McDonald’s Is Eating Up Franchise Expansion Opportunity in China
Where in the world can you find a consumer base more interested in Yum! Brands’ (NYSE:YUM) KFC than McDonald’s (NYSE:MCD). That would be China, but maybe not for long, if the world’s largest fast-food chain has anything to say about it. Street Insider reported Monday that a Chinese publication, WantChinaTimes, illuminated recently that McDonald’s is currently in the process of boosting its expansion efforts in the country. WantChinaTimes said McDonald’s is “aggressively” pushing to get more franchisees operating in China, and the company has even been organizing promotional events in high-profile cities in the country, like Shenzhen and Shanghai. KFC still enjoys a comfortable lead over McDonald’s in China, but if we know anything about the Oak Brook, Illinois-based chain, it’s that it doesn’t respond well to second best.
McDonald’s is no stranger to foreign expansion and franchisees, but Street Insider reports that its franchised locations only make up 5 percent of the company’s total footprint in China, and those stores are largely located in second- and third-tier cities that don’t always realize the best profits. KFC, on the other hand, has been aggressive about pushing its franchisee efforts in China, and that’s why it currently enjoys a lead in a country with a growing middle class of consumers that are beginning to flock to fast-food more and more.
But McDonald’s sees KFC’s franchising success and is now more determined than ever to match the company’s efforts and bolster them even more. According to Street Insider, McDonald’s is looking to double the number of stores open in China to 4,000 over the next three years, and it recognizes the success of franchisees as critical to achieving that plan. McDonald’s wants to orchestrate the opening of more franchisees in first-tier cities in China, growing is current footprint in the country, but its standards remain that those looking to franchise in China will only take over existing stores, must have around $325,000 in capital, go through up to 10 months of training, and run a store on a full time basis.