McDonald’s Outlines Asia Push

McDonald’s is laying out some big plans for China and Korea to compete with chains both American and homegrown. In China, McDonald’s plans to raise capital spending by 40% over 2010 levels. It will build as many as 200 new stores across the country, more than in any previous year, and swap out the old red and yellow decor for a more relaxed, European-style bistro design. By ’13, it plans to remodel 80% of its existing outlets in China.

Kenneth Chan, McDonald’s chief executive of China, told a news conference that the company aims to expand service in cities where it already operates, before moving deeper into China’s smaller cities. Half of the new restaurants will be drive-through outlets. In addition, McDonald’s will increase delivery services to 550 locations from 400, and accelerate the opening of McCafés and 24-hour restaurants. (Home delivery also is being tested in a handful of McDonald’s outlets in Japan.)

In Korea, the chain will invest $436 million to more than double its presence from 243 to 500 units during the next five years. “When you compare Korea to our other markets, you can see that we have a lot of opportunity here. Our penetration so far is less than one third of our other markets,” Sean Newton, McDonald’s Korea managing director, told a Jan. 17 press conference. McDonald’s Korea has chalked up fast growth in recent years by introducing a set of innovative ideas faster than its rivals, including 24-hour opening, home delivery and customized breakfast menus.

While sales have been strong, the chain has lagged behind in store counts compared to homegrown brands. According to the Korea Times, while 60% of McDonald’s restaurants worldwide are operated by franchisees, the opposite is true in Korea. The company has maintained a strategy of managing the stores itself; fewer than a dozen franchisees operate McDonald’s stores there. Newton, who took charge of McDonald’s Korea early last year, plans to boost that number by putting the standard company model into action. By ’15, approximately 40%, or up to 200 McDonald’s restaurants, will be run by franchisee business partners, he said.

As in China, the five-year plan includes re-imaging existing restaurants with contemporary designs by ’13 and installing drive-through windows at nearly all newly launched stores. Companywide, remodeling efforts have helped boost sales in renovated stores by 7% above those of non-renovated stores.