Summery
· McDonald's is likely to reach a final deal to sell its China-owned stores by the end of summer.
· Cheesecake Factory is likely to enjoy modest success as it launches its first China stores.
· McDonald's move is the larger story and focuses on a drive to shed direct ownership of its China stores and move to a franchise-based model that has underpinned its success in the west.
A couple of restaurant stories are in the headlines today, one featuring fast-food veteran McDonald's (NYSE:MCD) as it seeks a new China partner, and the other starring the popular US Cheesecake Factory (NASDAQ:CAKE) chain as it prepares to open its first China restaurant. The McDonald's story is clearly the larger of the stories and focuses on a drive to shed direct ownership of its China stores and move to a franchise-based model that has underpinned its success in the west. Meantime, I have to admit that one of my main reasons for writing about Cheesecake Factory is that I used to be a big fan of the chain, though the remote location of its first China restaurant means I probably won't dine there.
Let's start with McDonald's, which is reportedly talking to a number of Chinese bidders, including China National Chemical Corp (ChemChina) and New Hope Group, as it looks to sell its 1,650 self-owned China-based restaurants (English article). ChemChina seems like an odd buyer, but the reports point out it does have some restaurant experience through its ownership of a Beijing-based noodle chain. New Hope, meantime, is a Beijing-based conglomerate with a wide range of food-related assets.
The latest reports also say that US private equity giant KKR may join one of the bids for McDonald's China stores, implying that the source of this particular news is KKR itself. In April, a separate report said that other big private equity firms including TPG, Bain, MBK and Baring were also interested in bidding on McDonald's stores in China, as well as similar company-owned stores in Hong Kong and South Korea.
