A Chinese consultancy that has previously helped win antitrust battles against Coca-Cola and Apple has taken aim at McDonald's Corp, arguing in a complaint to regulators that the US-based fast-food giant's China sale may hurt workers and consumers. McDonald's said last month that it had agreed to sell the bulk of its Chinese mainland and Hong Kong business to State-backed conglomerate CITIC and US private equity firm Carlyle Group LP for up to $2.1 billion, in a deal that will see the consortium act as the master franchisee for a 20-year period. The complaint, which follows allegations from a US labor union that the transaction will likely lead to poorer pay and conditions for McDonald's 120,000 workers in China, could delay regulatory approval for the deal. Beijing-based Hejun Vanguard Group, a management consultancy that has a track record of representing domestic companies against foreign firms, filed two separate complaints against McDonald's with the Ministry of Commerce's (MOFCOM's) antimonopoly bureau and its franchise office, Hejun Vanguard told Reuters. While Hejun has stopped short of asking the MOFCOM to block the deal, it has called on the regulator to closely scrutinize the transaction and take measures to prevent McDonald's from "abusing" what it claims is the company's dominant position in the fast-food burger market in China. It has also called for the MOFCOM to investigate alleged violations of China's franchise law by McDonald's, which it claims has failed to properly register all of its outlets in the mainland. The MOFCOM did not immediately respond to a request for comment. CITIC, CITIC Capital and Carlyle declined to comment. McDonald's said it had filed reports on its franchise business with the MOFCOM in accordance with franchise regulations, and it disputed Hejun's analysis of its market share in China. It added that its franchise model globally is based on mutually beneficial partnerships. Hejun said it was not acting for any specific companies in the case and generally seeks to protect domestic brands from overly aggressive foreign companies. The Service Employees International Union, a US labor organization, last year warned potential buyers of roughly 3,000 McDonald's restaurants in Asia that such deals could saddle them with operational risks, including significant costs and liabilities. In January, it raised concerns over McDonald's China deal, saying that previous similar transactions in other markets - including Brazil and Puerto Rico - had put enormous pressure on franchisees, making it harder for them to provide adequate pay and conditions for their workers. "The deal will put enormous downward pressure on McDonald's master franchisees, existing franchisees that operate individual stores, and the workers and customers of those stores," said Li Su, CEO of Hejun Vanguard Group, in a statement. "Regulators should investigate the transaction and impose restrictions to prevent McDonald's from abusing its dominant market position." CITIC and CITIC Capital, an affiliate company that manages private equity funds, will hold 52 percent following the deal. Carlyle will control 28 percent of the business, while McDonald's will retain 20 percent. McDonald's owns and operates most of its outlets on the Chinese mainland.
Hotpot chain Sichuan Haidilao Catering Co is said to be making inroads into Hong Kong, joining a cluster of mainland counterparts whose business in Hong Kong has been chequered. Edwin Leong Siu-hung, founder of Tai Hung Fai Enterprise and one of Hong Kong's largest retail landlords, confirmed that one of his company's properties in Mong Kok had been leased to Haidilao and could be decorated within two months at the soonest. The Beijing-based restaurant operator also confirmed the news. It said that if everything goes according to plan, the company's first restaurant in Hong Kong will open three months later. Reports of Haidilao's expansion and initial public offering have been circulating since the end of 2015. Yihai International Holding Ltd, a hotspot seasonings producer and Haidilao's exclusive supplier, was already a few steps ahead of it, having raised HK$861 million ($110 million) on the Hong Kong Stock Exchange in July. Haidilao would follow in the footsteps of rival hotpot chains such as Little Sheep, Simmer Huang and Xiao Yu Hotpot Restaurant in Hong Kong, a market the company said it bets big on. Those early comers, however, failed to get very far in the Hong Kong market. Inner Mongolia-based Little Sheep, which has operated in Hong Kong for more than a decade, only has one of the six restaurants it initially opened. Likewise, having entered Hong Kong no more than two years ago, Simmer Huang shut its one and only restaurant in Hong Kong at the end of last year. "As for Haidilao, this may be a good timing to enter the Hong Kong market, where the commercial rental market has been under sustained downward pressure for quite a time and is showing signs of hitting bottom," said Hannah Li Wai-han, a strategist at UOB Kay Hian (Hong Kong). The hotspot chain will pay a monthly rent of HK$550,000 for the three-storey store. Founded in 1994, Haidilao is known for its spicy Sichuan-style food and impressive customer services, which include free manicure, shoe polishing and shoulder massage services, as well as noodle-pulling shows and dance performances. The restaurant chain now operates 168 outlets across 51 cities in Chinese mainland and has set up nine branches in Singapore, Los Angeles, Seoul and Tokyo.
Carrefour China opened its first discount outlet store in Chengdu. The store is operated in a store-within-store format and located inside its Guanghua branch in Chengdu. Carrefour said the new outlet store aggregates various discount products; the store layout is designed to display products according to the category they are in, allowing consumers to shop for affordable goods conveniently and enjoy the shopping experience by immersing in the discount shopping scenario.
Wuhan Zhongbai Group planned to open 150 Zhongbai Lawson Convenience Stores in 2017, with 70% of which opened through franchise agreement. In three years, Zhongbai planned to open up to 500 convenience stores. In 2016, the company opened 50 Zhongbai Lawson Convenience Stores, three of them are franchise stores. Through its regional master franchise agreement with Lawson, the company can take reference from Lawson’s store display, marketing campaign and operation model, etc. to standardize and upgrade its store operation, and capture market share of Wuhan's convenience sector.
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