jolaman ResearanSachs90ctober2025|7:06PMHKTGLOBALRESTAURANTSAddressing kev debates related to the China restaurants landscape andimplications for global investorsChina has emered as a linchpin of global fast food expansion,representing not onlyMichelleCheng a significant market but a major unit growth engine forindustry leaders like MCD.YUM, DPZ and SBUx, with 14bilion consumers and an expanding mide cass,China's QSR sectorhas become afiercebattleround with both globallocal brandsChristineCho pushing aggressively to expand their presence in an important market that offers attractive uniteconomics and substantial whit soace inlower-tiercities. WeXinyuRuanforecast China to represent more than 75% of net openings at YUM, and expect theGolimanSachs(asaiyuruan@gscommarkettorepresentc.40-50%ofopeningsatMCD/SBUX/DPZin2025(Exhibit2)Teddy Farley, CFAoldmanSache@edteddof FY24, vet management believes there are meaningful opportunities to penetrateCarolChenfurther and deeper into the market; with the company's 2026 target of 20k storesGolmanSsachatalcarolchen@gs.com implyingagoal toreachhalfof the Chinese pooulationMollyDai In this report, we lookinto several key themes/debates in the China restaurant industry thatare relevant for global investors:1) recent SSSG. unit growth andSamanthaChiangmarketsharetrends,2)store unit economics,paybackand diversifvingformats (ieincreasinsub-franchisedstoresforYUMC).3lcoffee/RTDteacompetitivelandscape with large local plaverslike Luckin andMixue continuinetoexoandpresence, and 4) impact of elevated food delivery subsidies on transaction growth in2H25/2026Bottomline:Onthe nositiveside weare seeinestillhealthy storeuinit economicewhich sets up a favorable backdrop for unit growth. However, we continue to see alrelatively muted SSSG backdrop given soft consumer sentiment, ingering de-consolidation rskand emerging risk topricing due to consumers more selective.spending behavior. We also need to keep a close eye on the level of food deliverysubsidies, whether it will persist through 2026 and how it impacts the priceperception.Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investorsshould be aware that the firm may have a conflict of interest that could affect the objectivity of this reportInvestors should consider this report as only a single factor in making their investment decision. For Reg A(certificationandotherimportantdisclosureswww.gs.com/ research hedge. html. Analysts employed by non-US afflates are not registered/qualified as researchanalystswithFlNRAintheU.S
Exhibit 1:China comprised HSD% of system sales onExhibit.2:..ut w.eforecast China to represent-52% ofaverageinFY24(MSD%excluading WM.1net unit openings onaverage inFY25(43%excludingChina exposure as of FY24(%)YUM)Expectedunitopenings(GSe)aunsodgeulo5005%apadx3szAd1000SBUXSource: Euromonitor, Data compiled by Goldman Sachs GloballInvestmenYUM/DPZ/SBUXreflect net openings while MCD reflects grossopenin...
