McD's Preps for China Drive-Thru Boom

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By JOE McDONALD
The Associated Press
Friday, January 19, 2007; 2:21 PM

BEIJING -- McDonald's Corp. opened its first drive-through in Beijing on Friday, launching a partnership with a major Chinese oil company to exploit the country's growing taste for both cars and Western fast food.

The Beijing drive-through is the first in McDonald's venture with China Petroleum and Chemical Corp., which McDonald's China CEO Jeffrey Schwartz said would open 25 to 30 more in the next 12 to 18 months. Both gas stations and drive-throughs are booming as car purchases by newly affluent drivers speed China's change from a bicycle culture to a car culture.

McDonald's and its partner, also known as Sinopec, christened the new two-story Beijing restaurant, set beside a Sinopec filling station, with a ceremony that mixed traditional lion dancers and a Chinese-speaking Ronald McDonald.

Minutes later, Beijing resident Dong Tianwu and his daughter pulled up at the drive-through window in a Chinese-made Xiali compact and bought three meals and drinks.

"It's certainly convenient," Dong said. At a walk-in McDonald's, he said, "if you take a child, sometimes you have to line up for hours and that's a lot of trouble."

China's booming market is a key growth area for the hamburger chain, Schwartz said.

"It's huge. It's a real priority for the global company because of the potential growth in China," he said. "We think drive-throughs are a big part of this."

China's double-digit economic growth has created a burgeoning market for cars, fast food and other consumer goods. The country overtook Japan last year to become the world's second-biggest vehicle market after the U.S., with 7.2 million cars sold, a 37 percent growth.

McDonald's, based in Oak Brook, Ill., opened its first restaurant in China in 1990 and has grown to 780 outlets in 120 cities with 50,000 employees. It faces strong competition from Yum Brands Inc., the industry leader in China with more than 2,000 KFC restaurants and 300 Pizza Huts.

"China is certainly a significant market for McDonald's, and they're focused on seizing that," said John Owens, who follows the restaurant industry for financial firm Morningstar Inc.

McDonald's plans to open about 100 new restaurants in China over the coming year, with more than half equipped with drive-through windows, Schwartz said.

Drive-throughs, which are highly profitable, have been a key part of McDonald's resurgence in the United States in recent years. The company has extended operating hours at many U.S. outlets, operating exclusively via drive-throughs through the night at many restaurants as a comparatively inexpensive way to boost sales.

McDonald's already has 15 other drive-throughs in China, in Shanghai and the southern cities of Guangdong and Shenzhen. The 20-year deal with Sinopec gives it the pick of any sites where the Chinese partner decides to open a restaurant beside one of its filling stations.

Sinopec, the country's No. 2 oil company, has more than 30,000 outlets throughout China and is adding 500 to 600 a year.

"It's a very interesting opportunity for McDonald's," said Owens. "They can cherry-pick the best sites."

Schwartz declined to give figures for McDonald's sales growth in China but said it is "very strong."

The company said this week its sales for Asia, Africa and the Middle East rose 5.5 percent last year. That was above the 5.2 percent growth rate reported for the United States.

McDonald's speeded up its plan to open drive-throughs in China after seeing strong demand at the first, which opened in December 2005 in the southern city of Dongguan near Hong Kong.

"We thought we were two to three years early, and once we opened it, we thought we might be two to three years late, because of how successful it was," Schwartz said.


© 2007 The Associated Press

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