Yum China Restaurants Gradually Returning to Pre-Covid-19 Status

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Yum China Holdings reported on March 23 that it continues to gradually reopen KFC, Pizza Hut, Taco Bell, Little Sheep and other restaurants across China “when possible and appropriate to do so, on a partial or fully operational basis.”

Store closures during the deadly and disruptive coronavirus crisis in the PRC peaked with about 35% of Yum’s approximately 9,200 outlets in China closed. For the restaurants that have remained operational, some provide only delivery and takeaway services and/or have shortened operating hours. Almost all units that stayed open experienced significant declines in traffic.

As previously disclosed by the Shanghai-based QSR chain, same-store sales declined 40% to 50% during the Chinese New Year holiday period, compared to the comparable time frame in 2019.

“In recent days, approximately 95% of our stores in China are either partially or fully open,” announced the company in a press release issued on Monday. “Approximately 10% to 20% of open stores provide only delivery and takeaway services, and some continue to have shortened operating hours. Traffic at open stores is recovering slowly and remains well below pre-outbreak levels.”

The pace of recovery has varied by region, and business is slower during weekends as many people still avoid going out. Same-store sales lately are down approximately 20%, with performance fluctuations varying by location, as the recovery is uneven.

Delivery Gaining Traction

Since the Covid-19 respiratory disease outbreak, food delivery has become an even more popular option, with consumers often preferring to order from established brand name restaurants known for high food safety standards.

Yum China pioneered contactless delivery in late January to enhance preventative health measures. This service proved popular with customers and has supported the delivery business during the time of reduced dine-in traffic, as its mix as a percentage of total sales approximately doubled during this period.

Yum has subsequently launched contactless pick-up and corporate catering services as highly sanitary options for consumers and corporate customers. It also introduced a community delivery service for areas quarantined due to coronavirus infection.

Support for Employees and Community

The company continued support for employees during the crisis, including virus outbreak safety training and provisions of facemasks. It honored commitments for scheduled hours even as stores were closed, and strengthened medical insurance coverage for staff and their families in the case of infection or suspected contagion.

In addition, RMB 3 million was donated to support hospital workers in Wuhan, where the viral outbreak originated. Since January 27, KFC and Pizza Hut have provided over 145,000 free meals to over 1,350 hospitals and community health centers in more than 28 provinces across mainland China. Little Sheep donated 20,000 instant hot pots to organizations actively involved in efforts to fight the spread of Covid-19.

Long-term Growth Commitment

Openings of new restaurants have paused due to coronavirus outbreak-related traffic restrictions and reduced availability of construction workers. The company will continue to monitor the situation and work with local authorities, resuming new store openings when conditions allow.

In response to sharply reduced sales, Yum managers implemented a number of measures to control costs, including managing inventory down in order to reduce write-offs, and scheduling employees to reflect reduced volumes and increased safety protocols.

“Despite a challenging start to the year, Yum China is here for the long run, and will ensure that it remains well positioned for the long term growth opportunities in China,” concluded the company’s press release.