NEW YORK (TheStreet) --Yum! Brands (YUM) will officially spin off its Chinese business Tuesday as Yum! China (YUMC) debuts on the New York Stock Exchange. Yum! China will have 7,300 restaurants, in 1,100 Chinese cities, spanning every province in China.
"The China CEO Micky Pant is here along with the president of the New York Stock Exchange Tom Farley and everyone is celebrating," CNBC's Eunice Yoon reported from Shanghai during Tuesday morning's "Squawk Box."
The company is celebrating the fact that the spin off will create $900 million in cash and eliminate debt. "Their more financially secure position could help the company really position themselves for a much more aggressive move into this market," Yoon added.
However, the company does face several challenges infiltrating the Chinese market.
For one, the company will have to make up for headwinds seen in the third-quarter, such as a decline in same-store-sales and food safety issues.
"But, the fundamental problems that they face is something even greater," Yoon noted.
The first fundamental challenge is making the Yum! Brands restaurants in China more aspirational. "Chinese people don't dream of eating at a KFC, for example," Yoon said. Yum! must find a way to re-brand restaurants to reverse the trend.
Secondly, Yum! will have to compete not only with American counterparts in the country like McDonald's (MCD) and Starbucks (SBUX), but also local Chinese fast-food restaurants with Chinese cuisine.
Yum! China plans to combat these challenges by renovating restaurants to make them more upscale, localizing the menus and offering high-end food items.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
The team rates Yum Brands as a Hold with a ratings score of C+. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, the team finds that it feels that the company's cash flow from its operations has been weak overall.
You can view the full analysis from the report here: YUM