Fast food chain McDonald’s faces decline worldwide, but wants to counter that trend by doubling the number of stores in China. Its alliance with property giant Evergrande makes sense for this strategy, explains business advisor Shaun Rein to the South China Morning Post.
The South China Morning Post:
The fast-food chain is now aiming to have 45 per cent of its 4,500 mainland China stores located in third- and fourth-tier cities, and more than 75 per cent of those will offer a delivery service.
The ownership by China Evergrande Group of some 700 property projects in 240 mainland – mostly lower-tier – cities, appears consistent with McDonald’s strategy.
“It’s increasingly hard for McDonald’s to find good locations in China. Developers and mall operators don’t want McDonald’s anymore, they now want more Starbucks, as McDonald’s attracts the wrong crowd who look for cheaper stuff,” said Shaun Rein, founder of China Market Research Group and author of the forthcoming book The War for China’s Wallet.
Different from most other major economies, the McDonald’s Chinese business has long been in the shadow of KFC, which entered the mainland China three years earlier in 1987 and boasts better consumer recognition.
What’s more, unlike in the US, most McDonald’s stores in China are franchisee-operated so the company doesn’t own a lot of properties on the mainland. This means a strong partnership with a big developer could be a short-cut to achieve its five-year growth plan, Rein said.
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