Plans Afoot For Emerging Markets At McD’s

McDonald’s plans to open 100 more restaurants in South Africa and 120 in India over the next five years as the company seeks out further growth in emerging markets, according to recent interviews with two of the company’s top executives.

Tim Fenton, president of the chain’s Asia-Pacific, Middle East and Africa regions, told Bloomberg News that the area’s growth is now responsible for about 14% of the company’s operating income, compared with less than 8% five years ago. According to Fenton, China is the main focus for regional investment, with plans for 2,000 McD’s outlets there by 2013. "It took us 19 years to get to 1,000 restaurants in China," Fenton told Bloomberg. "We will hit the second thousand in four years." McDonald’s has what he termed the "critical mass" there for 15% new-store growth for the next four years. India and South Africa have also reached the point where the company can take advantage of economies of scale and a reliable supply chain to grow faster, Fenton added.

Don Thompson, McDonald’s No. 2 and COO, echoed those comments in an interview with the Chicago Tribune. Since taking the reins in January, Thompson has been on a world tour of the chain’s 32,000 stores to look at growth opportunities in each market. On a visit to South Africa for the World Cup, Thompson affirmed Fenton’s plans for that country. "We have 134 outlets here now and we plan on building at least another 100 to 150 here over the next five years."

McDonald’s currently relies on Europe for more than a third of its operating earnings. Around the world, it is relying on an ambitious plan to spark broader demand in its restaurants by introducing a spate of new products and redesigning its restaurants.

Thompson admitted that the chain has emphasized growth over same-store focus. Going forward, he said some markets will focus more on reimaging and reinvesting in existing stores, while newer and less developed areas will focus on continued market growth. "We don’t have drive-thrus everywhere around the world in places that could really benefit from it. We don’t serve breakfast all around the world and there are markets that will benefit from that."

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