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McDonald’s looking for local franchise partners

HONG KONG — McDonald's Corp is planning a sale of 20-year franchise rights in Malaysia and Singapore that could collectively fetch at least US$400 million (S$545 million), people with knowledge of the matter said.

Employees remove a trash can outside a McDonald's restaurant. Photo: Reuters file photo

Employees remove a trash can outside a McDonald's restaurant. Photo: Reuters file photo

SINGAPORE — McDonald’s is seeking franchise partners for its restaurants in Malaysia and Singapore as part of efforts to move away from direct ownership and operation in Asia.

“McDonald’s has taken the decision to adopt a development licensee model for the Malaysia and Singapore markets in order to enable focused investment in the brand and speed up growth in these key Asian markets,” said a Singapore-based spokesperson at McDonald’s on Tuesday (July 26).

McDonald’s said it was negotiating with “suitable candidates” for the Malaysia and Singapore markets, but did not provide details or a timeline.

Bloomberg News earlier reported that the sale of McDonald’s 20-year franchise rights in Malaysia and Singapore could collectively fetch at least US$400 million (S$543 million).  Suitors for the fast-food operations in the two South-east Asian markets have begun sounding out banks for financing, sources told Reuters and Bloomberg. A potential bidder is in talks with lenders for as much as US$300 million in funding, said one source.

The transfer to a developmental licensee structure reflects McDonald’s overall turnaround strategy led by president and CEO Steve Easterbrook, which includes a long-term goal to be 95 per cent franchised globally. McDonald’s has been using the development licensee franchising model for more than 30 years and in more than 65 markets worldwide.  

Singapore and Malaysia’s immediate neighbours in Thailand, Indonesia and the Philippines are all development licensee models, as is South India and the entire Middle East. 

The potential sale of the franchise rights is not expected to affect consumers in Singapore and Malaysia, said industry experts. 

“Essentially the sale does not affect confidence from consumers because in the public’s perspective, the changeover is seamless and would seem the same to them,” said associate professor Ang Swee Hoon, Department of Marketing, NUS Business School. 

“McDonald’s has strict guidelines: All employees and management have to adhere to the rules set, while the menu, (staff) uniforms, (and) store design have to be uniform, and these are set by the HQ,” she said.In 2015, McDonald’s shared its global plan to unlock a faster rate of growth through a review of franchising and ownership models around the world.

The Big Mac-maker also announced in March this year its intention to identify strategic partners that will be able to add value and unlock growth potential in key markets throughout Asia. It is revamping its ownership models throughout Asia, including plans to sell operations in China, Hong Kong and South Korea.

“Asia represents a significant area of opportunity for McDonald’s to blend our global quality standards with local insights and expertise from partners who share our vision and values,” said Mr Easterbrook in March.

“This will allow McDonald’s to accelerate our growth and scale faster across diverse markets ... We’re in the midst of transforming our business and taking a strategic and thoughtful approach to enhance our ability to grow around the world. These actions build on our turnaround efforts and will advance local ownership, enable faster decision-making and achieve restaurant growth.” AGENCIES, ADDITIONAL REPORTING BY ANGELA TENG 

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