Partnership Announces McDonald’s Growth Plan for China
Following completion of a strategic partnership agreement with CITIC Capital and the Carlyle Group, Oakbrook, Illinois, USA-headquartered McDonald's Corporation has unveiled plans to significantly increase its presence in mainland China and Hong Kong. But it will do so with a direct ownership stake in the business of only 20%.
The transaction, which has obtained regulatory approval from PRC officials, effectively created the largest McDonald's franchisee outside of the United States. The $2.1 billion deal, first announced in January, includes the quick service restaurant chain’s existing operations in the People’s Republic of China (approximately 2,500 units) and Hong Kong (240 outlets).
The new partnership, which is 52% owned by state-backed CITIC and 28% owned by Carlyle, has plans for a series of development initiatives for mainland China. Termed Vision 2022, the strategy aims to drive double-digit revenue growth in each of the next five years by increasing the number of restaurants from 2,500 to 4,500, including delivery hub coverage of over 75% of restaurants, by the end of 2022. The pace calls for new unit openings to progressively ramp up from approximately 250 per year in 2017 to 500 per year in 2022.
The plan aims to increase the restaurant portfolio mix in smaller third and fourth tier cities, such as Shantou in Guandong Province and Shijiazhuang in Heibei, to roughly 45% of all McDonald's outlets in China. Vision 2022 also foresees an increase of "Experience of the Future" restaurants to over 90%, which will enable the brand to offer digitalized and personalized dining experience to more customers.
With innovation hubs located in Hong Kong and Shanghai, McDonald's intends to strengthen its brand leadership by enhancing customer experience through menu innovation and advanced digital retail experience.
"China will soon become our largest market outside of the United States [Japan currently ranks No. 2]. We are excited to join forces with CITIC and Carlyle for better localized decision-making to meet changing customer demands in this dynamic market," said Steve Easterbrook, McDonald's president and chief executive officer. "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.”
Zhang Yichen, chairman of the board of directors for the new McDonald's China entity, commented: "The partnership will strengthen entrepreneurial spirit, driven by ownership at the local level. It will also help us ensure first-class customer service and food safety while accelerating our growth in mainland China and Hong Kong.”