McDonald's Corp is reported to have narrowed the potential buyers of its China franchise to State-owned CITIC Group Corp and US-based private equity firm Carlyle Group LP, and an analyst said he is bullish on the potential transaction.
"The potential purchase by CITIC and Carlyle is a positive incentive for McDonald's, as this would boost the expansion of its stores and its business scale, and stimulate the capital market," said Zhu Danpeng, a researcher at the China Brand Research Institute.
"The acquisition would greatly assist McDonald's expansion in third- and fourth-tier cities in China, and boost its localization strategies."
But McDonald's China refused to comment on the details of the deal.
McDonald's plans to sell its stores in the Chinese mainland and Hong Kong, with a reported transaction value of 2 billion US dollars. The fast-food chain said there isn't any detailed schedule on the deal, and it will announce the details once they have been confirmed.
Since the announcement that McDonald's would introduce strategic investors to its China franchise in March, many Chinese enterprises, including Beijing Tourism Group and Sanpower Group, have shown their interest in making an investment.
Since entering the Chinese mainland in 1990, McDonald's now operates more than 2,200 stores in the mainland. Yet, with an emerging middle class and their rising income, some local catering chains and foreign cafe chains are taking customers away from fast-food operators.
From July to September, McDonald's saw its net profit fall by 3 percent in the Chinese mainland year-on-year, according to its earnings report.
McDonald's is upgrading its hardware and the overall customer experience to attract more diners. In early December, McDonald's upgraded its first restaurant in Shenzhen with improvements to its digital hardware and offering more personalized products.
The upgrading includes the launch of a separate ordering and pickup areas, a touch-screen ordering machine with a personal touch for customers to fine-tune their orders, such as "no ice" for drinks or "no sauce" for burgers. In addition, McDonald's changed its menus to live screens with a combination of pictures, videos and words, and stores can change their preferred menus.
By the first half of 2017, the fast-food chain said it is estimated that approximately 1,000 restaurants in 13 cities nationwide will complete their hardware upgrade, accounting for 40 percent of its outlets in the Chinese mainland.
"With the rise of digitalization and O2O development, the lifestyle of Chinese consumers has been changing constantly. We plan to deliver better experiences at our restaurants, and put more choice and control in the hands of our customers," said Phyllis Cheung, CEO of McDonald's China.
McDonald's archrival Kentucky Fried Chicken launched its first artificial intelligence-enabled store in Beijing last week, and the company said it planned to further expand its layout of smart restaurants.