McDonald’s is making a move to increase its ownership stake in its China business from 20% to 48%. In 2017, the fast-food giant sold control of its mainland China, Hong Kong, and Macau restaurants to Carlyle and Citic. Since then, McDonald’s has been successful in doubling its footprint in China to more than 5,500, establishing itself as the company’s second-largest market in terms of number of locations.
The decision to increase its stake in the China business involves McDonald’s buying out Carlyle’s minority share. In 2017, the company sold control of its restaurants in mainland China, Hong Kong, and Macau for $2.1 billion in an effort to own fewer restaurants and allow franchisees with knowledge of local markets to operate independently. Citic, a state-owned investment firm, had taken a majority stake at that time, along with private equity firm Carlyle which bought a 28% stake, while McDonald’s retained 20% ownership.
Financial terms of the recent deal have not been disclosed. Pending regulatory approval, the deal is expected to close in the first quarter of 2024, with Citic maintaining a 52% stake in the business. McDonald’s CEO Chris Kempczinski expressed belief in the opportunity to capture increased demand and benefit from the long-term potential of China’s fastest-growing market.
Despite doubling its footprint in China since 2017, McDonald’s has struggled with sales in the country since the Covid pandemic began. Estimated to account for about 4% of the chain’s total revenue, sales in China have decreased by 3.8% from the year before, according to Factset estimates. However, the chain remains optimistic about drawing in customers by promoting its burgers.