McDonald’s Strategies: East Vs. West

McDonald’s Corp. (NYSE:MCD) has differing strategies in the U.S. and China, two of its main markets. While the U.S. market is heavily reliant on the franchisee model, in China, McDonald’s has been cautious and used self-owned restaurants as the key to its growth – it has only 36 franchised stores in the country compared to the 1400 stores it owns.

“Right now, it’s a low percentage. But I think that over a very short time, you can get to quite a good mix of stores being franchised,” McDonald’s China Chief Executive Officer Kenneth Chan said while speaking to reporters outside a conference Tuesday.

Concerns of maintaining quality and finding the right partners may be the reasons for the low adoption of the franchisee model in China. “We’re not looking to be the largest in terms of the number of restaurants … but we want to be the best-quality, best-service restaurant,” Chan said. “Thus, we will get more market share versus our competitors even though we have fewer restaurants.”

Last year the chain opened more than 200 new stores in China, a record, and plans to ramp up investment by more than 50 percent this year by adding 225-250 new outlets. It faces competition from Yum! Brands, Inc. (NYSE:YUM), which operates the KFC, Pizza Hut, East Dawning and Little Sheep brands in China.

Here’s how shares of MCD and YUM recently traded:

McDonald’s Corp. (NYSE:MCD): MCD shares recently traded at $99.82, up $0.16, or 0.16%. They have traded in a 52-week range of $72.89 to $102.22. Volume today was 1,302,169 shares versus a 3-month average volume of 5,312,770 shares. The company’s trailing P/E is 18.93, while trailing earnings are $5.27 per share.

Yum! Brands, Inc. (NYSE:YUM): YUM shares recently traded at $65.79, up $0.23, or 0.35%. They have traded in a 52-week range of $47.15 to $65.99. Volume today was 536,897 shares versus a 3-month average volume of 3,695,140 shares. The company’s trailing P/E is 24.01, while trailing earnings are $2.74 per share.

To contact the reporter on this story: Alex Capel at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com