McDonald's to ramp up growth in China

Chain looks to have 2,000 units in China by 2013

McDonald’s Corp. outlined aggressive expansion plans for China on Wednesday, saying it expects to open between 175 and 200 units there next year.

A company representative said McDonald's is aiming to have 2,000 restaurants open in China by 2013, marking a major acceleration for the chain in that nation, where the first unit debuted in 1990 and the 1,000th opened last year.

Yum! Brands Inc. is by far the biggest U.S. quick-service player in China, with around 3,700 units of KFC, Pizza Hut and a proprietary Asian concept, East Dawning. Yum recently told analysts and investors that it would open about 475 restaurants in China in 2011.

McDonald’s, meanwhile, has been laying the groundwork for accelerated growth in the country over the past year. In August, McDonald’s raised a 200 million yuan bond issue to fund store growth, making it the first nonfinancial multinational corporation to tap into the offshore-yuan market, according to a report by The Wall Street Journal. The company opened its first Hamburger University in mainland China in March, moving the training center from Hong Kong to “the epicenter of the market,” said Tim Fenton, president of McDonald’s Asia/Pacific, Middle East and Africa division.

Kenneth Chan, chief executive of McDonald’s China, told CNBC last month that McDonald’s China now has the means to accelerate expansion upon China’s current system size of nearly 1,200 units.

“I think by 2013, we will be the third-largest market within the McDonald’s system,” Chan said in the CNBC interview. “We have the right format of restaurants to open within transportation hubs and residential neighborhoods, but we also see a great opportunity to open drive-thru restaurants in China.”

In a press conference Wednesday in Beijing, Chan said McDonald’s China also has introduced a new store design, dubbed “LIM” for “less is more,” and featuring brighter colors and softer seats, according to a report by Bloomberg News. The company hopes to have the new décor package in place at 100 more restaurants by the end of next year and in 80 percent of the system by 2013, the report said.

In McDonald’s most recent third-quarter earnings call, chief executive Jim Skinner said China’s 12.7-percent increase in same-store sales for the quarter resulted from improved operations and menu innovation built around value.

“China’s Value Lunch program remains popular and continues to grow sales and traffic,” Skinner said. “The Value Lunch is now moved into nearly every market in greater Asia and accounts for more than 10 percent of the total sales in the region.”

Oak Brook, Ill.-based McDonald’s Corp operates or franchises more than 32,000 restaurants in 117 countries.

Contact Mark Brandau at [email protected]