McDonald’s Steps Up China Super-Sizing With New Partners

McDonald’s is accelerating the pace of its store expansion in China, securing three real estate partners within just two months after its new owners, Citic Group and Carlyle Capital, took over its Chinese assets.

The latest partnership was inked Monday with real estate developer China Overseas Land and Investment Ltd. (Coli), which will help the fast food chain land restaurants on its properties, following a deal with Evergrande Group in August and one with Country Garden Group on Friday.

McDonald’s seeks to nearly double its current 2,500 stores on the Chinese mainland in five years. It lags behind major rival KFC, which has more than 5,300 restaurants.

“We (McDonald’s) will keep exploring opportunities to accelerate our future growth,” spokesperson Regina Hui told Caixin.

To fuel McDonald’s ambitious plan, Coli will offer land on its commercial complexes in more than 60 cities for collaborations. The two were connected by Citic Group, which is the second-largest shareholder of Coli, while its subsidiaries Citic Ltd. and Citic Capital, together with Carlyle Capital, officially became the new owner of McDonald’s China in July.

Evergrande will offer locations across its real estate holdings in more than 240 cities for new restaurants, while Country Garden has similar offers, with a focus on smaller third- and fourth-tier cities where McDonald’s vowed to locate 45% of the projected 4,500 stores by 2022.

At the same time, its major rival KFC, owned by Yum China Holdings Inc., is also making radical store expansion. Yum China CEO Pan Weiqi said in November 2016 that the company wants to triple the total number of its stores, including KFC, Pizza Hut and Taco Bell, in a decade or two.

Both Yum and McDonald’s have made an effort to cater to local customers in their leading overseas market, after their Chinese companies became independent. Similar to McDonald’s sale, KFC owner Yum Brands Inc. spun off its China business last year and separately listed Yum China in New York.

Both McDonald’s and KFC have made forays into online-to-offline (O2O) food delivery, a popular service in China. McDonald’s will add 2,000 more delivery-capable locations by 2020, making 75% of its restaurants able to provide the service, while KFC in May acquired an 80% stake in Daojia, an online aggregator with brands focusing on the higher-end delivery market.

Contact reporter Coco Feng (renkefeng@caixin.com)