According to a recent interview with Yum China CEO Joey Wat, the company has been investing more in technology, allowing it to open more stores without the need to hire additional staff. Yum China operates popular restaurant brands such as KFC and Pizza Hut in China. The company’s U.S.-listed shares saw a 5.45% increase after raising its net new store target for the year by 300 and announcing plans to return $3 billion to shareholders over the next three years.
Wat stated that despite increasing their number of stores by approximately 80% since 2016, their number of employees has remained stable at around 430,000 people. This stability is attributed to the implementation of technology that enables staff members to manage multiple stores and support the opening of new locations.
Yum China plans to invest between $3.5 billion and $5 billion over the next three years to expand its store network, improve its supply chain, and enhance its digital capabilities. In this current year alone, they plan on spending between $700 million and $900 million.
During the Covid-19 pandemic, Yum China began investing in technology to improve visibility into their supply chain and inventory levels. This investment was crucial during lockdown controls when certain stores had to close temporarily. Similar companies like Alibaba and Walmart’s Sam’s Club have also utilized software solutions in managing warehouses and inventories for improved services like one-hour grocery delivery.
To further integrate technology into their supply chain while reducing carbon emissions, Yum China is constructing more fulfillment centers instead of renting them. They aim to own 30% of these centers ultimately. Currently operating with 33 fulfillment centers, they plan on increasing this number to at least 45 within the next three to five years.
The introduction of AI-based forecasts has eliminated the need for store managers to manually order inventory items; ingredients are now automatically sent based on predictions made by AI algorithms. This technological advancement has not only reduced labor and operating costs but also minimized food waste. Wat mentioned that the logistics center’s current coverage is capable of handling Yum China’s planned store openings in the near future.
Yum China is also exploring the use of generative AI to help store managers analyze and understand store data better. However, they are still at an early stage of evaluation and determining whether internal resources or external assistance will be required for this implementation.
Regarding staffing requirements, Wat did not explicitly state whether Yum China would hire more employees to meet their technological investment goals. He simply mentioned that they would hire whoever they need. Notably, the company did not lay off any employees during the three years of the pandemic.
Despite China’s economic recovery from Covid-19 lockdowns slowing down in recent months, Yum China expects same-store sales this year to reach 90% of 2019 levels. The company opened more than half of its stores after 2019, with a roughly equal distribution between major cities and less developed areas in China.
Wat emphasized that summer is a peak time for their business, especially with local tourism. He added that transactions remained solid even after September when schools reopened for the new academic year.
In conjunction with to their popular restaurant brands, Yum China has a joint venture with Italian coffee brand Lavazza, which currently operates over 100 stores in China. Wat revealed that apart from coffee, they are exploring opportunities to introduce more branded food products in the Chinese market.
Yum China’s strategic investments in technology have proven beneficial for their expansion plans while maintaining operational efficiency. With AI-based forecasting systems and fulfillment centers integrated into their supply chain, Yum China can continue opening new stores without requiring significant increases in staff numbers.