In four years, the number of stores worldwide reached 50,000, and McDonald's threw out the fastest development goal in the company's history.
As of the end of the third quarter, McDonald's had a total of 41,198 chain stores worldwide, of which more than 39,000 were franchised stores and the rest were self-operated stores. This means that in the next four years, McDonald's will open 8,802 new stores around the world. Among them, 900 new restaurants will be opened in the U.S. and 1,900 new restaurants in international markets operated by owned restaurants, and more than half of the 7,000 new restaurants in international markets operated through authorized partners will be opened in the Chinese market.
According to McDonald's's plan, the number of 90-day active users will expand from 150 million to 250 million by 2027.
McDonald's CEO Kempczinski said the company plans to increase the number of restaurants in China from 6,000 to 10,000 by 2028, with China eventually (replacing the United States) as McDonald's largest market.
In fact, as early as August this year, the sixth anniversary of the establishment of "Golden Arches", McDonald's China revealed its development plan to target 10,000 restaurants.
For this goal, McDonald's China CEO Zhang Jiayin once said that China's urbanization process will continue to accelerate in the next five years, which means a broader space for development for McDonald's China. Golden Arches plans to reach 10,000 restaurants by 2028, with a new restaurant opening every nine hours on average. McDonald's China is now the second largest and fastest-growing market for McDonald's in the world, and McDonald's China leads the McDonald's global market in terms of new store development, digital transformation, and delivery business.
This also means that the number of McDonald's stores in China will reach 1,000 every year.
Faster and faster store opening
The development of McDonald's China has been accelerating in recent years.
At the beginning of 2023, McDonald's CEO Chris Kempczinski revealed at the results conference that McDonald's will open 900 new stores in China in 2023. It is reported that this figure accounts for nearly half of the number of new McDonald's stores expected to open globally this year. At the same time, this also means that every 10 hours, a new McDonald's store can be opened in the Chinese market.
Looking back on the development of the past few years, McDonald's China CEO Zhang Jiayin once told the media that the epidemic has not affected the pace of McDonald's expansion. It is understood that in 2020, McDonald's will add nearly 480 new stores, 660 new stores in 2021, and more than 800 new stores in 2022.
It is precisely under this acceleration that McDonald's China has doubled its overall scale in six years, which has also greatly promoted McDonald's overall performance. According to McDonald's (MCD.US) financial report information for the first half of the year, excluding the impact of exchange rates, McDonald's revenue in the first half of this year increased by 11% year-on-year to US$12.395 billion, net profit was about US$4.113 billion, a significant increase of 83% year-on-year, and diluted earnings per share were US$5.6, a year-on-year increase of 85%. In the second quarter, McDonald's global same-store sales increased 11.7%, with double-digit growth in every segment.
With the sale of a minority stake in McDonald's strategic partnership in Chinese mainland, Hong Kong and Macau in November, McDonald's performance levels may rise further in the future.
According to this transaction, "Golden Arches" ushered in a new shareholding structure: CITIC Consortium, with CITIC Capital as the main body, accounted for 52% and remained the controlling shareholder, and McDonald's global shareholding increased from the original 20% to 48%.
Looking back on this period of history, the Carlyle Group's shareholding has had a profound impact on McDonald's China.
In 2017, amid fierce competition, CITIC and CITIC Capital formed a group, and the Carlyle Group acquired McDonald's operations in Chinese mainland and Hong Kong for a total consideration of HK$16.141 billion (US$2.08 billion), and obtained 20-year franchises in both places. Golden Arches became McDonald's the largest franchisee outside the United States.
As a large chain brand with more than 2,400 restaurants in Chinese mainland and more than 240 restaurants in Hong Kong, McDonald's China has started a vigorous localization process. In the "Five-Year Plan" at that time, it was planned to achieve the goal of 4,500 restaurants by 2022. In September 2022, McDonald's China exceeded its target by more than 4,900 stores.
Lively burgers
However, McDonald's is far more than an overseas chain restaurant brand that wants to regain a heavy position in the Chinese market.
On September 14, 2023, Yum China Ltd. said at its 2023 Investor Day event that the company plans to reach 20,000 stores by 2026. It also raised its target for net new stores in 2023 to 1,400 to 1,600 stores from 1,100 to 1,300 previously.
As Yum China's most successful brand, KFC will maintain more than 1,200 net new stores per year in the next three years, and will be responsible for more than 75% of Yum China's annual new expansion tasks. As a brand that has been in China since 1987, KFC now has more than 9,500 restaurants in more than 1,900 cities and serves more than 1 billion consumers annually. Even so, there are still 1,100 cities to be entered. And today, KFC is still favored by college students and small-town youth.
On the other hand, Korhan Kurdoglu, CEO of TFI Group and chairman of the board of directors of Burger King China, also announced that starting in 2023, Burger King has set a plan to maintain opening 200 new restaurants in the Chinese market every year.
At the same time, Subway China also said in June this year when it completed a new master franchise agreement, it plans to open no less than 4,000 new restaurants in the next 20 years.
While overseas brands are growing at a fast and slow pace in the Chinese market, almost all of them are revolving around a similar strategy, which is to increase store density in first- and second-tier cities and further expand into lower-tier markets.
Red meal big data shows that as early as 2022, nearly half of the country's Western-style fast food stores are distributed in third-tier cities and below. Among the new domestic stores opened by KFC and McDonald's in 2022, 34.7% and 21.8% of the stores are located in third-tier cities and below, respectively. In October 2023, KFC has more than 3,000 stores in third-tier cities and below, making it the second-largest Western-style fast food brand in the lower-tier market, second only to Wallace, and McDonald's has more than 1,000 stores in third-tier cities and below, which is not much different from the number of Tex's stores that have been deeply involved in the lower-tier market for many years.
While the giants are expanding rapidly, another competitor that cannot be ignored is the Chinese burger brand that has developed rapidly based on the sinking market.
Compared with the first- and second-tier markets where Western-style hamburgers are everywhere, the sinking market is still a vast lazy market, and Chinese-style hamburgers are growing rapidly in the towns and towns of Fujian, Guangdong, Sichuan, Chongqing, Hunan and Jiangxi. Among them, Tustin, the representative brand of Chinese burgers, has expanded its stores in the past two years, with more than 2,000 stores in third-tier cities and below, and its number of stores in the sinking market ranks third in the Western-style fast food category.
However, in addition to the fresh concept of national fashion, the rise of Tustin also reflects the preference of the sinking market for affordable consumption. According to the data of Narrow Door Dining Eye, as of November 28, the unit price of Tustin customers was 19.18 yuan. As a comparison, the unit price of McDonald's is 27.88 yuan, and the unit price of KFC is 34.36 yuan.
In response to this situation, KFC quickly followed up and launched a new product "KFC OK three-piece set" priced at 19.9 yuan. Qu Cuirong, CEO of Yum China, the operator of KFC in China, even specifically mentioned at the earnings conference that the price of the product is very competitive.
But it would be biased to measure a brand's market acceptance only by price.
The main battlefield of local chain brands such as Wallace and Baker Burger below 20 yuan, they have determined the route of extreme cost performance through extremely low prices and full of products. However, due to problems such as quality, taste and food safety, coupled with the hidden danger of brand aging, it is difficult to stably occupy the minds of consumers.
Correspondingly, the "quality-price ratio" has become the mainstream of the current competition. How to ensure quality while still being affordable, in order to truly meet the current consumers' pursuit of value-for-money consumption concept.
According to the big data of red meals, the proportion of Western-style fast food brands with per capita consumption of less than 20 yuan will decrease from 63.5% in 2022 to 60.5% in 2023, and the proportion of brands with per capita consumption between 20~40 yuan will increase from 28.7% in 2022 to 32.8% in 2023.
As giants such as KFC and McDonald's go deep into the sinking market, a fierce competition from supply chain, store management to brand capability is about to kick off. How traditional brands can keep up with the needs of the new generation of consumers, how new brands can gain a firm foothold in the tuyere, and make up for the shortcomings of comprehensive capabilities in a timely manner will be the test that the entire Western-style fast food industry needs to face. (This article was first published on the Titanium Media APP, author|Xie Xuan, editor|Fang Yu)