Customers waited eagerly for their takeout food outside a McDonald’s restaurant in Beijing, China during the May Day holiday on May 1, 2022. The fast-food giant McDonald’s is increasing its minority share in its China business from 20% to 48% by buying Carlyle’s stake. In 2017, McDonald’s sold off control of its restaurants in mainland China, Hong Kong, and Macao for $2.1 billion in an effort to own fewer restaurants and let franchisees with local market knowledge run their own locations. At that time, a state-owned investment firm, Citic, took the majority stake, while private equity giant Carlyle purchased a 28% stake. McDonald’s retained a 20% ownership of the business.
The financial terms of the deal have not been disclosed, but it is expected to close in the first quarter of 2024, pending regulatory approval. Citic still maintains a 52% stake in the business. McDonald’s CEO Chris Kempczinski stated that the company believes it is the perfect time to simplify its structure and take advantage of the incredible opportunity to capture increased demand and benefit from the long-term potential of their fastest-growing market.
Since 2017, McDonald’s has expanded its presence in China to over 5,500 locations, making it its second-largest market by the number of restaurants. The company aims to increase the number of restaurants to 10,000 by 2028. However, McDonald’s sales in China have struggled since the Covid pandemic started. The country accounts for about 4% of the chain’s total revenue, a decrease of 3.8% from the preceding year, based on Factset estimates. On McDonald’s latest earnings call, Kempczinski noted that China is facing “slowing macroeconomic conditions and historically low consumer sentiment,” despite the chain’s efforts to draw in customers by promoting its burgers.