McDonald's opens drive-throughs in China

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[Shanghai, China] As more Chinese buy cars, McDonald's Corp. is opening drive-through restaurants in China, the latest sign that the U.S. fast-food giant is determined to overtake Yum Brands' KFC, the fast-food leader in mainland China.

"This is [drive-through] No. 2, which is sad; we should be at 102 by now," said Guy Russo, McDonald's president, Greater China, at the opening of a site in Shanghai's Pudong business district in early January.

The first drive-through site opened late last year in Dongguan, a small town between Guangzhou and Hong Kong, and a third in Guangzhou in mid-January. McDonald's plans to open at least a dozen more drive-through stores by the end of 2006. The drive-through sites, which account for a large proportion of McDonald's sales in the U.S., reflect China's rapid transformation into a car culture. With almost 6 million automobile sales last year, China has surpassed Japan and is now second only to the U.S. in annual car sales, according to the China Association of Automobile Manufacturers. The market is expected to grow 10% to 15% in 2006.

Mr. Russo's resolve to expand rapidly in China reflects the pressure placed on him and two high-level American execs, Gary Rosen, VP-chief marketing and corporate affairs officer, China, and Jeffrey Schwartz, now senior VP, China. Mr. Rosen, previously senior director-global marketing, arrived in Shanghai last June, while Mr. Schwartz was previously senior VP of the company's U.S. operations and franchising division. Mr. Russo, in his last job as CEO for Australia, transformed that country from a trouble spot into one of the company's most innovative and successful markets.

Now the trio is trying to jump-start flat sales in China. Rival KFC has kept costs low while mastering local tastes with innovative menu items and aggressive expansion into China's lower-tier cities. KFC has its own problems, though, dealing with Chinese consumers' fears of avian flu.

McDonald's has 735 stores in China and plans to have at least 1,000 by the opening of the Olympic Games in Beijing in 2008. Yum Brands has more than 1,500 stores, including KFC, Pizza Hut and Taco Bell. (For a longer version of this story, see

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