McDonald's Targets Partnership with Private Equity Firms for Asian Expansion

Apr 17, 2016 06:32 AM EDT

McDonald's Corp is targeting private equity firms for its planned sale of 2,800 North American restaurants.

(Photo : Getty Image) The American fast food chain aims to adopt a new business model across Asia, where competition among fast food retailers is intense, by bringing in partners to own the franchise-operated restaurants.

McDonald's Corporation is targeting private equity firms such as MBK Partners, TPG Capital Management, Bain Capital and state-owned China Resources Holdings for its planned sale of 2,800 North Asia restaurants, insiders familiar with the issue told Reuters.

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The company announced last week that it is looking for potential strategic partners to help in its key growth market across Asia including Taiwan and Japan to develop value and unlock growth opportunities within the regions.

The American fast food chain aims to adopt a new business model across Asia, where competition among fast food retailers is intense, by bringing in partners to own the franchise-operated restaurants.

A number of restaurant operators have already adopted the so-called franchise model. McDonald's aims to be 95 percent franchised, based on its official statement on March 31.

The fast food chain sought the professional expertise of investment and advisory firm Morgan Stanley to take charge of the sales across mainland China, Hong Kong, and South Korea. The sources further revealed that official sales are likely to start in three to four weeks.

Before this, Illinois-based McDonald's Oak Brook and its advisers were reportedly creating a list of potential strategic partners likely to participate in the auction. Asset management firm Baring Private Equity Asia is also likely to be invited to the auction, a banking source told Reuters.

Franchised partners may own up to 100 percent of the restaurant's stake in each McDonald's markets. They will also be liable for future capital spending. McDonald's, on the other hand, will get a one-time franchise payment and ongoing royalty fees, which is between 3 and 5 percent of yearly turnover.

McDonald's, however, declined to add further detail to its March 31 statement. Morgan Stanley also refused to make any comments.

TagsMcdonalds, McDonald's China, MBK Partners, franchising, TPG Capital Management, Bain Capital, Oak Brook, China Resources Holdings, Morgan Stanley, Baring Private Equity Asia