Yum China embracing “new era of AI” in push towards 20,000 stores by 2026


Mohit Kamboj

Yum China Holdings Inc. (NYSE: YUMC and HKEX:9987) is investing in advanced AI capabilities to further improve customer experience and better support a wide range of operations from restaurant management, supply chain to human resources as it pursues its goal to reach 20,000 stores across the country by 2026, the company announced at its recent Investor Day in Xi’an, China.

“Technology innovations like generative AI hold significant potential for our company’s growth as well as improving labor and operational efficiency, Yum China CEO Joey Wat commented. “We are continuing to invest in this area to ensure our future success.”

Strengthening digital capabilities is part of Yum China’s ongoing efforts to widen its competitive moat in an increasingly digital-driven consumer landscape. Digital orders comprised 90% of the company’s total orders as of the first half of 2023, compared to 51% during the same period in 2019. Within the same time frame, the company’s loyalty program members reached 445 million, more than double 2019 levels.

In recent years, digital tools and automated technology solutions such as AI-enabled sales forecasting, labor scheduling and inventory management have significantly enhanced Yum China’s store capabilities and transparency. These tools have allowed the company to increase its store count by 80% since 2016 while keeping headcount relatively flat. They will also be an integral part of Yum China’s continued expansion, by enabling its capable restaurant general managers to manage multiple stores.

At its Investor Day, the Yum China highlighted that it will target franchise stores to make up 15-20% of new store openings over the next three years to enable faster expansion into strategic locations. The company launched an all-in-one franchise portal for KFC and Pizza Hut integrating various functions from franchisee selection to store opening, training and operations. This helps streamline the process for store openings while ensuring unified operational and management standards in franchise stores.

The company also has been working to build a digitalized intelligent supply chain, leveraging advanced technology to smartly monitor and replenish inventory and ensure food safety. Specifically, smart replenishment enhances the estimation accuracy of new products, greatly improving product testing efficiency, and enabling faster product iterations.

Going forward, Yum China is further developing generative AI capabilities to enhance customer experience and operations. For example, Yum China is exploring more comprehensive use of AI-generated content (AIGC) to better engage with customers and serve them better. Two areas currently under development include AI-generated creatives, such as digital avatars that can connect with customers through livestream events; and AI customer service assistants that can communicate with customers and respond effectively to meet their needs.

Yum China also sees strong potential for AI to empower its HR function. AI-assisted candidate screening and interview scheduling has helped to reduce the time needed to fill positions. Going forward, the company is exploring AIGC to further enhance employee learning and development, and provide its people with a more personalized at-work experience.

As part of its refreshed “RGM 2.0” strategy announced during Investor Day, the company has earmarked capital expenditures of $500mn to $1b continued digitalization initiatives from 2024 to 2026 to further strengthen its technology moat, including expanded AI, Internet of Things (IoT), cloud computing and automation.

“We believe that through strategic investment in AI and other cutting-edge technologies, we will further revamp customer experience, improve employee working efficiency, and fortify our ecosystem together with our partners. Our digital moat will be wider and deeper.” Leila Zhang, Chief Technology Officer concluded.