McDonald's sells stake to new firm to run its outlets on the mainland and HK

McDonald's China has completed the transaction to sell the majority of its stake to CITIC Capital and Carlyle.

McDonald's China said on Tuesday it has completed the transaction to sell the majority of its stake to form a company to run all McDonald's outlets on the mainland and Hong Kong.

It will also push forward store openings on the mainland, seeking to open 500 stores a year in the next five years, double the current pace.

CITIC and CITIC Capital has a controlling stake of 52 percent in the new company, while Carlyle and McDonald’s will have interests of 28 percent and 20 percent respectively. The three parties will designate board members and the current management team will be unchanged.

“The partnership will strengthen McDonald’s China’s entrepreneurial spirit, driven by ownership at the local level. It will also help us ensure first-class customer service and food safety while accelerating our growth in mainland China and Hong Kong,”  said Zhang Yichen, chairman of the new entity. 

McDonald's board of directors and McDonald's China chief executive Phyllis Cheung (in red) pose at an employee's meeting on Tuesday. 

McDonald's China's vice president Regina Hui told a press briefing on Tuesday that the company would focus on leveraging Citic's rich resources in the property sector to drive business synergy.

By 2020, about 45 percent of McDonald’s estimated 4,500 restaurants in China will be located in third and fourth tier cities and will have a presence in 300 lower tier cities. Currently about 35 percent of the existing 2,500 stores are in third or fourth tier cities.

Hong Kong and the mainland will be McDonald's innovation hubs as the company seeks to strengthen its brand leadership by offering digital retail experience as well as localized menu items.
The sale to the new McDonald’s China franchisee is valued at US$1.6 billion, which includes McDonald’s existing businesses on both the mainland and Hong Kong.

The pace of China's overall fast food market growth has been declining since 2012 and is expected to grow 6.7 percent to 962.5 billion yuan (US$143.5 billion) by the end of this year, down from an average of 8 percent growth rate over the past three years.

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