U.S. Labor Group Voices Concern Over Sale of McDonald’s Stores in China

(Beijing) — A major U.S. trade union that launched a high-profile assault on McDonald’s last month has added its voice to a group of labor advocates expressing concerns about the fast-food giant’s plans to sell its self-owned stores in China to an outside buyer.

The Service Employees International Union (SEIU) said it launched a website last week to protect existing franchisees of McDonald’s Corp. in China, following the company’s announcement earlier this year that it will sell its self-owned stores in the country to a unit of local conglomerate Citic Group and U.S. private equity giant Carlyle.

“SEIU believes that this ownership structure now under review poses serious risks for McDonald’s franchisees in China, and the terms of the deal that have been revealed publicly suggest that it could result in future conflict with and mistreatment of your business, as well as negatively impacting your communities and the workers in your stores,” states the website, according to the SEIU.

Caixin could not locate the website, which the SEIU said was launched on Wednesday.

A McDonald’s spokeswoman said the company currently has about 50 franchisees in China whose operations are separate from its self-owned China stores being sold to the Citic-Carlyle group. She added that the deal is still being reviewed by China’s Ministry of Commerce, which must clear all such major sales.

“The introduction of a strategic investor won’t affect the rights of other franchisees,” McDonald’s said in a response to the SEIU’s action. “McDonald’s, Citic and Carlyle will use their own resources and strengths to advance McDonald’s business. We estimate we will open more than 1,500 new stores in China and Hong Kong in the next five years.”

The SEIU is involved in an unrelated ongoing clash with McDonald’s in the U.S., filing complaints in two states last month accusing the company of charging rents to franchisees that were well above industry averages. Such rents make it more difficult to pay employees good wages, the union contends.

The union’s concerns about the China plans follow similar statements from two other Asia-based labor groups about the sale, which values the operation at $2.1 billion and is part of McDonald’s bigger plan to shed self-owned stores in China and move to a franchise model that it uses in most other countries.

The Hong Kong Confederation of Trade Unions said in February it was concerned the sale would put pressure on Citic and Carlyle to lower costs, which would make it harder for them to pay good wages to their workers.

Before that, Beijing-based consultancy Hejun Vanguard Group had filed complaints to the Ministry of Commerce, saying McDonald’s charges franchisees higher royalties in China than other countries and had expanded haphazardly.

Contact reporter Yang Ge (geyang@caixin.com)