By Choi Sung-jin
McDonald's is planning to close its directly-managed stores in Korea, Japan and Taiwan and turn them into franchise outlets, industry sources said.
The world's largest chain of fast food hamburger restaurants plans to sell McDonald's Korea, in consultation with Morgan Stanley, they said. It was the second schedule of business realignment, following one on March 31, when the company was known to be seeking strategic partners to operate jointly its corporate entities in Japan and Taiwan.
McDonald's has been directly managing most of its stores in Asia so far. If and when it selects franchise partners, however, the U.S. fast food giant is highly likely to sell most of its stakes or turn them into joint ventures, just receiving commissions as royalties from affiliated stores, they said.
Industry analysts said that recently sluggish sales in the three East Asian countries might have forced the company to consider an "exit strategy" in the form of closing directly-managed stores.
McDonald's has been reeling from a sales setback in this part of the world over the past decade, with its regional turnover falling 10 percent from 2014 to $6.17 billion last year. Not only has its sales dropped but the company was embroiled in various "unfavorable incidents" in the past few years. In China, a problem arose over chicken in 2014 while the discovery of some debris in hamburgers has reduced sales in Japan by more than 10 percent in the past couple of years.
In Korea, it has come into conflict with unionized part-timers over the minimum wage and poor work environment. A case in point is the unionists' demand for abolishing the "45-second-hamburger" rule, which forces workers to make a hamburger in 45 seconds.
The fast food hamburger restaurant business has lost much of its growth impetus because of the emergence of various local brands and homemade burgers, the analysts said.
A company official said McDonald's is not withdrawing from the Korean market but is shifting to a franchise business because its Korean business has entered a stabilizing stage.
"Korean consumers may be unfamiliar with our shift to the franchise business system because McDonald's has been directly managing almost all its stores here," a company executive said. "Actually, however, we have been engaged in diverse types of franchise businesses in the United States and elsewhere."
The company is just readjusting its operation to analyze the Asian market and enhance its growth potential, he said. "This is far from retrenchment or withdrawal, because we still think Asia is the market with greatest growth potential," he said.
McDonald's is reportedly planning to open to 500 stores in China this year.
McDonald's is planning to close its directly-managed stores in Korea, Japan and Taiwan and turn them into franchise outlets, industry sources said.
The world's largest chain of fast food hamburger restaurants plans to sell McDonald's Korea, in consultation with Morgan Stanley, they said. It was the second schedule of business realignment, following one on March 31, when the company was known to be seeking strategic partners to operate jointly its corporate entities in Japan and Taiwan.
McDonald's has been directly managing most of its stores in Asia so far. If and when it selects franchise partners, however, the U.S. fast food giant is highly likely to sell most of its stakes or turn them into joint ventures, just receiving commissions as royalties from affiliated stores, they said.
Industry analysts said that recently sluggish sales in the three East Asian countries might have forced the company to consider an "exit strategy" in the form of closing directly-managed stores.
McDonald's has been reeling from a sales setback in this part of the world over the past decade, with its regional turnover falling 10 percent from 2014 to $6.17 billion last year. Not only has its sales dropped but the company was embroiled in various "unfavorable incidents" in the past few years. In China, a problem arose over chicken in 2014 while the discovery of some debris in hamburgers has reduced sales in Japan by more than 10 percent in the past couple of years.
In Korea, it has come into conflict with unionized part-timers over the minimum wage and poor work environment. A case in point is the unionists' demand for abolishing the "45-second-hamburger" rule, which forces workers to make a hamburger in 45 seconds.
The fast food hamburger restaurant business has lost much of its growth impetus because of the emergence of various local brands and homemade burgers, the analysts said.
A company official said McDonald's is not withdrawing from the Korean market but is shifting to a franchise business because its Korean business has entered a stabilizing stage.
"Korean consumers may be unfamiliar with our shift to the franchise business system because McDonald's has been directly managing almost all its stores here," a company executive said. "Actually, however, we have been engaged in diverse types of franchise businesses in the United States and elsewhere."
The company is just readjusting its operation to analyze the Asian market and enhance its growth potential, he said. "This is far from retrenchment or withdrawal, because we still think Asia is the market with greatest growth potential," he said.
McDonald's is reportedly planning to open to 500 stores in China this year.
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