Joey Wat, CEO of China’s Largest Restaurant Company, Shares Lessons on Controlling COVID-19

(Miss this week’s The Leadership Brief? This interview below was delivered to the inbox of Leadership Brief subscribers on Sunday morning, Dec. 6; to receive weekly emails of conversations with the world’s top CEOs and business decisionmakers, click here.)

On Nov. 23, CNN reported that the U.S. had 3 million new cases of COVID-19 in November. That same day, I interviewed Joey Wat, the CEO of Yum China, the country’s largest restaurant company. She mentioned that there were just a small handful of new cases in Shanghai, the world’s biggest city, with a population of over 25 million. Nearly 100% (99.5%) of Yum’s outlets in China are currently open.

Under Wat, 49, Yum China has emerged from COVID largely unscathed and cemented its reputation as one of the world’s most nimble fast-food companies. Yum China operates over 10,000 restaurants in 1,400 cities in China, a mixture of Pizza Huts, KFCs, Taco Bells and several Chinese food chains. The company, which had $8.8 billion in revenue last year, has a track record of menu innovation as well as a developed digital business—97% of its payments are digital. In some stores, it has rolled out Alipay’s “Smile to Pay,” which allows people at digital kiosks to make purchases via facial-recognition technology.

Wat grew up poor in rural China. She was delivered at home by her great-grandmother, who despite being blind and having bound feet was her village’s midwife. When Wat was 9, her family moved to Hong Kong, where she began working in factories, assembling plastic flowers. Her first experience in the restaurant industry was working in a Hong Kong restaurant as a waitress at 15.

Wat joined TIME for a conversation on how China is keeping the lid on COVID, her focus on digital, and the lessons from her great-grandmother.

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(This interview with Yum China CEO Joey Wat has been condensed and edited for clarity.)

What is the COVID situation like in China right now?

Life is back to normal. We are very happy to see traffic jams everywhere again. There are a few cases here and there, and everyone is taking it very seriously. In Shanghai, last week we had two cases.

And people are moving freely around the country?

Traffic between the cities is somewhere in the 70% to 80% range. The high-speed railway is running very well. We are very grateful. Most people still can have a normal life right now.

Have you been working in your office the whole time?

Yes, yes. It’s the middle of winter, it’s not warm. We shut down all the heating. The windows are open to keep the ventilation. Everybody puts on a coat. But we’re used to it. We did it last February, March.

Can you sort of summarize the components of what is required to defeat COVID?

We are vigilant. As citizens, we are vigilant. As a business, we are vigilant, and I think the government has done a superb job to react very quickly whenever they need to. Even for one or two cases, without disclosing the name of the person, they will disclose the route of the person. Because with the mobile phone, you can do it. So all the stores can see, Oh, was I impacted? And in some cases, they will come to KFC. And then when we see that, we close the whole store. We would do all the disinfection. Everyone there or nearby will be on quarantine until we get the tests and until we get the results.

And what is the general level of compliance?

When we need to wear masks and do temperature checks, everybody is so cooperative. It’s phenomenal to see the collective will to do something good for the collective goodness. The key things are the mask and the handwashing. The handwashing is magical.

How has your own staff been affected?

We set up our own crisis committee back on Jan. 11. Since then, we have been meeting on a daily basis. There’s no weekend, there’s no Chinese New Year. Every single day, we have a call in the morning for the headquarters, and then it cascades down all the way back to each store. Every day, effectively, we do whatever it takes. We have over 400,000 employees. We have had 10 cases. Everyone recovered. And eight cases were in Wuhan. Outside Wuhan, there were only two cases.

What was experience in Wuhan, the epicenter, at the height of the crisis?

We closed all our stores, but then we realized some hospitals and communities—particular hospitals, when they have such an influx of doctors and nurses—some hospitals were struggling with food for their nurses. So we opened seven of our stores just to produce food for the doctors and nurses, at no charge. We insisted on only one thing. No matter whether it is free food or not, the food must arrive warm. We don’t move cold food. The food is not only for the stomach, it’s for the heart as well.

How is a Pizza Hut in China different from one in the U.S.?

Well, roughly 15% of our sales are from steak. Pizza Hut is the biggest steak house in China, actually.

And pizza. Historically, have Chinese people eaten cheese?

No, no. Cheese is still a very high-end thing, and we still import 100% cheese.

Where does your cheese come from?

Here’s a fact. We usually import 100% of our cheese from the United States until last year. The funny tariff thing happened. It forced us to import 100% of our cheese from New Zealand. It’s very sad because we have been buying cheese from the U.S. for 32 years.

If relations normalize, will you go back to American cheese?

We are very open. We certainly hope that the relationship will improve and then the Chinese customer can have choices of cheese.

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You have placed a lot of emphasis on building your digital business. How is that going?

In 2016 we launched digital payments. Right now as of today, digital payments are 97% of my business.

Wow. People are paying with their phone?

With your phone and at a kiosk. The phone and kiosk is 78% of my business. And delivery and takeaway is 50% plus of my business now.

Is that because of COVID? Will that persist beyond COVID?

It has been growing like this in the last few years. But COVID definitely pushed it to another level up.

I understand that you have a lot of repeat business and a membership program that is attracting a lot of attention in the industry.

Sixty percent of my business is from my members now. Six zero.

Are they giving you an email address?

We don’t ask for their email address. It’s all on the phone. It’s all about mobile right now. So people will sign up about the members and then they order through their phone, and then for every single order they put down, we give them the points. We’ll have some special gift for them once in a while, and special promotions. It’s really at the beginning of our journey, I believe, how to serve our members well. However, the sheer number—it’s China, so the number is great. As of Q3, we have 285 million members. Many people [in the industry] are learning and trying to replicate. But we are lucky because we did it early enough, so we are standing at the forefront of the digital-technology industry.

Do they pay to be a member, like Amazon Prime?

People don’t have to pay anything. But in a subset, we have a subset of what we call privileged members. It’s about a third. People pay something and they can get a free delivery, whatever. We have 45 million such members already.

Privileged members pay about $3 a month. What do they get in return?

We have many choices. If you are a breakfast eater, then you can buy this breakfast card, and then you come in and we give a 40% discount off the very, very good breakfast. If you are a delivery customer, if you have a delivery set up all the time, you can buy this delivery membership and then you’ve got free delivery for a certain period of time.

Based on what your customers are buying, how is the Chinese consumer feeling? Are they buying the expensive things, or are they buying the cheap things on the menu?

After the pandemic, we have been focusing on more and more value for money. There’s still a lot of people who are concerned toward the uncertainties going forward. So the value for money certainly is still important. However, in the middle of the value for money, Chinese still love new and good food. This year, at KFC, we launched the most expensive burger to date that is made of Wagyu beef.

Is it tasty?

Of course!

How is it doing?

Sold out.

I understand you worked as a waitress when you were in Hong Kong.

Yes. I have a pretty humble background, and I’m very proud of it. I worked in a factory at the age of 9, and that was below the legal age. At 15, I went to work at a restaurant because that’s the legal working age and I could make more money being a waitress than working in a factory.

What were your responsibilities at the plastic-flower factory?

They come out piece by piece, petal by petal. You have to put them together. Put the leaf on and make them nice.

What did your parents do?

Very humble. My dad worked at construction sites. He had multiple jobs. Both my parents did not finish junior high school. My mom worked in a factory.

I know job creation is an important part of your business philosophy.

That has a lot to do with my background. I learned when I was a little girl that no matter what your background, if you have a job, a proper decent job, it gives you pride.

You went to business school in the States, at Northwestern, and became a consultant at McKinsey. Was it hard to shift from being a consultant to being a manager, with profit and loss responsibility?

Some people are very good at giving advice. Some people are much better at doing it themselves. I’m actually the second. When I was a consultant, actually it’s really painful, like “Come on! Of course this is the better option!”

Growing up in a small village in rural China, I understand your great-grandmother was quite an influence on you.

She was tiny, but she had such a strength for the family, for the village. She was a very generous, kind, wise lady. So she always had a lot of people coming, visiting her, seeking advice.

What was her name?

Women from that generation did not have a proper name. People would just call her Little Sister.

Any life lessons?

She was the best judge of people. She said something very profound: how big your heart is determines how big your world is going to be.

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