Five Guys, an American burger chain, is set to open its first outlet in Beijing in the coming month, joining a surge of American fast-food brands either entering or rapidly expanding within China. This comes on the heels of the establishment of the brand’s first Chinese outlet in Shanghai in 2021. According to a statement made by the company last week, it is aiming to open three outlets in Beijing’s prime shopping centers, primarily targeting younger consumers. Construction activities are already underway, indicating that the openings are not far off.
American chains like Wendy’s, Chili’s, Texas Chicken, and Popeyes are all vying for a piece of the world’s second-largest consumer market as they face oversaturation in their domestic markets, according to industry analysts. Sandy Lim, a China consumer analyst at S&P Global Ratings, stated that some smaller American chains are exploring possibilities in China to counterbalance the oversaturation in their domestic markets.
Lim elaborated, “Despite fierce competition, there are still pockets of demand within China’s large catering market.” She explained that unlike previous foreign brands that depended on direct operations overseen by overseas headquarters, exposing them to profits, losses, and market volatility, many American brands nowadays prefer franchising models.
Wendy’s, listed on Nasdaq, announced in May its plans to open up to 1,000 stores across China in the next decade. As per its first-quarter earnings report, the company has entered into a new franchise agreement with an experienced local restaurant operator, who remains unnamed.
In the first quarter, the burger chain’s sales, in the same stores, fell by 7.8% year on year, while its system-wide sales in international markets rose by 6% from the previous year.
Texas Chicken, another American fast-food chain, plans to open its first Chinese outlet in Shanghai this summer. In an April statement, the company announced its partnership with Deke Shengtang, a well-established local operator with several quick-service restaurant brands, to develop a minimum of 600 restaurants across the country over the coming years.
Chili’s, yet another American chain, opened its second store in Beijing in May. Meanwhile, the Louisiana-based fried chicken brand, Popeyes, made a comeback to Beijing in April, nearly twenty years after it left China in 2003. This chain currently has over 80 outlets in Shanghai.
Adapting to the Chinese Market
Fu Yifu, a special research fellow at Su Merchants Bank, noted that inflation continues to affect household spending in the U.S., while the presence of Western fast-food brands in China continues to grow.
Early market entrants like KFC, McDonald’s, and Starbucks have developed localized franchising models to mitigate risks. Five Guys is positioning itself to appeal to quality-conscious consumers in first-tier cities. Fu emphasized that Chinese consumers are not automatically attracted to foreign brands anymore. To succeed, these brands must offer differentiated products and adopt localized operations.
Questions & Answers
What is Five Guys’ expansion plan in China?
Five Guys plans to open three stores in Beijing’s popular shopping centers, targeting younger consumers. This follows the opening of its first China outlet in Shanghai in 2021.
What strategy are American fast-food chains employing in China?
Many American fast-food chains are opting for franchising models in China, partnering with experienced local operators. This model reduces their exposure to market volatility compared to direct operations managed by overseas headquarters.
What approach is Five Guys taking to appeal to Chinese consumers?
Five Guys is targeting quality-focused consumers in first-tier cities. As Chinese consumers are not automatically attracted to foreign brands, the company is focusing on offering differentiated products and adopting localized operations.
