Note 9 – Leases

As of December 31, 2025, we leased approximately 15,000 properties in China for our Company-owned restaurants. We generally enter into lease agreements for our restaurants with initial terms of 10 to 20 years. Most of our lease agreements contain termination options that permit us to terminate the lease agreement early if the restaurant profit is negative for a specified period of time. We generally do not have renewal options for our leases. Such options are accounted for only when it is reasonably certain that we will exercise the options. The rent under the majority of our current restaurant lease agreements is generally payable in one of three ways: (i) fixed rent; (ii) the higher of a fixed base rent or a percentage of the restaurant’s sales; or (iii) a percentage of the restaurant’s sales. Most leases require us to pay common area maintenance fees for the leased property. In addition to restaurants leases, we also lease office spaces, logistics centers and equipment. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In limited cases, we sub-lease certain restaurants to franchisees in connection with refranchising transactions or lease our properties to other third parties. The lease payments under these leases are generally based on the higher of a fixed base rent or a percentage of the restaurant’s annual sales. Income from sub-lease agreements with franchisees or lease agreements with other third parties are included in Franchise fees and income and Other revenues, respectively, within our Consolidated Statements of Income.


Supplemental Balance Sheet
	2025/12/31		2024/12/31		Account Classification
Assets
Operating lease right-of-use assets	$	2,189	$	2,146	Operating lease right-of-use assets
Finance lease right-of-use assets		49		46	PP&E
Total leased assets(a)	$	2,238	$	2,192

Liabilities
Current
Operating lease liabilities	$	438	$	417	Accounts payable and other current liabilities
Finance lease liabilities		6		5	Accounts payable and other current liabilities
Non-current
Operating lease liabilities		1,823		1,816	Non-current operating lease liabilities
Finance lease liabilities		51		49	Non-current finance lease liabilities
Total lease liabilities	$	2,318	$	2,287


Summary of Lease Cost										Account Classification
	2025			2024			2023

Operating lease cost	$	498		$	518		$	517		Occupancy and other operating expenses, G&A or Franchise expenses
Finance lease cost
Amortization of leased assets		6			5			5		Occupancy and other operating expenses
Interest on lease liabilities		2			3			2		Interest expense, net
Variable lease cost(b)		438			420			402		Occupancy and other operating expenses or Franchise expenses
Short-term lease cost		12			13			15		Occupancy and other operating expenses or G&A
Sub-lease income		(17	)		(19	)		(21	)	Franchise fees and income or Other revenues
Total lease cost	$	939		$	940		$	920

(a)

As of December 31, 2025, excluding the impact of foreign currency translation, right-of-use (“ROU”) assets decreased, primarily due to the amortization of assets relating to existing leases with fixed lease payments and a higher portion of our leases with variable lease payments. The decrease of lease liabilities, excluding the impact of foreign currency translation, was consistent with the decrease of ROU assets.

(b)

The Company was granted $11 million in lease concessions from landlords related to the effects of the COVID-19 pandemic for the year ended December 31, 2023. The lease concessions were primarily in the form of rent reduction over the period of time when the Company’s restaurant business was adversely impacted. The Company applied the interpretive guidance in a FASB staff question-and-answer document issued in April 2020 and elected: (1) not to evaluate whether a concession received in response to the COVID-19 pandemic is a lease modification and (2) to assume such concession was contemplated as part of the existing lease contract with no contract modification. Such concession was recognized as negative variable lease cost in the period the concession was granted. The Company was no longer granted such lease concession beginning in 2024.


Supplemental Cash Flow Information
	2025		2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	504	$	516	$	531
Operating cash flows from finance leases		2		3		2
Financing cash flows from finance leases		5		5		5
Right-of-use assets obtained in exchange for lease liabilities(c):
Operating leases	$	341	$	379	$	456
Finance leases		6		11		7

(c)

This supplemental non-cash disclosure for ROU assets obtained in exchange for lease liabilities includes an increase in lease liabilities associated with obtaining new ROU assets of $355 million, $400 million and $451 million for the years ended December 31, 2025, 2024 and 2023, respectively, as well as adjustments to lease liabilities or ROU assets due to modification or other reassessment events, which resulted in a decrease of $8 million, a decrease of $10 million, and an increase of $12 million in lease liabilities for the years ended December 31, 2025, 2024 and 2023, respectively.


Lease Term and Discount Rate	2025			2024
Weighted-average remaining lease term (years)
Operating leases		6.8			6.9
Finance leases		10.3			10.8

Weighted-average discount rate
Operating leases		4.1	%		4.5	%
Finance leases		4.3	%		4.7	%

Summary of Future Lease Payments and Lease Liabilities

Maturities of lease liabilities as of December 31, 2025 were as follows:


	Amount of Operating Leases		Amount of Finance Leases		Total
2026	$	516	$	8	$	524
2027		444		8		452
2028		381		7		388
2029		311		7		318
2030		254		7		261
Thereafter		686		34		720
Total undiscounted lease payment		2,592		71		2,663
Less: imputed interest(d)		331		14		345
Present value of lease liabilities	$	2,261	$	57	$	2,318

(d)

As the rate implicit in the lease cannot be readily determined, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the imputed interest and present value of lease payments. We used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date.

As of December 31, 2025, we have additional lease agreements that have been signed but not yet commenced, with total undiscounted minimum lease payments of $68 million. These leases will commence between 2026 and 2027 with lease terms of 1 year to 20 years.

Historical Timeline

Fiscal Year	Filed
2025	Feb 27, 2026	Showing above
2024	Feb 27, 2025

2023	Feb 29, 2024

2022	Mar 1, 2023

2021	Feb 28, 2022

2020	Feb 26, 2021

2019	Feb 27, 2020

2018	Feb 27, 2019

2017	Feb 27, 2018

2016	Mar 8, 2017

About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

Yum China Holdings, Inc. Leases Disclosure

Historical Timeline

About Leases Disclosures

Other Available Disclosures