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McDonalds Relocates China Headquarters

McDonalds, the world's leading hamburger maker, announced yesterday at a press conference it will enhance its Chinese market share by moving its China headquarters from Hong Kong to Shanghai.


The US company was quick to deny the relocation was in response to the runaway success of its rival, KFC.


McDonalds currently has 600 restaurants on the Chinese mainland, while KFC, also a US company, enjoys a greater market share with 1000 outlets.


"The relocation is a strategic relocation to leverage the rapid development of the China market and to reaffirm McDonalds' commitment to the China market," said Eric Foo, managing director of McDonald's (China) Co Ltd.


Foo cited "communication problems" with the headquarters based in Hong Kong. This affected the efficiency of the company's Chinese performance, he said.


"With the shift, the company can become much closer to the consumers, fully understand and market and take quicker reactions," he added


Over the next two years, the fast food global restaurant chain will increase its outlets by 100 a year in China - and this is a "conservative estimation" according to Foo.


Franchising will be the main way to fulfill McDonalds' desire for rapid expansion.


A year ago, McDonalds' first Chinese franchisee was granted to Meng Sun from the northern city of Tianjin. Her restaurant business has been described as outstanding by the franchiser.


"Applicants are very enthusiastic, but we are very critical and will choose the only best to receive our strict training," said James Chu, senior vice-president of McDonalds China Development Company, and who is also responsible for franchising and government relations.


Chu said franchising will roll out from areas outside Shanghai such as East China's Jiangxi or Fujian provinces, where McDonalds is operating as a solely-invested company.


By the summer next year, the company will select the first batch of franchisees, between 10 to 12 restauranteers, and place them on a prerequisite 10-month long training program before allowing them to operate under the McDonalds brand. These restaurants have a planned opening by mid-2006.


"The long-term training is to guarantee all restaurants will be operated at the same international level, no matter in China, Canada, France or Germany," Foo said.


He added: "The pace to develop franchisees is slow at the beginning, but will soon become amazingly faster."


McDonalds has 33,000-plus restaurants around the globe, 65 percent of which are operating as franchises. In the United States, 85 percent of the stores are franchised.


It set up its first restaurant in China in the early 1990s, and has 66 in Shanghai alone.


"I vowed to the city's vice-mayor Zhou Yupeng earlier today that we have a long-term vision in the Chinese market and we are to open many more restaurants here," said Foo.


Similar to its rival KFC, McDonalds has been working hard at its western meals blended with Chinese flavors.


(China Daily December 14, 2004)


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