McDonald to Shut Down 175 Restaurants, in China?

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Last updated at: (Beijing Time) Wednesday, November 13, 2002

McDonald to Shut Down 175 Restaurants, in China?

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McDonald to Shut down 175 Overseas Restaurants

The U.S. fast food giant, McDonald's Corp, announced on November 8 that the company resolved to close 175 overseas restaurants and reduce 600 staff worldwide due to an unsatisfactory performance. Pinpointing the message, related figures in the catering industry believe China-based McDonalds won't close down, while the pace in opening new restaurants may slow down.

McDonald's Corp. Chief Executive Jack Greenberg noted in the announcement that 175 restaurants in 10 foreign countries are scheduled to shut down in the fourth quarter this year, which will mean unemployment for at least 200 workers at home. In addition, the company will make large-scale adjustments in its business in seven Middle East and Latin American countries, withdrawing completely from three markets and cutting down input in other four markets. But Greenberg didn't name the seven countries. The whole plan is slated to complete till the first quarter next year.

As learned, the company now operates over 13,300 restaurants in the United States alone and over 30,000 in the world. Yet, things are getting harder and harder recently. The company's third quarterly earnings declined by 11 percent, indicating a seventh negative increase during the past eight quarters. Statistics published that day show McDonald reaped a profit of US$ 34.5 bn in the last 10 months, up 2 percent over the same period last year. Nonetheless, earnings in its two major markets----the US and Europe fell by 0.6 percent and 2.2 percent respectively.

In comparison with sluggish US chains, business of Chinese McDonald restaurants has seen a big boom. Among top 500 in the catering industry appraised by China Hotel Association last August, McDonald Beijing was rated as No. 1 fast-food restaurant operator, which suggested a go of the Chinese market.

Moreover, McDonald China is relatively a haven free from the global storm of price reduction. Last month McDonald Beijing declared that the Chinese restaurants wouldn't reduce prices. So far, the company has more than 500 restaurants opened in China, an increase of 100 as against the same period last year.

According to data released by Beijing Dongcheng District Taxation Bureau, McDonalds in this district harvested 495 mn yuan from January to July this year, with a tax payment increase by 54 percent to 24.26 mn yuan. Hence, analysts believe no Chinese McDonalds will close considering they always post pretty good results. However, the company is certain to slow down in development in China due to its global development strategy tending to be conservative.

By PD Online Staff Zhu Lizhen

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