Warc Blog

McDonald's in China push

14 May 2012
BEIJING: McDonald's, the fast-food group, is focusing on quality, service and an "anytime, anywhere" business model as it seeks to make progress in China.

The company unveiled its first Chinese branch in 1992, and it now runs over 1,400 outlets across the country, which has gone on to become its third biggest market worldwide.

In 2011 alone, 200 new McDonald's stores began trading in the country, and it intends to add an extra 225 to 250 in 2012. Despite this, however, it will still lag considerably behind KFC, owned by Yum Brands, which has a 3,500-strong chain.

In response, McDonald's plans to boost investment rates by 50%, rolling out dessert kiosks and drive-thrus, extending opening hours, and building up its delivery service, Kenneth Chan, the firm's China CEO, told Fortune.

"We are not looking to be the largest in terms of the number of outlets, but we want to be the best-quality, best-service restaurant. We hope to attract more and more customers to increase same store sales," he said. "We want to be available anytime and anywhere for our customers."

The US organisation will renovate 80% of its Chinese portfolio by the end of 2013, with varying designs. Wherever families predominate, for example, play areas for children will be set aside, while kiosks in business districts offer coffees and pastries.

More broadly, the company believes that breakfast, currently yielding 8–10% of sales, could see sales double. Elsewhere, it is introducing healthier lines, and adapting menu items to suit local tastes.

"We also offer customer-friendly amenities like free Wi-Fi and McCafes. We want to stay relevant to the younger population and make them stay longer," said Chan.

Similarly, in reflection of the firm's long term emphasis on value, McDonald's provides a range of menu options priced from $1 to $3. "We want to be affordable so Chinese consumers can come here often and not just as a treat," Chan said.

While 80% of McDonald's sites around the world are run by franchisees, only 36 restaurants in China operate using this approach, a figure the company hopes will increase going forward.

Alongside seven conventional licensees, McDonald's has two "development" franchises in place, giving partners with an impressive financial and business background scope to press into provinces where it currently lacks the capacity to penetrate.

"It's still a very low percentage and over a very short time that will change. The pace of franchising in China depends largely on finding the right partners," said Chan.

Data sourced from Fortune; additional content by Warc staff

 
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