The restaurant placemats tout "a brand new way of dining. It's fashionable and time-saving" -- and it is one way McDonald's Corp. is trying to explain drive-through eating to Chinese customers.
Executives of the restaurant chain plan to announce today a deal with China's largest gas retailer, state-owned Sinopec Group, to build drive-throughs at filling stations across this increasingly car-obsessed country. With the agreement, McDonald's can expand rapidly along highways and in fast-growing suburbs outside China's sprawling cities, where cars are becoming ever more popular.
"We see the future of China with cars, communities and houses spreading out," says Jeffrey Schwartz, chief executive of McDonald's China business. "We think the potential for drive-throughs is huge."
(Ronald McDonald performing at the opening of McDonald's first Chinese drive-through.)
McDonald's has coined a new, Chinese name for drive-through, De Lai Su, which translates roughly as Come and Get It Fast. When the company opened its first three drive-throughs in China last year, it aired a TV commercial -- with a young couple in a green convertible ordering food from their car -- and printed up fliers with instructions for using the drive-through.
At the time, employees were deployed in the parking lots to direct drivers to the drive-through lane. McDonald's also has tried to demystify the process by having customers place their orders with a person, rather than through a speaker as is common in the U.S. and other countries.
The company also is looking into new ways to make foods -- especially traditional Chinese dishes -- more portable, so they can more easily be consumed in the car. A Shanghai drive-through restaurant is testing a "rice burger," patties of beef or chicken sandwiched between two cakes of compressed rice.
A greater proportion of McDonald's China sales comes from chicken than in the U.S. In China, about 50% is chicken, 40% is beef and 10% is fish. The company sells a range of foods made specifically for the China market, including corn, spicy chicken wings and triangle wraps: beef or chicken and vegetables and rice wrapped in a tortilla-type wrapper.
It isn't clear that China's eating culture will mix well with American grab-and-go lifestyle. Traditionally, Chinese customers haven't favored takeout food, preferring to sit down for leisurely meals. Today, just 10% of the business at fast-food restaurants in China is take-away, a proportion that is only likely to inch up to 12% by 2008, according to London-based market-research firm Euromonitor International.
"Fast-food restaurants are still a place for family gatherings and appointments with friends," says Liu Du, a food-industry analyst with Guosen Securities in Shanghai. "We haven't fostered a real fast-food culture here."
(A customer buying food earlier this year from the McDonald's drive-through restaurant in the city of Shanghai.)
McDonald's is betting that will change as personal incomes rise, lifestyles become busier and more and more people own cars. Last year, more than three million new cars hit Chinese streets, and auto sales were up 54% in the first quarter of this year. McDonald's wants to follow China's new car-driving middle class to their new suburban homes. "We need to be where the consumer is going to be," says Mr. Schwartz.
Yum Brands Inc.'s KFC fried-chicken chain -- McDonald's main competitor in China -- opened the country's first drive-through in 2002 and added a second in Shanghai last year, but business has been lackluster and the company hasn't announced specific plans to open more. The company will likely add more drive-throughs in the future, but today "our customers prefer to eat their meals in our restaurants, or take it home with them," says Jonathan Blum, Yum's chief public-affairs officer.
McDonald's first foray into drive-throughs has been limited as well. Now, with the Sinopec deal, McDonald's will hold an advantage in one of KFC's struggles: finding real estate where you can drive in and out. In a statement, the chairman of Sinopec, Wang Tianpu, said that the deal with McDonald's "is of significant importance to us, and the Chinese economy."
Drive-throughs are key to McDonald's strategy of boosting its market share in China, which slid to 8.7% in 2004, the most recent year for which figures are available, from 10% in 2002, according to Euromonitor. KFC's market share climbed to 15.8% from 13.8% over the same period.
"China is extremely important to McDonald's globally," says Michael Roberts, McDonald's Corp.'s president and chief operating officer. McDonald's in coming years plans to open more restaurants here than in any other country, capitalizing on China's embrace of car culture. Auto sales are expected to rise 15% a year here. "We want to be part of that growth," Mr. Roberts says.
Before coming to China nine months ago, Mr. Schwartz, McDonald's China CEO, ran McDonald's business in Los Angeles and the rest of Southern California, where U.S. car culture has reached its zenith. "Things are headed that way here," the 53-year-old Mr. Schwartz predicts.
"McDonald's is looking for every opportunity it can find to claw its way back," says Matthew Tripodi, an analyst for Euromonitor. "They are trying to become as relevant to the Chinese population as possible, and drive-throughs are one area that has been largely untapped."
McDonald's has spent much of its time in China learning to slow down from its fast-paced U.S. roots. The company's new restaurants have Internet connections, play areas for children and special seating for their mothers, all of which are designed to reinforce their role as gathering places. "We eat McDonald's when the kids want to," says Luo Wenwei, a housewife from the prosperous southern town of Dongguan, who drives a Volkswagen.
McDonalds, which opened its first restaurant in China in 1990, expects to have more than 1,000 outlets by the time of the Beijing summer Olympics in 2008. By comparison, KFC has more than 1,600 stores. McDonald's says it expects more than half of its future restaurants in China will be equipped with drive-throughs -- in addition to regular dining rooms and free parking to attract suburban car owners.
Mr. Schwartz says drive-through customers account for about 30% of sales at the three outlets that have them. That compares with about 60% drive-through sales at U.S. McDonald's. "At first, I thought we might be a little early," he says. "But then sales took off." McDonald's won't disclose specifics of its results in China, but Mr. Schwartz says that sales and profits are rising. Sales at drive-throughs are higher than at the average McDonald's outlet in China.
Drive-throughs seem to be gaining snob appeal, because target customers are members of the car-owning middle class. The drive-through "is very convenient for us drivers," says Yuan Fang, a 35-year-old manager at an oil company. "We are quite busy and we can eat in the car."
On Sunday afternoon at the drive-through in Shanghai, Shi Jiaqiang pulled up in a new Ford Mondeo with his wife and two sons, to order Cokes and ice-cream cones. Mr. Shi, a manager at an electronics company, says he visits the drive-through regularly to buy lunch. "I don't have time to sit in the restaurant," he says. He often eats in the car, before hurrying back to the office or to a meeting. "The pace of life here is very fast," he says.
--Tang Hanting contributed to this article.
(Source: The Wall Street Journal/By GORDON FAIRCLOUGH and GEOFFREY A. FOWLER)