will john
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https://www.china-briefing.com/news/...and-mcdonalds/
https://www.scmp.com/business/china-...2-targets-come

Hi, there are a few things I dont understand about this and help would be appreciated:

1) CITIC and Carlyle will have full ownership of McDonald’s existing restaurants as well as additional new outlets for the next 20 years? What happens after 20 years?

2) There is equity in the deal? Can a Joint Venture have equity involved?

Business and management studies
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mnot
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(Original post by will john)
https://www.china-briefing.com/news/...and-mcdonalds/
https://www.scmp.com/business/china-...2-targets-come

Hi, there are a few things I dont understand about this and help would be appreciated:

1) CITIC and Carlyle will have full ownership of McDonald’s existing restaurants as well as additional new outlets for the next 20 years? What happens after 20 years?

2) There is equity in the deal? Can a Joint Venture have equity involved?

Business and management studies
If you are trying to learn about Joint Ventures China is probably not the place to start.
Often Western companies are required to enter into joint ventures in order to access the Chinese market by the CCP.

Its not clear exactly what the arrangement is from these articles but one could imagine the CCP controlled companies are helping to secure real estate for operation, presumably in exchange for equity.

It looks like CITIC and Carlyle will have full ownership of McDonald’s existing restaurants as well as additional new outlets for the next 20 years; but whether its all new restaurants is not clear. And what happens afterwards is not clear if Mcdonalds takes them or another leaseholder or another arrangement altogether. If I had to take a wild guess id bet McDonalds will take control over them. McDonalds is a real estate company at heart, so my guess is they are letting the CCP backed businesses take in the lion share of the revenue now in order to reap the rewards of the real estate long term knowing they can sell the lease afterwards but guarantee to keep the McDonalds franchise licence open for the duration.

It look like Starbucks had an arrangement but they bought out the equity the other party controlled, presumably they were in the JV with a CCP affiliated business to get in the market & one imagines the CCP profited handsomely when they agreed to sell. So their was equity on both sides but after the transaction Starbucks controlled all the equity
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will john
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(Original post by mnot)
If you are trying to learn about Joint Ventures China is probably not the place to start.
Often Western companies are required to enter into joint ventures in order to access the Chinese market by the CCP.

Its not clear exactly what the arrangement is from these articles but one could imagine the CCP controlled companies are helping to secure real estate for operation, presumably in exchange for equity.

It looks like CITIC and Carlyle will have full ownership of McDonald’s existing restaurants as well as additional new outlets for the next 20 years; but whether its all new restaurants is not clear. And what happens afterwards is not clear if Mcdonalds takes them or another leaseholder or another arrangement altogether. If I had to take a wild guess id bet McDonalds will take control over them. McDonalds is a real estate company at heart, so my guess is they are letting the CCP backed businesses take in the lion share of the revenue now in order to reap the rewards of the real estate long term knowing they can sell the lease afterwards but guarantee to keep the McDonalds franchise licence open for the duration.

It look like Starbucks had an arrangement but they bought out the equity the other party controlled, presumably they were in the JV with a CCP affiliated business to get in the market & one imagines the CCP profited handsomely when they agreed to sell. So their was equity on both sides but after the transaction Starbucks controlled all the equity
Very informative and helpful. Thank you
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willbailey123
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(Original post by mnot)
If you are trying to learn about Joint Ventures China is probably not the place to start.
Often Western companies are required to enter into joint ventures in order to access the Chinese market by the CCP.

Its not clear exactly what the arrangement is from these articles but one could imagine the CCP controlled companies are helping to secure real estate for operation, presumably in exchange for equity.

It looks like CITIC and Carlyle will have full ownership of McDonald’s existing restaurants as well as additional new outlets for the next 20 years; but whether its all new restaurants is not clear. And what happens afterwards is not clear if Mcdonalds takes them or another leaseholder or another arrangement altogether. If I had to take a wild guess id bet McDonalds will take control over them. McDonalds is a real estate company at heart, so my guess is they are letting the CCP backed businesses take in the lion share of the revenue now in order to reap the rewards of the real estate long term knowing they can sell the lease afterwards but guarantee to keep the McDonalds franchise licence open for the duration.

It look like Starbucks had an arrangement but they bought out the equity the other party controlled, presumably they were in the JV with a CCP affiliated business to get in the market & one imagines the CCP profited handsomely when they agreed to sell. So their was equity on both sides but after the transaction Starbucks controlled all the equity
hey. could you elaborate on this please. what are the strengths and weaknesses of mcdonalds using this jv strategy in china

thanks
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mnot
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(Original post by willbailey123)
hey. could you elaborate on this please. what are the strengths and weaknesses of mcdonalds using this jv strategy in china

thanks
I suspect that in order for McDonalds to get permission to open restaurants they have to play ball with CCP and go through a JV. I suspect they would prefer to just buy the land and lease the franchise’s like normal but the reality is the CCP controls everything & they are work hard to protect Chinese interests. So I suspect the upside from this is operating in China. If they didn’t go into a JV they probably would get stuffed and have to open restaurants in dead locations of no value
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