McDonald’s, the global fast-food giant, has announced that it will be purchasing Carlyle’s stake in its China business, increasing its minority share from 20% to 48% ownership. This move comes as part of McDonald’s strategy to own fewer restaurants and instead rely on franchisees with local market knowledge to operate its locations.
In 2017, McDonald’s sold control of its restaurants in mainland China, Hong Kong, and Macao for $2.1 billion. At that time, Citic, a state-owned investment firm, took the majority stake, while Carlyle acquired a 28% stake. McDonald’s retained a 20% ownership in the business. The decision to sell off its restaurants was aimed at streamlining operations and allowing for greater flexibility in expanding the number of locations in the country.
With its latest acquisition, McDonald’s will now hold a 48% ownership in its China business. The financial terms of the deal have not been disclosed, but assuming regulators approve the transaction, it is expected to close in the first quarter of 2024. Citic will still retain its majority stake, consisting of 52% ownership.
McDonald’s CEO, Chris Kempczinski, stated that the decision to increase its stake in the China business was driven by the belief that there is a significant opportunity to capture increased demand and benefit from the country’s long-term potential. The company aims to simplify its structure and take advantage of the market, which has become its second largest in terms of the number of locations.
Although McDonald’s has been expanding its presence in China, the company’s sales have faced challenges due to the impact of the Covid-19 pandemic. China currently accounts for approximately 4% of McDonald’s total revenue, experiencing a decline of 3.8% from the previous year. Slowing macroeconomic conditions and historically low consumer sentiment have affected the chain’s performance in the country.
Despite the challenges, McDonald’s has been actively promoting its burger offerings to draw in customers. The company believes that by focusing on its core products and leveraging its brand recognition, it can overcome the current market conditions in China. McDonald’s is confident that its simplified structure and increasing ownership will position it for long-term success in the country.
McDonald’s plans to continue expanding its footprint in China, with a target of reaching 10,000 restaurants by 2028. With the increased ownership and simplified structure, the company aims to capitalize on the growing demand and fully leverage its presence in the market. While uncertainties remain due to the ongoing pandemic, McDonald’s remains committed to its long-term growth strategy in China.
McDonald’s decision to increase its stake in its China business reflects the company’s commitment to simplifying its structure and seizing the opportunities in its fastest growing market. With a focus on core products and a goal of expanding its presence, McDonald’s is positioning itself for long-term success in China, despite the challenges posed by the Covid-19 pandemic.
Leave a Reply