In a bid to speed up its expansion and catch up with archrival KFC in the Chinese market, McDonald's is intensifying the recruitment of franchise stores.
Under the policy, the fast-food chain is organizing promotional sessions for prospective franchisees in first-tier cities such as Shanghai and Shenzhen.
At present, franchise stores account for less than 5% of the total McDonald's stores in China and are mostly located in second- and third-tier cities. McDonald's plans to double the number of its stores in China to 4,000 in three years via the policy, according to the Chinese-language Economic Observer.
According to McDonald's China website, the fast-food chain now permits franchise stores in Shenzhen, Huizhou, Shanghai, Luzhou, and Chengdu. This is the first time for the company to permit franchise stores in first-tier cities Shanghai and Shenzhen since it introduced the policy in 2010.
Prospective franchisees must apply to take over existing McDonald's stores already in operation, rather than opening new stores in new areas, said the report. A prospective franchisee must possess at least 2 million yuan (US$326,000) in capital, receive nine to 10 months of training and evaluation, and run the store on a full-time basis.
Over the past years, the franchise system has failed to catch on in China, although franchise stores now account for 80% of McDonald's over 30,000 stores in more than 120 nations worldwide, contributing to over 70% of its total profits.
Due to the conservative policy for franchisees, the number of McDonald's stores in China expanded at an annual clip of 17% during the 1990-2010 period, much lower than the growth rates in Japan and other Asia-Pacific markets.
McDonald's China racked up sales of US$225 million in 150 Chinese cities, accounting for 3% of the company's global sales. The country became the third largest market for the company worldwide in 2013.
However, it still considerably underperforms Kentucky, which now has nearly 5,000 stores in China. Even indigenous fast-food brand Dicos boasts 2,000 stores, higher than McDonald's. Scale of operation is critical for fast-food restaurants in a highly competitive market, according to Li Weihua, professor at China University of Political Science and Law.
