The heated competition among foreign and domestic fast food brands have pushed KFC to update its image and move up to the medium-level diners. The rising disposable income among consumers have encouraged demand for higher standards in restaurant decorations, said Ben Cavender, an analyst at the Shanghai-based China Market Research.

He said the revamping moves of KFC will help the chain's business slowly get better but will not bring the chain back to its days of strong growth boosted by the rapid opening of new stores.

During the first quarter of this year, Yum! Brands Inc saw a strong recovery in China.

Its China sales increased 17 percent in the first quarter compared with the same period a year ago, with 7 percent unit growth and 9 percent same-store growth. Its restaurant margins increased 6.8 percentage points to 23.4 percent, while operating profit rose by 80 percent.

Yum generates more than half of its overall revenue and operating profit from China.

Illinois-based McDonald's has also started a makeover of its restaurants in cities such as Beijing, Shanghai and Guangzhou, using a local designer. The company is also employing more locals to run its franchises in China.

Foreign fast food chains have faced increasing competition from local chains such as Real Kung Fu, which sells steamed food, and Taiwan-based fried-chicken chain Dicos. Dicos is expected to quickly expand its store numbers to 25,000 by 2040.

The ambitious goal was announced after Dicos allowed its employees to be a part of the franchising. It is also the first time that Dicos has surpassed McDonald's as the second largest Western fast food chain behind Yum's KFC.

Franchisors look to follow KFC's lead	KFC China announces measures to regain trust from customers