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McDonald's Plans to Open 100 New Outlets

McDonald's, the world's top fast food operator, is to open nearly 100 new outlets around China this year and promote McKIDS, a series of products targeted towards children, to the Chinese market from April.

In addition, Tim Lai, North China Managing Director of McDonald's China Development Company, told China Daily that, due to the success of the first McDonald's franchise restaurant in China, launched last August in Tianjin, the franchise operation model will be expanded around the nation this year.

So far, the fast food giant has over 560 outlets in China's four municipalities of Beijing, Shanghai, Tianjin and Chongqing, and more than 70 provincial cities.

"Though our business during the first half of last year was influenced by SARS, it recovered in the latest two quarters, hence we have achieved our 2003 target," said Lai.

Lai did not reveal the exact figures, he just says he is satisfied with results from last year and feels optimistic about the year to come.

In 2002, McDonald's Corp closed 175 outlets in 10 nations and regions outside China.

During the third and fourth quarters of last year, the global sales volume of McDonald's rebounded from the slowdown in the first half of last year.

According to a local report, a McDonald's restaurant in Shanghai's Huaihai Zhonglu will close this month, though Lai did not confirm the news and just emphasized that management changes are normal for any company and decisions on one outlet may have no direct connection with McDonald's overall performance in China.

"The number of new outlets is not the most important issue, the key principle for McDonald's is ensuring top-quality food and services in each restaurant," says Lai.

"Starting in April, McDonald's will launch McKIDS products, including garments, toys, game DVDs (digital video disks) and books aimed at children, in its outlets in China," says Lai.

The market promotion is also to be carried out in the United States, Canada, Japan and South Korea simultaneously.

Insiders say the move reflects McDonald's decision to diversify its business and make full use of its advantages on the children's market.

McDonald's launched its franchise operation strategy in China last year. Individuals who have US$300,000 to invest and over three year's operation experience in the catering sector, may apply for open a franchise restaurant after specific training.

"The business operation of McDonald's first franchise restaurant in China, which is in Tianjin, is excellent, which encourages us to further spread the franchise model in China," says Lai.

Such a model will not only reduce business expansion costs for McDonald's but also create more jobs for local people, experts pointed out. McDonald's is going head-to-head with KFC, which has 1,000 outlets in China to-date, in the fast-food industry for customers.

KFC has put forward a range of new Chinese-style fast food, involving chicken rolls and soup, in the recent years to adapt to the tastes of local consumers.

Lai did not comment on the issue and just pointed out that the image of McDonald's in Chinese consumers" eyes is a globally well-known brand engaged in western fast food.

"Consumers do not go to McDonald's for Chinese-style food. Our task is to guarantee the quality and safety of food and develop new products to meet their consumer demand,"Lai says.

Last year, McDonald's purchased 6 billion yuan (US$722 million) of raw materials, including beef, potatoes, milk and vegetables, from China, which were provided for local outlets as well as exported globally.

After entering China in 1990, McDonald's has invested over US$200 million to set up 52 farms and plants nationwide.

(China Daily January 15, 2004)

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