Fast-food giant McDonald’s is increasing its minority stake in its China business, raising its ownership from 20% to 48%. In 2017, the company sold control of its restaurants in mainland China, Hong Kong, and Macau to Carlyle and Citic as part of a broader strategy to reduce the number of owned restaurants and rely more on franchisees familiar with local markets.
Since then, McDonald’s has made significant strides in China, doubling its presence to over 5,500 locations. China has now become the company’s second-largest market by number of locations. With plans to reach 10,000 restaurants by 2028, McDonald’s is determined to capitalize on the country’s long-term potential.
However, the Covid-19 pandemic has posed challenges for McDonald’s in China. The country’s slowing macroeconomic conditions and historically low consumer sentiment have affected the chain’s sales. Estimates from Factset show that China now contributes around 4% of McDonald’s total revenue, a decline of 3.8% compared to the previous year.
Despite these challenges, McDonald’s remains focused on drawing in customers. The company has been actively promoting its burgers to entice consumers amidst the economic downturn. McDonald’s CEO Chris Kempczinski emphasized the opportunity to capture increased demand and tap into the long-term potential of China’s fastest-growing market.
The financial terms of McDonald’s acquisition of Carlyle’s stake were not disclosed. The deal is set to close in the first quarter of 2024, subject to regulatory approval. Citic will retain its majority stake of 52% in the China business.
1. Why is McDonald’s increasing its stake in its China business?
McDonald’s aims to take advantage of the tremendous opportunity and long-term potential in China’s rapidly growing market. By expanding its ownership, the company can have a more significant influence on decision-making and benefit from increased demand.
2. How many McDonald’s restaurants are there in China?
Currently, McDonald’s operates over 5,500 restaurants in China, making it the company’s second-largest market in terms of the number of locations.
3. How has the Covid-19 pandemic affected McDonald’s sales in China?
McDonald’s sales in China have faced challenges due to slowing macroeconomic conditions and historically low consumer sentiment caused by the pandemic. Estimates show a decline of 3.8% in China’s contribution to McDonald’s total revenue compared to the previous year.
4. When will the acquisition of Carlyle’s stake be completed?
The deal is expected to close in the first quarter of 2024, pending regulatory approval.
5. Who will retain the majority stake in McDonald’s China business?
Citic, a state-owned investment firm, will retain its majority stake of 52% in McDonald’s China business.