McDonald’s eyes loans to finance expansion

McGeorge Food Industries Inc. is eyeing loan financing to fund its P2.2-billion expansion project as the fastfood industry continues to be optimistic despite the economic crunch.

McGeorge, which holds the Philippine franchise of the McDonald’s hamburger chain, said financing would play a significant part in the company’s expansion plans in the future although it would also dip into internally generated funds.

According to MFI, McDonald’s USA remains optimistic about its business prospects in the Philippines, enough to fully support McDonald’s Philippines’ expansion plan and the effort to raise the amount needed to implement such plan.

"For the next several years, financing will play a large role in our expansion plans," said McGeorge’s Kenneth Yang. The company’s approach to its network expansion," he said, is to tap local entrepreneurs outside the capital since they had the built-in expertise of the local market.

This means that instead of opening company-owned branches nationwide, McDonald’s Philippines would be concentrating on looking for joint-venture partners in key cities. "We think they can run the business, we just have to provide training," he said.

For the company’s planned construction of a new meat plant and distribution center, borrowing would have to finance much of the undertaking although McGeorge’s internal funds could also account for a significant portion of the P1.5 billion needed for the project.

The plan, which was targeted to open for commercial operations in 2003, would be located in Luzon.

Earlier, McDonald’s Philippines revealed that it was embarking on an expansion plan that would add 20 to 30 more stores to its network, this year alone.

The plan, initially estimated to cost a total of P2.2 billion, would require the construction of a new meat and distribution plant somewhere in Luzon to support the new stores that would be opened all over the country.

"The prospects of the fastfood industry is better than other sectors," Yang said. "There will be a profit squeeze and it will become harder and harder to get more money because of the economic crunch."

However, Yang said volumes would continue to increase at an average rate of 10 to 20 percent a year and industry players need only to improve their efficiencies to maximize the anticipated industry growth.