50 new McDonald's branches to rise this year

MANILA, Philippines - The master franchise holder of McDonald’s in the Philippines expects as much as 50 new branches this year to take advantage of robust economic growth.

The rapid pace of growth will continue for the next three to five years, an executive said.

“We are very excited, we continue to grow. This year we can grow 40 to 50 stores all over the country,” Kenneth S. Yang, president and CEO of master franchise holder Golden Arches Development Corp., said in a chance interview.

This will allow the company to end the year with a record 370 stores nationwide.

Yang said the expansion is 50 percent more than the company did last year, on top of the store renovations.

“Definitely the economy is very strong and I think the growth of the business process outsourcing industry is helping a lot and the overseas remittances continue to be there,” Yang said. “Consumer spending is still very strong so I think,” he added.

The local economy surged 6.4 percent in the first quarter due to government and private sector spending while January to May remittances climbed 5.5 percent to $9.26 billion from a year ago.

Given the strong fundamentals, Yang said the company is maintaining its bullishness and the rapid expansion pace in the next three to five years.

New branches will be driven by a mix of company-owned stores and by franchising. “Our thrust for franchising is outside Manila, on provincial areas,” Yang said.

McDonald’s is also tapping tourist destinations like Palawan, Bohol and Boracay, Yang said.

Benchmark investment for a new branch is around P40 million, with McDonald’s targeting businessmen, professionals and retirees as its franchising partners.

The first branch of the quick service restaurant chain opened in Morayta, Manila back in 1981.

Meanwhile, profitability of McDonald’s is cut by higher operating costs.

“The challenge is really the cost of operating the business. Costs are increasing like commodity and electricity. It is very hard to keep our profitability at the same level so we try to be more efficient,” Yang said.