There are two fast food giants from the United States. They both originated from the and periods of World War II. Both have gone through ups and downs for more than 80 years. The entrepreneurial experience of the founders can be regarded as legends. Relying on the franchise chain system, they have opened stores all over the world. They are McDonald's and KFC .
Today, Reading on the Road will tell you about the business war between two fast food giants in the Chinese market.
1. At the beginning, McDonald's was a step behind
In the United States, McDonald's and KFC, one sells hamburgers and the other sells fried chicken, there is basically no big competition. McDonald's number one competitor is Burger King which also makes burgers. KFC’s number one competitor is Chick-fil-A, another fried chicken company.
However, when it comes to China, whether it is a fried chicken or burger restaurant, they all have the same name: Western fast food. The competition between the two companies has become fierce, and it has become a pair of CPs who love and kill each other.
As early as 1982, McDonald's began to study the Chinese market. From national policies to market environment, from the origin of raw materials to eating habits, from income levels to family structure, I have studied everything, and I have finally made up my mind: Chinese people either like to eat rice, or they like to eat steamed buns, flatbreads and noodles. How can we make them accept hamburgers from foreigners? It doesn't feel very reliable, so why don't you wait any longer.
KFC is different. It means just do it if you think about it. If you don't do it, how will you know whether it will succeed or not? So, as early as 1987, KFC opened its first Chinese branch in Qianmen, Beijing. On the opening day, in just one day, it generated hundreds of thousands of sales.
And what about McDonald’s at that time? It’s better to stay put, continue research, and secretly observe KFC’s performance. After it was sure that it would make a profit without losing money, it chose to open its first Chinese branch in Shenzhen in 1990.
Therefore, although McDonald’s studied China earlier than KFC, it entered the Chinese market three years later than KFC. This actually exposes a problem: McDonald's strategic vision in China is still lagging behind KFC. In the subsequent competition, the gap in strategic vision has become the key to determining who wins and who loses between the two companies.
In the first few years, McDonald's and KFC both ate up all the bonus as foreign brands and tasted the sweetness.
In terms of market, the market is broad enough. For adults, they satisfy hazy imaginations of American culture. And for children, they are a dream restaurant. I've made progress in my exams and it's my birthday. It would be so honorable to treat my friends to a meal of hamburgers and fries.
In terms of rent, the rent is low enough. If there is a McDonald's or KFC in a shopping mall, the rents of surrounding shops will definitely jump up. Therefore, shopping malls take the initiative to offer them the most favorable rents to attract them to open branches.
In this way, McDonald's and KFC began their crazy expansion. One starts from Beijing, the other starts from Shenzhen, opens stores in first-tier big cities, and then opens into second-tier big cities. When basically every first- and second-tier city has a few stores with golden M's or white-bearded grandpa, the real war will begin. The time to witness your strength is coming!
2. In order to seize the market, McDonald's cannot let go
Whether it is McDonald's or KFC, the most fundamental success factor for them to go from a small state to the United States and the world is franchising. What does franchising mean? The business is yours and the brand is mine; you recruit the employees and I train them; you make the profits and I share the income. In this way, companies can quickly expand market share, increase the number of stores and product sales without investing too much money and resources, without having to find locations and recruit employees one by one.
After arriving in China, KFC quickly liberalized the franchise system. We started franchising in Xi'an in 1993, and since 1998, we have promulgated a new franchising policy called "Don't start business from scratch." What does it mean? Generally speaking, if you want to join KFC, you have to go to an interview with money first, and after getting training, you can start building a new store from scratch. But under the new franchise policy, KFC will not let you "start from scratch." It has some mature direct-operated stores, which it will transfer directly to you.
This is like raising chicks. After finally raising them to the point where they can lay eggs, why are they sold? Don't tell me, some people specialize in raising laying hens. Just like some business incubators now, they specialize in investing in early-stage companies. When the company becomes profitable and its valuation increases, it actually withdraws. This is called specializing in the art industry and maximizing one's own advantages.
Compared with franchisees, what is the most prominent advantage of KFC? It is not about store operation and management, but standardized training on production operations. If a franchise store starts from scratch, it will take at least half a year to get the store in shape. In this case, why not just transfer the mature stores? KFC is specifically responsible for building its stores from zero to one, making them basically mature. The subsequent operations, development and growth are left to the franchisees. In this way, franchisees are very happy because the rebate cycle is shortened and the risk is reduced. KFC is also very happy. Not only is the quality of its stores more guaranteed, but the franchise fee is also very satisfying.
However, at this time, McDonald's was silent and silent. In the United States and other countries, when it came to franchising, it was all about taking big steps. But when it came to China, for some reason, it suddenly became timid and couldn't move forward no matter what. Is
a direct operation, or is it open to franchises? Should we consolidate the market in the first and second tiers, or sink to the third and fourth tiers? It is always hesitating, entangled, and undecided. Although it opened its own store very quickly. But no matter how fast, basic research must be done, right? Site selection planning and store decoration must take time and effort, right? With this time, KFC can open ten franchise stores.
Just like that, KFC expanded rapidly, quickly sinking from first- and second-tier cities to third- and fourth-tier cities. And what about McDonald's? It was still slow, and it didn’t start franchising until 2003, a full ten years later than KFC. After ten years of sharpening a sword, the sword is not much faster.
It can be said that in terms of market sinking and people-friendly approach, McDonald's is far behind KFC. This is not only reflected in the franchise policy, but also in their menus.
3. Localization, McDonald's Slow Eight Pai
Whether a catering brand can go far depends on whether it can capture the stomachs of consumers.
McDonald's is very confident in itself. Because it had already been studied at that time, for Chinese children, the taste formation period is from 4 to 7 years old, and the taste is fixed period from 7 to 12 years old. Whether it's steamed buns or burgers, spicy shredded potatoes or French fries, there's no big difference for them, and there's no problem of whether they're used to it or not.
In this case, it doesn’t matter what the menu is. According to experience in the United States, as long as there are more red and yellow signs in the decoration, a toy is added to the children's set menu, and a special game area is set aside in the store, children will definitely like to come. Moreover, after coming once, I wanted to come a second time. Next, when the children grow up and have a fixed taste, they will not be used to these Western fast food.
Therefore, after McDonald's arrived in China, its menu was basically the same as in the United States. It still had the same three core items: burgers, French fries, and happy fat house water.
However, KFC’s business philosophy is different. China’s food culture has a long history, and people’s mouths have long been cultivated.In addition, China has a vast territory, and one side’s soil and water support its own taste. There are eight major cuisines alone. Whether it’s moon cakes, rice dumplings or tofu curd, the sweet and salty parties can quarrel with each other and it’s hard to reconcile! It is too difficult to try one new trick and eat it all over the world.
Therefore, KFC has decided on a policy: Don’t wait for Chinese consumers to adapt to me, but should actively localize to adapt to Chinese consumers.
Since 2004, KFC has shouted a slogan: "Based in China, integrated into life." In 2008, this slogan became more straightforward: "Build a new fast food and change for China." KFC has shown with practical actions that changing for China is really not just talk.
Breakfast porridge in 2002, Old Beijing chicken rolls in 2003, Anxin fried dough sticks and Sichuan style tender beef in 2008, French style sesame seed cakes in 2009, soy milk and rice in 2010... In recent years, KFC has launched new products at an even faster pace, launching nearly 50 new products every year. You can even have snail noodles, what else is there that KFC doesn’t dare to have?
It can be said that when it comes to the most Chinese-style Western fast food, KFC deserves it.
Many people think that KFC’s new localized products are really flashy. Can this still be called KFC? No one can fix it. And what about McDonald's at that time? I also look down on KFC like this. When I was interviewed by the media once, I said: "Localization is not as simple as making fried dough sticks. We at McDonald's have our own strategies and development directions."
What are the strategies and development directions? It’s about polishing our core competitiveness and launching better-tasting hamburgers. It's useless, it can't replace its flagship products such as original chicken, spicy chicken wings and chicken drumsticks. McDonald's is still down-to-earth, making burgers conscientiously, and constantly polishing this core competitiveness.
But the problem is that McDonald's core competitiveness has been polished, but the menu has not changed much in decades. Regular customers can order with their eyes closed, so there is nothing new. Nowadays, there are so many choices for food and drink, and there are no new products. How can we attract customers to make repeated purchases?
No, McDonald’s is very anxious as it sees itself defeating KFC in the United States, KFC in Europe, and KFC in Japan and South Korea, but it is only in the Chinese market that it is left behind by KFC. By 2013, it finally gave in. It no longer makes pure American fast food, but also sells soy milk and fried dough sticks. Compared with KFC, the pace of localization is not only half a beat slower, but a whole eight beats slower!
However, although the body is very honest, McDonald's mouth is still very tough. They launched two types of meat burritos and said they were based on the most popular international food concepts. When he started selling fried dough sticks, he said that he was not doing localization, but just to give consumers more dining options that would be more in line with their eating habits.
So the question is, why is McDonald’s so resistant to the word localization that it missed the golden period of development in the Chinese market? The answer lies in the three words that McDonald's has adhered to since its inception: standardization.
4. Success is also standardized, failure is also standardized
McDonald's has relied on standardization to conquer the world since its fortune.
By the 1990s, McDonald's had thousands of stores around the world and accumulated rich global experience. The business strategy, store operation, and daily management system have already had a basically fixed model. Every time we go to a place, we apply it and use previous successful experiences to minimize possible market risks.
Especially food, it must be the standard among standards. Regardless of whether it is the United States or China, all branches must have the same quality, use the same ingredients, and follow the exact same operating procedures.
To put it nicely, this is McDonald's insistence on American standards.But seriously, this affects localization too much. Not only the localization of the menu, but also the localization of the supply chain.
You may not believe it, but when McDonald’s first opened its stores in China, it didn’t use Chinese suppliers very much. Core raw materials such as potatoes and ice cream syrup all come from the United States. If you want to fry French fries in a Chinese store, you have to transport frozen potatoes all the way from the United States. How expensive is the transportation fee alone? How much does this affect company profits?
So, no matter how popular McDonald's was back then, some of its stores have been operating for 20 years and are still losing money. This directly affects the performance of individual stores and also affects McDonald's expansion speed in China. While KFC has more than 6,000 stores across China, McDonald's only has more than 2,000 stores.
By the end of 2020, KFC had 7,166 stores across the country, accounting for 47% of its global store count. And what about McDonald's? In June 2021, it had just exceeded 4,000, which is almost one-tenth of the number of stores in the world.
So, many people say this: McDonald's won the world but lost China when it faced KFC.
Writer: Yang Mei, Bachelor of Finance, University of International Business and Economics, Master of Laws, Peking University
Editor: Liang San
Reading on the road, original article, no reprinting
