Yum China : 2025 HK Annual Report

Yum China Holdings, Inc.百勝中國控股 有限公司

NYSE: YUMC HKEX: 9987

2025

ANNUAL REPORT

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

INFORMATION ABOUT OUR EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

FINANCIAL SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

MANAGEMENT'S DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

DIRECTORS AND SENIOR MANAGEMENT 100

REPORT OF THE DIRECTORS 105

CORPORATE GOVERNANCE REPORT 127

INDEPENDENT AUDITOR'S REPORT 144

CONSOLIDATED FINANCIAL STATEMENTS 150

FORWARD-LOOKING STATEMENTS

This annual report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These statements often include words such as "may," "will," "estimate," "intend," "seek," "expect,"

"project," "anticipate," "believe," "plan," "could,"

"target," "predict," "likely," "should," "forecast," "outlook," "model," "continue," "ongoing" or other similar terminology. Forward-looking statements are based on our current expectations, estimates, assumptions or projections concerning future results or events, including, without limitation, statements regarding our strategies to expand our restaurant network and restaurant portfolio, our strategies to improve system sales and store performance and develop new sources of revenue, plans relating to our share repurchase activity, declaration of dividends, and plans for returning capital to our stockholders, plans to invest in technology and high-quality assets, plans to enhance digital and delivery capabilities, franchise development, logistics and supply chain management, our sustainability goals and anticipated effects of population and macroeconomic trends. Our plan of capital returns to shareholders is based on current expectations, which may change based on market

conditions, capital needs or otherwise. Forward-looking statements are neither predictions nor guarantees of future events, circumstances or performance and are inherently subject to known and unknown risks, uncertainties and assumptions that could cause our actual results and events to differ materially from those indicated by those forward-looking statements. We cannot assure you that any of our expectations, estimates, assumptions or projections will be achieved. Factors that could cause actual results and events to differ materially from our expectations, estimates, assumptions or projections include (i) the risks and uncertainties described in the Risk Factors included in this annual report and (ii) the factors described in Management's Discussion and Analysis included in this annual report. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. We disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law.

LANGUAGE

If there is any inconsistency between the English version and Chinese version of this annual report, the English version shall prevail, provided that if there is any inconsistency between the Chinese names of the entities or enterprises established in the PRC mentioned in this annual report and their English translations, the Chinese names shall prevail.

BUSINESS

References to "Yum China" mean Yum China Holdings, Inc. and references to the "Company," "we," "us," and "our" mean Yum China and its subsidiaries.

"U.S. dollars," "$" or "US$" refers to the legal currency of the United States, and "RMB" or "Renminbi" refers to the legal currency of the People's Republic of China (the "PRC" or "China").

The KFC, Pizza Hut, Lavazza, Huang Ji Huang, Little Sheep and Taco Bell brands are collectively referred to as the "brands" or "concepts." Throughout this annual report, the terms "brands" and "concepts" are used interchangeably and "restaurants," "stores" and "units" are used interchangeably.

General

Yum China is the largest restaurant company in China in terms of 2025 system sales. We had $11.8 billion of revenues in 2025 and 18,101 restaurants as of December 31, 2025. Our growing restaurant network consists of our flagship KFC and Pizza Hut brands, as well as emerging brands such as Lavazza, Huang Ji Huang, Little Sheep and Taco Bell.

We have the exclusive right to operate and sublicense the KFC, Pizza Hut and, subject to the agreed terms, Taco Bell brands in China, excluding Hong Kong, Macau and Taiwan. We own the intellectual property of the Little Sheep and Huang Ji Huang concepts outright. KFC was the first major global restaurant brand to enter China in 1987. With more than three decades of operations, we have developed extensive operating experience in the China market. We have

since grown to become the largest restaurant company in China in terms of 2025 system sales, with 18,101 restaurants covering over 2,500 cities primarily in China as of December 31, 2025. We believe that there are significant opportunities to further expand within China, and we intend to focus our efforts on increasing our geographic footprint in both existing and new cities.

As of December 31, 2025, we owned and operated approximately 83% of our restaurants. Franchisees contribute to our revenue through the payment of a combination of upfront franchise fees and on-going royalties based on a percentage of sales, and payments for other transactions with us, such as purchases of food and paper products, advertising services, delivery services and other services.

Restaurant Concepts

KFC

KFC is the leading and the largest quick-service restaurant ("QSR") brand in China in terms of 2025 system sales. Founded in Corbin, Kentucky by Colonel Harland D. Sanders in 1939, KFC opened its first restaurant in Beijing, China in 1987. As of December 31, 2025, there were 12,997 KFC restaurants in over 2,500 cities across China. In addition to Original Recipe®chicken, whole chicken and other chicken products, KFC in China has an extensive menu featuring beef burgers, pork, seafood, rice dishes, congees, fresh vegetables, desserts, coffee, tea and many other products. KFC also seeks to increase revenue from different channels, including dine-in, delivery and takeaway.

Pizza Hut

Pizza Hut is the leading and the largest casual dining restaurant ("CDR") brand in China in terms of 2025 system sales and number of restaurants as of December 31, 2025, offering multiple dayparts, including breakfast, lunch, afternoon tea and dinner. Since opening its first China restaurant unit in Beijing in 1990, Pizza Hut has grown rapidly and, as of year-end 2025, there were 4,168 Pizza Hut restaurants in over 1,000 cities across China. Pizza Hut has an extensive menu offering a broad variety of pizzas, pasta, steaks, rice dishes, burgers and other entrees, appetizers, beverages and desserts. Pizza Hut also aims to further drive growth from different channels and occasions, including dine-in, delivery and takeaway. Pizza Hut also offers packaged foods to capture at-home consumption demand.

Other Concepts

In addition to KFC and Pizza Hut, our restaurant brand portfolio also includes Lavazza, Huang Ji Huang, Little Sheep and Taco Bell.

• Lavazza. In April 2020, we partnered with Luigi Lavazza S.p.A. ("Lavazza Group"), the world-renowned family-owned Italian coffee company, and established a joint venture ("Lavazza joint venture"), to explore and develop the Lavazza coffee concept in China. Lavazza joint venture operates both the coffee shop business and the retail business. Lavazza coffee shops offer an authentic Italian coffee experience. As of December 31, 2025, there were 146 Lavazza coffee shops in mainland China and Hong Kong. The retail business involves selling retail coffee products beyond Lavazza coffee shops.

• Huang Ji Huang. In April 2020, we completed the acquisition of a controlling interest in Huang Ji Huang. Founded in 2004, Huang Ji Huang had 627 units in China and internationally as of December 31, 2025. Huang Ji Huang primarily operates a franchise model and is an industry-leading simmer pot brand.

• Little Sheep. Little Sheep, with its roots in Inner Mongolia, China, specializes in "Hot Pot" cooking, which is very popular in China, particularly during the winter months. Little Sheep had 135 units in both China and international markets as of December 31, 2025. Little Sheep primarily operates a franchise model.

• Taco Bell. Taco Bell is the world's leading western QSR brand specializing in Mexican-style food, including tacos, burritos, quesadillas, salads, nachos and similar items. We opened our first Taco Bell restaurant in Shanghai, China, in December 2016. As of December 31, 2025, there were 28 Taco Bell units in China. The Company and Yum! Brands Inc. ("YUM") are currently in the process of renegotiating the terms with respect to the development of the Taco Bell brand in China. For more information, refer to "- Intellectual Property."

  Our Strategies

  Since 2021, we have been implementing our "RGM" strategy, which stands for "Resilience, Growth and Moat." At our Investor Day held in November 2025, we outlined our RGM 3.0 strategy, which focuses on all three aspects - resilience, growth and moat - powered by two complementary forces, innovation and operational efficiency. Going forward, we intend to continue to maintain our dual focus on system sales and same-store sales growth, and capture new opportunities through front-end segmentation and back-end consolidation. Through an equity and franchise hybrid model, we have been accelerating our store network expansion with the aim of reaching our next milestone of 20,000 stores in 2026 and targeting over 30,000 stores by 2030. In the meantime, we will continue to invest in digitalization and supply chain, our key growth enablers.

  Continue to strategically expand our restaurant network

  We are confident in the long-term market opportunities in China and aim to maintain our industry-leading position in the QSR and CDR markets in China with our core brands while continuing to nurture our emerging brands.

• Further expand geographical coverage. Restaurant chains have a low penetration rate in China, especially in lower-tier cities. Given the rapidly expanding middle class and dining out population as a result of continued economic growth and urbanization, we believe there are significant opportunities to expand within China, and we intend to focus our efforts on increasing our geographic footprint in both existing and new cities. In 2025, we entered into around 270 new cities. By 2030, we aim to nearly double our presence and increase penetration from 2,500 to 4,500 cities. We are tracking over 2,000 cities that do not have a KFC, and 1,500 cities that have KFC but do not yet have a Pizza Hut restaurant. For additional information on the risks associated with this growth strategy, see the section entitled "Risk Factors," including the risk factor entitled "We may not attain our target development goals; aggressive development could cannibalize existing sales; and new restaurants may not be profitable."

• Explore new restaurant formats. We are keen to explore various new restaurant formats to support further store expansion and drive sales growth, including different modules, store designs or service models aimed at addressing the needs of different consumer segments and for different occasions. For example, in 2025, we accelerated the growth of our side-by-side modules, KCOFFEE Cafes and KPRO (our light-meal concept), unlocking additional consumption occasions. We believe that our world-class supply chain management, strong digital capabilities and in-depth local know-how will help us to build robust development pipelines to seize the market opportunities.

• Accelerate equity & franchise hybrid model. While we continue to focus on the operation of our Company-owned restaurant units, we also intend to continue accelerating franchise development to unlock additional opportunities for our core brands. We anticipate high franchisee demand for our brands, supported by strong unit economics, operational consistency and multiple store formats including new store models suitable for franchisees, such as KFC's small town and Pizza Hut WOW, to drive restaurant growth. We plan to continue to develop franchise store portfolio over time by focusing on strategic channels and remote locations as well as lower-tier cities previously beyond our reach. As of December 31, 2025, approximately 17% of our restaurants were operated by franchisees. The franchise mix of net new stores increased from 30% in 2024 to 37% in 2025 for KFC and increased from 10% in 2024 to 31% in 2025 for Pizza Hut. We anticipate the franchise mix of net new stores will increase to 40% to 50% for both KFC and Pizza Hut from 2026 to 2028, targeting to raise the total franchise mix to twenties percentages by 2028.

• Grow emerging brands. Our key growth strategy for emerging brands, such as Lavazza and our Chinese dining business unit, including Huang Ji Huang and Little Sheep, focuses on exploring suitable business models to achieve sustainable growth. In addition, we plan to continue our efforts in product innovation and operational enhancement for these emerging brands to potentially scale up operations in the future.

  Continue to improve unit-level sales and profits and develop new sources of revenue

• Focus on food innovation and value proposition. We continue to focus on food innovation and strengthening our value proposition. We are keenly aware of the power of our core menu items. At the same time, we seek to continue to introduce innovative items to meet evolving consumer preferences and local tastes, drive

  customer engagement and continue to broaden our brand appeal. Each of our restaurant concepts has proprietary menu items, and emphasizes the preparation of food with high quality ingredients. We continue to develop unique recipes, regionally-inspired menu items and special seasonings to provide appealing, tasty and convenient food choices at competitive prices. In addition, we continue to offer great value for money and attractive marketing campaigns. We continue to promote signature value campaigns such as "Crazy Thursday" and "Buy More Save More on Weekends" for KFC and "Scream Wednesday" for Pizza Hut, which offer selected menu items at attractive prices, and have received positive consumer feedback. To expand our addressable market and drive incremental traffic, we have also widened our price ranges by introducing more entry price point products, and tapped into new customer segments and occasions by introducing new categories and one-person meals. We believe our continued food innovation and value proposition are pivotal to enhancing our unit-level performance. Besides great-tasting food and great value, we collaborate with leading IPs in animation, gaming and sports on themed food, packaging and gifts, offering emotional value and attracting new and young customers.

• Pursue best in-store experience. We continuously look for ways to improve customer experience. Our brands also look to improve efficiency to drive sales growth. For instance, we continue to improve customer experience through our proprietary smartphone applications, pre-order services and store design. In addition, we are continuously investing in digital and automation to improve operating transparency and efficiency. For example, our smart i-kitchen system now provides real-time order status for customers, all digitalized through our app and WeChat portal with customer-friendly user interface, providing them with streamlined ordering experience. Furthermore, our robotic servers have been rolled out in over 60% of our Pizza Hut restaurants, an effort we have been

  continuously carrying out nationwide that not only brings better digital experience but also saves on crew work. The introduction of Smart Delivery, a digital system to dynamically adjust delivery coverage for each store by daypart, combined with our wider store network, allows us to continue to improve delivery coverage and reduce delivery time. To further enhance customer experience, we are also evaluating the possibility of adopting other digital initiatives in our restaurants and will continue to invest in this area, as discussed more fully below.

• Grow coffee business. We are also building a coffee portfolio to capture the coffee market in China across different customer segments, including coffee products provided by KFC, which offers convenience and value. In addition to our extensive network of KFC stores, KFC also offers coffee products through our KCOFFEE Cafes. KCOFFEE Cafes expanded from approximately 50 cafes in 2023 to about 2,200 cafes in 2025, with a target of over 5,000 cafes by 2029. In April 2020, we also partnered with Lavazza Group to explore and develop the Lavazza coffee concept in China to offer an authentic Italian coffee experience. As of December 31, 2025, there were 146 Lavazza units in mainland China and Hong Kong, and we are targeting 1,000 Lavazza stores by 2029 and aiming to further grow its retail business.

• Optimize delivery capabilities. China is a world leader in the emerging online to offline, or O2O, market. This is where digital online ordering technologies interact with traditional brick and mortar retail to enhance customer experience. We see considerable growth potential in the delivery market by aligning our proven restaurant operation capabilities with our delivery network that offers consumers the ability to order restaurant food anywhere. By optimizing our delivery strategy, we have captured more sales opportunities and achieved double-digit annual growth for delivery sales over the past decade. Delivery contributed approximately 48% of Company sales in 2025. On delivery platforms, our core brands maintain

  a balanced approach - driving top-line growth while protecting margins. Going forward, we intend to continue to optimize our delivery service by adopting innovative technologies, rolling out new delivery menu items and adjusting delivery coverage for each store by daypart, taking into account the operating hours of nearby stores.

• Enhance digital capabilities. As of December 31, 2025, KFC and Pizza Hut loyalty programs, combined, exceeded 590 million members. The programs have been effective in increasing order frequency and enhancing guest loyalty. Digital sales exceeded $10 billion, with digital ordering accounting for approximately 94% of total Company sales in 2025. We also enhance private domain traffic and drive users to our own app and mini programs by providing attractive benefits, exclusive discounts, and improved customer experience. Going forward, we intend to continue to leverage our powerful digital ecosystem and adopt emerging technologies to drive sales, improve customer experience and increase operational efficiency. We plan to continue our investment in end-to-end digitalization, automation and artificial intelligence ("AI"), with applications across four major areas: customers, stores, supply chain and back office.

• Invest in high-quality assets. We continue to identify and evaluate investment opportunities in high-quality assets to capture growth opportunities. We will prudently assess investment targets based on their strategic value, business scale and financial performance, among other factors.

Operational Management and Efficiency

Restaurant Unit Management

Our restaurant management structure varies among our restaurant brands and restaurant size. Generally, each restaurant that we operate is overseen by a management team led by a restaurant general manager,

or RGM, together with one or more assistant managers. RGMs are skilled and highly trained, with most having a college-level education. We have also introduced a shared management model, Mega RGM, by using AI-enabled digital tools to improve store efficiency and empower our capable restaurant managers to oversee multiple stores without compromising quality, including tools that help analyze and forecast transaction volume so that we can improve labor scheduling and inventory management. For example, the "Super Brain," an end-to-end AI-enabled system, integrates data from store operations and aids the decision making of restaurant general managers. Moreover, we plan to further empower our restaurant teams through agentic AI, helping them closely monitor the real-time ordering and operational procedures of the restaurants and make timely staffing adjustments, which is expected to substantially improve in-store management, delivery operations and customer service. We also continued to simplify, centralize, and automate key processes over the past few years to improve operational efficiency. In 2025, we consolidated resources to build a centralized recruitment and training platform as well as a one-stop RGM service center to ease the burdens on our RGMs and allow them to focus on better serving our customers.

The performance of RGMs is regularly monitored and coached by senior operations leaders. Each restaurant brand issues detailed manuals, which may then be customized to meet local regulations and customs. These manuals set forth standards and requirements for all aspects of restaurant operations. The restaurant management team is responsible for the day-to-day operation of our restaurants and for ensuring compliance with operating standards.

Franchise Restaurant Management

While we continue to focus on the operation of our Company-owned restaurant units, we also intend to continue accelerating franchise development to unlock additional opportunities for our core brands. As of December 31, 2025, approximately 17% of our restaurants were franchise restaurants. We

are selective in granting franchises. We evaluate prospective franchisees based on financial strength, operational capability, and alignment with our corporate values and goals, among other criteria. Our franchise program is designed to ensure food safety and promote consistency and quality. Our franchisees are contractually obligated to operate their restaurants in accordance with operational standards set out in the franchise agreements, which are consistent with standards required for Company-owned restaurants. Like our Company-owned restaurants, our franchise restaurants are also subject to our internal quality audits and reviews. We retain the right to impose disciplinary measures, including fines and suspension of operations, depending on the nature of the non-compliance, and to terminate any franchise agreement in the event of material non-compliance by the franchisee.

We believe that it is important to maintain strong and open relationships with our franchisees. To this end, the Company invests a significant amount of time working with the franchisees on key aspects of the business, including products, equipment, operational improvements and standards and management techniques. We also provide centralized procurement to franchisees and empower them with digital tools in store management.

Franchisees are responsible for supplying capital required to pay a franchise fee to us and to purchase or lease the land use rights, building, equipment, signs, seating, inventories and supplies; and, over the longer term, for reinvesting in the business through expansion. Franchisees contribute to our revenue through the payment of a combination of upfront franchise fees and on-going royalties based on a percentage of sales, and payments for other transactions with us, such as purchases of food and paper products, advertising services, delivery services and other services.

Expansion Management

We believe that there are significant opportunities to further expand within China and we intend to focus

our efforts on increasing our geographic footprint in both existing and new cities and achieve healthy payback periods. We expanded our restaurant count from 7,562 at the end of 2016 to 18,101 at the end of 2025, representing a compound annual growth rate ("CAGR") of approximately 10%. We expect to expand our business through organic growth, growth of franchise units and development of our emerging brands.

Our expansion strategy has been systematically focused on high potential locations across city tiers, including increasing store density in existing cities and entering new cities. Each potential restaurant site is assessed and evaluated individually based on its site potential, potential financial return and potential impact to nearby stores. We take into account factors such as economic and demographic conditions and prospects, consumption patterns, GDP per capita and population density of the local community, presence of activity centers such as shopping complexes, schools and residential areas that generate guest traffic, and the presence of other restaurants in the vicinity during our site selection process. We also consider the guest traffic and distance from the existing restaurants under the same brand to reduce sales transfer that may occur from existing restaurant units. Our flexible store formats and partnership with franchisees empower us to expand in lower-tier cities, remote areas and additional strategic locations, including highway service centers, school campuses and hospitals. As we are opening more smaller format stores and actively managing costs, the average capital spending for each new KFC and Pizza Hut restaurant unit in 2025 was approximately RMB1.3 million and

1.0 million, respectively.

Supply Chain Management

The Company's restaurants, including those operated by franchisees, are large purchasers of a number of food and paper products, equipment and other restaurant supplies. The principal items purchased include protein ingredients (including poultry, beef, pork and seafood), cheese, oil, flour, vegetables and paper and packaging materials. The Company has not

experienced any significant, continuous shortages of supplies. We maintain contingency plans, including pre-identified alternative sources, to help ensure supply continuity. Prices paid for supplies fluctuate from time to time. We control our raw material costs by entering into long-term bulk purchase agreements for our key food ingredients, fully utilizing all chicken parts, implementing dynamic price management to respond to market conditions, sourcing directly from origin, expanding local sourcing resources and developing long-term relationships with suppliers.

The Company partners with over 850 independent suppliers for restaurant operations, which are mostly China-based. We implement a strict supplier qualification process that includes supplier compliance checks and on-site audits to ensure the supplier meets our food safety and quality control standards. We have formulated detailed specifications for food ingredients and consumables we procure. We believe supply chain management is crucial to the sustainability of our business and we are dedicated to applying digitalization and automation technologies in our supply chain management system. Our in-house and integrated supply chain management system employs over 1,000 staff in food safety, quality assurance, procurement management, logistics, engineering and supply chain strategy and investment.

In addition, we operate a tailor-made, world-class logistics management system, which is capable of accommodating large scale, wide coverage and advanced information dissemination as well as fast store expansions. The Company utilizes 34 logistics centers to distribute supplies to Company-owned and franchised stores, as well as to third-party customers. The Company owns and operates a substantial portion of these logistics centers. Our current network covers our stores in over 2,500 cities and towns, with capacity to cover more than 5,000 cities and towns. We implement AI-powered smart logistics network planning and intend to continue to upgrade our warehouses with automated solutions to enhance supply chain agility and efficiency. In addition, the Company owns seasoning facilities for its Chinese dining business unit, which manufacture and sell

seasoning products to Huang Ji Huang and Little Sheep franchisees. The Company's supply chain strategy of working with multiple suppliers, as well as building a vast logistics network, allows for continuous supply of products in the event that supply from an individual supplier or logistics center becomes unfeasible.

To improve the efficiency and effectiveness of our procurement process, the Company has adopted a central procurement model, whereby the Company centrally purchases the vast majority of food and paper products from approved suppliers for most of the restaurants regardless of ownership. The Company believes this central procurement model allows the Company to maintain quality control and achieve better prices and terms through volume purchases. In 2024, we launched Project Red Eye to improve supply chain efficiency. Guided by the principles of "spending better and buying better," we optimized our procurement and product innovation strategies to provide attractive value offerings and enhance our margin.

Food Safety and Quality Control

Food safety is the top priority at the Company. Food safety systems include rigorous standards and training of employees in our restaurants and distribution system, as well as requirements for suppliers. These standards and training topics include, but are not limited to, employee health, product handling, ingredient and product temperature management and prevention of cross contamination. Food safety training is focused on illness prevention, food safety and regulation adherence in day-to-day operations. Our standards also promote compliance with applicable laws and regulations in China when building new or renovating existing restaurants. For further information on food safety issues, see "Risk Factors - Risks Related to Our Business and Industry - Food safety and foodborne illness concerns may have an adverse effect on our reputation and business."

Our quality assurance department regularly conducts unannounced food safety and operation excellence checks of all restaurants covering food safety, product

quality and guest service. We also conduct regular product quality inspections on main menu items, and perform microbiological testing of restaurants' utensils, small wares, water, ice and food to ensure they meet the required standards. In addition, we leverage knowledge graph technology and generative AI ("GenAI") to help monitor and mitigate potential food safety risks.

We have established a team managing delivery services for our restaurants. We require all third-party delivery companies to sign and strictly implement a letter of commitment on the food safety and quality practice of delivery food, which stipulates clear requirements for regulatory compliance, staff management, catering, delivery facilities, equipment and strict management of third-party platforms.

Innovation and Digitalization

Our vision is to become the world's most innovative pioneer in the restaurant industry. We are dedicated to adopting innovations in our business model and restaurant operations to comprehensively reach our customers and provide superior products and services in a technology-driven and happy way, as vividly demonstrated by our slogan "Good food, good fun, and good value."

We believe we are a pioneer and first-mover among restaurant brands in China in utilizing and investing in emerging digital technologies to modernize our business operations and accelerate our growth, which is critical to empower and maintain our competitive advantage in China. In recent years, we have stepped up our investment in digitalization, advancing on end-to-end digitalization of our business operations. In 2021, we opened a digital R&D center with three sites in Shanghai, Nanjing and Xi'an, to strengthen our internal digital capabilities and support sustainable business growth by using advanced technology.

Dining Experience

Menu innovations

Offering appealing, tasty and convenient food at great prices is our value proposition. We have a dedicated food innovation team primarily focusing on the development and innovation of new recipes and improvement of existing products. In 2025, we launched around 600 new or upgraded menu items across all of our restaurant brands. Leveraging our local know-how and the wealth of consumer taste preference data accumulated, we have become a pioneer in food innovation, pushing the boundaries of QSR and CDR dining in China.

Our menu innovation endeavors are also supported by a world-class 27,000 square-foot innovation center in Shanghai for the development of new recipes, cooking methods and menu concepts. The innovation center is an integrated research and development facility that has been designed to generate new menu ideas and concepts with new ingredients and cooking methods to enable the rapid roll-out of innovative products catering to customers' local tastes.

Ordering and payment

KFC rolled out mobile pre-ordering service on a nationwide basis in December 2016, which allows guests to order online and pick up in store. Pizza Hut launched table-side mobile ordering in 2018, which enables guests to order by scanning a QR code with their mobile phone. Now mobile ordering is a standard feature of our Super Apps including the KFC Super App and the Pizza Hut Super App. Guests can also order through our proprietary mini programs embedded in WeChat. In addition, in certain commercial districts, in-store kiosks provide guests with convenient and fast digital ordering options. We continuously enhance our Super Apps to address the needs of customers and improve their digital experience. For example, we introduced

member-exclusive perks, App-exclusive new product pre-sales and lucky draws to attract our customers. We recently rolled out Smart K, our AI-powered ordering agent, to all users of the KFC Super App, enhancing the convenience of the digital ordering experience through verbal requests processing and customized suggestions. In 2025, digital ordering accounted for approximately 94% of total Company sales.

As early as June 2015, we started to partner with Alipay on digital payment functionalities, making us among the first batch of restaurant chains in China to make mobile payment available to guests. We commenced mobile payment cooperation with WeChat Pay in 2016. Digital payments grew from 33% of Company sales in 2016 to 99% in 2025.

Guest loyalty and interaction

Super Apps integrate multiple functions including messaging, e-commerce and payments in a single application by embedding mini programs or providing in-App links to other applications. In early 2016, the KFC Super App was implemented nationwide. Super Apps play a very important role in our overall digital ecosystem. They enable a digital customer experience by offering convenience, efficiency and interesting functionality before, during and after dining.

Member engagement is fostered through our Super Apps and WeChat mini programs, which serve as the primary platforms for enrollment into our membership programs. Additionally, we continue to monetize our membership base by introducing privilege membership subscription programs that increase frequency and spending at our brands. These monetization opportunities rely heavily on our ability to interact with our users through our Super Apps, WeChat mini programs and third-party e-commerce platforms. As of December 31, 2025, KFC and Pizza Hut loyalty programs, combined, exceeded 590 million members and over 265 million active members who transacted in the last 12 months. Member sales accounted for approximately 61% of KFC and Pizza Hut's system sales in 2025. We believe that creative and engaging interactions with our guests can help us enhance

customer experience and guest loyalty, which will ultimately lead to increased sales.

Restaurant Format Innovation

To supplement our growth, we are focusing on developing flexible restaurant formats and upgrading existing restaurants. We have developed multiple restaurant formats, including different models or modules to reach more customer segments and serve a wide range of occasions. Our side-by-side modules, KCOFFEE Cafes and KPRO (our light-meal concept) share KFC's in-store resources and membership programs to drive incremental sales and profits with lighter investments and operating costs. KFC's drive-throughs are designed to serve the growing number of car owners in China, capturing demand for convenient, on-the-go dining. The KFC Small Town and Pizza Hut WOW models feature simpler operations, good food variety, and excellent value for money. We continue to lower the capital expenditures per store to tap into more locations. Combining flexible store models and lower upfront investment opens up more site potential across city tiers and supports accelerating franchise growth. In addition, we continuously look for ways to improve customer experience. We continue to refresh the look of our restaurants and remodel with the latest technology, equipment and infrastructure. Over 70% of both KFC and Pizza Hut restaurant units as of December 31, 2025 were remodeled or built in the past five years.

Delivery

We believe that food delivery is a significant growth driver in China. We were one of the first restaurant businesses in China to offer delivery services. As early as 2010, KFC established its own delivery platform and started to accept delivery orders placed on its mobile applications. Orders generated from our own delivery platforms for KFC and Pizza Hut contributed a significant portion of our delivery sales. Starting from 2015, we were also one of the first to partner with delivery aggregators to further generate delivery traffic. In addition to ordering

through aggregators' platforms, guests may also place delivery orders through the KFC and Pizza Hut Super Apps. The ability to generate orders from our own channels allows us to be well-positioned in commercial collaborations with aggregators, and manage costs and commissions in a more competitive manner.

We have established a team managing delivery services for our restaurants. We use both our dedicated riders and platform riders to deliver orders. Delivery contributed approximately 39% and 48% of KFC and Pizza Hut's Company sales in 2024 and 2025, respectively.

Doing Business in China

Risks Related to Doing Business in China

Substantially all of our business operations are located in China. Accordingly, we face various legal and operational risks and uncertainties under the complex and evolving Chinese laws and regulations, including the following:

• Changes in Chinese political policies and economic and social policies or conditions may materially and adversely affect our business, results of operations and financial condition and may result in our inability to sustain our growth and expansion strategies.

• The interpretation and enforcement of Chinese laws, rules and regulations may change from time to time, which could have a material adverse effect on us.

• The audit report included in the annual report on Form 10-K filed with the SEC is prepared by auditors who are located in China, and in the event the Public Company Accounting Oversight Board is unable to inspect our auditors, our common stock will be subject to potential delisting from the New York Stock Exchange.

• Changes in political, business, economic and trade relations between the United States and China may have a material adverse impact on our business, results of operations and financial condition.

• Fluctuation in the value of RMB may result in foreign currency exchange losses.

• The increasing focus on environmental sustainability issues may create operational challenges for us, increase our costs and harm our reputation.

• Interventions in or the imposition of restrictions and limitations by the PRC government on currency conversion and payments of foreign currency and RMB out of mainland China may limit our ability to utilize our cash balances effectively, including making funds held by our China-based subsidiaries unavailable for use outside of mainland China, which could limit or eliminate our ability to pay dividends and affect the value of your investment.

• Changes in the laws and regulations of China or noncompliance with applicable laws and regulations may have a significant impact on our business, results of operations and financial condition, and may cause the value of our securities to decline.

• We rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries in China to fund offshore cash requirements.

• Under the EIT Law, if we are classified as a China resident enterprise for Chinese enterprise income tax purposes, such classification would likely result in unfavorable tax consequences to us and our non-Chinese stockholders.

• We and our stockholders face uncertainty with respect to indirect transfers of equity interests in China resident enterprises through transfer of non-Chinese-holding companies. Enhanced scrutiny by the Chinese tax authorities may have a negative impact on potential acquisitions and dispositions we may pursue in the future.

• There may be difficulties in effecting service of legal process, conducting investigations, collecting evidence, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us and our management.

• The Chinese government may determine that the variable interest entity structure of Daojia does not comply with Chinese laws on foreign investment in restricted industries.

• Certain defects caused by non-registration of our lease agreements related to certain properties occupied by us in China may materially and adversely affect our ability to use such properties.

• Our restaurants are susceptible to risks in relation to unexpected land acquisitions, building closures or demolitions.

• Any failure to comply with Chinese regulations regarding our employee equity incentive plans may subject Chinese plan participants or us to fines and other legal or administrative sanctions.

• Failure to make adequate contributions to various employee benefit plans as required by Chinese regulations may subject us to penalties.

• Proceedings instituted by the Securities and Exchange Commission (the "SEC") against certain China-based accounting firms, including our independent registered public accounting firm, could result in our financial statements being determined to not be in compliance with the requirements of the Exchange Act.

• Chinese regulation of loans to, and direct investment in, Chinese entities by offshore holding companies and governmental administration of currency conversion may restrict or prevent us from making loans or additional capital contributions to our Chinese subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business.

• Regulations regarding acquisitions may impose significant regulatory approval and review requirements, which could make it more difficult for us to pursue growth through acquisitions.

• The PRC government has significant oversight and discretion to exert supervision over offerings of our securities conducted outside of China and foreign

  investment in China-based issuers, and may limit or completely hinder our ability to offer securities to investors, which may cause the value of such securities to significantly decline.

  These risks could result in a material adverse change in our operations and the value of our shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless. For a detailed description of risks related to doing business in China, refer to "Risk Factors - Risks Related to Doing Business in China." For more information regarding the effect of government regulations on the Company, including PRC regulations, refer to "- Government Regulation." For more information regarding the Company's cash flows into and out of China, refer to "- Cash Flows."

  Cash Flows

  Yum China is a Delaware holding company conducting substantially all of its operations in China through its China subsidiaries. Yum China derives substantially all of its revenue through its operations in China, and Yum China indirectly owns, and receives dividends from, its China subsidiaries. In addition, the Company has also generated cash from its global offering in September 2020.

  For the year ended December 31, 2025, the Company's China subsidiaries distributed approximately $783 million in dividends to the Company's Hong Kong-incorporated holding companies. Dividends paid by China subsidiaries to their direct offshore parent companies are subject to Chinese withholding income tax at the rate of 10%, but Hong Kong has a tax arrangement with mainland China that provides for a 5% withholding tax on dividends upon meeting certain conditions and requirements. Once distributed outside of mainland China, the funds are freely transferrable. For the year ended December 31, 2025, the Company's Hong Kong subsidiaries distributed approximately $1,023 million dividends to the Company's Delaware holding company.

  In 2025, Yum China paid cash dividends to stockholders totaling $353 million and repurchased $1,136 million of its common stock. The source of funds for these dividends and repurchases was cash on hand held outside of mainland China. These dividends to stockholders generally had no tax consequence to the Company, but may be taxable (including by way of withholding) to its stockholders. In August 2022, the Inflation Reduction Act of 2022 (the "IRA") was signed into law in the U.S. The IRA contains certain tax measures, including an excise tax of 1% on net share repurchases that occur after December 31, 2022. For more information on our dividends and share repurchases, see the Consolidated Statements of Cash Flows and Note 13 to the Consolidated Financial Statements in this annual report.

  In addition, Yum China makes investments in its China subsidiaries through capital contributions to further support their operational and growth needs. In 2025, one of Yum China's subsidiaries, which was incorporated in Hong Kong, made capital contributions to its subsidiaries in China totaling approximately

  $15 million. Cash may also be transferred among the Company's China subsidiaries and their offshore holding companies by means of intercompany loans. No such intercompany loans were made in 2025.

  For more information regarding the Company's cash flows, see our Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023 and the related notes to our Consolidated Financial Statements.

  Cash Management Policies

  The Company has comprehensive cash management policies in place, including specific policies governing approvals with respect to fund transfers throughout our organization.

  Our Board of Directors and the audit committee of the Board (the "Audit Committee") oversee the Company's major financial risk exposures. The Company maintains an authorization policy on cash management, setting forth the scope of authority for

  certain treasury matters that are delegated by the Board of Directors to management. Under this policy, certain treasury matters, such as intercompany loans, bank borrowings, short-term and long-term investments and dividends distributed from the Company's subsidiaries to the holding company, are clearly defined, with the level of approval required for each matter specifically identified.

  Our management regularly monitors the liquidity position, funding requirements and investment returns in different jurisdictions of our subsidiaries, and takes into consideration regulatory requirements in the jurisdictions in which the Company has subsidiaries or operations. When funding is required, all necessary approvals are obtained from Company management and relevant governmental authorities, including China's State Administration of Foreign Exchange.

  In addition, our ability to declare and pay any dividends on our stock may be restricted by earnings available for distribution under applicable Chinese laws. See "- Government Regulation - Regulations Relating to Dividend Distribution" for more information.

  Government Regulation

  The Company is subject to various laws affecting its business, including the following:

• Each of our restaurants in China is required to obtain (1) the relevant food business license; (2) the environmental protection assessment and inspection registration or approval; and (3) the fire safety inspection acceptance approval or other alternatives. Some of our restaurants which sell alcoholic beverages are required to make further registrations or obtain additional approvals, as described under the heading "Risk Factors - Risks Related to Doing Business in China - We require various approvals, licenses and permits to operate our business and the loss of or failure to obtain or renew any or all of these approvals, licenses and permits could adversely affect our business and results of operations;"

• Cash transfers from the Company's PRC subsidiaries to its subsidiaries outside of China are subject to PRC government administration of currency conversion. Shortages in the availability of foreign currency may restrict the ability of the PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to the Company, or otherwise satisfy their foreign currency-denominated obligations. See "- Regulations Relating to Dividend Distribution" and "- Regulations Relating to Taxation" for more information;

• We are subject to Chinese regulations on loans to and direct investment in Chinese entities by offshore holding companies. For example, loans by us to our wholly-owned Chinese subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the local counterparts of the State Administration of Foreign Exchange ("SAFE"). If we decide to finance our wholly-owned Chinese subsidiaries by means of capital contributions, in practice, we might be still required to report to China's Ministry of Commerce ("MOFCOM") or obtain approval from other authorities. See "Risk Factors - Risks Related to Doing Business in China - Chinese regulation of loans to, and direct investment in, Chinese entities by offshore holding companies and governmental administration of currency conversion may restrict or prevent us from making loans or additional capital contributions to our Chinese subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business" for more information;

• We are subject to regulations relating to certain investments and acquisitions relating to businesses in China, including under the PRC Anti-monopoly Law, Provisions of the State Council on the Thresholds for Declaring Concentration of Business Operators, and the Provisions on M&A of a Domestic Enterprise by Foreign Investors jointly adopted by six PRC regulatory agencies, including MOFCOM, the State-owned Assets Supervision and Administration Commission, the Chinese State Taxation Administration ("STA"), the State Administration for Industry and Commerce of the

  PRC (now known as the State Administration for Market Regulation of the PRC), the China Securities Regulatory Commission ("CSRC") and SAFE. See "Risk Factors - Risks Related to Doing Business in China - Regulations regarding acquisitions may impose significant regulatory approval and review requirements, which could make it more difficult for us to pursue growth through acquisitions" for more information;

• We are subject to heightened data and cybersecurity regulations, including those enforced by the Cyberspace Administration of China ("CAC") including the PRC Cybersecurity Law, which imposes tightened requirements on data privacy and cybersecurity practices, the PRC Data Security Law, which imposes data security and privacy obligations on entities and individuals carrying out data activities (including activities outside of the PRC), requires a national security review of data activities that may affect national security, and imposes restrictions on data transmissions, the PRC Personal Information Protection Law, which sets out the regulatory framework for handling and protection of personal information and transmission of personal information, among others. See "Risk Factors - Risks Related to Our Business and Industry - Unauthorized access to, or improper use, disclosure, theft or destruction of, our customer or employee personal, financial or other data or our proprietary or confidential information that is stored in our information systems or by third parties on our behalf could result in substantial costs, expose us to litigation and damage our reputation;" and

• We may be subject to regulations relating to overseas securities offering and listing of China-based companies, including pursuant to the Opinions on Intensifying Crack Down on Illegal Securities Activities issued by the PRC government authorities, which called for enhanced oversight of overseas listed companies as well as overseas equity fundraising and listing by Chinese companies, and proposed measures such as the construction of regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies; the Trial Administrative

Measures of Overseas Securities Offering and Listing by Domestic Companies and the supporting guidelines issued by the CSRC, which regulate overseas securities offering and listing activities by China-based companies; the Revised Cybersecurity Review Measures, jointly issued by the National Development and Reform Commission, the Ministry of Industry and Information Technology of the PRC, and several other administrations, which require, among other things, that a network platform operator holding over one million users' personal information must apply with the Cybersecurity Review Office for a cybersecurity review before any public offering or listing outside of mainland PRC and Hong Kong. See "Risk Factors - Risks Related to Doing Business in China - The PRC government has significant oversight and discretion to exert supervision over offerings of our securities conducted outside of China and foreign investment in China-based issuers, and may limit or completely hinder our ability to offer securities to investors, which may cause the value of such securities to significantly decline."

The Company is also subject to tariffs and regulations on imported commodities and equipment and laws regulating foreign investment, as well as anti-bribery and corruption laws. Compliance with applicable laws and regulations has not had a material effect on the Company's capital expenditures, earnings and competitive position. The Company has not historically been materially and adversely affected by such requirements or by any difficulty, delay or failure to obtain required approvals, licenses, permits, registrations or filings and has obtained all material required approvals. As of the date of this annual report, no material permissions have been denied to us by relevant government authorities in China, and we have not received any inquiry, notice, warning, or sanctions regarding our business operations and corporate structure from the CSRC, CAC or any other PRC governmental agency that would have a material impact on our business, results of operations or financial condition. However, we cannot predict the effect that the compliance with laws and regulations

may have on our capital expenditures, earnings and competitive position in the future, or how we may be affected if we do not receive or maintain any required permissions or approvals, inadvertently conclude that such permissions or approvals are not required, or if applicable laws, regulations or interpretations change and we are required to obtain additional permissions or approvals in the future. If (i) we have inadvertently concluded that such permissions, approvals, licenses or permits have been acquired or are not required, or

(ii) applicable laws, regulations, or interpretations change and we are required to obtain such permissions, approvals, licenses or permits in the future, then we may have to expend time and costs to procure them. If we are unable to do so on commercially reasonable terms or in a timely manner, it could cause significant disruption to our business operations and damage our reputation, which would in turn have a material adverse effect on our business, results of operations and financial condition. See "Risk Factors" for a discussion of additional risks relating to federal, state, provincial, local and international governmental regulation of our business.

Regulations Relating to Dividend Distribution

The Chinese laws, rules and regulations applicable to our China subsidiaries permit payments of dividends only out of their accumulated profits, if any, determined in accordance with applicable accounting standards and regulations. In addition, under Chinese law, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years' accumulated losses, if any, to fund statutory surplus reserves, until the aggregate amount of such a fund reaches 50% of its registered capital. As a result, our China subsidiaries are restricted in their ability to transfer a portion of their net assets to us in the form of dividends. At the discretion of their board of directors, as enterprises incorporated in China, our China subsidiaries may allocate a portion of their after-tax profits based on China accounting standards to discretionary surplus reserve. These reserves are not distributable as cash dividends.

Regulations Relating to Taxation

Enterprise Income Tax. Under the China Enterprise Income Tax Law (the "EIT Law") and its implementation rules, a China resident enterprise is subject to Chinese enterprise income tax in respect of its net taxable income derived from sources inside and outside China. The term "resident enterprise" refers to any enterprise established in China and any enterprise established outside China with a "de facto management body" within China.

Our China subsidiaries are regarded as China resident enterprises by virtue of their incorporation in China, and are generally subject to Chinese enterprise income tax on their worldwide income at the current uniform rate of 25%, unless reduced under certain specific qualifying criteria. Our China subsidiaries may deduct reasonable expenses that are actually incurred and are related to the generation of their income, including interest and other borrowing expenses, amortization of land use rights and depreciation of buildings and certain fixed assets, subject to any restrictions that may be imposed under the EIT Law, its implementation regulations and any applicable tax notices and circulars issued by the Chinese government or tax authorities.

Yum China and each subsidiary of Yum China that is organized outside of China intends to conduct its management functions in a manner that does not cause it to be a China resident enterprise, including by carrying on its day-to-day management activities and maintaining its key records, such as resolutions of its board of directors and resolutions of stockholders, outside of China. As such, we do not believe that Yum China or any of its non-Chinese subsidiaries should be considered a China resident enterprise for purposes of the EIT Law, and should not be subject to Chinese enterprise income tax on that basis. See "Risk Factors - Risks Related to Doing Business in China - Under the EIT Law, if we are classified as a China resident enterprise for Chinese enterprise income tax purposes, such classification would likely result in unfavorable tax consequences to us and our non-Chinese stockholders."

Value-Added Tax and Local Surcharges. Effective on May 1, 2016, a 6% value-added tax ("VAT") on output replaced the 5% business tax ("BT") that has historically been applied to certain restaurant sales under the China Provisional Regulations on Business Tax. Pursuant to Circular Caishui [2016] No. 36 jointly issued by the Ministry of Finance of the PRC and the STA, beginning May 1, 2016, any entity engaged in the provision of catering services in China is generally required to pay VAT at the rate of 6% on revenues generated from the provision of such services, less any creditable VAT already paid or borne by such entity upon purchase of materials and services. Our new retail business is generally subject to VAT rates at 9% or 13%. The latest VAT rates imposed on our purchase of materials and services mainly included 13%, 9% and 6%, which were gradually changed from 17%, 13%,

11% and 6% since 2017. These rate changes impact our input VAT on all materials and certain services, primarily construction, transportation and leasing. However, the impact on our operating results is not expected to be significant. Local surcharges generally ranging from 7% to 13%, varying with the location of the relevant China subsidiary, are imposed on the amount of VAT payable. On December 25, 2024, the prevailing VAT regulations were enacted into the Value-Added Tax Law of the People's Republic of China (the "VAT Law"), which came into effect on January 1, 2026 along with its implementation rules. In terms of tax rates, the VAT Law maintains the existing standard rates of 13%, 9% and 6%.

Repatriation of Dividends from Our China Subsidiaries. Dividends (if any) paid by our China subsidiaries to their direct offshore parent companies are subject to Chinese withholding income tax at the rate of 10%, provided that such dividends are not effectively connected with any establishment or place of the offshore parent company in China. The 10% withholding income tax rate may be reduced or exempted pursuant to the provisions of any applicable tax treaties or tax arrangements, as well as the interpretation in applying these treaties and arrangements. Hong Kong has a tax arrangement with mainland China that provides for a 5% withholding tax on dividends upon meeting certain conditions and requirements, including, among others, that the

Hong Kong resident enterprise directly owns at least 25% equity interests of the Chinese enterprise and is a "beneficial owner" of the dividends. We believe that our principal Hong Kong subsidiary, which is the equity holder of our Chinese subsidiaries operating substantially all of our KFC and Pizza Hut restaurants, met the relevant requirements pursuant to the tax arrangement between mainland China and Hong Kong in 2018 and in subsequent years, thus, it is more likely than not that our dividends or earnings expected to be repatriated to this principal Hong Kong subsidiary since 2018 are subject to the reduced withholding tax of 5%. However, if the Hong Kong subsidiary is not considered to be the "beneficial owner" of the dividends by the Chinese tax authorities, the withholding tax rate on dividends paid to it by our Chinese subsidiaries would be subject to a withholding tax rate of 10% with retrospective effect, which would significantly increase our tax liability and reduce the amount of cash available to the Company. See "Risk Factors - Risks Related to Doing Business in China - We rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries in China to fund offshore cash requirements."

Gains on Direct Disposal of Equity Interests in Our China Subsidiaries. Under the EIT Law and its implementation rules, gains derived by non-resident enterprises from the sale of equity interests in a China resident enterprise are subject to Chinese withholding income tax at the rate of 10%. The 10% withholding income tax rate may be reduced or exempted pursuant to applicable tax treaties or tax arrangements. The gains are computed based on the difference between the sales proceeds and the original investment basis. Stamp duty is also payable upon a direct transfer of equity interest in a China resident enterprise. The stamp duty is calculated at 0.05% on the transfer value, payable by each of the transferor and transferee. We may be subject to these taxes in the event of any future sale by us of a China resident enterprise.

Gains on Indirect Disposal of Equity Interests in Our China Subsidiaries. In February 2015, the STA issued the STA's Bulletin on Several Issues of Enterprise Income Tax on Income Arising from Indirect

Transfers of Property by Non-resident Enterprises ("Bulletin 7"). Pursuant to Bulletin 7, an "indirect transfer" of Chinese taxable assets, including equity interests in a China resident enterprise ("Chinese interests"), by a non-resident enterprise, may be re-characterized and treated as a direct transfer of Chinese taxable assets, if such arrangement does not have reasonable commercial purpose and the transferor avoids payment of Chinese enterprise income tax. Where a non-resident enterprise conducts an "indirect transfer" of Chinese interests by disposing of equity interests in an offshore holding company, the transferor, transferee and/or the China resident enterprise being indirectly transferred may report such indirect transfer to the relevant Chinese tax authority, which may in turn report upward to the STA. Using general anti-tax avoidance provisions, the STA may treat such indirect transfer as a direct transfer of Chinese interests if the transfer avoids Chinese tax by way of an arrangement without reasonable commercial purpose. As a result, gains derived from such indirect transfer may be subject to Chinese enterprise income tax, and the transferee or other person who is obligated to pay for the transfer would be obligated to withhold the applicable taxes, currently at a rate of up to 10% of the capital gain in the case of an indirect transfer of equity interests in a China resident enterprise. Both the transferor and the party obligated to withhold the applicable taxes may be subject to penalties under Chinese tax laws if the transferor fails to pay the taxes and the party obligated to withhold the applicable taxes fails to withhold the taxes.

The above regulations do not apply if either (i) the selling non-resident enterprise recognizes the relevant gain by purchasing and selling equity of the same listed enterprise in the open market (the "listed enterprise exception"); or (ii) the selling non-resident enterprise would have been exempted from enterprise income tax in China pursuant to applicable tax treaties or tax arrangements, if it had directly held and transferred such Chinese interests that were indirectly transferred. The China indirect transfer rules do not apply to gains recognized by individual stockholders. However, in practice, there have been a few reported cases of individuals being taxed on the indirect transfer of

Chinese interests and the law could be changed so as to apply to individual stockholders, possibly with retroactive effect. In addition, the PRC Individual Income Tax Law and relevant regulations ("IITL"), revised effective January 1, 2019, impose general anti-avoidance tax rules ("GAAR") on transactions conducted by individuals. As a result, if the China tax authority invokes the GAAR and deems that indirect transfers made by individual stockholders lack reasonable commercial purposes, any gains recognized on such transfers might be subject to individual income tax in China at the standard rate of 20%.

It is unclear whether Company stockholders that acquired Yum China stock through the distribution or the Global Offering (discussed under "Report of the Directors - General Information") will be treated as acquiring Yum China stock in an open market purchase. If such acquisition of Yum China stock is not treated as acquired in an open market purchase, the listed transaction exception will not be available for transfers of such stock. We expect that transfers in open market transactions of our stock by corporate or other non-individual stockholders that have purchased our stock in open market transactions will not be taxable under the China indirect transfer rules due to the listed enterprise exception. Transfers, whether in the open market or otherwise, of our stock by corporate and other non-individual stockholders that acquired our stock in the distribution or the Global Offering or in non-open market transactions may be taxable under the China indirect transfer rules and our China subsidiaries may have filing obligations in respect of such transfers upon the request of relevant Chinese tax authorities. Transfers of our stock in non-open market transactions by corporate and other non-individual stockholders may be taxable under the China indirect transfer rules, whether or not such stock was acquired in open market transactions, and our China subsidiaries may have filing obligations in respect of such transfers upon the request of relevant China tax authorities. Corporate and other non-individual stockholders may be exempt from taxation under the Chinese indirect transfer rules with respect to transfers of our stock if they are tax resident in a country or region that has a tax treaty or arrangement with China that provides

for a capital gains tax exemption and they qualify for that exemption.

Tax Cuts and Jobs Act (the "Tax Act"). In December 2017, the U.S. enacted the Tax Act, which included a broad range of tax reforms, including, but not limited to, the establishment of a flat corporate income tax rate of 21%, the elimination or reduction of certain business deductions, and the imposition of tax on deemed repatriation of accumulated undistributed foreign earnings. The Tax Act has impacted Yum China in two material aspects: (1) in general, all of the foreign-source dividends received by Yum China from its foreign subsidiaries were exempted from taxation starting from the tax year beginning after December 31, 2017 and (2) Yum China recorded additional income tax expense in the fourth quarter of 2017, including an estimated one-time transition tax on its deemed repatriation of accumulated undistributed foreign earnings and additional tax related to the revaluation of certain deferred tax assets. The Tax Act also requires a U.S. shareholder to be subject to tax on Global Intangible Low Taxed Income ("GILTI") earned by certain foreign subsidiaries.

The U.S. Treasury Department and the Internal Revenue Services ("IRS") released the final transition tax regulations in the first quarter of 2019. We completed the evaluation of the impact on our transition tax computation based on the final regulations released in the first quarter of 2019 and recorded additional income tax expense for the transition tax accordingly.

Inflation Reduction Act of 2022 (the "IRA"). In August 2022, the IRA was signed into law in the U.S. The IRA contains certain tax measures, including a Corporate Alternative Minimum Tax ("CAMT") of 15% on certain large corporations and an excise tax of 1% on net share repurchases that occur after December 31, 2022. On December 27, 2022, the

U.S. Treasury Department and the IRS released Notice 2023-7, announcing their intention to issue proposed regulations addressing the application of the new CAMT. Additional notices or proposed regulations were released subsequently to continue to provide interim guidance regarding certain CAMT

issues before proposed regulations are published. On November 21, 2025, the U.S. Treasury Department and the IRS released final regulations relating to the excise tax.

Hong Kong Profits Tax. Our subsidiaries incorporated in Hong Kong are generally subject to Hong Kong profits tax at a rate of 16.5%. For the years 2018 and onwards, the first HK$2 million of profits generated by one entity incorporated in Hong Kong is taxed at a rate of 8.25%, while the remaining profits will continue to be taxed at the 16.5% tax rate. In December 2022, a refined Foreign Sourced Income Exemption ("FSIE") regime was published in Hong Kong and took effect from January 1, 2023. Under the new FSIE regime, certain foreign sourced income would be deemed as being sourced from Hong Kong and chargeable to Hong Kong Profits Tax, if the recipient entity fails to meet the prescribed exception requirements. Certain dividends, interests, intellectual property income and disposal gains, if any, received by us and our Hong Kong subsidiaries may be subject to the new tax regime.

Pillar Two Income Tax. The Organization for Economic Cooperation and Development (the "OECD"), the European Union and other jurisdictions (including jurisdictions in which we have operations or presence) have committed to enacting substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed. In particular, the OECD's Pillar Two initiative introduces a 15% global minimum tax applied on a jurisdiction-by-jurisdiction basis and for which many jurisdictions have now committed to an effective enactment date starting January 1, 2024.

One Big Beautiful Bill Act (the "OBBBA"). In July 2025, the OBBBA was signed into law in the U.S. The OBBBA includes a broad range of provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and others. These provisions have multiple effective dates beginning in 2025.

See "Risk Factors" for a discussion of risks relating to federal, state, local and international regulation relating to taxation of our business.

Holding Foreign Companies Accountable Act

On December 2, 2021, the SEC adopted rules (the "Final Rules") to implement the Holding Foreign Companies Accountable Act (the "HFCAA"), which became law on December 18, 2020. The HFCAA requires the SEC to prohibit the securities of any "covered issuer" from being traded on any of the U.S. securities exchanges, including the New York Stock Exchange ("NYSE"), or traded "over-the-counter," if the auditor of the covered issuer's financial statements is not subject to Public Company Accounting Oversight Board ("PCAOB") inspection for three consecutive years, beginning in 2021. This requirement was updated from three years to two years by the Consolidated Appropriations Act, 2023, which became law on December 29, 2022.

On December 16, 2021, the PCAOB issued a report on its determination that it was unable to inspect or investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong because of positions taken by Chinese authorities in those jurisdictions. Our independent registered public accounting firm was subject to the determinations announced by the PCAOB on December 16, 2021. Pursuant thereto, on March 30, 2022, the SEC added Yum China to the conclusive list of "Commission-Identified Issuers," subject to the trading prohibition and supplemental disclosure requirements under the HFCAA. Subsequently, in August 2022, the PCAOB announced that it signed a Statement of Protocol with the CSRC and the Ministry of Finance, which it described as the first step toward opening access for the PCAOB to inspect and investigate completely registered public accounting firms in mainland China and Hong Kong. On December 15, 2022, the PCAOB vacated its 2021 determination that the positions taken by authorities in mainland China and Hong Kong prevented it from inspecting and investigating completely registered public accounting

firms headquartered in those jurisdictions, including our independent registered accounting firm.

In view of the PCAOB's decision to vacate its 2021 determination and until such time as the PCAOB issues any new adverse determination, the SEC has stated that there are no issuers at risk of having their securities subject to a trading prohibition under the HFCAA. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our control. If the PCAOB again becomes unable to conduct a full inspection of our independent registered public accounting firm's audit documentation related to their audit reports, then our common stock will again be subject to potential delisting from the New York Stock Exchange.

For more information regarding the risks to the Company from the HFCAA, please see "Risk Factors - Risks Related to Doing Business in China - The audit report included in the annual report on Form 10-K filed with the SEC is prepared by auditors who are located in China, and in the event the PCAOB is unable to inspect our auditors, our common stock will be subject to potential delisting from the New York Stock Exchange."

Intellectual Property

Our use of certain material trademarks and service marks is governed by the master license agreement between Yum Restaurants Consulting (Shanghai) Company Limited ("YCCL"), a wholly-owned indirect subsidiary of the Company, and Yum! Brands Inc. ("YUM"), through YRI China Franchising LLC, a subsidiary of YUM, effective from January 1, 2020 and previously through Yum! Restaurants Asia Pte. Ltd., another subsidiary of YUM, from October 31, 2016 to December 31, 2019. Pursuant to the master license agreement, we are the exclusive licensee of the KFC, Pizza Hut and, subject to the agreed terms, Taco Bell brands and their related marks and other intellectual property rights for restaurant services in

the PRC, excluding Hong Kong, Macau and Taiwan. The term of the license is 50 years from October 31, 2016 for the KFC and Pizza Hut brands and, subject to achieving certain agreed-upon milestones, 50 years from April 15, 2022 for the Taco Bell brand, with automatic renewals for additional consecutive renewal terms of 50 years each, subject only to us being in "good standing" and unless we give notice of our intent not to renew. In exchange, we pay a license fee to YUM equal to 3% of net system sales of the licensed brands. We have also agreed generally not to compete with YUM. In addition, we were granted a right of first refusal to develop and franchise in the PRC certain restaurant concepts that YUM may develop or acquire. On April 15, 2022, the Company and YUM, through their respective subsidiaries, entered into an amendment to the master license agreement to amend the development milestones for the Taco Bell brand, including a measurement condition of at least 225 stores by the end of 2025, subject to the terms of the agreement. As of December 31, there were 28 Taco Bell restaurants in China. The Company and YUM are currently in the process of renegotiating the terms with respect to the development of the Taco Bell brand in China. If an agreement cannot be reached, YUM will have the right to terminate our right to enter into new Taco Bell sublicenses and territorial protections for the Taco Bell brand in China. For more information, refer to "Risk Factors - The operation of our restaurants is subject to the terms of the master license agreement which, if terminated or limited, would materially adversely affect our business, results of operations and financial condition."

We were granted by YUM a royalty-free license to use the name and mark of "YUM" as part of our name, domain name and stock identification symbol pursuant to a name license agreement entered into between YUM and us on October 31, 2016. The name license agreement can be terminated by YUM in the event of, among other things, material breach of the agreement by us. Our use of certain other material intellectual property (including intellectual property in product recipes, restaurant operation and restaurant design) is likewise governed by the master license agreement with YUM.

In addition, our use of the Lavazza trademarks and service marks in mainland China and Hong Kong for permitted activities is subject to exclusive licenses. We own registered trademarks and service marks relating to the Little Sheep and Huang Ji Huang brands and pay no license fee related to these brands.

Collectively, these licensed and owned marks have significant value and are important to our business. Our policy is to pursue registration of our important intellectual property rights whenever feasible and to oppose vigorously any infringement of our rights.

Competition

Data from the National Bureau of Statistics of China indicates that sales in the restaurant industry in China totaled approximately RMB 5,756 billion in 2025, representing an increase of 3% compared with prior year. Industry conditions vary by region, with local Chinese restaurants and western chains present, but we possess the largest market share (as measured by system sales). While branded QSR units per million population in China are well below that of the United States, the market remains highly competitive. We compete with respect to food taste, quality, value, service, convenience, restaurant location and concept, including delivery and shared kitchens. The restaurant business is often affected by changes in consumer tastes; national, regional or local economic conditions; demographic trends; traffic patterns; the type, number and location of competing restaurants; and disposable income. We compete not only for consumers but also for management and hourly personnel and suitable restaurant sites. KFC's competitors in China are primarily western QSR brands such as McDonald's, Dicos and Burger King, and to a lesser extent, domestic QSR brands in China. Pizza Hut primarily competes with western CDR brands, including Domino's and Papa John's, as well as other domestic CDR brands in China.

Seasonality

Due to the nature of our operations, we typically generate higher sales during Chinese festivities, holiday seasons as well as summer months, but relatively lower sales and lower operating profit during the second and fourth quarters.

Human Capital Management

As of December 31, 2025, the Company had approximately 290,000 employees, including approximately 130,000 full-time employees and approximately 160,000 part-time restaurant crew members. The Company has continued to improve its operational efficiency by streamlining and centralizing certain operational and kitchen tasks, and leveraging technology to automate key processes. Through continuous innovation, we are fostering a more supportive and efficient environment for our employees, providing them with opportunities to thrive. The Company is also dedicated to offering fair and competitive compensation and benefits, along with tailored programs to support employees at all levels. In addition to our employees, we engage outsourced delivery riders and restaurant workers. While they are not included in our headcount, they are an integral part of our operations and receive training and care, enabling us to adapt to diverse business and customer needs.

Our Board of Directors provides oversight on certain human capital matters, including inclusion and diversity, management succession planning, and our employee rewards and benefits program. Under the board's oversight, the Company regularly conducts a people planning review to attract, retain and develop a workforce that aligns with our values and strategies.

Culture and People Philosophy

The Company is committed to the "People First" philosophy by implementing our principle of "Fair, Care, Pride." In 2022, we released our Human Rights Policy, highlighting our commitment to

create a workplace and a community that respect and protect human rights, which includes providing a discrimination-free and harassment-free workplace, ensuring fair compensation, creating a safe and healthy working environment, encouraging a diverse and inclusive culture, equipping employees with future-ready employability, respecting employees' freedom of association, prohibiting child labor and forced labor and engaging with the communities we serve and our stakeholders. Our Human Rights Policy is consistent with Yum China's Code of Conduct.

The Company endorses the Universal Declaration of Human Rights adopted by the United Nations and international human rights conventions, including the International Labor Organization Declaration on Fundamental Principles and Rights at Work. We proactively identify, prevent and mitigate human rights risks in the Company and throughout the value chain. The Company implements whistleblower policies to detect and deter violations of employees' rights, and investigates, addresses and responds to concerns raised by employees and takes appropriate corrective actions.

Diversity, Inclusion and Equal Opportunities for All Employees

The Company is committed to fostering a working environment that is professional, inclusive and non-discriminatory for employees. In our workplaces, differences are understood, appreciated and encouraged. Each employee, without regard to race, religion, color, age, gender or gender identity, disability, military or veteran status, sexual orientation, citizenship or national origin, is provided with fair opportunity on the Company's platform.

The Company is committed to equality by providing fair recruitment, training and promotion opportunities for all employees. By the end of 2025, our female employees represented more than 50% of the total workforce. The Company continues to make progress in nurturing talented leaders across all management levels. By the end of 2025, women holding director and above positions represented more than 50% of our senior management workforce.

Barrier-free and Inclusive Workplace for People with Disabilities

The Company strives to create a barrier-free and inclusive workplace for people with disabilities. The Company piloted the first "Angel Restaurant" in 2012, using modified equipment and operational processes, and provides training to assist "angel employees" - those with special needs - to perform a full range of jobs. By the end of 2025, we had opened approximately 80 Angel Restaurants in over 70 cities, providing jobs for over 300 people with special needs.

Training and Development

The Company values the growth of employees and continuously nurtures top talent through a systematic training system. Every employee is required to formulate a specific development goal to improve their competencies in addition to completing the key objectives of the role. We prepare employees not just for fulfilling current job requirements, but also for more challenging expanded job responsibilities in the future. In 2025, the number of total training hours totaled around 8 million.

Building Talent Pipeline and Supporting Development

The Company is well-known for its career development path - the "Bench Planning" - which enables most operation leaders to grow from within. Two signature programs - the KFC Business School and the Pizza Hut Management Institute - provide systematic training and development opportunities. A new college graduate can advance to RGMs in less than two years by participating in these programs and acquiring the operational, financial and managerial knowledge required for operating a restaurant. In the long run, the programs lay a solid foundation for their future success.

The Company provides continuous support to RGMs to unleash their potential. Through digitalization and automation, which help with streamlining operations, enhancing demand forecasting, inventory management, crew scheduling and food production, we empower our capable RGMs to manage multiple stores while upholding high operational standards. In addition, our centralized recruitment process frees up

our RGMs from spending significant amount of time on administrative tasks, allowing them to focus on operational tasks.

The Company offers a tailored and fast-tracked YUMC Management Trainee Program for fresh graduate trainees in its marketing and supply chain functions. Through job rotations and targeted training, they are offered an opportunity to gain a thorough understanding of the business and build a foundation for becoming industry-leading professionals.

Digitally-powered Training Platform

Our training programs have tapped into the digitalization trends through the mobile learning platform, with the goal of equipping employees with the knowledge and skills necessary in the digital era and enabling their sustainable career development. The employees can easily access these training programs, even during the pandemic when face-to-face training may not be available.

Continuing Education Program

The Company sponsors a continuing education program to help employees obtain higher education degrees. By the end of 2025, around 7,500 employees were granted subsidies and achieved higher education degrees through our continuing education program. In addition, the Company also provides scholarships for eligible employees to achieve postgraduate degrees.

Total Rewards and Employee Benefits

The Company is committed to equal pay for equal work. Based on annual market research, it provides employees with fair and competitive compensation and benefits, recognizing and rewarding their contributions, performance and efforts.

In line with relevant labor laws and regulations, we provide full-time employees with pension insurance, medical insurance, unemployment insurance, work injury insurance and maternity insurance. Part-time employees are covered by employer liability insurance. Employees also enjoy paid leaves in accordance with labor laws.

The Company has launched equity incentive schemes such as CEO Awards and RGM Restricted Stock Units (RSUs). The scheme is part of Yum China's long-standing commitment to its RGM No. 1 corporate culture. The Company believes that its RGMs serve as the most important leaders and are key contributors to its long-term success. In 2016, Yum China announced a grant of RSUs valued at $2,000 to each qualified RGM. As of the end of 2025, this program has allowed more than 15,300 RGMs to become stockholders of Yum China. In addition, the Company granted RSUs valued at $3,000 to all eligible RGMs starting in February 2021, covering approximately 6,200 RGMs as of the end of 2025. The turnover rate of RGMs was 7.8% in 2025.

Meanwhile, the Company has established a comprehensive welfare and care system known as "YUMC Care," which offers employees benefits tailored to their life stage and individual needs. For example, the Company provides RMB1 million medical insurance coverage for each RGM, family care scheme for restaurant management teams, and critical illness insurance for crew leaders. For office staff, the Company operates its flexible benefit platform, covering approximately 7,000 employees. The platform allows employees to select benefits based on their individual needs, including family medical insurance, medical examinations and recreational activities. Both office staff and RGMs are covered by the Company's housing subsidy scheme.

Health and Safety

Protecting the health and safety of employees is the Company's top priority. Leveraging the Yum China Occupational Health and Safety ("OH&S") Management System, we provide necessary education, training, equipment and resources to help ensure that our employees, customers and partners fully understand and comply with relevant regulations, policies and procedures. We have also clearly defined the structure and accountability for the effective management of OH&S in Yum China. The Company regularly inspects and upgrades employees' protective equipment, carries out workplace safety reviews, and trains all employees on operational procedures and safety precautions.

In addition, Yum China's Employee Assistance Program ("EAP") continues to provide professional counseling and educational sessions to promote employees' physical and mental health. For example, by leveraging the EAP program, the Company was able to offer stress management tips to employees when they underwent quarantine during the pandemic.

Engagement and Wellbeing

The Top Employers Institute has certified the Company as a Top Employer in China for the eighth consecutive year. In 2025, we maintained our leading position as the top employer within the restaurant industry, showcasing our unwavering commitment to fostering an outstanding workplace and employee experience.

The Company maintains multiple communication channels with employees, including organizational forums such as RGM Convention and Founders' Day. The Company also ensures effective communication of business strategies and corporate messages through various digital platforms such as corporate WeChat, Apps and intranet portals.

Environmental Matters

We strive to reduce the environmental impact of our business activities by incorporating sustainability into the daily operations of our restaurants, as well as focusing our efforts on climate action, supply chain collaboration, and circular economy.

Climate Action

Our commitment to enhance climate action tops the list of our environmental sustainability priorities. We are committed to reaching net-zero value chain GHG emissions by 2050, and have set near-term science-based targets (SBTs) by 2035.

Our near-term SBTs are:

• To reduce absolute Scope 1 and 2 GHG emissions 63% by 2035 from a 2020 base year.

• To reduce Scope 3 GHG emissions from purchased goods 66.3% per ton of goods purchased by 2035 from a 2020 base year.

  We established an abatement target for 2025, aiming for a 20% reduction in energy indirect GHG emissions per company-owned store by 2025 from a 2020 base year, and we have successfully achieved the target.

  We have developed a 1.5°C-aligned decarbonization strategy and roadmap, focusing on energy efficiency improvement, renewable energy investment and supplier collaboration. We have identified and assessed climate-related risks and opportunities in our operations and value chain in line with the recommendations of the Task Force on Climate-Related Financial Disclosure ("TCFD"). We continuously enhance disclosure transparency through our Sustainability Report, TCFD Report and CDP Questionnaires (including Climate Change, Water Security and Forests).

  Supply Chain Collaboration

  We prioritize supply chain collaboration as a key strategy to achieve our 2050 net-zero goal. Through engaging, educating and empowering our suppliers, we work closely with them in joint efforts to drive low-carbon transformation throughout the entire value chain. Additionally, we have set an ambitious goal to achieve a zero-deforestation supply chain, with the aim of reducing carbon emissions resulting from upstream deforestation.

  Circular Economy

  Food Loss and Waste

  We are working toward the goal of a 10% reduction of our food waste per restaurant by 2030, as compared to a 2020 baseline, by exploring innovative initiatives for food loss reduction across different stages of the value chain. For example, we use AI/IoT technology to improve sales forecasting accuracy and inventory management, increase the proportion of cold chain transportation and use smaller fryers to avoid cooking an excessive amount of food. We continue to promote our food bank project by establishing pick-up stations

  at more restaurants under more brands, providing surplus food for free to residents in need. We also strive to explore solutions to recycle and reuse waste, such as recycling used cooking oil, coffee grounds and packaging waste as resources in the Company's value chain through collaboration with various stakeholders.

  Sustainable Packaging

  We continue to reduce the use of packaging through design optimization, material replacement, and innovative application methods. We are committed to ensuring that 100% of customer-facing, plastic-based packaging is recyclable and refuse to purchase paper products from suppliers that knowingly cause deforestation. We have achieved our target of a 30% reduction of non-degradable plastic packaging weight in 2025, as compared to a 2019 baseline.

  Nutrition

  We advocate a balanced diet and healthy eating habits through product innovation, variety in offerings, industry communication, public education and other relevant measures. We are committed to reducing the use of salt and sugar as part of our nutrition and health initiatives. We have increased the offering of grains, fruits, vegetables and beans in our menus to promote balanced food choices. We have collaborated with academic organizations to promote dietary health for 18 years. Chinese Nutrition Society - Yum China Dietary Health Foundation is a specialized research foundation in China in the field of health and nutrition in the restaurant industry. We also cooperate with the China Foundation for Rural Development to encourage public donations to improve child nutrition in rural areas.

  Cybersecurity

  Information technology systems, including our mobile or online platforms, mobile payment and ordering systems, loyalty programs and various other online processes and functions, are critical to our business and operations. The Company faces risks associated with cybersecurity, including operational interruptions,

  financial losses, personal information leakage and non-compliance risks. For additional details on risks from cybersecurity threats, please refer to "Risk Factors - The occurrence of security breaches and cyber-attacks could negatively impact our business." and "- Unauthorized access to, or improper use, disclosure, theft or destruction of, our customer or employee personal, financial or other data or our proprietary or confidential information that is stored in our information technology systems or by third parties on our behalf could result in substantial costs, expose us to litigation and damage our reputation."

  Our information technology systems are protected through technological safeguards and management measures. We detect, identify, assess and mitigate cybersecurity risks by adopting standard risk management methodologies, which are developed based on the international cybersecurity management system standard ISO 27001 as well as the asset-oriented risk assessment framework. To minimize potential impact on business operations in the event of a cybersecurity incident, we have formulated, and regularly tested, our incident response plan. We also established a framework for data security and personal information protection, including measures to prevent data loss and detect and block abnormal accounts and activities, as well as systems and processes to prevent, detect and mitigate vulnerabilities. Our employees participate in regular cybersecurity training to enhance their awareness of cybersecurity risks. We engage in the periodic assessment of these processes and practices that are designed to address cybersecurity threats and incidents.

  We regularly engage external consultants to assess and independently verify our cybersecurity risk management, striving for continuous optimization of our cybersecurity policies, cybersecurity risk management processes, and technical measures. These engagements assist us in ensuring our cybersecurity management practices and technical measures comply with applicable laws, regulations, industry standards and the Company's policies. The Company has maintained ISO/IEC 27001 certification since 2018 for certain online business.

  We have established processes designed to manage cybersecurity threats associated with the use of

  third-party service providers. These processes include security evaluations before third-parties' admission, ongoing oversight and assessment of their security status, and adopting necessary security measures at termination of services.

  Our Board of Directors maintains overall responsibility for overseeing the Company's risk management framework, and cybersecurity represents an important component of the Company's overall risk management framework. The Board regularly reviews risks that may be material to the Company. The Audit Committee assists the Board in the oversight of cybersecurity and other technology risks. Through receiving regular reports from the Chief Technology Officer ("CTO") and the Chief Legal Officer, the Audit Committee discusses with management cybersecurity risk mitigation and incident management, and reviews management reports regarding the Company's cybersecurity governance processes, incident response system and applicable cybersecurity laws, regulations and standards, status of projects to strengthen internal cybersecurity management, the evolving threat environment, vulnerability assessments, specific cybersecurity incidents and management's efforts to monitor, detect and prevent cybersecurity threats. On top of that, significant cybersecurity incidents will be immediately reported to the Board in accordance with the Company's incident response plan.

  Yum China Compliance Oversight Committee (the "Compliance Committee"), primarily comprised of leaders and representatives from our information technology, supply chain, legal, finance, HR and public affairs functions, as well as internal audit group, is responsible for assisting the Board and Audit Committee in overseeing the Company's cybersecurity risks. The Compliance Committee meets regularly to discuss legal and regulatory developments on cybersecurity, assess the Company's emerging cybersecurity risks and mitigation plans, and determine strategy to promote cybersecurity compliance. Through ongoing communications, the Compliance Committee is informed about and monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents. Our CTO, as a member of the Compliance Committee, served various

  positions in the Company's information technology department for more than 20 years and began leading the department in 2017.

  To its knowledge, the Company has not experienced a material cybersecurity breach within the last three years, nor identified any risks from cybersecurity threats that have materially affected us, including our business strategy, results of operations or financial condition. The Company maintains cybersecurity insurance as part of its overall insurance programs.

  Properties

  As of year-end 2025, the Company had 15,060 Company-owned units in China. Of these Company-owned units, 14,998 units were leased properties and 62 units were owned properties. The leased Company-owned units are further detailed as follows:

• KFC leased properties for 10,985 units.

• Pizza Hut leased properties for 3,816 units.

• Other restaurant concepts leased properties for 197 units.

Company-owned restaurants in China are generally leased for initial terms of 10 to 20 years and generally do not have renewal options.

We also lease our corporate headquarters in Shanghai and Dallas, Texas in the U.S., and regional offices and an innovation center in China, and own building, land use rights, or both for non-store properties, which primarily include logistics centers, seasoning facilities for Little Sheep and Huang Ji Huang and certain regional office buildings. We sublease over 130 properties to franchisees and other third parties. Additional information about the Company's leased properties is included in Note 9 to the Consolidated Financial Statements. We believe that our properties are generally in good operating condition and are suitable for the purposes for which they are being used.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Our current executive officers of the Company, and their ages and positions are as follows:

Name	Age	Title
Joey Wat	54	Chief Executive Officer
Adrian Ding	39	Chief Financial Officer
Warton Wang	51	General Manager, KFC
Jeff Kuai	45	General Manager, Pizza Hut
Duoduo (Howard) Huang	53	Chief Supply Chain Officer
Leila Zhang	57	Chief Technology Officer
Pingping Liu	53	Chief Legal Officer
Jerry Ding	40	Chief People Officer
Xueling Lu	52	Controller and Principal Accounting Officer

Joey Wat has served as our Chief Executive Officer since March 2018 and as a member of our Board of Directors since July 2017. Please refer to the section headed "Directors and Senior Management" for a detailed biography of Ms. Wat.

Adrian Ding has served as our Chief Financial Officer since March 2025. Mr. Ding joined the Company in March 2019 as Vice President of Corporate Finance. He also served as Chief Investment Officer of the Company from February 2020 to March 2025, General Manager of the Company's Lavazza joint venture from March 2022 to December 2024, and Acting Chief Financial Officer of the Company from October 2024 to March 2025. Prior to joining the Company, Mr. Ding worked for Alibaba Group Holding Limited from 2018 to early 2019, and was responsible for strategic investments in the technology and media sectors. Before that, Mr. Ding gained extensive experience in investment banking, having advised clients on a number of capital markets and M&A projects. Mr. Ding worked at UBS AG as a Director in Investment Banking. He also previously worked at Morgan Stanley and Citigroup Global Markets Asia Limited. Mr. Ding currently serves as a director of Fujian Sunner Development Co., Ltd. (Shenzhen Stock Exchange: 002299).

Warton Wang has served as the General Manager, KFC since May 2022. Mr. Wang served as our Chief Development Officer from July 2020 to May 2022. Mr. Wang joined KFC as an operations management trainee in 1998. He was promoted to Market Manager of KFC in 2007 and was appointed as a Regional Vice President, KFC Field Operations in 2015.

Jeff Kuai has served as the General Manager, Pizza Hut since November 2017. Mr. Kuai previously served as the General Manager, Pizza Hut Home Service from October 2016 to October 2017, a position he previously held at Yum! Restaurants China from January 2015 to October 2016. From March 2012 to August 2013, Mr. Kuai was Director of Delivery Support Center for Yum! Restaurants China, where he was instrumental in building its online ordering and e-commerce capabilities. Prior to that, Mr. Kuai spent nine years in the information technology department of Yum! Restaurants China, enhancing its information technology infrastructure and productivity.

Duoduo (Howard) Huang has served as our Chief Supply Chain Officer since November 2021. Mr. Huang served as Vice President, Pizza Hut Regional Operations, from June 2018 to November 2021. Before transferring to Pizza Hut, Mr. Huang held various leadership positions in KFC, including as General Manager of Nanjing and Wuxi markets. Mr. Huang joined Yum! Restaurants China in 1995.

Leila Zhang has served as our Chief Technology Officer since March 2018. Ms. Zhang served as Vice President, Information Technology from October 2016 to March 2018, a position she held at Yum! Restaurants China from 2014 to October 2016. Ms. Zhang joined YUM in 1996, held various positions in the information technology department, and began leading the department in February 2017. Prior to joining YUM, Ms. Zhang was an engineer with Inventec Electronics (Shanghai) from 1992 to 1996.

Pingping Liu has served as our Chief Legal Officer since January 2024. Ms. Liu joined the Company in May 2016 and served as Senior Legal Director of the Company. Ms. Liu also served as Corporate Secretary from May 2019 to March 2024. Ms. Liu has 20 years of experience in legal and compliance. From July 2005 to July 2013, Ms. Liu worked at Shearman & Sterling LLP (now known as A&O Shearman). From September 2002 to June 2005, Ms. Liu worked at Arnold & Porter LLP. Ms. Liu is admitted to the District of Columbia Bar Association and the New York State Bar Association.

Jerry Ding has served as our Chief People Officer since August 2023. Mr. Ding served as Head of Corporate Strategy from November 2019 to July 2023 and brand leader of Taco Bell from November 2021 to May 2023. Prior to joining Yum China, Mr. Ding worked at McKinsey & Company for over six years, specializing in developing corporate-level strategies.

Xueling Lu has served as our Controller and Principal Accounting Officer since January 2018. Ms. Lu previously served as Senior Director, Finance of Yum China, a position she held since she joined the Company in November 2016. Prior to joining the Company, Ms. Lu was the Asia Pacific Controller of Lear Corporation from 2013 to 2016. Before joining Lear Corporation, Ms. Lu spent 10 years in public accounting with Ernst & Young, specializing in audits and initial public offerings of companies listed in the U.S., SEC reporting and Sarbanes-Oxley compliance. Ms. Lu is a certified public accountant in California and a member of the American Institute of Certified Public Accountants.