Yum! Brands Inc said on Thursday its second-quarter earnings fell 15 percent due to the bird flu outbreak and food safety scandals.

According to the parent company of Taco Bell, KFC and Pizza Hut, sales in China, which generate more than half of its total revenue, fell 20 percent in the second quarter. This included a 26 percent decline at KFC but also 7 percent growth at Pizza Hut.

Its operating earnings decreased 63 percent, while restaurant margins decreased 5 percentage points to 10.6 percent, according to the report.

"China sales are recovering as expected. The extensive media surrounding Avian flu in China has subsided and same-store sales at KFC are clearly improving," chief executive David Novak said in the statement.

Yum! which has nearly 6,000 stores in the country, expects sales to turn positive in the fourth quarter.