REUTERS

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McDonald's Shakes Up Taiwan, China Strategy

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McDonald's Corp. is aiming to sell its stores in Taiwan to a franchise operator and expand its franchise business in China, a spokesman said Thursday, as the company tries to turn around its fortunes in Asia and cut costs globally.

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McDonald's uses franchisees and licensees in its more mature markets, like the U.S. But elsewhere it has largely relied on a more costly model of operating its own stores to oversee their quality and growth.

The Oak Brook, Ill., company's new chief executive, Steve Easterbrook, has been overhauling its U.S. business, including by selling more restaurants to franchises and eliminating management layers. Now he's turning to the international market in an effort to boost sales and profits.

Mr. Easterbrook has said global franchise ownership, including the U.S., will expand to 90% from 81% currently, and that the company will sell 3,500 restaurants to franchisees by 2018.

McDonald's is looking for a franchise candidate to run its 413 Taiwan stores, which it has operated itself since entering the market more than three decades ago, the spokesman said.

McDonald's operated all its stores in China for more than two decades, until 2008 when it turned to franchising. By the end of last year, around 20% of its 2,000-plus stores in China were franchised, and the company plans to continue increasing the licensees and franchisees, the spokesman said. "Franchising is about growth and economic efficiency," he said.

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McDonald's sales in Asia tumbled after problems with one of its suppliers last year affected its available menu items and crippled sales. Sales at stores open more than a year Japan, where McDonald's has also faced f ood contamination scares, and China declined 32.3% and 4.8%, respectively, in the first quarter, Kevin Ozan, McDonald's chief financial officer, said in an April earnings call. The company says it is still aiming to pull back consumers that it lost last year.

Executives also said previously that McDonald's would close 700 underperforming stores primarily in Japan, China and the U.S. Mr. Easterbrook said the company expects China sales to return to "a normalized level of performance by midyear."