Nearly a year of bidding war for McDonald's stores in China has finally come to an end. CITIC shares released an announcement at noon on the 4th that all conditions precedent to the acquisition of control of McDonald's business in mainland China and Hong Kong have been reached, and the acquisition has received regulatory approval, and the delivery was completed on July 31st.

CITIC said it will be the largest McDonald's franchise business outside the U.S. The partners will operate and manage about 2,700 McDonald's restaurants in the mainland China and Hong Kong markets at a cost of $2.08 billion to the parties, or about $770,370 per restaurant, for an acquisition cost of about 5.17 million yuan. In other words, that cost would be about 5.17 million yuan if the receiver, CITIC, opens up individual franchises, all else being equal.

If the receiver now opens up individual franchising, all other things being equal, that cost would be about 5.17 million yuan

A few years ago, McDonald's China opened up franchising to individuals in first-tier cities such as Shanghai and Shenzhen. For an investor to become a McDonald's franchisee, the individual had to have at least 2 million yuan in cash or equivalent realizable assets, and the 2 million yuan was not loanable.

What the franchisee will get is the right to operate an existing McDonald's restaurant for 10 years.

The $2 million includes the purchase of kitchen equipment, signage, seating, décor, an introductory franchise fee and a 3-part security deposit. The actual amount needed to operate is much higher than $2 million.

Besides the 2 million yuan, what other costs will be incurred? First, the rent or property costs; second, the franchisee still needs to pay monthly franchise fees, system fees and advertising and promotion fees; and third, the salaries of the restaurant staff and the daily operating cash flow.

Application process, must be trained in person to operate

McDonald's choice of franchisee is not absolutely money on the line game.

According to McDonald's franchising website, the procedure for individuals to apply to join McDonald's stores is not simple, and there are more processes to go through, namely: filling out an application form online - initial screening - first interviews -Three-day restaurant internship -Second interview -9~10 months of full-time training -Passed McDonald's assessment - Official signing - Handing over the McDonald's restaurant - Starting the operation of the restaurant.

The whole process can be described as "passing through five hurdles to get rid of six generals". Even if the contract is successful, the future management and operation of the store needs to be personally responsible for, not entrusted to others.

Return on investment cycle is relatively long

Some industry insiders said that in the past, the general recovery cycle of investment in at least five years or more. And in recent years, with prices, labor, rent and other costs rising year by year, as well as KFC and other similar fast-food brands of fierce competition, the future profit margin may not be very optimistic. However, learning from McDonald's standardized operating system, brand management and other aspects of the experience, for aspiring franchisees of fast food chain business is not a rare experience.

Whether the receiver will open up individual franchises again, we will see!