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Fast food chains hungry for expansion

By Ding Qingfen (China Daily)
Updated: 2008-12-30 07:55

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The battle between US fast food chains Kentucky Fried Chicken and McDonald's for market share in China seems to be hotting up after both companies announced expansion plans and a slew of price cuts to woo customers recently.

At a ceremony marking the opening of the 200th KFC restaurant in Beijing yesterday, Zhao Li, the company's general manager, said that despite the slowdown in business, the fried chicken specialist will open more restaurants in 2009 throughout China than "the previous year's average" of 400 new openings.

KFC has opened more than 2,300 stores in 450 Chinese cities, he said.

Last month, McDonald's China Chief Executive Officer Jaffrey Schwartz said in Dongguan, South China's Guangdong province, that McDonald's will add another 175 restaurants next year to the current 1,000 it has in the country.

McDonald's is now the second largest US fast food chain in China after KFC.

Fast food chains have been doing well in the US and Europe as consumers are shunning expensive and fancier restaurants due to the economic slowdown.

In China, however, fast foods are not as cheap as the mainstream restaurants in major cities. In many of the smaller cities, where the cost of living is considerably lower, US-style fast food is often considered a luxury.

"The negative trend would worsen in the first half of 2009," said Lucy Wu, deputy secretary-general from China Chain Store & Franchise Association.

Rentals for commercial premises have been continuously falling due to the global economic downturn and this in turn has spurred the new expansion plans of the fast-food chains, said Tian Huilan, researcher, First Capital Securities.

It has created room for fast food chains to win more customers by cutting prices.

Last week, some 1,400 KFC restaurants in 31 cities cut the prices of five of their popular set meals by at least 20 percent. The other restaurants are also expected to follow suit soon.

"We will roll out a raft of promotion programs next year," said KFC's Zhao.

Since early December, McDonald's has launched a so-called "preferential program" on a trial basis in three cities, Guangzhou, Shenzhen and Nanjing. Under the program, prices of some items are reduced by as much as 28 percent during lunch hour.

The program is expected to be extended to all McDonald's restaurants in China next year.