Thank you for standing by, and welcome to the Yum China First Quarter 2024 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Florence Lip, Investor Relations Senior Director. Please go ahead. Thank you, operator. Hello, everyone. Thank you for joining Yum China's first quarter 2024 earnings conference call. On today's call are our CEO, Ms. Joey Wat, and our CFO, Mr. Andy Yeung. I'd like to remind everyone that our earnings call and investment materials contain forward-looking statements, which are subject to future events and uncertainties. Actual results may differ materially from these forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statement in our earnings release and the risk factors included in our filings with the SEC. This call also includes certain non-GAAP financial measures. You should carefully consider the comparable GAAP measures. Reconciliation of non-GAAP and GAAP measures is included in our earnings release. You can find a webcast of this call and a PowerPoint presentation on our IR website. Please note that during today's call, all year-over-year growth results exclude the impact of foreign currency, unless otherwise noted. Now, I would like to turn the call over to Joey Wat, CEO of Yum China. Joey? Hello, everyone, and thank you for joining us today. I'm proud to share that we turned in a solid performance in the first quarter. System Sales grew 6% year-over-year, on top of 17% growth last year. Our revenue reached $3 billion in the quarter, an all-time high. Core operating profit improved to $396 million from a high base of $392 million last year. Adjusted operating profit in quarter one of last year was the highest in the 30 quarters since our spin-off. This quarter was the second highest. We achieved these results in a challenging and competitive environment, thanks to our resilient business model and our team's agility and hard work. We demonstrate once again our ability to adjust to changing conditions and deliver solid results. We continued to invest to accelerate growth, adding a record number of stores. We reached and surpassed the milestone of 15,000 stores. At the same time, we returned a record amount of cash to our shareholders through share repurchases and cash dividends, totaling $745 million. Let me start with our store opening strategy. We remain bullish on China. We see the China market as offering us wide space for years to come. We intend to fill in by expanding our store portfolio. In quarter one, we passed the 15,000 store milestone, opening 378 net new stores. I am proud of how we have been able to accelerate. It took us 25 years to build the first 5,000 store in China, 8 years to build the next 5,000 stores, and just 4 years for the last 5,000 stores. We are well on our way to another 5,000 stores by 2026. Contrary to select recent reports, China continues to develop rapidly, with hundreds of new shopping malls, residential complexes, and commercial developments opening every year. Urbanization and long-term consumption upgrades in tier 2 cities and below present particularly attractive opportunity for us. Housing and living costs are more affordable there. Tremendous consumption potential has yet to be unleashed. We expect roughly 30% of our new stores this year to be in new cities or strategic locations, such as transportation and tourist locations. Our flexible store models and franchise partnerships give us the tools to capitalize on every opportunity. Taking a closer look at each of these, our flexible store models enable us to expand across city tiers and penetrate further. In Q1, 2/3 of new store openings were in smaller store formats. On average, our new store now takes just CNY 1.2 million-CNY 1.5 million CapEx to build, and we are always pushing for even lower CapEx and innovating new formats. KFC has recently developed a small-town mini model for lower-tier cities. With a simplified menu and optimized equipment, per-store CapEx can get as low as CNY 500,000. Pizza Hut has just 3,400 stores and holds significant potential for further expansion. We have developed a compact model. It is smaller than our standard stores, but features more dine-in space and menu choices than our satellite model. These promising new models enable us to add store density and enter smaller cities more flexibly and profitably. Transportation and tourist locations represent just single digit of our store mix right now, but they are key to capturing the spike in travel volume during holiday periods. Same-Store Sales at these locations grew around 20% during Chinese New Year. We are opening more stores at highway service centers in over 20 provinces, capitalizing on the opportunity presented by the rising car ownership. Some of our stores will be opened through franchising. In fact, partnering with franchisees is key to unlocking opportunities in lower tiers, remote areas, and other strategic locations. At our investor day last year, we estimated, about 15%-20% of our net new stores in the next three years will come from franchising. In quarter one, this mix has reached 19% at KFC. A disciplined approach backs our accelerated expansion. Payback periods have remained consistent at two years for KFC and improved from three years to two to three years for Pizza Hut. We track these KPIs very closely to help ensure we open high-quality new stores. Let's now spend some time on our brand strategy. We have devised robust strategies to meet diverse demands in China. We satisfy our customers' taste buds with delicious, innovative food, and we build an emotional bond with them. Through a combination of premium and affordable options, we make sure there's something for everyone. We recorded over 460 million transactions in the first quarter alone, representing a 15% increase year-over-year. It was not easy. While our restaurants remained open this year and last year, there were a lot more other restaurants opening during the holidays this year. But our customers respond well to our offerings. The strong transaction growth also reflects our successful strategy to spread our price points, expanding into lower-ticket orders, and that will allow us to capture more market shares. Now, let me spend some time on each brand, beginning with KFC, our primary growth engine. Delicious, innovative food, and amazing value have been the keys to our success. Our high-ticket average products sold very well in quarter one. KFC's beef burger and whole chicken sales grew double digits. We take a holistic approach to drive traffic while protecting our ticket average. We launched the super juicy pineapple beef burger [Foreign Language]. The combination of pineapple and beef taste is exotic, and customers like it. At the same time, we add entry price beef burgers into our weekday value combo. So we have both value and premium options to meet diverse consumer needs. Our 6-year-old signature Crazy Thursdays continue to drive major traffic to KFC. Thursdays now even outperform weekends. Leveraging full chicken utilization, we offer great value to customers at sustainable cost. Our delivery business remains strong. Delivery sales have grown double digits every year for the past decade. We identify smaller orders as an area of opportunity. To tap it, KFC reduced its delivery fee and expand one-person meal options in late February. The initiatives attract strong incremental traffic, capturing more market share, especially in lower-tier cities. To offset the lower delivery fee, we have taken action to reduce our overall operating costs for riders. This includes introducing platform riders at selected locations, where their quality actually matches our dedicated riders. We can serve more customers while maintaining service quality and sustainable margins. We are constantly searching for new growth pillars. K-Coffee continues to grow nicely, achieving a 30% increase in cups sold in quarter one. We are excited about further penetrating this segment of a growing coffee market.... To this end, we have developed a side-by-side K-Coffee model. We call it Jian Bing Jian. Its distinct storefront and dining area cultivates a cafe ambiance surrounded by coffee aroma. These shops are connected to KFC stores so that we can share a kitchen to keep the investment and operating costs down. Using KFC equipment, we can serve unique products like coffee floats, Xue Ding Cafe, and sparkling coffee, Qi Pao Mei Shi, without additional investment in equipment. Summer is coming, so we really encourage our friends to try this very refreshing sparkling coffee. It's indeed one of our best-selling coffee already. We see initial success of 100 side-by-side stores across 80 cities already, and we intend to roll this model out aggressively. Next is Pizza Hut, which now has over 3,400 stores only and is ready for accelerated growth. In the past 12 months, Pizza Hut added over 400 stores and increased city coverage by 10% to over 750 cities. We aim to broaden its addressable market with a strong value proposition for mass market appeal. Our strategy emphasizes widening price points, expanding into new categories, and delivering emotional value to consumers. First, we are widening price points. We enriched our entry price pizza offerings. Sales from below RMB 50 pizzas grew double digit in quarter one. Our Bolognese Pizza, Yishi Roujiang Pizza, priced at RMB 39, has quickly become one of our top 5 best-selling pizzas. It's a familiar taste inspired by our spaghetti, well, actually, our signature dish for the past 30 years, and it has become a customer favorite. These results give us confidence that we are on the right track. Our higher ticket offerings also offer abundant value. We brought back our popular all-you-can-eat deal at RMB 178 for 5 days. With Beef Wellington, durian pizza, crayfish, and other very delicious options to choose from, this campaign generated a lot of social buzz and became a strong sales driver, particularly for those people who love to indulge themselves with the all-you-can-eat deal. We are also expanding offerings to capture our share of growing one-person meal occasions. Just last week, we launched the pizza dough burger, Pizza Bao, in around 2,000 stores with existing ingredients. This made-to-order burger features pizza dough buns, freshly baked in-store on daily basis. The inspiration actually comes from Chinese buns, so our pizza dough bun is chewy and fluffy. It's very unique, and it's very different. It perfectly complements our juicy beef and chicken patties. The result is good, and we are confident that will unlock incremental sales. We aim to offer emotional value to our customers beyond delicious food. In quarter one, we more than doubled the number of IP collaborations with top animations and games. These campaigns attract a wave of young customers eager to join the fun. Let's turn to Lavazza. Lavazza's two growth engines, coffee shop and retail, are making good progress in driving synergies. We further reduced the CapEx of our latest small store formats and improved store economics. Our retail business expanded to premium outlets, such as five-star hotels and Michelin-star restaurants. By growing the two businesses, we are building the Lavazza brand in China. Looking forward, Lavazza Group and we are planning to partner with a local roastery for fresher beans, more competitive costs, and smoother operations. Now, let's briefly touch on our Chinese dining brands. Little Sheep and Huang Ji Huang had a strong recovery last year. Huang Ji Huang remains a very resilient model with strong growth potential. Little Sheep has made good progress with their new one-person hot pot module. We achieved initial success with the pilot stores in Shanghai, resulting in a robust pipeline with our franchisees. We are also expanding internationally, such as reentering the U.S. with a new Little Sheep store in New Jersey. As we expand to serve more customers and capture incremental traffic... We are pursuing greater operational efficiency to make our business even more resilient. In the spirit of our restaurant general manager number one, or our RGM number one philosophy, we launched Project Fresh Eye to assess our operational processes through the fresh eyes of our RGM. Our goal is to empower our RGM, supporting them better and faster. The scope covers all aspects, from our restaurants to supply chain and back office. We aim to improve efficiency, enhance agility, and drive cost effectiveness. We are streamlining processes and integrating resources to promote synergies across regions and functions. Technology will continue to play a big role in driving efficiency. We are starting to use generative AI to develop creative marketing and facilitate our recruiting processes. In addition, we benchmark against the industry to identify areas of opportunities and develop targeted strategies. We aim to be best in class and best in cost, passing on any cost savings to our customers and other stakeholders. Our ability to address our consumers' ever-evolving needs allows us to connect with them emotionally and continually. Our pioneer digital capabilities, proprietary supply chain management, and unmatched operational efficiency enable us to do this on a massive scale. These qualities set us apart from our competition and help us drive sustainable growth in this dynamic market. With that, I will turn the call over to Andy. Andy? Thank you, Joey, and hello, everyone. We delivered solid results in the first quarter, driving sales, core operating profit, and EPS growth despite a higher base. During the action-packed first quarter, we launched exciting offerings and took bold strategic actions to expand our addressable market. At the same time, we are pressing on with our cost structure rebasing, driving operational efficiency to support long-term sustainable growth. Let's now look at our first quarter performance in more detail. System sales increased 6% year-over-year, led by 8% net new unit contribution. Same-Store Sales were at 97% of prior year levels, against a very strong performance last year. By brand, KFC system sales increased 7% year-over-year, driven by net new store contribution. KFC's portfolio reached 10,603 stores, adding 307 net new stores in the quarter. Same-Store Sales were at 98% of prior year level, with 4% Same-Store traffic growth and a 6% lower ticket average. Putting this into perspective, our ticket average in the quarter was RMB 42. This is sequentially higher than RMB 39 in the fourth quarter last year due to holiday impact, and is also higher than RMB 39 in the first quarter, 2019. Now, in line with our strategy to drive incremental traffic, we offer higher ticket average products like whole chicken and beef burger, while enriching entry-level combos. We also lower our delivery fees to capture smaller ticket orders. We had nice rebound in breakfast, coffee, and ice cream sales, which have a lower ticket average. Pizza Hut system sales increased 4% year-over-year, driven by net new unit contribution. Pizza Hut portfolio reached 3,425 stores, with record first quarter net new store of 113. Same-store sales were at 95% of the prior year level, led by strong traffic growth of 8% and a 12% lower ticket average. As Joey mentioned, we are strategically enriching our entry price pizza, steaks, smaller party-size options, and one-person meals at Pizza Hut. This helps Pizza Hut tap into underserved customer segments and roll out to more locations, capturing incremental traffic. Operating profit was $374 million. Our operating margin as a percentage of revenue was 12.6%. We're delighted that our core operating profit was not only stable, but also grew by 1% on top of the very strong performance last year. As a reminder, core operating profit excludes foreign exchange impact, special items, and other items affecting comparability. Our proactive savings in G&A expenses partially offset the year-over-year lower restaurant margin. As Joey mentioned, we have challenged ourselves to strive for higher efficiency so that we can drive sustainable growth. Now, let's go to our restaurant margins and key cost items. Our restaurant margin was 17.6%, 230 basis points lower than last year, or 130 basis points lower on a comparable basis. The year-over-year difference was mainly due to high Cost of Sales and cost of labor, while our occupancy and other costs continued to improve. Cost of Sales was 32.1%, 200 basis points higher year-over-year, or 170 basis points higher on a comparable basis. We increased value for money offering. Favorable commodity costs, superb procurement, and efficiency gains from Project Fresh Eye allow us to pass the savings back to customers. Cost of Labor was 25.4%, 80 basis points higher year-over-year, or 60 basis points higher on a comparable basis. This was mainly due to last year's wage increases for frontline staff and higher rider costs as the delivery mix went up. We improved our labor productivity, which more than offset the sales leveraging impact. Occupancy and other was 24.9%, 10 basis points lower year-over-year, or 60 basis points lower on a comparable basis. This improvement came from lower rent expenses as well as lower marketing and advertising expenses. Our G&A expenses decreased 10% year-over-year because of operational efficiency gains, our cost optimization, and lower performance-based compensation this year. G&A expenses as a percentage of revenue was 4.7% in the quarter, improving from 5.6% a year ago. Obviously, the ratio would fluctuate with seasonality in sales, but for the full year, we aim to keep G&A ratio to be around 5%. Our effective tax rate was 26.9% in the first quarter. The lower tax rate on a year-over-year basis was due mainly to less non-tax-deductible expenses. We expect the full year effective tax rate to be in the high twenties. Diluted EPS was $0.71, growing 10% year-over-year. Moving on to our second quarter outlook. As a reminder, the second quarter of last year was a phenomenal quarter. System sales increased 32% year-over-year in the second quarter last year. Operating profit last year was the highest among all second quarters. We also benefited from strong demand around Labor Day and Children's Day holidays last year. We recorded around $12 million in temporary relief and VAT deduction benefits, which is not expected to recur this year. All these were, again, from a high base for comparison. Looking ahead to the second quarter of this year, we expect the tide to remain choppy. This will test our ability to adapt. We'll continue to execute on our strategy to drive incremental traffic with great value for money offerings. Consumers are indeed more rational in their spending in the new normal, but they do respond well to our exciting offerings and campaigns. On the operational side, we will continue to work hard to improve efficiency across the organization and pass along the savings to customers. For the full year, with a strong store pipeline, we are expecting to open 1,500-1,700 net new stores. In addition to investing for growth, we also returned a record $745 million to shareholders in the first quarter, including buying back 16.6 million shares, which is equivalent to more than 4% of our shares outstanding. Our strong cash flow generation and healthy cash position are what made this possible. At the end of the quarter, we had $3.1 billion in net cash. We are committed to return $1.5 billion to shareholders in 2024 and continue to drive our long-term and sustainable growth. With that, I will pass it back to Florence. Florence? Thanks, Andy. Now, we will open the call for questions. In order to give more people the chance to ask questions, please limit your questions to one at a time. Operator, please start the Q&A. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star, then two. If you're using a speakerphone, please pick up the handset to ask your question. The first question today comes from Michelle Cheng from Goldman Sachs. Please go ahead. Hi, Joey and Andy, congrats for the still very resilient results, very tough comp. My question is about the same-store sales and consumption trend. Given we know the offline traffic has been very bad year-to-date, but our same-store sales, especially KFC, is still pretty healthy. You share the higher ticket size items going by like a double digit and the transportation hub growth during Chinese New Year are pretty strong at 20%. I wonder whether you can share more colors about the different performance, including like, tier cities, day parts, consumer cohorts or holiday versus, post-holiday sales. Is there any color on month-to-date trend and how we should expect into second quarter and Labor Day, given Andy just mentioned that we also had a tough comp last year. So also wondering how we should look at the second quarter same-store sales. Thank you. Thank you, Michelle. I would recap a little bit of the Chinese New Year, and then go to the quarter to what we are seeing right now. So as mentioned on the quarter four earnings release call last time, we anticipate a tough Chinese New Year because it was very high base. The situation was unique last year with the reopening, and then there's pent-up demand on traveling, and then also we are a bit more well prepared with the new store with the store opening than our peers. And yet we deliver 6% system sales growth on top of 17% growth last year's quarter one, and mainly led by the robust transaction growth. And that's very encouraging. With from the growth of the total 15% transaction growth, we see few things. For the 2024 Chinese New Year, we see the return to normal trading with more store available for consumer. Trading was robust and the transportation hub, et cetera, the business was booming. And then, we also see diverse demand, which I mentioned in my prepared remarks. You know, on the one hand, customer likes the value for money for the high ticket item, but at the same time, the functional need with lower ticket average is equally appreciated. And that's very strong recovery of the smaller ticket item from delivery all the way to coffee, breakfast, ice cream, et cetera. So all these are good. And then we also see the trend continue to see the trend of consumer behavior during holidays. So during holidays, they splurge, and then after the holidays, they tighten up the belt a little bit. But the trading in March sequentially improved. And then if we move to the next trend, is about the region, city, tier, location, et cetera. We see the regional recovery from the north recovered the best because that was lapping on a lower base the year before. And Eastern China, eastern part of China, continued to be very resilient, which is brilliant. And then of course, all regions across China grew system sales. By city tier, as we have mentioned a few times before, the tier two still performed the best, and lower tier city lapping strong CNY last year, you know. And the tier two cities with regional hubs, such as, you know, Chengdu, et cetera, continue to do really well, because, as I mentioned it again in the prepared remarks, the living cost and housing price there are lower, so the trading is very robust, which is good. By location, sales at shopping mall, where we have more store, have surpassed the 2019 level, and the trading is robust. And that's also very encouraging, because, it's not record value, but China last year actually add about 400 shopping mall to the base, about 6,000 shopping mall that we are tracking. I don't think that many countries are still building that many shopping malls. For 2024, that trend will continue. We estimate a few more hundred shopping malls coming to China. One other trend, delivery continued to do really well. And as you can see, KFC delivery sales actually increased by 14%, which is massive. 14%, that is a consistent growth for four decades in this delivery business. And it's driven by the smaller order delivery, which is something that we again mentioned in the previous quarter earnings release. That was our part of our strategy and worked really well. Going to Q2, I think Andy can make a few comments about Q2. Yeah. Great. Thanks, Michelle, for the questions. And so I think for quarter two, as we mentioned, you know, we're committed to, you know, delivering compelling value to consumer. And again, you know, like the strategy work, really well. We're going to introduce more products, and then try to- ...pursue, some more engaging marketing campaign to drive sales. You know, as in our prepared remark, we have mentioned, you know, we continue to see, you know, consumer to be more rational in spending, but they do respond positively to, you know, our new product introductions, you know, our value propositions and also, you know, some of the fun marketing campaign as well. So that's what we're gonna do more. And in term of, you know, like the quarter for this year, you know, just remind everyone, you know, we have a very high base last year. Last year, we actually have seen, you know, 32% increase in our System Sales, and then also record profit last year in the second quarter, which was helped by some very strong performance during the Labor Day and Children's Day holiday sale. As well as, you know, last year, we also had some one-time, about $12 million, which we're not, we're not expecting that to occur this year. So, all in all, you know, like we will have a high base, you know, but despite, you know, these challenges we mentioned, we focus on, you know, on our strategy, our values, you know, new product introductions, campaigns that resonate well with consumer. And then, we also have mentioned in the prepared remark, we have a Project Fresh Eye, and to further boost our efficiency. And again, as we mentioned, we will try to find more savings, so that we can pass on to customer. And we do plan to, you know, continue to improve our G&A expenses. Obviously, you know, that would fluctuate, you know, quarter by quarter, the ratio. But for the full year, we intend to keep it around 5%. So, yeah, so, this is, you know, sort of the plan there. But, the couple of things I want to mention is, that is worth keeping in mind. One is that, our new store contributions, you know, the revenue structure, is changing, as we, increase the mix of smaller store and, and also franchise store, right? Which would, you know, change the mix between franchise fees versus company sales. And also foreign exchange. You know, our operating currency is RMB, and our foreign currency is US dollar. So, you know, we will continue to be impacted by the currency, exchange, fluctuation. Thanks. Thank you, Joey. Thank you, Andy, for the detailed explanation. Thank you. The next question comes from Brian Bittner from Oppenheimer. Please go ahead. Thanks. As it relates to the operating environment, I realize it's a very competitive and promotional environment, which I think is driving a lot of the pressure to your average check. But at the same time, it is also helping you drive traffic growth. Your same-store traffic was up 4% in the quarter, which is impressive. And I'm curious where this traffic is coming from. Is it new customers, or is it coming from loyalty customers, just more frequency from existing customers? Can you unpack where the traffic growth is coming from? And Andy, as, as it relates to the average check declines, how long do you expect average check to be a headwind to your same-store sales? Thank you, Brian. So I will take these questions. First of all, I would like to point out that, you know, the overall ticket average aligns really well with our strategic goal, which is to drive incremental traffic to our store. You know, as you mentioned, you know, we have seen pretty impressive same-store transaction growth, you know, both at KFC and Pizza Hut, which demonstrate that, you know, our strategy is working and, you know, the strength of our business. You know, if you look at KFC, for example, you know, we experienced 4% increase in same-store traffic and Pizza Hut, 8%. So that's good. Now, when we talk about, you know, TA, the ticket average, it is very important for us to note that the year-over-year comparisons, you know, are influenced by, you know, a mix of factors, including a delivery mix, product mix, and also order size, in the post-COVID recovery. So, however, you know, I think it's worthwhile to look at, you know, the longer trend, which long-term trend, because, you know, it, it will provide a clear perspective, you know, on, on our strategy there. For example, for KFC, the overall TA, was, you know, RMB 42, in the quarter, very healthy. With, you know, that is a sequential increase from, you know, RMB 39 in the fourth quarter, due to holiday impact, obviously. It's also higher than the RMB 39 in the first quarter, 2019. And so, again, like, we are committed to manage the TA at KFC through a balanced approach over the long term. Our strategy have improved, you know, focusing on value for money, introducing new products, and also launching promotional campaigns when and to meet customer demand. Now, we also have reduced the delivery fees to capture more smaller ticket size delivery order. And, you know, and also, you know, after the pandemic and the reopening, we definitely see, you know, some strong rebound in our sales in breakfast, coffee, and ice cream item, as we have mentioned before. At the same time, we also have mentioned, you know, our high ticket items like whole chicken, beef burger, continue to do well going, you know, the sales at double digit rate, in the quarter. So, this is a balanced approach, positioned as well, to enhance, customer value, and then also expand our market reach.... Now, on the Pizza Hut side, you know, as the brand continue to grow, its network beyond 2,000 stores, we are transforming the business from a relatively premium casual dining business into a more mass market operation. Now, so, we are realigning, you know, our market positioning, with our pricing at Pizza Hut. We have expanded both, you know, our price range and also product range, offering more, pizzas and other items below RMB 50. We are also providing more options for consumer, such as our recently launched, you know, burger, making Pizza Hut product more suitable for smaller party size. Now, this approach, I think should help us to expand our addressable market segment. We are glad to see that, you know, our strategic pricing strategy has been successful in driving store transaction growth in the quarter. So, but, you know, while we are driving the ticket average lower at Pizza Hut, our focus remains the same, driving incremental sales and protecting profit and margin. Thanks. Thank you. Thanks. I mean, our KFC and Pizza Hut business, both are very big, so I just find it helpful maybe to highlight one or two things in the category to show the growth. Although when it translates to total number, it might not be that big, but because our base is big. Brian, give you a example other than what Andy just said, our coffee business for KFC, K-Coffee, number of cups of coffee actually grew by 30%. I mean, it does not show it in a big number, but for coffee, it's brilliant. So we saw about what? 50 million cups of coffee for the quarter one alone, 30% growth, brilliant, very promising category. And we only have 100 of those dine by size store right now. As I mentioned earlier, we intend to grow it very aggressively. And Pizza Hut, one highlight here is the lower priced pizza, which is something that we mentioned in the previous quarter earnings release. The pizza price below RMB 50. We have seven choices in that category, for the price lower than RMB 50 now. And this small group of pizza, and we of course intend to launch more at this price point. It gave us double-digit sales growth for Pizza Hut. Well, the TC growth, which is the question you asked, of course, is even better. So that gives you a sense of how focused we are on driving the transaction growth. Thank you. Thank you. Thank you. The next question comes from Shang Liu from BofA. Please go ahead. Good morning, Joey and Andy. My question is on the competition side. So in the past two quarters, competition has always been a key investor concern. So we also noticed that in the recent few months, our promotional intensity has increased. So based on our observation, compared with our last earnings call, do we think competition has actually further intensified or still largely stable at the moment? Thank you. Well, honestly, competition has always been very intense throughout decades. We will continue to learn and evolve and grow with our competitor. But I just want to highlight again and again, that it's good to see competitors up their game and increase the investment in the industry. You know, last year, 2023, the industry actually grew at 20%, although it was rarely reported in the mass media. And then for this year, or the year before the 2023, the industry always grow at very nice number, like, you know, double digit, or much faster than the GDP growth of 5% or whatever the GDP growth is. So naturally, it attract both domestic and international investors to continue to invest in this industry, so it's really not a bad thing at all. I think what is important, Walter, here is we have to remain quite open-minded and continue to relearn and reconnect with our consumer, and that's exactly what we have been doing, and we'll continue to do that. And, you know, we in the last few years, you can see that we learn from local players who launch, you know, Chinese burger. We learn it. We learn from other player about the possibility of the whole chicken. We learn from other competitor in pizza category the focus on the lower priced pizza. And that's how we compete in this market, and we'll continue to stay agile. And the market will always be choppy, but that's okay. You know, we are here to stay, and it will, it will continue to test our ability to, to compete. And our strategy is always very consistent. For KFC, it's about in the long term, we- and make sure that our ticket average is, is relatively stable by having high ticket average items such as beef burger or whole chicken, and then have the entry price product to grow the transaction and et cetera. And then for Pizza Hut, again, it's very consistent, is to drive down the TA actually. 2017, our TA was 132, now it's 90. We'll continue to drive it down because that TATC strategy has to be consistent with our mass market store growth strategy. So we'll have sort of the stable and consistent strategy to compete in this market. Thank you. Thank you. Thank you. The next question comes from Lillian Lou, from Morgan Stanley. Please go ahead. Thanks, Joey and Andy. I have a question about Joey commented on the diversified consumer demand right now, and there has been some widening, so-called the holiday effect. And are we seeing actually from store performance as well, given that situation, there is more gap between best performing stores or relatively worse performing stores or the stores in different locations, for example, the heavy traffic hubs, the tourists, so more of an underlying bigger gap in terms of the store performance? And, you know, reacting to that, we continue to deliver better efficiency and the cost savings. So trying to understand better from this challenge of more diversified store performance or customer demand, how we manage, keep saving more. I think Andy and Joey mentioned a little bit, but trying to dip in a little bit better understanding for the ongoing cost saving progress. Thank you. Thank you, Lillian. Well, first of all, I would like to report that for the more diverse demand between, well, the sort of the splurge consumption during the holiday and a bit more tightening, tightening the belt after the holiday, that is not that unique. I spent 10 years in U.K. Consumer, they are exactly the same, despite the cultural difference or language difference. So we just learn to train our business better and better. So how do we deal with that? How do we meet the diverse demand? During the holiday, we focus on the high- ticket, high- ticket trading, like the bucket, or the whole chicken, beef burger, so that our customer can splurge. But at the same time, we will also drive the TC, like Chinese New Year is a great example. The location where customers splurge actually is lower tier city and the transportation hub and tourist location. But in tier one city, it's still very functional, and China is a very big country. So we just would see what the trend, and then we match, and we deliver what customer want, and not being judgmental about it at all. And then in terms of going forward, and you can see in our store opening strategy, we're going to continue to accelerate and probably further accelerate store opening in the strategic location, like the transportation hub and tourist location, and also the mini store model. And these are very, very good models. The mini store model is what I mentioned earlier in the prepared remark, is very low- cost investment, $500,000. Our normal investment is about RMB 1.2-RMB 1.5 million now. So the smallest one is the RMB 500,000, the model we tested, and we are happy with that, and that's for KFC. And that's very good for the strategic location because the investment is low, and it's also very good for the low-tier city, 'cause we see customers are going to more and more low-tier city right now. So we respond to it, and we are very agile, very fast. And of course, to make the mini model work, the cost efficiency has to work. And again, to be specific here, the mini store model, the menu is only half of the menu of the normal KFC. And that certainly helps. And then smaller store, the operating cost, including rent and labor, is lower, therefore, it works. And for Pizza Hut, I mentioned it in my prepared remark, but it might not be clear enough. After many years of delivering new store return within 3 years, I hope you guys realize that, in this particular quarter, we changed that to 2-3 years. So if you remember, when we start the Pizza Hut new store opening, the payback time is more than 3 years, 3-4 years. Then we improved to 3 years. And as of this quarter, 2024, quarter one, Pizza Hut has finally improved to 2-3 years, which is brilliant. So it also means that we are more flexible to open this kind of better payback new store in the strategic location that we want, and also with better cost efficiency. We can go through line by line, but, you know, the new store payback, they say, "Oh,[inaudible]. Thank you, Lillian. Thanks a lot, Joey. Thank you. The next question comes from Anne Ling from Jefferies. Please go ahead. Hi, thank you. Hi, management team. Thanks for giving me the chance to ask a question. It's regarding the cost side. You know, we noticed that on the cost of goods sold, there's actually like, you know, some increase, you know, in terms of the food cost. I'm just wondering, like, you know, whether it is because of the promotions that we are offering that result in a higher promotional co- higher COS, or is it because, like, you know, there's some new items, for example, with the lowering of the delivery cost, and now we are also charging this $1 or $2, RMB 1 or RMB 2 packaging cost? And I'm not sure whether this also, reflected in the cost of, cost of goods as well. So maybe like, you know, you can share with us, you know, what is the outlook of the food cost? You know, given the fact that, you know, if we look at the chicken price, you know, year to date it was actually down 11%. So any chance that, you know, we will see some savings, you know, on that front? Thank you. And thank you for your questions. So when we look at, you know, the first quarter Cost of Sales, it's around 32.1%. You know, it's around like what we have, you know, if you stop what we target about like 31 plus minus 1% range. You know, in fact, you look at, KFC is actually within that, and Pizza Hut's a little bit higher. And, you know, obviously both, as we have mentioned on, you know, the prepared remarks, both, you know, a brand, focusing on driving store traffic, driving, you know, transaction growth in the store. And so, we have, you know, stepped up, you know, value for money campaigns. We also have new product introductions, and other promotional activities. So the result is good. We've seen, you know, System Sales grow 6% overall for the company. Now, in terms of, you know, the commodity prices, we do have favorable commodity price, you know, in the quarter. And for poultry, we also, you know, have favorable commodity prices there. We do lock up, you know, our supply contract a quarter or so ahead of time, so, you know, we know that, you know, in the second quarter we probably would also have favorable commodity prices as well. However, because the, you know, chicken life cycle or raising the chicken life cycle is about like, you know, almost like a quarter, and so we cannot provide, you know, a longer term sort of outlook for you. Now, in term of the gain that we got from, you know, those commodity favorable commodity prices and whatnot, as we have mentioned before, like we do intend to pass the savings back to consumer, so that they can get the good value that they have. Now, for Pizza Hut, it's a little bit higher for the quarter. You know, it's because, you know, they did run the All Y ou C an E at, five-day All You Can Eat campaign, you know, which is, you know, great consumer demand. But, you know, the cost of itself is a bit higher over there. And we'll continue to calibrate, you know, obviously, you know, the supply chain and make it more efficient over time so that we can both, you know, drive sales and drive growth and protect profit as well. Thanks, Anne. Thank you. By the way, one last comment. The reduction of the delivery fee has rather minimal impact on the margin because we have the 14+ sales growth in delivery in KFC to offset that. So it's okay. And of course, before we launch it, we test it, and we know it's going to be okay. Thank you. Okay, got it. Thank you. Thank you. The next question comes from Ethan Wang from CLSA. Please go ahead. Thank you. Good morning. Hi, Joey. Hi, Andy. So my question is on the delivery services. So post-COVID, there was some concern that the delivery sales contribution might go down, but actually in the first quarter, it held up pretty well. So, has management seen any trend that delivery sales is more resilient than offline dining? And in that case, is that gonna affect our planning on a salary expense going forward? And I really want, because we mentioned that in some cities we are now cooperating with platforms. So how should we think about this? Is that a deliberate kind of planning in terms of, in terms of cost controlling? How is that gonna help? Thank you. Thank you, Ethan. In terms of delivery as a percentage of sales, as I mentioned in the previous question, it has continued to improve and increase in the last 10 years. So the trend is not going away. And KFC right now is about, you know, 60%+ is from delivery and takeaway, and then about 30% from dining. And our store portfolio emerged to reflect that, right? Because our store become smaller, you know, become more delivery focused. Same as Pizza Hut, we have the satellite store that is very delivery driven... and for Pizza Hut, the delivery business, you know, of course, is in the high 30s too. So they will continue to grow. There are two things that I would like to mention in our delivery sales going forward. One is, we are going for the smaller order size of the delivery business because you will notice that traditionally and historically, our ticket average for delivery business for both KFC and Pizza is very high and probably slightly too high. So for KFC, we have reduced the delivery fee, tested in quarter four last year, and we roll it out in quarter one this year to encourage and to grow the smaller order delivery business. And it worked because it's hard for customer to make the choice when the delivery fee is too high, when the order size is smaller. So it worked, so we'll continue to do it. And then Pizza Hut have a bit more work to do because we have to have enough one person meal choice first to make that happen. So well, look at it in a positive way, we have even more opportunity here. So one opportunity is the lower priced pizza. That helps because that encourages smaller order. Second is, if you're in China, you will know that we just launched the burger business, which by the way, is very exciting. I love the burger for Pizza Hut as well. I love the burger from KFC. It's very different. The KFC one is more juicy, and then Pizza Hut one is very unique. It's hard to describe how unique it is until you try it, so I really encourage you to cross the border sometime and try it. The dough is made of pizza. Well, the pizza bread pizza bun is made of the pizza dough, so, and it's freshly baked in the store, and that alone is very unique, and the beef itself is brilliant. And other than great product, it's one person meal, because the average ticket size for Pizza Hut is more than one person. So with that, we will continue to grow to sort of the smaller order delivery business. And both are the right thing to do, and have quite a bit of margin there. When it comes to the platform rider, you know, you guys know that for years and years, we insist on using our own delivery rider because of the quality. Although it's slightly higher cost, we know that. However, time has changed. We have learned that when we did again, test it, and so that we know that is the case, in select location, some platform rider, the quality is very good. So we test them in the quarter four last year, and then we continue to test it in quarter one this year. Why this is important? Because this is Chinese New Year, when the demand is very robust, and we have to make sure even when the demand is high, the quality is still good. And we are very happy with the test. So for KFC, we'll continue to roll that out in select location on the condition that the quality is as good. But they are more affordable, so it help manage the delivery business margin. And then Pizza Hut, we have not started a platform rider mix practice yet. So that will be something to be followed. So I will pause here. Thank you so much, Ethan. Sorry, I know we're running out of time. When we mention selected locations, they're currently high-tier cities, I assume? Sorry, I could not hear you. Select location? High- Oh, it's everywhere. Yeah. We just, you know, evaluate based on the quality, so it could be high-tier city or a low. Got it. Thank you, Joey. Thank you, Ethan. Thank you. The next question comes from Sijie Lin from China International Capital Corporation Limited. Please go ahead. Thank you, Joey and Andy, and congrats for another solid quarter results under a challenging base. So I have one question on the K-Coffee. We are very happy to see that we already have 100 independent, or so-called, base, side-by-side K-Coffee stores in a short time. And could you please tell us a bit more about the positioning and development strategy of K-Coffee? So like, like regarding the pricing, the menu design, the store format, the store location, et cetera, what's our similarities and differences compared with the current main coffee players? And how could we give full play to our own advantages? What's the plans for the future store expansion? Thank you. I think the best way to find out is if you come to some of our K-Coffee side-by-side store, then you'll figure out all of these very quickly. So let me kind of mention again, for the K-Coffee, cups of coffee, the number of cups of coffee increased 30%, for the quarter one, which is a very significant number, so we are very grateful for our customer support. So right now, we have 100 this K-Coffee store side by side. Let's start with result, then we'll go to the detail. The result is, these are all profitable addition. Even at the price of CNY 9.9 for a lot of the coffee, we make our cost structure work. So as our shareholder, don't have to too worry about the impact on the overall margin. So the way that it works is, you know, despite we sell K-Coffee in all the KFC stores, but we also see the need for a dedicated space for customers. And you know what define a coffee store versus a fried chicken store? The coffee store is having this very lovely coffee aroma. It's the smell and the lovely space. So we create that space and at very small incremental cost, because you right now see more of these side-by-side K-Coffee store in lower tier city and top tier city, because we open so many new stores every year. So we take advantage of the development, and we will have two stores run. One is KFC, and next to it is K-Coffee. And the trick here is we share the kitchen, so there's no incremental investment in kitchen. And you know that within our investment, the biggest portion of the CapEx is actually the kitchen. So that helps. And then the pricing is similar to what we sell in other KFC stores. The coffee is very affordable. The menu it has something unique, though. So if you come to our K-Coffee shop, make sure you try our the gigantic egg tart. You know, we sell millions and hundreds of millions of egg tart every year, but we also realize that this gigantic egg tart is a brilliant sell. It's a big portion of our K-Coffee sale right now. So we do have some very unique product for the K-Coffee shop, and we'll continue to do that. And again, as I mentioned in the prepared remarks, our growth strategy for side-by-side K-Coffee shop for 2024 will be aggressive. And what is aggressive? You'll see by the end of the year. Thank you, Sijie Lin. Thank you, Joey. Thank you. That does conclude today's Q&A session. I'll now hand the conference back to Florence Lip for any closing remarks. Thank you. Thank you, Travis. Thank you for joining the call today. For further questions, please reach out through the contact information in our earnings release and on our website. Thank you very much. Thank you. Thank you.