McDonald’s Corporation (NYSE:MCD) is targeting private equity firms as it looks to franchise up to 2,800 restaurants in North Asia. Reuters reports that the fast food chain is considering opening talks with the likes of Bain Capital, MBK Partners, and TPG Capital Management, seen as potential buyers.
McDonald’s has already reiterated plans to become 95% franchised, a model that other global restaurant operators are also adopting. The franchising push will start with stores in China Hong Kong and South Korea. Reports indicate the company is considering going for separate partners for the three markets.
By bringing in new partners McDonald hopes to trim its capital expenditure in the region. The fast food giant could also use the spin off to shield itself from competition from other global chains.
Asia has become a fierce battleground as global restaurant chains continue to battle it out for market share. Private equity firms are reportedly interested in acquiring stakes in some of the chains because of the rapid growth opportunity available in the quick-service restaurants.
Three to four weeks from now, a formal sales process should start, the company having hired Morgan Stanley to foresee the selloff process.
The selloff could result in the franchise partners owning a majority of the stakes in the restaurants in each market. The precise structure of the deal is yet to be decided, but McDonald’s could offload up to 100% stakes in some of the restaurants according to reports. According to people familiar with the matter, the company is considering offering a majority stake as one of the ways of making the deal appealing to buyers
An outright sell-off could relieve the fast food giant of any capital spending that totaled $2.6 billion last year. The Illinois-based fast food joint would in return get a one-time franchise payment as well as royalty fees. Even with a franchising push, McDonald’s plans to open an additional 1,500 restaurants over the next five years.