So the demand was soft. And then by second half of the holiday, after seeing mom and dad, I think people decided, still decided I want to travel a little bit. So the second half of the October festival, actually the traffic picked up. So that’s a little bit of this natural human behavior happening during the national holiday, during mid-autumn festival. That’s the point one. Point two is, in terms of the consumption, cautious spending, we do see customer spending a bit less on the premium product. Although our premium burger, our premium product and pizza still are doing quite well, but there’s that little trend going. And then it comes to the third point is, what are we going to do about it? Well, we have been working on, and we have been doing it quite well actually with pretty good result.
It’s widening the price range. So it’s not only the bottom, the top bit, because we serve very large customer base and there’s always some customer who want to treat themselves, the same customer who want to treat themselves during a certain time. So the premium beef burger, etc., we do that. But at the same time, we also enrich entry price offering. Pizza Hut, the pizza is a good example. We have sort of single digit revenue coming from pizza below RMB50. And in fact, this is a very big settlement for both international and domestic player. We see this as a big opportunity here. So you can imagine, we are going to have more and more product in this particular segment. Not only the below RMB50 pizza, but also single person meal, because for Pizza Hut business, our business model, our average number of customer per transaction is over two people.
Well, that shows that we have the opportunity to serve the one person meal as well, and we see good progress in it and we could do more and get more market share in the one person meal sector. And then for KFC, we also continue to work on the choices of products at the entry price offering to capture untapped potential of customers, particularly those in the lower tier cities. So we can operate at a wide price range, all the way to tier six city. And that’s what we do, and therefore we see very good traffic growth. On top of that, in terms of the state part, we say are still doing better than we can. And why the weekend traffic is still a bit soft and that has a lot of reasons behind it? But the point is, our focus on the whole chicken, which is mainly at home consumption product, our focus on certain other products to support the weekday traffic.
We’re doing the right thing and we see very good results from customers. And therefore for quarter three, we deliver record revenue, record profit. But of course the biggest challenge for us is the foreign exchange, that you know 6% of our revenue and profit, which is the problem. But in constant currency, we are doing quite well. So we will continue to focus on the few things that I mentioned, a really good product and very good price and good experience, but still protect the margin for the investors and shareholders. Thank you, Anne.
Anne Ling: Got it, got it. And can I ask another question regarding the franchise business? We talk a lot about this during the Investor Day. Can you share with us the latest update with your captive franchise, i.e., those specialty, those hospital, Uni and also the highway centers? When will we see the ramp up on the franchise business?
Andy Yeung : Right, so if you – I’ll just be quick about this one. As we look at the third quarter, for example, our franchise, number of new franchise is growing pretty fast, like 20% plus compared to last year and so like for new opening. So I think we’re making progress there, but obviously things is not going to happen overnight. It’s going to come to the ground. So that’s how we look at it.
Anne Ling: Okay, thank you. Thank you, Andy.
Operator: Your next question comes from Ethan Wang from CLSA. Please go ahead.
Ethan Wang: Hi, Joey. Hi, Andy. So my question is on the same store sales. So we see that ticket price at KFC and Pizza Hut, the kind of ideas that is understandable with China’s consumption space and consumption space competition. And yeah, it’s good to do more promotions if you have more traffic. It’s always a balancing act. But I just wonder if we decrease ticket sales and maybe prioritize on the traffic, is that going to cause some pressure on future margin, especially from labor. Because with more people, we need to have more staff, but with every order, the ticket price comes lower. We understand that’s the impact from the delivery, but just want to understand what have some more color on the thinking, on the trend going forward. Thank you.
Andy Yeung : Okay, so let me try to address that. And then, so in terms of the TA, I think there’s a couple of questions concerning TA. Let me try to help folks understand a bit more in detail. Again, if you look at the – for example, KFC TA shift, there are three key components to it. Obviously, a number of people have mentioned traffic driving promotion activities. But that’s only part of the story and it’s not the even main part of that, we also have the lower delivery mix shift, right. So last year, during the pandemic, we have seen very high delivery and when this delivery come back, especially what we call like group ordering delivery, last year right, group buy delivery. And so when this year, when things return to more normal, we do see the delivery mix to be slightly lower than last year.
And so that’s normal, because people are coming back to the store and so that’s about impact. The other one is, as we mentioned, that certain dayparts right, the office shift would also have an impact on that. For breakfast as we mentioned, generally have a lower TA. And so when that’s going faster, then you would also see a TA impact on the overall KFC TA. Same for Pizza Hut, maybe slightly differently as we have mentioned, besides the promotion activities, we are actually by design trying to target and tap markets which is below RMB50 segment, which is very underserved by Pizza Hut, but it’s a very big part of the pizza market overall, which is obviously right now, a number of players are active in that. So we want to penetrate that market.
The other one for TA, for Pizza Hut as Joey mentioned, is our purposeful targeting of single person user app. Pizza Hut – while KFC, if you look at a TA and then you look at Pizza Hut, you will see that Pizza Hut always have high TerrAscend, and then a part of that is because it’s in group dining and also in family dining. So when we have product that defines particularly for single person news set, especially working lunch and whatnot, you’re going to see the TA shifting there. And finally, as we go back, even before the pandemic, we have done a pivotal job to actually increase the value proposition to consumer. One of the biggest challenge for Pizza Hut before their high new program was that the volume proposition to the consumer. And so we’ve been working very hard to hold the price stable and whatnot to drive that, and so that’s why by design doing that.
Because when Pizza Hut is going to try to expand and address a bigger customer base, you’re going to have a wider pricing range and so that’s why you continue to expect TA or have some movement there. So that’s a lot of component there by our strategy. But the key point is that despite all that stuff that’s going on, you see that our sales is very stable, 31% right, because we have product innovation. We have a very strong supply chain managing that. So overall, that’s how we want to keep a balance between driving the traffic, expanding our addressable market, and at the same time, maintaining our TA. Now, obviously for COL, the biggest concern on the long-term is demographic change in China and whatnot. And so it’s very important for us to continue to invest in our information digital and to improve our operation, so that we can continue to improve the labor productivity of our workforce.
And we’ve been quite successful doing that before the pandemic and coming off the pandemic, we’re also pretty stable at about 25%, 26%, and that’s the thing that in the long run as we mentioned, China maintained the overall margins and expanded potentially over time. Thank you.
Joey Wat : Maybe I just add some color on the COL side in particular. If we look beyond just one quarter, we look at our COL over the last few years, as we share in the Investor Day, when we have few thousand stores, 6,000, 7,000 stores, we have 430,000 people or 450,000 people actually. Now we have 14,000 stores, almost double, we still only have 430,000 people. So as Andy mentioned, we use automation, digitization to manage labor costs. When it comes to sort of more – when it comes to handling the promotion and while managing the COL, well as I mentioned in my prepared remark, we tend to pick those products that utilize the existing ingredients and that they are very easy to make. And we’re very careful about maximum number of items that the staff can handle in our store.
