Last year Coca-Cola and Pepsico made western China a crucial front in the global cola war, now western China is a hot zone in the battle of the world's fast food giants.
McDonald's has introduced its first developmental license in China to a Kunming company with the aim of rapid expansion in Yunnan province, already a KFC stronghold.
On August 23 the US-based company issued its first developmental license to Kunming Northstar Group (昆明诺仕达集团) vice president Ren Jianmei (任剑媚), signaling a shift in a largely failing strategy to gain ground on KFC. McDonald's opened 1,000 stores in its first 19 years in China and last year announced it would double its number of China outlets by 2013.
McDonald's currently has around 1,300 outlets in China, less than half of KFC's nearly 3,200.
Developmental licenses are different from the standard franchising approach, in which the franchiser sublets the restaurant to the franchisee. Under the developmental license model, Kunming Northstar will effectively own the restaurant facility and property and will have expansion rights in Yunnan, where it is committed to opening at least 20 restaurants in its first five years of holding the license. There are currently 11 McDonald's outlets in Yunnan.
Ren told China Daily that most of the McDonald's franchises it plans to open in Yunnan in the coming years will be located in Kunming. She added that some stores will also open in popular Yunnan tourist destinations – which likely include Lijiang and Xiaguan.
Up until 2007, when it began to experiment with franchises, McDonald's had opened the majority of its China outlets on its own. The company currently has only six franchises nationwide.
In the massive US fast food market McDonald's dominates KFC, but in China things couldn't be more different. KFC parent company Yum! Brands – which also owns the Pizza Hut and Taco Bell brands – has a 40 percent share of China's 60 billion yuan (US$9.4 billion) fast food market, more than double the 16 percent share held by McDonald's, according to London-based market research firm Euromonitor International.
Much of KFC's success in the China market has been attributed to its incorporation of Chinese dishes and flavors into its menu, as well as a highly localized management structure that enjoys a high degree of autonomy.
McDonald's aims to open a new outlet in China every day within four years, but it will take more than that to gain ground on Yum! Brands, which is presently opening a new China restaurant every 18 hours.
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