McDonald’s Prepares to Double Its Footprint in China

By Douglas A. McIntyre Published Dec 4, 9:50AM EST

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McDonald’s Prepares to Double Its Footprint in China — © robas / Getty Images

McDonald’s Corp. (NYSE: MCD | MCD Price Prediction) has made a deal to buy out one of its joint venture partners in its operations in China. It has taken over a 28% stake owned by private equity firm Carlyle. The arrangement puts McDonald’s ownership level at 48%, which effectively gives it control of the business. The transaction values the entire business at $6 billion.

The valuation seems low, given the expansion potential in the world’s largest country by population. CEO Chris Kempczinski approved the deal because his company wants to “further benefit from our fastest growing market’s long-term potential.”

McDonald’s has about 40,000 stores in the world. It has just over 13,000 locations in the United States. Its most successful overseas markets, by store count, are China, Japan and the United Kingdom. The U.S. expansion may be difficult. McDonald’s growth in America will be capped by saturation based on half a century of building store count. (See the most popular fast-food chains in all 50 states.)

McDonald’s in China

What exactly are McDonald’s long-term plans in China? The number of stores in the country has approximately doubled since 2017 to 5,500 locations. According to Reuters, management aims to reach 10,000 stores by 2028.

China could supersize McDonald’s financial results. Despite its size, McDonald’s posted a revenue gain of 14% to $6.7 billion in the most recent quarter, and net income rose 17% to $2.3 billion. Its stock price will rely on continuing the pace of expansion. So far in 2003, that pace has been weak, up only 8.5% to about $298, while the S&P 500 is about 20% higher.

What are McDonald’s risks in China? They are probably geopolitical. The United States has started blocking some business transactions by American-owned businesses, particularly those that make advanced technologies. China could retaliate, which puts every U.S.-based company at some risk, even if it is not in the tech sector. McDonald’s could be on the list of targets.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.