6/09/2016

Will McDonald's Korea Franchise in Korea?

In early April this year, chief executive and president of McDonald’s, Steve Easterbrook, announced that the company was seeking a “strategic partner” in Korea, as part of the company’s implementation of a “global turnaround strategy.”  A report on the announcement can be found at: McDonald's seeks strategic partner in Korea.

At the time, the company did not elaborate as to what exactly was meant by “strategic partner” though McDonald's did say that the company was “open to all possibilities” including a master franchise or joint ventures with local enterprises.  The company commented that of the 119 countries in which McDonald’s operates, 60 percent are executing various forms of strategic management structures including franchises or joint ventures.  For the duration of its almost 30 years in Korea, McDonald’s Korea has been managed directly by headquarters in the United States.

A few days after the initial report, it was reported in the Korea Times, a local English-language newspaper in Korea, that McDonald’s is planning to close its directly-managed stores in not only Korea, but also Japan and Taiwan, and turn these stores into franchise outlets.

Industry analysts speculate that recent slow sales in the region may have forced the company to sell their directly-managed stores as a form of “exit strategy.”  A McDonald's official has, however, said that the company’s shift to a franchise business is simply “a readjustment in its operation,” as its Korean business “has entered a stabilizing stage,” adding that the company still believes that “Asia is the market with greatest growth potential.”

We will update the reader when more is known.
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