McDonald’s Corp., long a second fiddle in China to Yum! Brands Inc.’s KFC brand, wants to accelerate growth in the quickly growing economy, and hopes that a strategic partner will help accomplish that goal.
The Oak Brook, Ill.-based quick-service operator said Thursday that it is seeking strategic partners in China, Hong Kong and Korea as part of an effort to accelerate growth there, with plans to add 1,500 locations over the next five years.
Such partners would enable more localized decisions and increase capital resources to invest in restaurant expansion and modernization in those countries, McDonald’s said.
“Asia represents a significant area of opportunity for McDonald’s to blend our global quality standards with local insights and expertise from partners who share our vision and values,” McDonald’s CEO Steve Easterbrook said in a statement. “This will allow McDonald’s to accelerate our growth and scale faster across diverse markets, placing us closer to our customers and the communities we serve.”
McDonald’s has more than 2,800 restaurants in China, Hong Kong and Korea, about half the number that KFC operates in China.
Most of McDonald’s locations are company-owned units. But the company has said it would refranchise many of its company-owned locations around the world in the coming years, with the goal of becoming more than 95 percent franchised.
McDonald’s has nearly 37,000 restaurants worldwide, and currently operates about 18 percent of those locations.
The burger giant said last year that it plans to evaluate ownership structures in different markets around the world as it seeks to sell some of its company-owned restaurants to franchisees. The idea is to get local restaurants into the hands of local operators who know their markets.
“The identification of strategic partners in Asia is consistent with this strategy,” McDonald’s said in a release.
McDonald’s has already signaled its intent to use strategic partners in key markets as it seeks to reverse some of its fortunes in Asia. The company previously said that it plans to search for strategic partners in Japan, which has struggled recently because of a food-safety scare and supply chain issues in the country, as well as Taiwan.
China has been a difficult market for Western restaurant brands in recent years. In particular, a pair of food-safety scares led to plunging sales at Yum’s KFC brand in China. Now, with sales stabilized, the Louisville, Ky.-based company is spinning off its China division.
Still, restaurant operators believe China remains fertile ground for development. The country has a population of just under 1.4 billion people, and its gross domestic product has increased by a third since 2011, according to Focus Economics. It is now the world’s second largest economy.
Additionally, there simply aren’t as many branded restaurants in China.
“We’re in the midst of transforming our business and taking a strategic and thoughtful approach to enhance our ability to grow around the world,” Easterbrook said. “These actions build on our turnaround efforts and will advance local ownership, enable faster decision-making and achieve restaurant growth.”
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