Aug 5 (Reuters) - KFC's ( YUM ) parent company in China reported

an aggressive expansion of stores on Tuesday, riding the growth

of China's middle-class in relatively smaller cities that have

few chain restaurants despite populations numbering in the

millions.

Yum China Holdings ( YUMC ) reported that 336 net new store

openings drove most of its 4% sales growth in the quarter,

following a central plank of its stated strategy. The company

reported 1% same-store sales growth even as a slowing economy in

China saw consumers tighten spending.

Yum China Holdings ( YUMC ), a Shanghai-based spin-off of Yum! Brands ( YUM )

, owns and franchises more than 17,000 stores in the

country, including more than 12,000 locations for KFC ( YUM ), which it

says is the largest restaurant chain in China.

"We have a solid pipeline and remain confident in achieving

our target of 1,600 to 1,800 net new stores in 2025," Chief

Financial Officer Adrian Ding said on the earnings call.

Yum China ( YUMC ) said in recent filings that there are over 800

cities without a KFC ( YUM ) and 1,400 cities that have a KFC ( YUM ) but no

Pizza Hut.

Behind the rapid growth is a vast logistics network and

in-house supply chain that allows Yum China ( YUMC ) to open new stores

quickly. "Other restaurants don't have that," said Ivan Su, an

analyst with Morningstar, comparing the company's network to the

U.S.-based restaurant supply company Sysco.

Yum China ( YUMC ) said in its annual filing that its supply network

could cover stores in more than 3,000 cities and towns, though

it currently only has stores in around 2,200 cities and towns.

KCOFFEE is among the company's fastest-growing store brands.

The company reported 300 new openings in the second quarter,

bringing the total to 1,300 locations. Ding said Tuesday the

company was raising its goal for KCOFFEE locations by the end of

2025 from 1,500 to 1,700 locations.

Most of Yum China's ( YUMC ) stores are corporate-owned, and around

15% are franchisee-owned, according to its latest annual filing.

The company aims to increase the proportion of franchisees for

new stores.