A Better Big Mac Index and a McDonald’s a Day
McDonald’s hopes to double its location growth in China to a restaurant a day, while fattening up its currently meagre franchise business there.
“We should be opening a restaurant every day in the next three to four years” in China, Peter Rodwell, company president for Asia excluding Japan, Australia and New Zealand, said in an interview in Singapore today. “We’re now opening a restaurant every other day.”
McDonald’s franchised outlets in China may account for as much as 20 percent of the total within six years, Rodwell said, as the hamburger chain aims to increase its stores from 1,300 to 2,000 by 2013. While its website says more than 75 percent of restaurants worldwide are operated by franchisees, only six McDonald’s shops in the world’s most-populous nation are franchised, said Vivian Zhang, a Shanghai-based spokeswoman ….
McDonald’s “needs to get everything right at the very beginning before going ahead on a large scale” with regard to franchising in China, Michelle Chen, a Shanghai-based analyst with KGI Asia Ltd., said in a phone interview today. “A common issue with franchising in China is that franchisees want quick money and don’t have the same capability as the corporate for running a business.”
Meanwhile, changes to The Economist’s famed Big Mac Index should discourage its abuse by US politicians attacking China’s currency policy. The index previously suggested that the yuan was seriously undervalued against the dollar. But, as China Real Time reports:
“It was never intended as a precise gauge of currency misalignment,” the Economist said in an article on Friday. Yet to the magazine’s dismay, “American politicians have even cited the index in their demands for a big appreciation of the Chinese yuan.”
… [The] new Big Mac index, which adjusts for GDP per capita, … takes into account the lower costs in poorer countries. As the magazine notes, China’s average income is one-tenth what it is in the U.S., meaning China’s burgers really ought to be substantially cheaper.
New York Senator and prominent yuan critic Chuck Schumer might want to make sure he’s sitting down before he checks out the Economist’s results, which show that on this basis the yuan is actually overvalued against the dollar by 3%. Against a group of various currencies, the yuan is still figured to be undervalued by 7%. which the Economist says is “hardly grounds for a trade war.”