Date
28 May 2017
McDonald's has 2,200 stores in China, 65 percent of which it owns and operates. Photo: Bloomberg
McDonald's has 2,200 stores in China, 65 percent of which it owns and operates. Photo: Bloomberg

McDonald’s China franchise deal could fetch up to US$2 bln

McDonald’s Corp. is seeking to earn US$1.5 billion to US$2 billion by franchising its 2,200 stores in China.

The move is part of chief executive Steve Easterbrook’s plan to slim down the fast-food chain and boost profit, the Wall Street Journal reports.

The company owns and operates 65 percent of its stores in China.

Aside from the upfront cash, McDonald’s will also seek 5 to 7 percent of the sales for the 20-year life of the deal, the newspaper said.

The deal would allow the company to keep a minority stake in the stores while slashing its operational costs and preserving capital.

The plan reflects the maturing of the fast-food business in China, where McDonald’s and Yum Brands Inc. – owner of Kentucky Fried Chicken and Pizza Hut – have operated for 25 years, the Journal said.

As big consumer chains expand into China’s smaller cities, they seek local partners with better knowledge of the market.

“In the lower-tier cities, we want to accelerate, and a local partner would have more local wisdom and more local resources,” Phyllis Cheung, chief executive of McDonald’s China, told the Journal in an interview.

“The whole idea of franchising is that you have more flexibility and speed to market – and are more able to answer to consumer needs.”

At least six bidders have shown interest in McDonald’s franchising deal, including US private-equity groups Carlyle Group LP, TPG and Bain Capital LLC, the report said, citing people familiar with the situation.

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RA/CG 

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