April 26, 2024

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[THE INVESTOR] Two years after it first set out to seek a local strategic partner in Korea, McDonald’s is still looking for one.

“We are seeking a partner who understands our brand value,” a McDonald’s Korea spokesperson told The Investor. “We are also looking for a long-term deal that can last at least 10-20 years.”

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According to the fast-food chain, there aren’t many candidates who are large enough to operate a franchise as big as McDonald’s.

In 2016, the global fast-food chain operator was out hunting for a strategic partner to sell its Korean business. Conglomerates like  CJ Group and Maeil Dairies were cited as potential buyers, but the talks fell through when McDonald’s Korea reportedly asked for 500 billion won (US$468.82 million) from the buyers. The figure was considered too high at the time.

“It wasn’t because of the money,” said the McDonald’s representative.

The company says it will continue to look around for a company that it considers a worthy partner. It added that it won’t sell its license to private equity firms, who are usually in for quick payoffs.

Addressing rumors that the company is planning to sell or even exit its business in Korea -- speculation that gained more traction when McDonald’s closed down some of its outlets here last month -- the company said it was more to do with rent, complaining that some buildings were asking for twice the amount than before.

Moreover, shuttering outlets is nothing unusual for the firm. “Last year, we closed around 18 stores and opened 10. And in 2016, we closed around 24 and opened 22. This is just our annual business cycle,” said the firm’s representative.

The company believes the recent shutdown garnered media attention because it was located in Sinchon, a landmark meeting spot for the area’s university students.

Despite these explanations, sources say that McDonald’s business has steadily gone downhill. Some industry watchers estimate that sales dropped by 20-30 percent last year, after news broke out of a four-year-old girl being diagnosed with Hemolytic uremic syndrome, more commonly known as hamburger disease, after eating at a McDonald’s outlet in Pyeongtaek, Gyeonggi Province.

Although prosecutors closed the case citing lack of evidence that its hamburger patties caused the illness, concerns seem to linger. McDonald’s Korea’s sales in 2016 stood at 691.3 billion won, while its operating profit reached 4.2 billion won. The company did not disclose its 2017 sales.

By Song Seung-hyun (ssh@heraldcorp.com)