McDonald's Nudges Up China Franchise Experiment

McDonald's (NYSE: MCD) is inching up its franchising experiment in China. Six years ago the company launched a pilot program in the Middle Kingdom, where both it and China's legal structure could learn how to franchise in this emerging market. With 1,000 plus company-owned stores by its international master licensee, McDonald's in China now has three franchisees that own six franchises.

McDonald's had asked interested parties to prepare at least 2 million yuan ($293,000) to cover equipment purchases, joining fee and other expenses, a spokeswoman said. She added that the company would initially experiment with new franchisees in Jiangsu province near Shanghai.

"The whole franchising process is still on a trial run," she said in a telephone interview, declining to say how long the trial expansion would be confined to the Jiangsu. - Reuters

Being a store in Jiangsu is like being a factory outlet store somewhere outside of Los Angeles, say, on the way to Riverside. Its presentation and reduced prices do not influence the store on Rodeo Drive, Los Angeles. Likewise, the Jiangsu locations benefit from China's most populous city, Shanghai, being next door. But at the same time, the Jiangsu franchises are positioned so that they will not ruin a critical market for the brand if the franchises become rogue.

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Related reading:

• McD Opens Hamburger U, Shanghai
• Burger King Stays Small in China, Despite Big Goals
• The Way of the Franchise In the People's Republic of China
• James Bryant - Franchising in China, Story of Subway (Podcast)
• Where Franchising Is Going in 2009, by Jerry Wilkerson