In the News

Ambitious Growth Objectives for the New Owners of McDonald's in China

Jim Riley

9th August 2017

The new owners of the McDonald's franchise in China have set themselves an ambitious growth objective - to almost double the number of stores by 2022.

As this superb article in the FT explains, McDonald's recently sold its entire Chinese operation as it struggled to compete with local rivals and multinationals like Yum! Brands (owners of KFC & Pizza Hut).

Back in early 2017 Citic & Carlyle paid around $2bn to McDonald's for the right to become the "master franchisee) for McDonald's in China and Hong Kong, with the deal lasting 20 years.

As part of the deal, McDonald's retained a 20% share holding in their former Chinese business.

The change is part of McDonald's global strategy to rely almost wholly on franchising as the way it operates its brand. It aims to have 95% of global stores operated using the franchise model.

The FT article hints at the challenges faced by Citic & Carlyle, not the least being their perceived lack of experience in running fast-food businesses in the Far East.

However, the decision to accelerate the growth of the business in China is probably making for financial reasons. As is pointed out:

"In order for Citic and Carlyle to make money, they need to grow McDonald’s faster".

Jim Riley

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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