McDonald's to invest RM65m on 14 new stores

MCDONALD'S Malaysia plans to invest about RM65 million this year to open 14 new stores to grow its business, its chief said.

The company, which has been in the country for some 26 years, now has 177 stores and business has been doing well.

Malaysians, mainly those who work in urban areas like the Klang Valley, are finding less time to eat at home and they are turning to fast-food outlets instead.

"Our growth over the last five years on an annual basis has been in double digits. In fact, the last four years, between 15 and 20 per cent annually. This comes from same restaurant sales and new restaurants that we open," managing director Azmir Jaafar told Business Times in an interview.

In fact, the business of McDonald's has been growing faster than the fast-food industry, which closely tracks Malaysia's economic growth.

The country's economy expanded by 6.3 per cent last year and it is set to grow by a slower five per cent this year.

McDonald's has carried out a few initiatives that are mainly aimed at meeting the public's lifestyle, Azmir said.

It opened restaurants around the clock to capture a "huge" 24-hour market, started a delivery service and invested heavily in drive-through outlets.

"About 30 per cent of our restaurants are drive-throughs. There is no real good ratio (for normal and drive-through) but the intention is to grow this," he said. For instance, from the 14 new outlets to open, half of them would be drive-throughs.

Malaysia's fast food industry was worth about RM2 billion last year, Azmir said, citing figures from research company Euromonitor. The government does not keep data on the industry.

The market is dominated by two big players that have a 55 per cent share, namely McDonald's and QSR Brands Bhd, which runs the Kentucky Fried Chicken and Pizza Hut restaurants.

There are smaller players like Burger King and A&W as well as niche brands like Carl's Junior and Wendy's.

However, they either have a small number of outlets or use premium prices that are not common to the industry.

The industry's biggest worry is the rising cost of raw materials. McDonald's for instance, by virtue of its menu, imports most of its beef, cheese and milk.

"We have a tough challenge. It's not that we don't want to buy locally but it's not available in the volume that we need," Azmir said.

Fortunately, being part of a global group helps. McDonald's businesses in Asia Pacific buy their needs from just two or three sources, helping to cut costs.

Labour is another challenge for the company because many perceive the industry as a temporary workplace.