McDonald’s to Open 2,000 New Restaurants in China

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McDonald’s plans to open 2,000 new restaurants in China by the end of 2022, bringing the total number of fast food chains it operates in the world’s most populous nation to 4,500.

The company’s aggressive bid to tap into China’s emerging middle class economy came several months after it sold most of its business in the country to investment firms CITIC and Carlyle Group. Backed by the expertise of its new partners, which McDonald’s claims have a better understanding of the local market, the fast food giant is confident that the new restaurants can drive double-digit sales growth every year for the next five years.

McDonald’s plans to ramp up the number of restaurants it opens in the People’s Republic from approximately 250 per year in 2017 to 500 per year in 2022, with a specific focus on smaller cities. To meet its ambitious goals, the company is also seeking to boost its delivery hub coverage to over three-quarters of Chinese restaurants and introduce its “Experience of the Future” initiative, described as a modern dining experience offering digitalized and more personalized services, to over 90 percent of its fast food chains in the country.

“China will soon become our largest market outside of the United States,” said McDonald’s CEO Steve Easterbrook in a statement. “Mainland China and Hong Kong are leading the global system in capturing new consumer trends such as delivery and digitalization and its driving strong performance and growth momentum.”

McDonald’s offloaded a majority stake in its China business to Chinese financial firm CITIC and U.S. private equity giant Carlyle in January 2017 in a deal reported to be worth as much as $2.1 billion. McDonald’s retained a 20 percent stake in the business. (See also: McDonald’s Sells 80% Stake in China Operations.)

McDonald’s took the decision to sell off a chunk of its Chinese business after struggling to compete with nimbler rivals in the country. CITIC and Carlyle were identified as suitable partners because of their local expertise in a market that offers significant growth potential.

“We are excited to join forces with CITIC and Carlyle for better localized decision-making to meet changing customer demands in this dynamic market,” Easterbrook said in a statement.

Yum! Brands YUM YUM, the parent company of rival firm KFC, made a similar move in 2016, spinning of its China division from the rest of the company after coming under pressure from activist investors.

Investopedia

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