McDonald’s is increasing its minority stake in its China business from 20% to 48%. This move comes as the fast-food giant doubles its footprint in China to more than 5,500 restaurants, making it the second-largest market by number of locations. In 2017, McDonald’s sold control of its restaurants in mainland China, Hong Kong and Macau to Carlyle and Citic for $2.1 billion. The deal was part of a broader strategy by McDonald’s to own fewer restaurants, leaving franchisees with knowledge of local markets to run their own locations.
Financial terms of the deal announced Monday were not disclosed, but it is expected to close in the first quarter of 2024 pending regulatory approval. Citic still retains its majority stake in the business at 52%. McDonald’s CEO Chris Kempczinski stated that he believes there is no better time to simplify their structure, given the tremendous opportunity to capture increased demand and further benefit from China’s long-term potential.
However, McDonald’s sales in China have struggled since the Covid pandemic began. The country accounts for about 4% of the chain’s total revenue, down 3.8% from the year prior according to Factset estimates. On McDonald’s latest earnings call, Kempczinski noted that China is dealing with “slowing macroeconomic conditions and historically low consumer sentiment,” although the chain is drawing customers by promoting its burgers. Despite this setback, McDonald’s continues to aim to reach 10,000 restaurants by 2028 in this rapidly growing market.