McDonald's executives once again emphasized their goal of having ten thousand stores in China in public.
On December 6th, McDonald's CEO Chris Kempczinski stated in an interview that the company plans to increase the number of restaurants in China from 6000 to 10000 by 2028.
This is not the first time McDonald's has mentioned its 10000 store target this year. In August of this year, McDonald's China CEO Zhang Jiayin revealed the plan. When Carlyle Group withdrew from McDonald's China business, McDonald's also emphasized that this goal will not change.
From July 2021 to January 2023, McDonald's achieved its fifth 1000 stores in 1.5 years. According to the third quarter financial report of 2023, as of September 30, the number of McDonald's China system restaurants was 5582, compared to 4905 in the same period of 2022, with a net increase of 677 in one year.
To achieve these 10000 store targets, it means McDonald's will open 1000 stores in China each year for the next four years - the fastest pace in its history.
So where will these stores be located?
From the perspective of the stock market, McDonald's China's strategy is to penetrate the community.
After partnering with CITIC Group and Carlyle to establish the "Golden Arch" company and becoming McDonald's largest franchisee in China, McDonald's China has also established partnerships with real estate developers such as Country Garden and CNOOC Real Estate, leveraging the resource advantages of CITIC Group. These real estate developers can make it more efficient to open stores in communities with lower rent and stronger consumer stickiness.
According to data from Jihai, currently, the distribution of McDonald's stores in China, located in residential areas, is equivalent to that of shopping venues, accounting for 30% and 34% of the overall proportion, respectively.
For example, in Shanghai, the number of McDonald's stores has exceeded 450. However, McDonald's Shanghai General Manager Luo Wei once revealed to Interface News that the speed of opening stores in Shanghai will continue to increase in the future, with a focus on breaking through blank markets such as communities, the five new cities, and high-tech zones.
A portion of the community stores are located in universities. As early as 2013, McDonald's opened its first campus store in the central area of Huazhong University of Science and Technology. Over the past decade, this catering giant has had over 60 campus stores. Although the number of university stores is not large, they are closest to young consumers, bringing more popularity on social networks - such as internet slang like "Maimen" and "Poor Man Package", which are interactions between the younger generation and McDonald's.
As for the incremental market, McDonald's China also targets the sinking market.
McDonald's China CEO Zhang Jiayin previously stated that outside of first and second tier cities, the lower tier market will be a key area for McDonald's deployment. At a media conference in August 2023, Zhang Jiayin revealed that currently, 50% of McDonald's total stores in China are located in third - and fourth tier cities, and new stores account for half of them in both high and low tier cities.
For example, this year McDonald's opened re franchise in Yunnan, Inner Mongolia, Xizang, Xinjiang and other places. However, according to Zhang Jiayin, the current model "has no overall plan to increase", and McDonald's China "will continue the current state".
Given the different consumption habits and scenarios in high and low tier cities, this company has also made adjustments to its products and market strategies, such as strengthening single person dining scenes in first tier cities and adding round tables and children's playgrounds in lower tier markets, emphasizing family gatherings.
In addition to store size, McDonald's China is also striving to attract consumers to enter its stores.
Coffee is a good tool.
In August 2022, McCafe announced an upgrade in China. As of the end of 2022, the total number of coffee shops in Beijing, Hebei, and Shanxi markets has exceeded 400, achieving online and offline omnichannel ordering and delivery. According to the plan, approximately 1000 new coffee shops will be added in China by 2023, with a total expected to approach 4000 stores - of which the newly opened coffee shops are mainly distributed in third tier cities.
In fact, catering giants are also eyeing the coffee business in lower tier markets, such as Yum! Brands China, one of McDonald's main competitors in China. In the second half of this year, "KCOFFEE" opened a batch of "independent boutique coffee shops", mainly appearing in lower tier markets such as Zhangzhou in Fujian, Shangyou in Jiangxi, and Xiaogan in Hubei.
And KCOFFEE is also closely relying on the sinking of KFC restaurants, constantly increasing its distribution points. At present, KFC has established over 1900 towns in China, and it will continue to track 800 cities that have not yet opened stores in the future. Among the new stores opened in 2022, KFC and Pizzahut will arrange more than half of the stores in the third to sixth tier cities.
Besides coffee, McDonald's has another initiative worth noting.
At the investor conference on December 6th, the company introduced its first new concept restaurant, CosMc's, launched in the United States. According to its introduction, CosMc's will have four driveways, no dining space, and a smaller storefront than traditional McDonald's. The main focus is on customized chilled beverages, including flavored lemonade, turmeric latte, pear smoothie, and snow cheese ice cream. The menu structure may be similar to Starbucks or milk tea shops.
Although CosMc's has not yet been launched in China, Kempczinski bluntly stated, "We are not worth spending time developing an idea that can only work in one market.".
In the current situation where China has already risen to become McDonald's world's second largest market, his implication is that once the CosMc's model runs smoothly, McDonald's may further penetrate the beverage market in the future, thereby achieving greater revenue growth.
At present, McDonald's business situation in the Chinese market has not disappointed the global headquarters.
According to the company's financial report, McDonald's sales for the first three quarters of 2023 increased by 11% year-on-year, reaching $19.1 billion. In the third quarter, global same store sales (tracking restaurants that have been open for at least 13 months) increased by 8.8%, while international franchise markets including China and Japan saw a 10.5% increase in same store sales.
McDonald's global financial report did not disclose specific data on the Chinese market, but Zhang Jiayin said at a media conference in August, "Our growth in the first half of the year was very good, with sales and overall growth far exceeding pre pandemic levels. This is due to two factors, one is the increase in same store sales, and the other is the increase in new stores."
In fact, for Western fast food brands such as McDonald's, the current consumer environment has already shown strong advantages for them.
This track, due to its strong product replicability and high degree of standardization, has the genes of a thousand stores. Under the scale, the mature supply chain system owned by catering giants also makes it easier for them to leverage price advantages, launch more cost-effective products, cater to current consumer trends, and thus become more competitive.
But managing thousands of stores is also a challenge for McDonald's China.
This involves training and management of franchisees, as well as continuous exploration of the supply chain, and so on. For top catering brands, any minor food safety and store operation issues can potentially trigger a huge public opinion crisis. While McDonald's China is accelerating its frenzy, it also needs to make sufficient preparations in the backend management mode.