McDonald's licensed for expansion

China Daily, September 26, 2011

After entering China in 1990, McDonald's has more than 1,300 stores in 26 provinces, regions and municipalities on the Chinese mainland. It aims to expand its China network to more than 2,000 outlets by 2013.

The fast food chain currently has 11 stores in Yunnan province. A developmental licensee operation commits the license holder to open a minimum of 20 new stores during the first five years of ownership. They will open mostly in Kunming, the capital city of Yunnan, and other tourist spots, according to Ren.

Franchise operations are widely considered to be an efficient way to open more chains. About 80 percent of McDonald's global outlets are operated by franchisees. They require less capital than self-operated stores.

McDonald's relies heavily on franchises in more mature markets such as the United States, but has almost exclusively opened self-operated stores in China since entering the market two decades ago.

"The regional franchise program run by McDonald's in China was launched as a strategy against its biggest rival, KFC Corporation, because franchising can be a very effective way to grow in China," said Gao Jianfeng, an analyst at Bogo Consultants.

KFC, which belongs to Yum! Brands, claims on its website to be the No 1 quick-service restaurant brand and the largest and fastest-growing restaurant chain on the Chinese mainland, with more than 3,200 restaurants across the country. It entered the market in 1987.