War for stomach shares – McDonald’s new franchise move heats up fast food market

McDonald's China hopes its new franchise arrangement can keep it ahead of other brands. Yin Aidi/IC Photo

By Chu Meng

McDonald’s launched its new franchise business model in Yunnan Province last week. The move has been seen as an ambitious strategy to localize and expand the successful chain store.

Vice President Ren Jianmei of Kunming-based North Star Enterprise, a company with real estate and jewelry holdings, signed the first developmental franchise agreement with McDonald’s last Tuesday.

China is the only market in the world where McDonald’s maintains direct restaurants, traditional franchises and developmental franchises at the same time.

Ren said his company’s objective is to take over McDonald’s existing 11 stores in Yunnan Province within the next 10 months, and to build 20 new stores during the next five years.

Wang Jianhui, director of McDonald’s China’s public affairs, said there are big differences between traditional and developmental franchises.

Traditional franchises are assigned to specific locations by McDonald’s. The company selects the address, rents the store property from the landlord and leases it to the franchisee. The store equipment, furniture, decoration and renovation costs are paid by the franchisee. Contracts normally last for 20 years, and the franchisee pays a 4 percent franchise fee and 9 percent leasing fee.

Developmental franchises delegate much more power and freedom to the franchisee. McDonald’s grants the right to the local franchisee to take over all stores in a specific area, and to own and operate their own new stores in that area.

In this mode, McDonald’s has no role outside employee training, Wang said.

Loosened yuan bond market – McDonald’s sets benchmark for China with yuan bond sale

McDonald’s Corp’s yuan bond sale, the first by a foreign company in Hong Kong, may pave the way for a new global debt market as China seeks to capitalize on its status as the engine of the world’s economic recovery.

McDonald's has expanded faster in China than anywhere outside the US. IC Photo

McDonald’s, which opened its first 1,000 restaurants faster in China than in any other country outside the US, sold 200 million yuan of 3 percent notes due in September 2013. Bentonville, Arkansas-based Wal-Mart Stores, the world’s largest retailer, said in March it was considering selling bonds in yuan.

As the fastest-growing major economy, China changed its rules in February to let foreign companies issue yuan-denominated bonds through Hong Kong to strengthen its position as a financial center and promote the Chinese currency for global commerce.

Yuan bonds issued by Chinese companies have returned 6 percent this year, their best performance since 2005, according to a Bank of America Merrill Lynch index tracking 1.38 trillion yuan of debt.

“This is going to become a popular trend,” said Donald Straszheim, a Los Angeles-based senior managing director and head of China research at International Strategy & Investment Group. “There are hundreds of global companies wanting to do more business in China and they will want to be involved in the country’s evolving credit market.”

Nuggets addictives could fry McDonald’s business

McDonald's says its chemicals are not harmful. CFP Photo

By Han Manman

The Food and Drug Administration announced an investigation Tuesday into the allegedly harmful presence of two chemicals in McDonald’s chicken nuggets.

Experts at the administration would only speak to confirm basic details about the acceptable quantities of these two chemicals in foods.

According to the national standard on food additives, the chemical additives tertiary butyl hydroquinone (TBHQ), a petroleum-based product, and dimethylpolysiloxane, an anti-foaming agent, can be used in meat and fat.

However, the law mandates a ratio of less than 0.2 grams of these chemicals per kilogram of food.

Chinese authorities are seeking to determine the exact quantities of the chemicals present in McDonald’s McNuggets. The food giant has been reluctant to disclose any details about its manufacturing process.

News of the chemicals first broke with a CNN report in late June that claimed US McDonald’s chicken nuggets contained traces of two chemicals. The food giant’s China division admitted Monday that its domestic products contained the same additives.

It didn’t take long for public fear to spread from the US, and domestic media went wild with the story.

However, McDonald’s said the additives are “safe and harmless.”

Seeking to reassure Chinese consumers, McDonald’s responded with a statement late on Monday saying its McNuggets, though they contain the two additives, are safe to eat.

“The amount of TBHQ and dimethylpolysiloxane meet the standards for food additives under Chinese regulation. The food McDonald’s supplies does no harm to consumer health,” it said.

But many McDonald’s junkies are passing on their McNuggets.

Experts said additives are an indispensable part of food processing, and food cannot be produced, shaped or stored without additives. However, their dosage must adhere to standards.

“Most food additives are used to improve taste or fulfill a processing need. But regularly eating foods with those additives could pose a risk if their chemicals were to accumulate in the body,” said Liu Qingchun, deputy director of nutrition at the General Hospital of Armed Police Forces.

Beijing is conducting its own food safety investigation independent of the central government.

Guo Zixia, vice director of Beijing Municipal Institute of Health Inspection (BIHI), said although there is a national standard, the method of testing whether foods meet it has never been standardized.

Guo said the case has prompted experts at the Ministry of Health to start standardizing how food additives are measured across the country.

Joy found beyond the burgers

By Wang Yu

Most fast-food eaters know that their burgers and chips are nothing but high-calorie time savers. But those meals are a source of happiness for some toy collectors.

Fast-food restaurants have been around in China for 20 years. Most young adults can still remember their first visit to a fast-food restaurant when they begged their parents for whichever meal came with a toy.

Some adults are still chasing those moments of childhood.

Using the Internet, collectors are tracking down the lost pieces in toy series they started collecting in primary school.

Photos by Song Nannan

McDonald’s opens Shanghai school

A pedestrian passed a McDonald’s billboard in Beijing. China is McDonald’s fastest-growing global market, said the company’s president for Asia, Pacific, Middle East, and Africa. Gettey Images

SHANGHAI — China’s newest university has no football field or fancy library. For inspiration, it looks not to Confucius, but to Ronald McDonald. But Shanghai’s Hamburger U. aspires to be a leader in higher learning for ambitious Chinese managers.

McDonald’s Corp. inaugurated its first Hamburger University in China yesterday to train new generations of managers as foreign companies step up efforts to develop and keep Chinese talent.

China is McDonald’s fastest-growing global market, said Tim Fenton, the company’s president for Asia, Pacific, Middle East, and Africa. He said the country’s $300 billion-a-year “informal eating out’’ market is expanding at an annual rate of 10 percent, compared with 2 to 3 percent in the United States.

“It’s because of China’s strategic importance to McDonald’s that we have chosen to have our new Hamburger University in Shanghai,’’ Fenton said. “We have to get ahead of the people curve.’’

Foreign companies in China are focusing on developing local managers but face pressure to keep them as they move on for better opportunities.

Yesterday, the American Chamber of Commerce said a survey of 202 multinational companies found they are changing strategies to adapt to rising costs and high employee turnover.

Companies need to offer better opportunities to keep talented employees, said Joni Bessler, a partner at consulting firm Booz & Co., which helped to compile the survey. “Innovation is required to get people to stay for more than two years,’’ said Bessler.

http://www.boston.com/business/articles/2010/03/31/mcdonalds_opens_shanghai_school/

Subway eyes match against McDonald’s

US sandwich chain Subway hopes to match McDonald’s in China in terms of total stores within 10 years, Subway president Fred DeLuca said Monday.

DeLuca, who founded Subway in 1965 at the age of 17, said China had great growth potential and his company is targeting 500 additional restaurants in the next five years, with 35 to 50 set to open this year.

“If we accomplish that, then maybe in another five years we may be able to match McDonald’s store count,” DeLuca said.

The two chains are currently neck and neck in total stores worldwide, with about 32,000 each.

(Agencies)