Why McDonald’s Is Thriving In China

Summary

McDonald's, one of the world's largest restaurant chains with 60 million daily customers, plans to open 900 new restaurants in 2023, with a significant focus on China. Despite facing challenges such as food safety issues and competition, McDonald's has adapted to the Chinese market with localized menus and digital innovations. The company has also embraced the franchise model to reduce operating costs and is exploring the coffee market with plans for 1000 new McCafes, capitalizing on China's growing coffee consumption.

Takeaways

• 🌐 McDonald's is one of the world's largest restaurant chains with 60 million customers daily and over 40,000 locations in more than 100 countries.
• 📈 The company plans to open 900 new restaurants in 2023, with nearly half of those in China due to its massive growth potential.
• 🏠 McDonald's entered China in the early 1990s and currently operates over 4500 restaurants in mainland China and Hong Kong.
• 📉 The brand has faced challenges in China, including COVID-19 lockdowns, food safety issues, and competition from local fast-food chains.
• 🍔 In China, McDonald's has had to adapt its menu to cater to local tastes, which differ from the U.S., with less emphasis on hamburgers.
• 👥 McDonald's has over 1.9 million employees globally and is the second-largest market for McDonald's by store count, after the U.S.
• 💼 The company sold its China business to CITIC and Carlyle Group in 2017, retaining a 20% stake, to reduce operational costs and volatility.
• 📱 McDonald's has embraced digital technology in China, with almost 90% of transactions being digital compared to about 25% in the U.S.
• ☕ McDonald's sees an opportunity in China's growing coffee market and plans to launch 1000 new McCafe locations by the end of 2023.
• 👷‍♂️ The availability of a large labor pool in China is an advantage for McDonald's, contrasting with the highly saturated and competitive U.S. market.

Q & A

How many new restaurants does McDonald's plan to open in 2023?

McDonald's plans to open 900 new restaurants in 2023.

In which country will almost half of the new McDonald's locations be opened?

Almost half of the new locations will be in China.

What is the current number of McDonald's restaurants in mainland China and Hong Kong?

McDonald's currently has more than 4500 restaurants in mainland China and Hong Kong.

What challenges has McDonald's faced in China?

McDonald's has faced challenges such as lockdowns due to COVID-19, food safety issues, and competition from rivals whose menus may be more suited to the Chinese palate.

How does McDonald's approach the cultural differences in China?

McDonald's navigates cultural differences by having local franchisees that help determine the menu and the best way to operate, considering regulatory and cultural factors.

What was the significance of McDonald's first restaurant in China?

McDonald's first restaurant in China opened in Shenzhen in 1990, and its move into Beijing two years later with the world's largest McDonald's at the time, serving 40,000 customers on opening day, marked significant milestones for the brand.

How does McDonald's compete with rivals like KFC and Pizza Hut in China?

McDonald's competes by building out its supply chain, adapting to the Chinese market, and embracing its franchise model to reduce operating costs.

What was the outcome of McDonald's decision to sell its China business in 2017?

In 2017, McDonald's sold its China business for a little over $2 billion to CITIC and the Carlyle Group. McDonald's retained a 20% stake, CITIC owned 52%, and the Carlyle Group had a 28% stake.

How does McDonald's approach to real estate differ between the U.S. and China?

In the U.S., McDonald's is a significant holder of commercial real estate and acts as a landlord, but in China, due to different land ownership laws, it cannot own land 100% and must operate more like a traditional franchisor.

What percentage of McDonald's revenue came from the U.S. in 2021?

More than 30% of McDonald's revenue came from the U.S. in 2021.

How does McDonald's plan to expand its presence in China?

McDonald's plans to open an additional 900 stores in China in 2023 and has leaned into digital delivery and adapted its menu to cater to Chinese tastes.