing menus, offering innovative food and unique coffee drinks, blending Italian essence with local taste appeal.
Good morning, everyone. It is an honor and a pleasure to speak at Yum China Investor Day. Lavazza is strongly committed to the long-term success of our joint venture with Yum China. In this highly competitive landscape, it is critical to maintain consistency in positioning, execute flawlessly, and foster creativity to shape the consumer experience. During my recent visit to China, I was amazed by the exceptional quality of our coffee shops, particularly the coffee and food products, as well as our frontline colleagues' outstanding customer service. We are just at the beginning of a long and thrilling journey that will keep us side-by-side. Thank you, and I hope you all enjoy this special event.
Thank you. The joint venture between Yum China and Lavazza has made encouraging progress over the past couple of years. Two synergetic growth engines have emerged: the coffee shop business and the retail business. The coffee shop business surrounds our own Lavazza stores, while the retail business involves selling retail coffee products beyond Lavazza coffee shops, namely into other B2B or B2C channels. Since the time we introduced the Lavazza JV at our 2021 Investor Day, our footprint has grown five-fold to reach over 100 stores across 11 cities in China. Our first half revenue in 2023 has also more than doubled year-over-year. On the digital front, we've been improving our digital and delivery capabilities. Approximately 70% of our sales come from digital orders, and 37% of our sales are contributed by delivery.
We have also grown our member base to over 2.4 million, which is still a young brand here in China. Since opening our first V Icon campaign, as well as through selected co-branded collaborations, we have come up with three key themes: who we are, how we differentiate, and blend with local markets. I will share some more color of each of these three key themes shortly. We are confident that these four strategic pillars and assets to work with. Lavazza is the original inventor of blended coffee beans, a technique now a full middle-class consumers and family-oriented coffee enthusiast. It's an example of our brand building efforts. This is a unique event we hosted at Shanghai, Sinan Mansion, Sinan Gongguan. The event gave them a firsthand and interactive brand experience of Lavazza coffee world.
We have also been heightening our brand awareness and exposure through high traffic events such as coffee festivals and music festivals through our coffee trucks and booths. Through these events, we build experiential engagement from our baristas with large groups of consumers. Beyond our own branding programs, co-branded collaborations are helping to amplify our brand recognition. For example, earlier this year, we had a collaboration with a gaming IP from miHoYo, Tears of Themis, 未定事件簿. The collaboration was a big success. It not only grew, it not only grew our sales, recruited a meaningful number of new members, but also generated significant social buzz among young consumers. Overall, we're investing in and shaping our best product with high quality and perceived value. Third, coffee and contemporary Italian store experience. And lastly, brand communication that conveys our brand essence and activates consumer engagement.
As evidenced by our leading consumer feedback ratings across all major third-party platforms, you can see that all of the above aspects are helping us win over consumer recognition, build our brand equity, and effectively grow our business. Now we come to the second strategic pillar, which is menu and calendar. This is critical to winning a competitive market. We have identified three key themes in this pillar: who we are, how we differentiate, and blend with local market. Who we are. This reinforces Italianness as Lavazza's identity. For example, by our cappuccino campaign this spring on social media platform, we became a consumer top-of-mind choice for cappuccino, a symbolic Italian coffee drink. How we differentiate? We leverage our coffee expertise and authentic Italian experience to win over our consumers. One example is our Kaffa Bean.
This is a unique single origin Arabica bean coming from Ethiopia, and is considered the first coffee on Earth. This product has earned rave reviews from our consumers for its high quality and great taste. It first, and me only. We provide a wide special Italian touch to create a captivating new twist. Traditional famous Chinese street food coming from here, from Xi'an, identity, while also bridging perfectly to the local market. Quality - high quality beans and blending expertise enable and a unique story to tell. Roma bean, one of our signature beans tailored to local consumers' taste, is a great example demonstrating our state-of-the-art blended coffee techniques. Yunnan bean is the first bean Lavazza sourced from China, and we are exploring to potentially bring Yunnan bean to the world by potentially adding it to Lavazza's global procurement.
Critical to our uniqueness, our product presentation aims to demonstrate traditional Italian coffee ritual. For example, dipping a croissant into coffee is a distinctly Italian way to enjoy coffee. In Italian, we call it Inzuppo. Communicating these types of coffee and food ritual differentiates us from competition and bring our brand story to life for our consumer in a very real way. Thirdly, blend with local market. While authentic Italianness is part of our strategy, we strongly believe that it is important to offer products that cater to local consumers' preferences. With this in mind, we add elements such as buffalo milk and coconut in our drink products, and these products have effectively enhanced our sales performance. For example, the buffalo milk sales, the buffalo milk series coffee drinks have added double-digit percentage of incremental sales in the first month after launch last year.
On food, we innovate with similar approach. We sell in the digital space. Our digital engagement is further enhanced. Around 37% of our overall sales in the first half to consumers with an unparalleled experience. We're systematically enhancing our digital outreach while strengthening our digital infrastructure. One example of this is our mini program. With just a few simple clicks, consumers can tailor their coffee drink to their own specific preferences. In addition, our specially designed user interface demonstrate Lavazza's unique brand story and our fine selection of coffee beans. Beyond this, we're also utilizing social media platforms such as Dianping and Douyin to bolster our incremental sales. Various coupons and live streaming initiatives, nice growth driver for us. Delivery sales mix was up, buyers, and at the same time, we're further enhancing our digital and apps.
To create a memorable experience for our consumers, store model and design are critical elements. We have constantly evolved and enhanced our store models. Our journey started with store model 1.0, where we tried out this, Italian style, classic Italian style design, and building areas and cost efficiency has led to our latest iteration. 2023, the new openings from this period, adopting this new model, store model 2.5, has demonstrated better unit economics compared to the overall store portfolio, yielding a meaningfully improved store-level UC Margin, catering to a variety of property settings. We conduct our store rollout using a pyramid portfolio strategy, carefully shaping distinct positioning for each of our store model.
To illustrate this systematic approach, our flagship and large stores serve as iconic branding in prime locations, while our standard and compact stores play a crucial role in adding density in core areas of cities. Additionally, our presence extend to office and community spaces via our lobby store format. We have developed beautiful new store designs that resonate with our consumers. With its mix of a contemporary Italian design, iconic visual elements, and coffee credential, our design emphasizes the charm and history of coffee while telling the unique story of Lavazza's pioneering role in the coffee world. I welcome you to visit our stores and experience for yourself how our stores use design and environment as important touch points to make our brand story resonate with our consumers. As of today, we have entered 11 cities across China with over 100 stores.
Our current footprint brings us to the growth engine, retail. Retail is the other engine too is Lavazza's position as iconic Italian branding coffee, widely recognized in the roast and ground and capsule coffee categories. We have established a distinct route to market by growing our e-commerce business, as well as fostering a close collaboration with our premium to-be partners, including premium hotels, fine dining establishments, and various retailers across China. As we continue to build this engine, we'll introduce more product categories tailored to the local Chinese retail market. We hope to make Lavazza a meaningful and cherished element in the daily lives of coffee lovers across China.
Coffee break. Please feel free to grab some Lavazza coffee or refreshment. Our lunch is a little bit late today, so make sure you grab some food so you don't starve yourself. After the break, our Chief Technology Officer, Leila Zhang, will present our digital strategy.
... to empower business. Well, just now in the previous, some of our achievements and plans in digitization. In the past two years, we have further improved our digital customer experience ecosystem, consisting of our Super apps, membership, delivery services, and third-party channels. Our total number of members now exceeds 445 million, with digital orders accounting for approximately 90% of company sales. At the same time, market conditions have affected the way our business operates, putting forward more requirements for digital capabilities. The following video will introduce how our digital digitization has gone through the fundamentals of end-to-end capacity building and further unlock the potential of digitization.
Building industry-leading digital capabilities. We firmly believe that building fundamental digital connections from farm to consumer creates... With many milestones achieved, Yum China's end-to-end digitalization journey continues. Going forward, we are continuing to enhance our digital capabilities to empower our teams and drive sustainable profit growth.
AI capabilities to open up the end-to-end digital capability. It is a digital franchise, which helps the rapid expansion of franchisee business. The third is a digital supply chain from farm to store. Finally, all these digital capabilities are built based on a unified Yum China cloud infrastructure. Let us go through each of these cases in detail. First, a very important part is from farm to store, digital and intelligent supply chain. It also empowers our suppliers. The following initiatives are included: We have further advanced technologies such as RFID and IoT to enable automatic inventory checking and monitoring, accurately identifying products and helping to reduce human error. Smart replenishment system, it reduce the risk of inventory. In particular, for the new product, we can make our forecast more accurate. It greatly enhance the testing efficiency and empower the fast iteration of products.
With our supply chain control tower, we integrate core suppliers, logistics, and store data, enabling more intelligent decision-making. Leveraging a knowledge graph algorithm, our AI-powered food safety risk monitoring system proactively identifies and mitigates risks based on big data of food safety, significantly improving food safety control efficiency. The smart store system, it enhance the efficiency of management. Starting from 2016, the number of store counts has increased by 80%, while our employee headcount has remained relatively flat. Thanks to the cooperation of all our colleagues, a number of digital tools empowering our restaurant management teams have helped to make that possible. AI-enabled operation analysis. By integrating the Super Brain into the Pocket Manager, restaurants' general managers can quickly identify and resolve operational pain points and automatically schedule tasks to improve efficiency. For example, we enhance efficiency by automatic labor scheduling, et cetera.
They also help to pinpoint the opportunities to reduce cost and enhance efficiency. Remote supervision. The restaurant management team can supervise operations at their stores remotely to expand management scope and improve operational efficiency. Intelligent monitoring system, it is based on vision recognition system. It includes unmanned security, unmanned delivery, quality recognition, et cetera, helping to reduce repetitive and manual tasks with a view to enhancing the quality control, efficiency, and reduce the complexity of our business strategy. Digital and intelligent support experience for franchisees, reducing the complexity of store opening. These apps cover KFC and Pizza Hut franchisees. All together, for Huang Ji Huang and Little Sheep, all of our digital and smart capabilities... As one of the earliest enterprise cloud platforms in China, the Yum China Cloud project has completed the first phase of its development and construction. So fluctuation.
By integrating public and private cloud transaction volume, one after another, with mass demand from our customer, security service system is embedded in the Yum China Cloud.
Improve customer experience and store operation efficiency in AI technology application. Membership, service, ordering, and delivery, as well as customer services, decision-making AI have already promoted sales, recommended ordering, and in the private domains, we will use AIGC to improve customer experience and integrate more generative AI capabilities.
Is that based-
Super Brain is a strong analytical tool. However, it cannot formulate action guidelines for store operations. AIGC can speak natural language and provide the operators with more accurate silo to integration. Generative AI can empower not only employee recruitment. Third aspect is to combine generative AI and decision big models. These AI will expand more scope for innovation to ecosystem knowledge base. They will synergize unstructured knowledge. A notable example is The Yum China Digital, a lot of mid offices for our engineering. Have a technical capabilities through. I would like to use AIGC to sum up our agility. Markets and businesses are always changing. I and the digital capabilities to ensure that I stands for integration. We will integrate generative AI, decision-making AI, and a knowledge graph to build Yum China's AI capability, synergy of different technologies. The big models sometimes also generate nonsense.
For generality, we will build ability for new business scenarios. Existing AI solutions can be quickly repurposed and applied. Industry-leading AI provider to test and adopt will be wider and deeper. We've been empowered to share with you today some of our thoughts on digital path, communicate with you. Thank you. Next, I would like to invite our Chief Supply Chain Officer, Howard, onto the stage.
Thank you, Leila. And good morning, ladies and gentlemen, I'm Howard Huang. To briefly introduce my background, KFC Marketing Manager for more than 10 years. For three years, this overview of our supply chain ecosystem to you today. Yum China operates a robust innovation, logistics, engineering system. As Joey mentioned earlier, our goal is to reach 27 stores by 2026. To achieve this, to better support the development of our brands and the sustainability. Over the years, we achieved a consistent quality result through building a holistic food. This system covers our entire value chain, from farms to stores. It leverage the very- and raises alert to enable preemptive action. Importantly, as with digital data collection, we can help our suppliers and the operation teams to optimize their processes and improve performance.
Another critical part of what we do is cost management. As Joey mentioned, we have maintained... The slide shows just one example of the result we have achieved. A few issues include a proactive and processes, working with upstream supplier products and logistics infrastructure. In these areas, what sets us apart? Creative utilization of materials. This allows us to provide more choices to our customers and improve customers' experience, and accelerate our brand growth. One example is what we call whole chicken utilization, parts and parts of white feather chicken. In products for KFC and Pizza Hut, by doing so, we can provide our customers with more product choices at lower prices. I take one example, as Warton mentioned, the Golden Spark chicken burger, parts of the whole chicken to help maximize yield and achieve cost efficiency.
We then use our unique to make the meat juicier and more tender. Moreover, we are increasing the use of other chicken types. For example, a Rising Star product uses a smaller chicken called 817. Our whole chicken innovatively combines two different cooking processes, a steaming and light frying, so sealing natural juices and locking in flavor. Our customer feedback has been very positive, and about 36 million chickens were sold in the first half of 2023. Another product we are serving in Pizza Hut restaurant is chicken soup. We creatively leverage the chicken breeding cycle and developed the soup with our egg suppliers. Chinese consumers consider chicken soup to be highly nutritious. By serving these products-...
at a reasonable cost, we can provide our customers with high perceived value, leading to a better overall dining experience. Let's turn now to how we will invest and further improve our supply chain operational efficiency. The investment will mainly focus on three areas: intelligent network, automation, and infrastructure. About half of the investment in supply chain will be spent on logistics, and the rest is planned for other capability development, especially on product innovation and central kitchen. Recently, we invested in a production facility of a strategic seasoning supplier to further deepen collaboration in product innovation. An important initiative we are working on is intelligent network planning. We started this project with opportunities that arose during the pandemic.
During this time, when our regular truck transportation routes were not available to ship materials, we came up with an alternative solution: use railway and sea freight as backup channels. Multimodal delivery adds a flexibility to our network. This involves a strategic site selection and a coordination with suppliers and vendors to shorten transportation times and distances and achieve cost savings. Going forward, we are planning to co-develop logistics centers and food industry products together with the suppliers and other strategic partners to further streamline operations and reduce transport costs. We have implemented a diverse array of automation solutions at our logistics centers. The high-density four-way shuttle system at our Xi'an logistics centers is expected to increase our storage capacity by 50%, shorten the delivery time by 51%, and improve operational efficiency by 45%.
Many of you will visit there this afternoon. We also plan to install our industry-leading automated storage and retrieval system at our Shanghai Nanxiang Logistics Center. These will better leverage space and support our chicken stock levels. With our logistical infrastructure, we are planning ahead to support our brand's accelerated growth. Our current network covers the stores in more than 1,900 cities and towns, with the capacity to cover more than 3,000 cities and towns. With our long-term growth in mind, we plan to reach 45-50 logistics centers in the next three to five years, aiming to cover more than 5,000 cities and towns to reduce our sales lead time and transport cost. About 30% of these logistics centers are expected to be company-owned.
Company-owned infrastructure helps us better adopt customized technology and automation solution to support our long-term development. It also helps us meet our sustainability goals, like our Nanning, Guangxi Logistics Center, which is now operating on 100% green power. This leads us to our last pillar, sustainability. We are working to protect the planet through a more sustainable climate action, circular economy, and technology tools such as Kitchen Internet of Things are now used for improved energy efficiency for Scope 1 and 2 emissions. We are rolling out this project nationally and expect to cover 500 stores by the end of this year, and projecting to save 3% energy per store. We are accelerating our green energy transition. The Nanning Logistics Center is a good example.
By leveraging virtual power purchase agreement and installing solar panel on future new logistics, we will power more stores and logistics with green energy. Well, for scope three emissions, we successfully launched our Yum China supply chain distributed photovoltaics and virtual power purchase agreements alliance. With more than 40 key suppliers, the objective is to speed up their transition to green energy at a competitive cost through a collective purchasing. Our circular economy focus on reusable packaging and waste recycling while also achieving a cost saving, which I explain these a bit more. Recycle more. For waste recycling in stores, we have converted over 3,000 tons of used cooking oil into biodiesel as of 2022.
... These translates to 9,000 tons of greenhouse gas emission reduction. At the same time, we also partnered with a local company in Shanghai KFC stores. As an expertise and the trees for more stores. At the same time, our team too, and expect to further grow the business inquiry.
Okay, thank you, Howard. Today, I'm Jerry Ding, CPO of Yum China. First of all, I would like to take this opportunity to express my sincere gratitude to our people at Yum China for their strength, resilience really have been pivotal to us emerging here today a much stronger and more agile company. So as we look into the future to reaching our ambitious goal, our people will continue to play an instrumental role to us. Our future-ready people strategy is aligned with our mission and vision.
Staff and support around 50% more stores than our labor market. Our frontline, like our restaurant general managers, our RGMs, is the key to address this. Since last year, we have started a centralized recruitment process. This frees up our RGMs from spending significant amount of time on recruiting, so that they can focus on some other tasks such as customer experience and driving sales. In addition, with the help of digitalization and automation, we have been enabling more of our RGMs to manage multiple stores. At KFC, for example, a single RGM can now manage three stores instead of one per store. We are also reworking workflows and streamlining operations, while at same time. We have also invested in technology to accelerate our recruiting fulfillment pace. CVs, just for one position alone, our operations need to do the manual screening of these CVs.
So to better enable our team, we have deployed AI technology to assist the initial screening, the interview scheduling, and even the interviews. So these, you know, an improved interview experience. They have also shortened our lead time to fulfill the days of the moment we receive CV. This is a significant 60% reduction from the previous of average 12 days. We are now also exploring AI-generated content or AIGC. This holds potentials to enhance operation efficiency, improve our service, and provide our employee with a more personalized at work experience. We are now in our recruiting process, learning and develop programs, providing us with an enhanced insights to really step change our HR function in the future. The productivity is important.
It must never come at the expense of delivering exceptional cost invest in extensively in training to continually improve the skill of our people. So that's our training outcomes really clearly show the result here, with our brand continuing to be transparent. At Yum China, we see the value, 100% of our market managers are homegrown and promoted from within the company. The average tenure of these senior leaders in their operation teams exceed 20 years. Some of our senior leaders today, including Warton and Howard, who you just met, started their career as operation MT some 20 years ago. This practice supports our goals in building a sustainable and high-performing team. Let's talk about how the employees towards our common objective. Are the fundamentals to our core value? At Yum China and our restaurant, helping employees.
We are also expanding investment in education to encourage our employees to pursue higher education. We provide them with necessary resources and support. Our Pursue Your Dream, this includes up to CNY 1 million in medical coverage, even for their parents. This gives our people a peace of mind, knowing their family's well-being is secure. They are focused on work responsibilities and better serving our customers. Pretty incentive plans so that we can share our growth. It was only 9% in 2022, when our collectively volunteer over four million hours in... One that stands out in my mind, and perhaps for all of us in 2022, was the feeling of pride when we offered eight of our KFC annual employees. Our efforts, we are proud of what we have achieved, and rise by a clear vision, technology, innovation, and steadfast commitment to our people's well-being.
Through this collaborative approach, we will ensure robust-
... sustainable growth while setting new industry standard for excellence. Thank you, all. And now let's welcome our CFO, Andy Yeung, to the stage.
Thank you. It's really good to see everyone here. My heart is racing. I'm sure it's because I am very exciting initiative to capitalize and drive. I would like to share more with you on what they mean in dollar and cents, and how finance can help our company's strategy. Now, last year, we have emerged from the pandemic stronger in a significant improvement on almost from store count, to sales, to how if you look at on a year-over-year basis and also on a, you will see that you'd have improved on almost every metrics for growth for us. Expanding our store network, let's talk a little bit about, you know, our store network expansions. We have factors.
One, we plan to, you know, take advantage of three. You know, our innovative models, as, you know, and Jeff and Adrian have mentioned, you know, we have a lot of innovative store models. Coupled with our diverse brand portfolio, it really places us in a very good position to satisfy. Fourth, our strategic franchise partners are expected to play an even bigger role in our expansions in the coming years. We expect, you know, they to account for about 15%-20% of our new store opening in the next three years. Essential to our store footprint expansions is really to identify area with strong growth potential. Factors that would increase the number of, you know, store rate include economic growth, our economics.
Now, out of the 3,000 cities that we have identified, KFC already have a presence in 1,900 of them, and there are still over 1,100 cities that remain untapped by KFC. Now, the opportunity for, you know, KF, for Pizza Hut is even more pronounced. More than 1,200 cities currently have a vision like Jiangxi Province, with faster economic growth, but low brand penetrations, offer tremendous growth opportunity for us. Furthermore, if we look at the top-tier cities like Shanghai and Suzhou Province, our focus shift to increasing our network density. By doing so, we can cater to the rising demand for off-premise dining and benefit from the network effect of having a denser store network. Now, not only we are expanding our footprint, but we are also ensuring the quality of our new store opening.
Both KFC and Pizza Hut boast fantastic unit economics and store payback, particularly for the smaller models. Now, if you look at the cash payback period for our new store opening, we have been remarkably consistent over the year. Roughly two years for KFC and three years for Pizza Hut. Smaller model for KFC offer a compelling payback period of two years and cash dividends, cash margins of about 21%. Now, Pizza Hut satellite store model also offer a fantastic payback period of two years and a cash margin of 16%. Now, this success come from our consistent and disciplined approach to store opening. This innovative product, innovative store models require lower upfront investment, therefore unleashing significant growth potential for our brands. This is especially true for Pizza Hut, which saw a significant...
Have four objectives for store opening over the next three years in place to offset the impact of those fast pace of store opening, and more importantly, to drive positive same-store sales growth in the coming year. Now, Warton and Jeff have already, you know, gone through them in more detail, so I would just, you know, highlight a, you know, few key points here. Food innovation. Good food attracts customers. We'll continue to innovate, you know, in our new new product introductions, introducing new delicious dishes to our consumer, enhance our signature dishes, widen our price options so that we can appeal to a broader consumer base. Brand engagement. Our brand resonate very well with consumer. Many of our marketing campaign, like Crazy Thursday, you know, have become viral online. Convenience.
To cater to the increasing demand of, you know, speed and ease for our customer, our goal is simply to be there whenever, wherever our customer needs us. Customer loyalty. Retaining customer loyalty is very crucial to us. We're utilizing our advanced digital infrastructure to broaden our membership base... promote cross-brand selling and to increase the purchase frequency, and also spend by our members. Our emerging brand are very important to our future growth. They are also making very encouraging progress at this time. Collectively, our emerging brand operates 1,000 stores. A little bit more than three years since its debut in China, Lavazza have just recently celebrated its 100th store. Now, as Adrian mentioned earlier, Lavazza is on a solid trajectory, making good progress on brand recognitions, product developments, store format, all that leading to better unit economics and sales.
We are confident that Lavazza will become one of our Taco Tuesday campaign, which features NBA star LeBron James. Now meanwhile, our Chinese dining business overall is making good progress, you know, and have a strong recovery this year and became profitable as well. So we will continue to invest, but with discipline, to restructure, you know, our cost base, and it pays off by 20%-25% the break-even sales, therefore enhancing our room for further development. More importantly, we did it by rephasing our cost structure that would benefit our margins in the long run. For example, by improving cost structure, by introducing store management team sharing initiative, we empower our capable RGM to manage multiple stores. Enhancing our labor productivity, right? By investing in digital infrastructure, optimizing depreciation to variable costs.
Now, certainly, we face some potential challenges in the long run, like rising commodity prices, increasing wages, and challenges in hiring and retaining quality staff. But as we have demonstrated over the past few years, we have, you know, like with hard work and innovations, even in very challenging time, we can sustain and even improve our margins over time. We aim to keep our cost of sales and our cost of labor as a percentage of revenue stable, while we work to improve on our operational leverage in our fixed costs and expenses. Now, to achieve this goal, we will continue to focusing on product innovations, labor productivities, and leverage on our investment in digital technology and supply chain infrastructure from our operations. By the second, you know, quarter, our capital allocations priorities are introduce a five-year CapEx plan of five digital and supply chain investments.
For the first two years of the plan, which includes this year, we are on track to invest roughly $1.5 billion in CapEx. We're increasing our store count by almost 2,500+, building eight logistics centers, rolling out, like, the number of automation initiatives at our restaurants and also our logistics operations, and also completing our initial end-to-end digitization plan. Now, for the coming three years, we plan to invest. We plan to expand logistics and further digitize and dial in efficient logistics centers to reach about 30% by 2026. Now, this will enable us to further invest in end-to-end digitization for the long run. Another $500 million-$1 billion will be reserved for investment in digitalization to further, you know, strengthen our technology moat, from IoT to cloud computing, to automation and expanded AI applications.
Now, this investment, we believe, would help drive sales and productivity, improve customer services while ensuring cybersecurity and system capability. In another area for our capital allocation is our M&A and strategic investment. While we are receptive to investment that would foster, you know, growth and enhance our core capabilities, we maintain a disciplined approach to our strategic investment, primarily focused in three key sectors. One, we consider, we consolidated KFC's legacy joint ventures. Now, in three key market areas, Wuxi, Hangzhou, and Suzhou, which together account for roughly 17% of our KFC and Pizza Hut, to fortify our ecosystem. Now, despite the challenges during the pandemic, we have returned a portion and Joey will provide a more concrete update tomorrow. I know, lots of spend there.
But before I conclude my presentation today, I will, you know, just give you a quick update on our 2023 outlook. Now, in the first half of this year, our sales have notably improved compared to, you know, the same period last year. Indeed, our same-store sales have rebounded. Our recovery trajectory remain fairly stable. Now, we anticipate the recovery of our same-store sales to maintain a relatively steady pace. For the full-year 2023, at roughly 90% of the 2019 levels. Furthermore, our system sales should continue to benefit, you know, from our robust pace of new store opening as well. Now, given the current pace of store openings, net new store to be in the range of 1,400-1,600 for the full-year 2023.
Now, that's an increase from previous expectation of 1,100-1,300 net new store. We continue to expect, you know, capital expenditure to be in a range of $700 million-$900 million. So, with that, you know, I will conclude my presentation today. Thank you. Let me now invite Joey back to the stage to give you her closing remark.
Hello. Thank you.
Thank you very much.
Thank you, Andy. Hello again. As we come to the end of our presentations today, I want to thank each of you again. It's been a pretty busy morning. Many people, beginning with Plato, I guess, have observed that necessity is the mother of invention, and so the pandemic was to us. The many measures that we took to survive over the last few years add up to a transformation of almost every aspect of our business. I'm confident that with our amazing team, world-class capability, and our powerful brands, these will make us one of the very best of our restaurant industry in this world. Before we transition into the Q&A session, as promised previously, I'm thrilled to unveil our key targets for the next three years.
First, we are pleased to announce that we are targeting a combination of significant increase in back to normal. We can continue to trade the business as a normal business. The aggressive investment into our business, our stores, our digital capability, and our supply chain capabilities. Second, other than the cash, second, let's talk about the next target, growth target. We mentioned many, many times, it should be very clear right now that we intend to reach 20,000 stores by 2026, and there are three ambitious financial targets here. One, high single-digit to double-digit growth in system sales in the next three years. Two, high single-digit to double-digit growth for operating profit for the coming three years. And three, double-digit growth of EPS in the coming three years.
These targets reflect our commitment to delivering value to our shareholders, our confidence in our prospects, expanding our reach and driving robust growth. Very importantly, our vision remains unchanged, which is to be the most innovative pioneer in our industry globally. One more time, it's not because we are that arrogant to think that we can be that amazing. It's this humble belief that in order to survive and to excel in this industry, being innovative is the most critical and basic capability that we have to build. May I also invite other presenters to come on to join us in minutes for Q&A? Feel free to ask the question in Chinese or in English. However, please limit your question to one per person because of the limited time. If you'd like to ask a question, please raise your hand.
Please state your name and the company you represent before you ask the question. Let us get our management ready first. All right. Okay, let's take our first question. Luo Chen, you're the first to arrive here today, so our first question.
Okay, thank you. It's my privilege to ask the first question. I guess the majority of the attendees here are Mandarin speakers.
... Chairman, analyst, my name is, Luo Chen. I'm impressed we finished the presentation on time and started the Q&A. This is the sixth Investor Day that I have attended this year. The previous five really ran very late on their schedule. It really represents the flawless execution from Yum China being on time, and I really admire Joey and Andy's flow management of all the presentations, because you really saved the most exciting part that we all want to listen to, to the last five minutes. It's the first time that we have organized Investor Day for the past four years. The last time was in Beijing in April 2019, was in the Waldorf Hotel, if I remember correctly. And that was well before COVID, as well as before the worsening of the China-U.S. relations.
A lot have changed over the past four years, but not in a so good way. There have been a lot of changes in Yum China, but in a very good way, because it has become stronger and more resilient. The capital market are all asking this question: What are the future prospects of China's economic development?
Everyone is talking about consumption degradation, as well as the heightened competition. I would like to share with you my observations in the following five aspects. First of all, I think that everyone in the industry are now doing value campaign. We have got a Crazy Thursday, but we have to be crazy every day, let alone our competitors. Look at the digital channels, more and more Luckin Coffee, et cetera. They have been accelerating speed of store locations, but a lot of competitors are doing the same. Last but not least, we have seen some emergent competitors, like Tastien for Chinese, the margin.
But if we have reinvestment needs, well, is the implications to our same-store sales recovery, and in the lower cities, a space for opening up new stores. And the third, what are the implications to our new we differentiate ourselves from peers? I'm sorry. Comes down to our capabilities to deliver that. It's not just about long-term commitment to supply chain, R&D, and innovation. These are our long-term commitment, and we have been doing it. We have invested for the long term with a lot of manpower input for KFC, for Pizza Hut, for all the other brands. These are very important enablers, without which values alone is not enough. Secondly, competitors and the competitions in lower tier cities. Is this true? It's true for all brands. We welcome competition. It means there is confidence in the market, so there is no economic downturn.
Or despite economic downturn, there are still abundant opportunities. There are so many questions from the investors because the size of the market, the size of the economy is there, so intense competition is good news. As for lower city competitions, I think internally it's also a good news. Here, I think that we are the only company that the boss are saying that you must penetrate into lower tier cities, and there are a lot of people saying that there are objections. It's too hard to do. And then there are fierce competitions like from Tencent, et cetera. And however, with the competition, they, these people will have more passion to penetrate into the lower tier cities.
Jiangxi Province was a market that was neglected, but now with the participation of competitors, now we are talking about doubling the business of Pizza Hut, KFC, in these locations. Our beef and the chicken burgers are very good examples in Jiangxi nationwide. Second, price competition. Before, in the past, we were quite weak in the lower than CNY 20 menu. That's where the other brands have grown, very rapidly. That's why we have a combo, OK Duos, which are less than CNY 20 . It has been very competitive in the market. So with the support of supply chain, we will have more customer-friendly products, more targeted resources allocation. We have this budget, quite a lot of, promotions, and our cost structure is as sound as pre-COVID levels. We have the confidence is not enough...
Such as a beef burger, it's a relatively costly product, but it's value for money, and the customers are favoring these kind of products. Next question, please.
Let's take our next question from Xiaopo.
Hello. Yeah, thank you so much. I will be very short. Congratulations for this great presentation. We are so glad to be here to see the high energy of Joey and the leadership team, even better than the COVID. I would ask in Chinese as well.
I think what's different about the company is that over the past three years, we experienced the COVID, but you've sped up investment in infrastructure. But I think this is something that differentiates your company from others. My question is very simple: Have you ever considered that if the digital capabilities is the hidden gem of the company, have you ever considered to capitalize on that, to budgetize on that, and to monetize on that? If we can monetize on these infrastructures, will you open these infrastructures to third parties to get more revenue?
Thank you, Xiaopo. Definitely, digitalization is something that we have been a front runner in the restaurant industry. And if you look at emerging brands, they are benefiting from it with the digitalization foundation of KFC and Pizza Hut, the emerging brands, the Taco Bell, the Lavazza, among others.
We have also a SaaS platform for all the emerging platforms when help the emerging brands. Any platform of SaaS, if you look at, basically, you need to have 3,000 stores to have this economy of scale. We have the benefit of the economy of scale of Pizza Hut as well as KFC, so that we have the power to empower the emerging brands. So we can also empower our Chinese dining brand, as well as other emerging brands on this SaaS platform. So we have already monetized on these infrastructures from this sense. And in the next step, we plan that we would be able to empower the industry. If more industry peers can work together to co-build these platforms, the digitalization will progress even faster.
In this era, it's all about openness, be it online platform. It must be open. I think that for our systems, openness and the compatibility of our systems are also things that we have to face up to, as well as to address. I hope that I answered your question.
The next question from Michelle, from Goldman Sachs.
I'll also ask in Mandarin. We are encouraged to see that, Joey, that there will be a lot of more shareholder return, and the target of store opening is more concrete. I want to ask about franchise model. In the past, we were conservative about franchising, but from 1,400, 1,600 to 1,800, many of them will come from franchising opportunities. Can you share more on the opportunities of the franchising and the potential of economics of your franchising business?
The economic model of franchising, we understand it very deeply. KFC, Pizza Hut, have quite a large number of franchising business, and we are looking at it from the strategic point of view. Warton has shared in his presentation on this as well. At Yum China, we are a highly efficient team.
In big cities, these efficiencies can be best represented, but in lower tier cities and remote areas, efficiency will go down. It's like the guerrilla war in lower tier cities. There are also strategic points. For example, highway service stations, schools, hospitals. Very frequently, it's very hard to get to these places, so we have to work together. We have been quite conservative because we attach great importance to food safety, something that we do not compromise. We've shared with the past. Food safety is a priority in our capabilities, and that's why we dare to open up opportunities for franchising. COVID has also brought us quite a lot of business opportunities as well. After three years of hard work in China, we have quite a lot of suppliers, partners, and consumers who have placed their trust in us.
It was very difficult to get into or have access to the university market, but now we have the opportunities. We really have to work hard on that. That's basically our strategic thinking. Thank you.
Lillian. Lillian from Morgan Stanley, please.
Thank you, Management. I'm Lillian from Morgan Stanley. My question is a bit relevant to Michelle's question. Overall, thank you for the presentation, Joey. We will read the margins for restaurant. Second, in terms of ROE, low teens, with less-
Restaurant margins, the most important thing obviously is restaurant sales, low- to mid-single-digit. So I think, you know, continue to look to, to sort of, you know, manage that, cost of labor is really one, as we mentioned, we try to reduce the workload, the administrative workload, at the restaurant level. We also... You know, invest in technology and automations so that, you know, our staff can do their job more efficiently, better. And so, so that way, by increasing labor productivity, we, you know, try to keep, you know, our cost of labor stable. Now, the lever there is really the fixed cost area. You know, O&O, we will continue to work to restructure that. And we have been very successful over the last, you know, 10 years, right? Not just last few years.
Reduce that, and that, you know, is a really great way to drive leverage. And obviously, you know, we will continue to work, to work to gain leverage in our G&A expenses. Although we continue to invest in digital, which would increase the depreciation.
Partners, do you have any thinkings? Do you have any future plans? Thank you.
Take place, and also help us, you know, to sort of innovate in our product. Not only, you know, have, as we mentioned earlier, recently invest in a joint venture with one of our upstream supplier in our strategic initiative.
All right,
Let me just add a little color to it. You can see—Actually, over the last few years, one big, big investment is the joint venture consolidation, which did not get a lot of the attention, and there's no consolidation risk, management risk, because we've been running the business. So when the opportunity present and the number works, we will invest and get better shareholder return. And when we invest, we always ask ourselves whether we can build the capability ourselves. If we could, we do internally, like, you know, technology-wise, we do it internally because the capabilities we want the capabilities stay with us for long term.
... and then the IP, et cetera, blah, blah, blah. But there are things that we think that will be much faster and more effective if we use our capital to invest, such as, you know, the recent investment in central kitchen, because it's a very different story to run factories and central kitchen. It'll be more effective if we learn from someone. I mean, no matter who we are, Yum China, we always need to maintain the humility that there are so many things that we don't know, and we need to learn. So we have constantly update ourselves about the upstream opportunities, particularly for some very key categories, because we sell everything in very big scale. So we have to make sure that, one, this is good, two, is that's enough for us, in the long term.
We will always look at the upstream opportunity and hopefully make some investment to bolster the bottom line and to support the core business. The focus is about core business, all of our core business. We are not going to go sideways because that's more than enough for us to focus on. Thank you.
Next question. Maybe the gentleman. Yeah.
Ivan Su from Morningstar. My question's on your CapEx. Do you still expect your unit CapEx to decline going into the next couple of years? And then number two is, if we were to extrapolate your CapEx guidance for the next three years, there seems to be a pretty big step-up, you know, in 2024. So I want to get a better understanding of what's driving that step up in CapEx. Is it more remodeling or, you know, supply chain, digital-related investments? Thanks.
Okay. So in terms of, like, you know, our CapEx spending, obviously, as we mentioned, we have a pretty ambitious target over the next three years. We plan to reach about 20,000, so basically accelerations in store opening. And then, as we mentioned, you know, we have a bigger portfolio of store now, so to keep them fresh, we're gonna invest, you know, also money into keeping them remodeling and keeping them fresh. Now, if you look at, as we mentioned, for us, you know, the 20,000 in store is just the next milestone, right? We continue to look forward to future growth, and our supply chain investment had to come ahead of, you know, the store opening. So our target is to open more logistic center over time.
And also, as we look forward in the future, we probably, as we mentioned, own more of our logistics center. The reason to do that is because if we want to invest in automations, especially in automations, you know, it's better to have your own operation or own warehouse than leasing it for five, 10 years, and then you have to dismantle your automations. Now, as dependent on, like, you know, technology side, like, you know, we depend on how far we can, you know, take the, you know-
We have a high bar on warehouses. We need a lot of transportation, but in the COVID-19, we found out that as well as other models of transportation, if we can run our own supply chain, we can be very flexible and mix and match. First, as per those. So we invest more for big stores and invest more for small, such are many. And second, we can design very good sitting area so that it is loved by the consumers, but it does not cost a lot. Second, you don't need to decorate every store. As based on the forecast of your sales, you can wait a little bit until the sales grow to a certain number, so that you can do the full decoration, so as to avoid the risk of waste. Thirdly, there is a new project called Flexible Kitchen.
In future, all the kitchen will be assembled. It will not be fixed, it will be module-based. All the kitchen will be produced in the factory, and then it can move to the location to be installed, and then it can be removed as well if it becomes unnecessary. All of these designs will help us reduce the new investment for the stores.
I think we have time for one more question. Our shareholder, Lee?
Yeah. Hi, I'm Lee from T. Rowe Price. Thanks for the presentation, and I'm thrilled to see Yum China to be well-positioned for a period of accelerated growth after it further strengthened its moat and resiliency in the past few years. I'm going to play the devil's advocate here and ask an what-if question. If Yum China's stock price halves in three years' time, compared to what it is today, what do you think would be the possible causes, and what would you do in that scenario? Thank you.
I guess this question is for me. It's a really good question, I think. And then, you know, I think it's probably on a lot of people's mind as well, just given the market volatility. But I think, you know, but I think hopefully that was not gonna happen, because, you know, obviously, we're delivering pretty strong performance. Hopefully, the market will recognize, you know, that value there. Now, obviously, if that happens, $200, we are sitting on about $4 billion in cash. That means a little bit more than six times our EBITDA or $1 billion, you can buy it, and then in six years, you can own it debt-free. And then a business that would spit out at least $1.4 billion, which we have done last year, maybe more.
As we have mentioned, we continue to see growth in our business. So I think a lot of people will see great value in our company. Thank you.
... we still see some people with question. Maybe we can extend for two more questions?
Okay.
We can-
Our management is very generous with their time, so maybe we'll take two last questions. Maybe our shareholder as well.
English. Good afternoon, everyone. I just wanted to ask a question about the RGMs, and then work—they, they're working multiple stores, and it... Thank you.
... 50% of our restaurants have got one RGM. We cut unnecessary KPIs. The restaurants can raise their phone. Any operations that can be removed outside the restaurant will be removed. Recruitment and training are the biggest responsibilities. We now have city. So I will ask the functional departments to do more, so the RGM can manage more restaurants. Second, we rely on systems, which is totally different from several years ago. The scheduling purpose, but now these are automated, saving a lot of administrative manpower. To sum up, we enable RGMs to focus on the core businesses. We use automated systems, and we reduce the. Maybe in the future, an RGM can manage five restaurants at most.
Only the better one. And that is the incentive for the better performing our things slightly differently, but we are having-
Is it, you know, because you see a lot of capability, you're seeing rents, and the Chinese economy in general is slowing down? So I'm just wondering why. Thanks.
This is about 2026, because we have... 'Cause right now, you might have the same question, "Oh, the smaller brand compared to many other competitors in the market." And I will urge you to come back to look at Pizza Hut. We embarked the journey of revitalization back to 2017, and this is the sixth year. When we start the journey of revitalization, the number of stores that we opened that year back to 2019. Is 2019? 41 stores. 41 stores. 41 stores, 2019. And this year, we're gonna open 400 stores, 10x . 10x . So before we move fast, we have to make sure that we are absolutely doing the right thing. We fix the store model, the cost, the people, the infrastructure, the food, the price, the customer preference, the branding, you name it.
I mean, I was once on the analytical side of the business when I was in consulting. The privilege of being an analytical person is we always say, "Oh, there are five things." Analogy is you throw the fish net, and you have, like, 20... Get it right first before you run fast, and this is our speed. And why right now we are ready to run so fast? Because we can. Because we are ready. And when we can, we are ready, we should have very clear goal, because clear goal is motivating, it's exciting. We only live once. Let's do something exciting when we could.
If we have these opportunities to do it, why not?
We don't get this opportunity to do things right and to have a, you know, exciting target, and we work very hard for this moment. So now we are ready to have this exciting target and put every ounce of energy into this goal. It's very fun and exciting. But it's okay. When we try to run fast, and people say, "Oh, you might be too fast." When we are taking our time, people say, "You are a bit too fast." It's okay. We are taking our own pace, and we are ready. Thank you.
Thanks, Joey. It's a good wrap-up for the Q&A session. That's all the time we have for Q&A. For those of you joining via webcast, thanks for your participation.