I was reading an elementary-school version of Guiness Book of World Records with my son at the bookstore today. Always love those statisticy-best-this-or-that-in-the-world books. One stat claimed that China had more Fast food restaurants than any other country, and the quantities were way above everyone else. As I recall, there were literally five times as many fast-food restaurants in China as the number two contender, the U.S. The restaurants there were the typical big U.S. ones, with KFC leading the pack.
So that speaks to quantity of restaurants, but how does revenue stack up? Specifically, what I’m wondering is: For KFC (and other fast-food restaurants), do the Chinese revenues dwarf revenues from other countries? And if so, are market strategies and expenditures being aligned with the Chinese market? I.e. are big percentages of senior management at places like KFC now those with knowledge of the Chinese market, namely Chinese citizens living in China? Is product development focused more on Chinese tastes?
As a side note, when I was in Pakistan, the slogan at KFC was Colonel Sanders saying “I’m a chicken genius!” Don’t know why that didn’t get adopted here.
According to McDonald’s Investor Factsheet (a PDF file), the US and Europe accounted for approximately 2/3 of all 2002 revenue, and the US alone made up over half of its income. All of Asia/Pacific, Middle East, and Africa are lumped together, and contributed only about 10-15% (eyeballing) of the company’s revenue or income.
If I interpret the data from Yum Brands correctly, there are 5,447 KFC restaurants in the US, compared to 932 in China, so even the numbers are smaler.
What’s interesting, though, is that both McD and Yum’s 2002 annual reports feature a rather Asian-looking kid on their covers, so that probably tells us where their executives think the growth is.
Y’know, if the Chinese don’t watch out, they’ll be on their knees in a generation or two, what with all the fat and calories from fast food. This is a condition I am all to sadly aware of.
I wonder what the book would consider a fast food restaurant. I wonder if they would be consider street vendors that sell the local cuisine fast food. That would make more sense to me.
Hmmm. Now, I know I read that
a) China has 5 times as many fast-food restaurants as the U.S.,
and
b) KFC is the leader there.
This isn’t adding up. I suppose it’s possible I read that KFC is the leader amongst western competitors in the market, but I really don’t recall it that way.
Ah, maybe KFC is the leader, but there are just a ton of sole-proprieter fast-food restaurants. When I think “fast food”, I think “mega-franchise”, but maybe the term really meant “a place where you can get food fast”
I think they surely must be including the myriads of local noodle shops.
IIRC, China basically invented restraunts, and they have been a part of Chinese culture far longer than Western culture. It was only until recently that eating out on an everyday basis became acceptable for normal people in the United States. Fifty, or even thirty years ago, if you said you ate out four nights a week and every day at lunch, people would look at you like you were nuts or ask if you’d won the lottery. But the Chinese have been doing that for centuries.
Plus, there are a billion people there. India has just about as many people, but do not have a strong restraunt culture. Some Hindu sects actively advocate against eating out. So they arn’t really contenders. America can eat all the fast food they want, but they can’t compete with a billion people.
Hmmm. This contradicts what the Guiness Book I read (that inspired this post) said. According to them, the enormous number of fast-food restaurants had sprung up in in incredibly short order, like in less than ten years. They said that the reason for fast-foods appeal in China was because it was inexpensive, allowing one to eat out on a much more frequent basis.
depends on what you define as fast food. China has a lot that would fit the bill but not so many that you would recognize. McD, PizzaHut and KFC are the three dominant foreign players.
Don’t know about now, but maybe 10 years ago 3 of the 5 busiest McD’s in the world were in Hong kOng.
Many of the big three franchises in China are extremely profitable. What that translates into franchise revenue and equipment revenue for the home country I’m not sure about. Really, McD’s makes it’s money on franchise licensing, and depends on the level they set for China times the number of outlets. Outlet size just isn’t that great. I mean 1,000 outlets is nice but no where near the US.
YUM! which is basically the KFC (and maybe PizzaHut) franchising arm in China had the former GM abscond with something like 50-100 million dollars. So maybe profits are what they should be
I’d challenge that. A chicken burger at KFC costs about 10 yuan, IIRC and if that site’s prices are right. That’s not so expensive, but noodle shops are still a lot cheaper. 4 or 5 yuan will get you a big bowl of noodle soup and a bottle of beer. Even though there does seem like there’s a price war going on in China right now, American fast food restaurants are still significantly more expensive than traditional Chinese fast food shops.
In my opinion, and experience, the reason why KFC is so popular in China has to do with the quality of the chicken they use. Now, North Americans might laugh at the idea of having “KFC”, “chicken” and “quality” in the same sentence, but it’s true. Only at KFC will you get a big, fat, chiken breast at a somewhat affordable price.
KFC is definately more popular here than in the States. Everyone here thinks it and McDonalds are the most popular restaurants in America.
It costs 16.50 Yuan to get a regular meal at KFC in China. The pieces are smaller, the drink is smaller(no refills anywhere in China except Subway), and the chicken is lower quality than the States, but the Chinese love it.
16.50 isn’t too bad a price for a quick meal in China. You can pay about 12 Yuan for a good meal at a regular restaurant.
I have no idea how much the PRC takes of their profit, but I wouldn’t be surprised it it was a ton.
Hah, if anything, McDonalds and the ilk were considered luxury foods in China during the 80’s and 90’s. Even now, they really only compete due to the relative novelty factor of western food. As a comparison, here in Hong Kong, a decent lunch would run around 25HK Dollars or $3.5 USD. A cheap lunch can get as low as 12 HKD which is about $2 USD. McDonalds is $27 - $28 HKD. In China, its about half this price, somewhere around $3 - $1 USD for a meal.
Thanks all for the good info. One thing I’m particularly curious about is how much senior management at KFC and such are Chinese citizens living in China. I tend to think of these as “American companies”, and now I’m wondering how true that is anymore. Any inside experience?
One other interesting thing in the article. I always believed that McD’s and KFC were franchise only, but it seems that I was wrong. When you think about it, it makes sense for the corporation to break the new ground, otherwise the franchise owners would be taking a huge risk.
Most of the franchises are owned by Chinese citizens/companies. YUM! is in the same office building as me. Definately some of the top management are Westerners 'cause I’ve seen them. Not many though. Have several ABC’s and returning Chinese. I’d say like most of this type of investment/management company in China there are up to 10 members of upper mangement are Americans and the rest locals.
by coincidence I went to KFC today for the family takeaway special. I go there about 2x per year, so anyhoo. Sat lunchtime. all tables full, people waiting for tables, 10 deep to order food with all lines operating. It struck me that I have never ever even once seen a caucasion working in any kind of capacity at a fast food franchise in china ever. No obvious owners or managers, or even visiting people. Now there may be some overseas Chinese that are not obviously non-locals, but I’ve never crossed paths with one except a couple that work at the Yum! China corp hq in my office tower.