Monday, October 21, 2013

Flight to Quality Hits American Fast Food in China

This month, McDonald’s and KFC reported declining same-store sales in China, in both cases surprising Wall Street analysts. Both restaurant chains are being affected by a flight to quality. No one is surprised anymore by flat same-store sales in U.S. fast food, but it’s a trend that wasn’t expected to reach China, at least not this year.

KFC parent company Yum had pinned its hopes on rapid growth in China, so the report of a sharp decline there put its business plan in doubt. McDonald’s report, though, may be more gloomy. It doesn’t have a bright spot anywhere in the world to point to, and a barrage of promotions in the United States failed to lift sales about last year’s levels. McDonald’s blames the state of the global economy for its poor results, but it may just be that it doesn’t have much to offer to people who are trying to do better for themselves.