McDonald’s is Dominating the Chinese Fast Food Market with Rapid Expansion Plans
McDonald’s intends to increase its already substantial presence in China by opening 900 new outlets worldwide in 2023, with over half of them being situated in the second-largest economy in the world. Despite having more than 4,500 stores in mainland China and Hong Kong, the fast-food behemoth is making the shift in an effort to take advantage of China’s still-emerging rate of growth. The company views China as its top priority market for retail development with an aim toward tripling the number of its outlets within the next ten or two years.
The fast food market in China is one of the largest in the world, with a value of $184 billion. McDonald’s had to overcome a number of obstacles before making a name for itself in China, though. In particular, the business found it difficult to compete with rivals KFC and Pizza Hut, both of which were already well-known in the nation.
One factor in KFC’s success was that its parent company, Yum! Brands, controlled the Chinese distribution market. This gave KFC access to smaller cities and a first-mover advantage. Furthermore, chicken is a more widely consumed protein in China than beef, making KFC’s menu more alluring to the locals. McDonald’s, on the other hand, had to adjust its menu to Chinese preferences while navigating legal and cultural obstacles.
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Although McDonald’s first set foot in China in the early 1990s, it didn’t inaugurate its first restaurant in Beijing until 1992. With 700 seats and 29 cash registers, this restaurant, which at the time was the biggest McDonald’s in the world, served 40,000 patrons on opening day. Chinese customers lined up to try a taste of American culture due to the novelty of a Western fast-food business.
Despite its early success, McDonald’s encountered a number of obstacles. In 2014, after journalists secretly taped employees picking meat up off the floor of a nearby supplier, the business, along with KFC parent Yum! Brands, faced questions about food quality. That year, business for McDonald’s China decreased as a result of the incident.
Local competitors like noodle stalls, which serve steaming bowls of noodles for a small portion of the price of a McDonald’s meal, also posed a serious threat to the business. With around 2.6 million fast food outlets, China has a very crowded market.
McDonald’s has to change their business strategy to meet these obstacles. Using the franchise model was one of the significant innovations that allowed the business to reduce operational costs. In 2017, McDonald’s sold its China operations to the Chinese state-owned company CITIC and the US private equity firm Carlyle Group for more than $2 billion. In accordance with the terms of the agreement, McDonald’s kept a 20% ownership in the company, and its partners were in charge of financing, including real estate expenses. In addition, the business gets royalties from sales and startup costs for new eateries.
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Notwithstanding these difficulties, McDonald’s is currently in a strong position to rule the Chinese fast food sector. The brand will expand its already significant footprint in China with ambitions to open 900 new restaurants globally in 2023. China offers the organization a tremendous prospect for growth and has a lot of room for expansion. To keep its position as the market leader, it will need to continue to adjust to regional tastes and deal with cultural and regulatory variances. Every firm is under more scrutiny than ever because of social media and rising public expectations of corporate behavior. Nonetheless, given its track record of achievement, McDonald’s is well-positioned to overcome these obstacles and maintain its dominance of the Chinese fast-food market for many more years.
