McDonald’s sets a mega refranchising deal

mcdonalds exterior

McDonald’s Corp. has agreed to sell its mainland China and Hong Kong operations to a partnership controlled by the Chinese state for $2.08 billion in cash and stock.

The Carlyle Group, a U.S.-based investment firm, will be a partner in the venture, holding a 28% stake, and McDonald’s will retain a 20% interest.

The deal calls for the unnamed partnership to serve as McDonald’s master franchisee for the area. The venture has set a goal of opening 1,500 restaurants in the next five years, with a focus on third- and fourth-tier cities. Currently, more than 2,640 McDonald’s restaurants operate in mainland China and Hong Kong. About 1,750 of those are company-owned, McDonald’s indicated.

The deal is McDonald’s largest refranchising deal to date, and could be the largest ever for a U.S. restaurant franchisor. The company set a goal as part of its turnaround of refranchising 4,000 units, which would make the chain 95% franchised.

McDonald’s has not said how it will use the proceeds from the deal. In the U.S., the chain is in the midst of a capital-intensive drive to install self-ordering kiosks in all stores.

The new franchisee will also strive to boost sales in China through menu management, digital initiatives and the expansion of delivery.

The state of China is participating in the deal through two companies, Citic Ltd. and Citic Capital Holdings, which will collectively hold a 52% interest in the new partnership. Citic Ltd. is a public company whose shares are traded on the Hong Kong stock exchange. China holds a 58% stake in the concern.

Citic Capital is an asset management company with more than $8 billion in capital from Chinese and international investors.

Yum Brands, the franchisor of KFC, Pizza Hut and Taco Bell, spun off its Chinese operations into a separate publicly traded company in October.

Today's top stories

1
The U.S. Department of Labor does specify how an unpaid internship can be legal , but most restaurant operations would either fail this test or have to significantly alter how they handle internships...
2
Dave Theno, one of the restaurant industry’s most prominent authorities on food safety, drowned Monday off the coast of Hawaii while swimming with his grandson, according to media reports . He was 66...
3
Sonic Drive-In plans to test a burger patty made with a blend of ground beef and mushrooms to reduce the meat content, a health initiative believed to be a first for a national quick-service chain...
4
In a move likely to intensify competition in the growing fun-and-food category, the private-equity firm L Catterton has invested in Punch Bowl Social, a six-unit contender. Terms were not disclosed,...
5
Paul Damico and Kat Cole have been shifted into new positions by Roark Capital and its Focus Brands holding for the rollout of Roark’s Naf Naf Grill fast-casual Middle Eastern concept. Damico has...
6
Sustainability has long been a trend influencing the industry, but it’s one that operators still need to consider today. Consumers are aware of what it means to eat sustainably—including using local...
7
Expect the unexpected—that’s the theme of the menu trends presentation during next month’s Restaurant Trends & Directions conference in Chicago. “The accelerated pace of demographic, cultural,...
8
In the struggle to pinpoint why restaurant traffic is falling, some Yoda types have cited increased competition from a gray area between restaurants and supermarkets—the place where alternatives like...
9
Customer traffic is among the biggest problems in today’s restaurant environment. In the face of the competition to bring guests in the door, operators are challenged with setting themselves apart...
10
After craveable food and beverages and well-trained staff, a hard-working menu runs a close third as a marketing and profitability tool. With shrinking margins and a growing competitive environment,...