McDonald Aggressive Expansion Plan In China Amidst Slowdown
McDonald’s intends to make China its No.2 market and it is likely to establish more than 1,000 outlets in the region to achieve the objective.
On Thursday, CEO Steve Easterbrook of the America’s largest fast-food restaurant chain, McDonald’s Corporation, announced that the company is planning to open more than 1,000 outlets in China over the next five years. The Golden Arches is currently searching for an investment partner in Asia to help achieve its goal of opening up around 250 outlets each year.
Currently, China stands as the third largest market right behind Japan and the U.S., Mr. Easterbrook hopes the country to become No. 2 market for the fast food giant. Earlier, McDonald’s had put high reliance on its costlier model for operating its outlets until mid-2000s when the company transitioned to franchising in China.
The initiative taken by the fast food giant is along the similar lines as that of other multinationals of the sectors including casual dining, entertainment, and sports such as Starbucks and Adidas AG who have planned of 500 and 3,000 stores in China over a period of five years.
Recently, China had the slowest economic growth. Many international brands including General Motors, Mazda, Ford, recorded steep decline in the region’s sales. Likewise, brands like Kerring SA and Hugo Boss AG closed down their outlets in the country because of the declining sales, but the CEO believes that even in the middle of the strong slowdown, the divisions like fast-food meals are likely to stand firm.
Mr. Easterbrook supported his idea by expressing that the company believes the sales in this region will continue to grow, amidst the economic slowdown, due to the growth rate of population and urbanization. He cited, “For everyday affordable spends like us, we’re confident in the consumer.”
According to James Roy, who is an associate principal at China Market Research, McDonalds Corp. is still far behind in regaining the trust of its loyal customers. The steep decline in the sales for the company happened when a food scandal hit hard on the company in 2014, leaving the restaurants without hamburgers or chickens.
The company lost many customers who were already cynical about fast foods and the likes. Last year, it announced plans of closing down around 350 outlets operating in U.S., Japan, and China; out of which 90 belonged in China.
The biggest competition of the Oak Brooks, Illinois firm is the Chinese fast-food rivals. A survey carried out by consultancy McKinsey & Co. in 2015, in which around 10,000 consumers participated across China, revealed that last year around 51% consumers consumed Western fast food, which came substantially down from the 2012’s 67%.
McDonald’s is not surrendering without a fight. It has plans in its pipeline to launch healthier menu items across its restaurants in China, including, multigrain muffins, apple slices, and veggie cups, according to the CEO, Steve Easterbrook. Moreover, he is confident that since the organization has assured its customers of the quality it will likely regain the customers’ confidence.
McDonald’s underwent many strategic changes since Mr. Easterbrook took the charge of its country. The organization restructured its business by handing over the restaurants to the franchisees. Now, it is transitioning the exact approach to the international markets and has planned on to overhaul 95% of its restaurants across the globe to be franchised. The decision will result in the sale of around 4,000 outlets to franchisees by 2018.
Still, the casual dining behemoth is having trouble in closing the franchising deals in the Asian region. Last year, the company announced of selling its restaurants in Japan and Taiwan to franchise operator but it could not find suitable collaborator to carry out the plans and the deals sway in the wave of uncertainty yet. The visionary CEO expressed that the fast food giant is in the initial stages of finding the appropriate partner.
