3 December 1995

Press Index

Hong Kong -- The head of McDonalds's Corp.'s China unit can't wait for the day when the golden arches will tower over nearly every street corner of nearly every mainland Chinese city.

"I want you not to have to walk more than three minutes to get something to eat. We want that you can get there any time of day, whether by walking or driving, whether for breakfast, for lunch or dinner," McDonald's China Development Co. President Marvin Whaley said.

But Mr. Whaley says McDonald's won't be counting its McChickens before they're hatched and will pursue a reasonable and sustainable rate of growth within the limits of its resources.

Still, after sluggish negotiations with mainland authories beginning in the late 1980s, McDonald's rise in China has been nothing short of meteoric.

From its first China restaurant, which opened just across the border from Hong Kong In October 1990, the company founded by Ray Kroc says the mainland market is now its largest growth area outside of the U.S.

McDonald's expects to have 61 restaurants in 11 Chinese cities by the end of this year, 60 next year and add 300 by the year 2000. Beijing alone will have sprouted 10 new restaurants in 1995, bringing its total to 17.

The Shenzhen Special Economic Zone now has 13 restaurants, and after a new restaurant opened on Sunday, the Guangdong-Foshan area has nine.

Following its buyout of the company's Hong Kong partner in April, McDonald's is working to bring its China development unit and its Hong Kong operations closer, eventually under one rubric.

The combined entity will operate between 500 and 600 restaurants by the end of the century, with Hong Kong adding an additional 100 stores to its currents 98.

"You walk around Hong Kong and see so many restaurants. I look around and see empty space," Mr. Whaley said.

Mr. Whaley says McDonald's experienced the same frustrations as it did elsewhere in establishing its mainland presence. One bump on the road has been its continuing tussle with central and Beijing government officials over the fate of its flagship restaurant on the corner of Beijing's busiest shipping street.

After signing a long-term lease with the Beijing government for the prime location, McDonald's government for the prime location. McDonald's was told it had to move the store to make way for a massive development by Hong Kong tycoon Li Koshing. While buildings have been torn down all around the restaurant site, "we're still open for business," Mr. Whaley says.

Mr. Whaley says the media have mistakenly overblown what is essentially a commercial and urban-planning decision into a soap opera pitting foreign business against the Chinese government and a Hong Kong billionaire. He says McDonald's fully expects to give way to progress and knows it will receive an equitable settlement.

"Things are very complicated in China because they're trying to do so much," he says. "We'll come to an agreement that is suitable for us and suitable for them. We have a very good working relationship with the city. They'll compensate us."

Looking beyond problems like the Beijing store, Mr. Whaley acknowledges it's hard for McDonald's to contain its enthusiasm about China's potential.

He says the only obstacle to the corporation's growth on the mainland is the availability of management personnel, who often have to be poached from Hong Kong and other world-wide McDonald's operations.

"We're excited about China because China is in a growth position," Mr. Whaley says. "In China, if we've got two stores, we've only got two managers to choose from. We have to go outside to get the management. The biggest thing that affects growth is our ability to get people."

McDonald's goal on the mainland, as elsewhere, is to create a local, self- sufficient entity with as few expatriate staffers as possible, Mr. Whaley says. The company's strategy for expatriate employees for them "to work themselves out of a job" by training locals to replace them.

The company has forged joint-venture ties with powerful mainland partners. Beijing General Corporation of Agriculture, Industry and Commerce in the north and Guangdong International Trust and Investment in the south, and used its corporate know-how and resources to create infrastructure where none existed previously.

Back to Media Page