June. 11. 2022
McDonald’s seeks to sell Korean unit amid intensifying competition
|Customers order set menus at a McDonald’s restaurant in Seoul on May 27, last year. Korea Times file|
By Kim Jae-heun
McDonald’s is moving to sell its Korean branches as more companies enter the overly-crowded fast food market here, the company said Friday. The U.S. fast food giant first attempted to dispose of its Korean business back in 2016 but failed to do so as potential buyers opted out, due to high sales prices and other reasons.
Mirae Asset Securities has been selected as a sales manager to find the new owner of McDonald’s Korea, which has seen its profitability deteriorate, despite rising revenue, because of rising wages and higher raw materials costs, amid intensifying competition.
“McDonald’s is looking for a strategic partner in Korea to improve the company’s growth. We are working with an external consulting firm to review various options. We will provide more details on the sell off at the appropriate time,” a McDonald’s Korea official said.
McDonald’s sales in Korea have actually increased from 724.8 billion won ($570.4 million) in 2019 to 867.8 billion won in 2021. This increase is only counting the revenue created from the restaurants McDonald’s Korea directly managed, and if sales created with franchisees are included, the figure reaches over 1 trillion won. It is the largest sales achieved by the American fast food restaurant chain in Korea. Its operating losses reached 44 billion won in 2019, 48.3 billion won in 2020 and 27.7 billion won in 2021.
Various factors are attributable to McDonald’s money-losing business in Korea. Higher delivery service fees here during COVID-19 have increased its business expenses, along with soaring costs of labor and raw materials.
In addition, McDonald’s Korea has been paying brand royalty fees to its headquarters based on its sales achieved, not its profits. The local branch paid 50.1 billion won in 2020 and 54.3 billion won last year in royalty fees.
In 2016, Maeil Dairies and global private equity Carlyle formed a consortium to acquire McDonald’s Korea, but the deal didn’t go through.