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Should KFC Rethink its China Strategy?

When YUM! Brands held its annual investor day in early December, the script was familiar: The star of the fast-food family—the pretty one that brought home the big bucks and wowed rivals—was once again KFC China. Its sluggish U.S. sibling, with disgruntled franchisees and years of poor results, was barely mentioned. Never mind that the Louisville, Ky., company had warned just a week earlier that sales at Chinese locations would drop 4 percent in the quarter. The theme of the 2012 meeting, reiterated last month in its annual report, was “On the Ground Floor of Global Growth: China and a Whole Lot More.”

Now the owner of Taco Bell and Pizza Hut looks like a parent who has given too much attention to one kid. KFC China is the suddenly disappointing high-achiever, with same-store sales dropping 36 percent in April amid food safety scares, avian flu, and increased competition. Leslie Patton of Bloomberg News reports that the menu mix is also a problem.