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Yum! Brands & McDonald's Go Digital in China to Boost Sales

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Yum! Brands, Inc.’s (YUM - Free Report) KFC and McDonald's Corp. (MCD - Free Report) are incorporating technology to grow sales in China. The U.S.-based fast food giants are seeking a turnaround after going through a challenging time in China, which has been historically one of their most profitable markets.

According to media reports, McDonald’s will start testing mobile ordering and payment in China in the ongoing third quarter. The quick service chain aims to speed up both service and payments thereby improving guest experience. Apart from this, McDonald’s recently opened digital “Create Your Taste” kiosks at two outlets in Shanghai.

KFC, on the other hand, has reportedly collaborated with online and mobile commerce company, Alibaba Group Holding Limited (BABA - Free Report) , in June to launch mobile-payment services at some of its Chinese stores. Customers can scan bar codes generated by Alibaba’s mobile-payment application Alipay to pay for their in-store orders.

Yum! and McDonald's suffered a drastic sales decline last year after local Chinese television media allegedly uncovered a scandal blaming a meat supplier of unhygienic practices. Reportedly, the meat supplier not only reused meat that had fallen on the factory floor but also mixed fresh and expired meat. This coupled with competition from local chains, and the declining interest among the younger generation, led to a massive decline in traffic.

The digital wave has hit the restaurant sector as more and more restaurateurs are deploying technology to enhance guest experience and increase profitability. Both Yum! and McDonald's are banking on these mobile ordering strategies to boost traffic. We believe that in addition to attracting the younger generation to its restaurants, these initiatives will also boost profits.

Yum! Brands carries a Zacks Rank #2 (Buy), while McDonald's has a Zacks Rank #3 (Hold). A well-performing restaurant stock that is worth a look is Panera Bread Company , which sports a Zacks Rank #1 (Strong Buy).

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