KFC McDonald's Joined in raids

Recently, KFC’s franchise policy has been adjusted, and the starting fee for the franchise fee will be reduced from 8 million yuan to 2 million yuan. This is the first time KFC has declined since 1999 when it launched a franchise business in China.

When McDonald's dropped 2.5 million yuan in franchise fee, KFC had said "never lower the threshold." This adjustment, according to Guo Geping, president of the China Chain Store Management Association, is certainly related to KFC’s expansion strategy.

Surprise attack

Although McDonald's ranks first in the United States, KFC ranks seventh, but in the Chinese market, KFC has lagged far behind opponents with 1,500 chain stores (more than double McDonald's). In terms of turnover, McDonald's is also behind KFC.

At the end of 2004, McDonald's opened franchise rights in more than 30 cities including Chongqing, and so far it has received more than 1,000 applications. However, after the layers of assessment, McDonald's announced that by June 2006, 10 people in China may be eligible to operate McDonald's restaurants, and only limited to secondary cities.

In fact, as early as 1999, KFC began to implement "zero-point joining" franchise, has more than 60 franchise stores. However, in time and again with McDonald's franchise competition, KFC began to realize that he is alienated from investors.

A KFC franchisee told the reporter: “In the past, KFC had required investors to invest 8 million yuan as initial fee, storefront decoration, equipment introduction and other expenses; the first franchise period was at least 10 years; all franchisees did not enjoy regional specificity. The franchise program is limited to areas with a population of more than 150,000 and less than 400,000 and per capita annual consumption of more than RMB 6,000.” The source told reporters, “While McDonald's has a small number of franchise stores, the price is obviously superior to that of KFC and many The waiters have turned to McDonald's."

"After the adjustment, the growth rate of KFC's new franchise will surely be faster," said Guo Geping.

Road

For the unprecedented decline of RMB 6 million, there are still doubts in the industry.

Yum Dhamma, Director of Franchising Development Department of Yum! Brands (parent company of KFC) in China, said: “'Antage fee' refers to the reference price for purchasing a mature, operating KFC restaurant based on some composite indices, but the cost is It is not fixed, and the most important one is the geographical location and benefits.The shop with good operating efficiency still needs 8 million yuan to join in. Only some locations are not bustling, and the restaurant with less investment in the early stage may have a success rate of 2 million yuan. ”

At the same time, KFC announced that joining the city is no longer confined to the third and fourth tier cities. In addition to Beijing, Shanghai, Guangzhou, Shenzhen and other first-tier cities, Suzhou, Wuxi and other areas with joint ventures, and Zhejiang Province has not yet opened the franchise. Outside of the business, all the other second and third-tier cities are let go.

Wang Qun, the senior director of the public relations department of Yum! China, said that, theoretically speaking, minus the branches of the aforementioned four cities and some joint ventures, about 900 of the 1,500 branches in mainland China could be transferred.

Since the transfer price can be traded between 2 million and 8 million yuan, it may attract the interests of many investors. Taking Shenyang as an example, the operating conditions of the 30 KFC restaurants are very good. If all of them are changed to franchise stores, KFC alone will recover at least 200 million yuan. Hundreds of transfers across the country, the amount of money will be very large.

Zhu Mingxia, a professor at the University of International Business and Economics, believes: "The franchise has relieved the financial pressure and allowed KFC to obtain more funds and energy to open new stores."

As franchisees, the most concerned and most sensitive is the return on investment. Zhu Yuanhe, senior vice president of McDonald's China Development Co., Ltd., said that McDonald's generally recovers costs and makes profits within 5 years. For poor management, McDonald's will conduct repurchase; and KFC’s relevant person in charge told reporters that they are not expected to join the franchisees. Estimates, do not promise, rely on franchisees to determine the project's reasonable payback period.

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McDonald's, with its number of stores at a disadvantage, may feel pressure, but it seems that it has not been "disordered." According to a person in charge of McDonald’s China’s senior management, McDonald’s will also implement franchising in accordance with established guidelines. The previously-known “McDonald's lower initial fee” is also purely non-existent.

A series of events this year show that McDonald's is reviving its performance in China through another channel.

According to sources from McDonald's headquarters, McDonald's plans to invest 1.8 billion US dollars in 2006 to open 800 stores worldwide, of which 125 new stores will be settled in China.

This includes McDonald's recent introduction of the fist business model "drive" restaurant. “McDonald’s in the Chinese market after more than 10 years of exploration, has finally found a new direction of development. If the traditional restaurant is the first generation of McDonald's products in China, then the “get off” is the second generation of McDonald's products, which It will be the focus of McDonald's future development in China. We want to open as many car shuttle restaurants as possible, said Shi Lesheng, CEO of McDonald's (China) Co., Ltd.

The “Drive-In” restaurant usually has 3 windows. The driver can order food in the first window in the car, pay for the money in the two windows, then take things in the third window, and then drive away. The whole process is not More than 10 minutes. Similar to the car restaurant, McDonald's has opened several places in Shenzhen, Shanghai and other places in China.

Xeroxen said that there are about 13,000 McDonald's stores in the United States, with an average of 65% of sales coming from "get-through" orders. The "get-through" is McDonald's most important cash cow. Now, the Chinese auto market continues to expand, and the per capita car occupancy rate continues to rise. In the next three years, McDonald's plans to open 12 to 15 “go-fast” restaurants each year, and has selected 70 potential stores.