McDonald’s Corp. will maintain its breakneck expansion in China despite weak consumer sentiment, as the burger chain follows its rivals in seeking more growth in lower-tier cities hungering for western fast food.
The Chicago, Illinois-based company seeks to open about 1,000 restaurants in China this year, matching the pace of new store openings in 2023, which has been a record for the company in the country.
That will account for nearly two-thirds of the new restaurants McDonald’s plans to open across all markets outside the U.S., Chief Financial Officer Ian Borden said in an analyst call.
“We think there’s going to be an opportunity for us to continue to build out development and penetration in that market to many places where we don’t really have McDonald’s presence,” Chief Executive Officer Chris Kempczinski added. “We’re very much on track from our development aspirations, and we would expect to do something similar in 2024 from that standpoint.”
The company also reiterated its goal of having more than 10,000 restaurants by the end of 2028.
Competitor Yum China Holdings Inc. already boasts more than 14,000 outlets in China, and plans to boost store numbers to 20,000 by 2026.
McDonald’s is just one global chain looking to expand its market share in lesser-known Chinese cities. Competition is stiffening as economic woes lead consumers across the country to tighten their belts — making cheap eats, like fast food, more appealing. Roughly 60% of new openings for KFC restaurants in China were located in lower-tier cities in the first nine months of 2023, the state-owned People’s Daily reported in December.
McDonald’s executives said they saw sales in the Chinese market getting more reliant on promotional campaigns, with Kempczinski saying the company would “do what we need to do to maintain our competitiveness in that market.” Consumer brands in China have been doling out sizable discounts and promotions in the past year — with price wars breaking out as they compete to lure shoppers trying to stretch every dollar.
McDonald’s in December raised prices on some of its products by an average of 3%. Late last year, the companyalso agreed to buy Carlyle Group Inc.’s minority stake in the partnership that runs its business in China, Hong Kong and Macau for an undisclosed price. McDonald’s increased its stake in the partnership to 48% from 20% as part of the deal.