Some 2,000 quick ser­vice out­lets to open by 2022 in small cities

China Daily (Hong Kong) - - BUSINESS - By WANG ZHUOQIONG in Shang­hai wangzhuo­qiong@ chi­nadaily.com.cn

McDon­ald’s Corp, the global fast-food chain that has forged a new part­ner­ship in China last month, will ex­pand faster by open­ing 2,000 new res­tau­rants in the next five years.

They will be set up mostly in third- and fourth-tier cities with a fo­cus on take-aways and dig­i­tal­ized ser­vices.

The com­pany said it will in­crease its ex­pan­sion pace from about 250 new out­lets this year to 500 per year from 2022 on­ward.

It did not dis­close other de­tails like the scale of new in­vest­ments that would en­sue.

The new part­ner­ship, jointly es­tab­lished by CITIC Ltd, CITIC Cap­i­tal, Car­lyle Cap­i­tal and McDon­ald’s, paid $2.08 bil­lion for the US-based fast food chain’s busi­ness in the Chi­nese main­land and Hong Kong.

The deal re­ceived reg­u­la­tory ap­proval and was com­pleted on July 31.

The new com­pany will be­come McDon­ald’s largest fran­chisee out­side of the United States.

CITIC Ltd and CITIC Cap­i­tal to­gether hold a ma­jor­ity 52 per­cent stake in the new com­pany, while Car­lyle Cap­i­tal will hold 28 per­cent, and McDon­ald’s 20 per­cent.

Cur­rently, McDon­ald’s op­er­ates and man­ages 2,500 res­tau­rants in the Chi­nese main­land, in­clud­ing 600 fran­chises, and 240 res­tau­rants in Hong Kong.

The new com­pany will man­age all the 2,000 new res­tau­rants di­rectly.

De­spite McDon­ald’s global dom­i­nance, KFC, owned by Yum China, has big­ger pres­ence in the Chi­nese quick ser­vice restau­rant. Yum China runs more than 5,000 KFC res­tau­rants in over 1,100 cities and coun­ties.

KFC ’s wide pres­ence in China ap­pears to have bol­stered t he con­fi­dence of McDon­ald’s in­vestors in the new ex­pan­sion plan, in­dustr y in­sid­ers said.

The new part­ner­ship of McDon­ald’s aims to achieve dou­ble-digit sales growth an­nu­ally in the next five years.

The goal in­cludes de­liv­ery cov­er­age of 3,375 res­tau­rants or over 75 per­cent of the to­tal.

“China will soon be­come our largest mar­ket out­side of the United States,” said Steve Easter­brook, McDon­ald’s pres­i­dent and CEO.

“The main­land and Hong Kong are lead­ing the global sys­tem in cap­tur­ing new con­sumer trends such as de­liv­ery and dig­i­tal­iza­tion and it is driv­ing strong per­for­mance and growth mo­men­tum.”

Zhang Yichen, the new chair­man of McDon­ald’s China, said restau­rant own­er­ship at the lo­cal level will fos­ter en­tre­pre­neur­ial spirit within the com­pany.

For ex­am­ple, con­sid­er­ing the strong de­mand for take­out food and the pop­u­la­tion den­sity in China, Zhang emailed Easter­brook re­gard­ing the need to de­velop a cus­tom­ized soft­ware sys­tem for the Chi­nese mar­ket.

The lat­ter dis­patched McDon­ald’s global IT team to sup­port the China busi­ness. Now, the take away oper­a­tion in China tops the global chain’s com­pa­ra­ble sys­tems across mar­kets.

Zhang said CITIC has more than 1,400 bank branches in China. Be­sides, CITIC and Car­lyle’s ex­ten­sive re­sources and mar­ket ex­per­tise in real es­tate, sup­ply chains, re­tail, con­sumer goods and tech­nol­ogy, cou­pled with the global qual­ity stan­dards and brand­ing of McDon­ald’s, will prove to be a win­ning for­mula.

Ja­son Yu, gen­eral man­ager of Kan­tar World­panel China, a firm that re­searches shop­per be­hav­ior, said, “CITIC op­er­ates many branches in third- and fourth-tier cities, and they un­der­stand the lo­cal mar­ket, hence will be able to help McDon­ald’s to choose ap­pro­pri­ate sites for new res­tau­rants and also pro­vide use­ful real es­tate in­for­ma­tion.”

PRO­VIDED TO CHINA DAILY

The launch of the new McDon­ald’s China in Shang­hai.

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