McDonalds in ChinaMcDonald's (MCD) has always been the worldwide giant of Western-style fast food. As of December 2011, the company had 33,510 restaurants in 119 countries.

Whenever and wherever the classic American burger joint has shown up, the Golden Arches have dominated -- until now.

The most popular Western-style, fast-food company in China right now is Yum! Brands (YUM), the owner and operator of fast-food stalwarts Taco Bell, Pizza Hut, and KFC. In fact, Yum!'s operations in China dwarf its longtime rival: It has more than 4,000 outlets there, versus McDonald's 1,400.

China Is Just the Appetizer

With a population of more than 1.2 billion, the next potential growth market for Western fast food is India. There, too, Yum! has Big Mac-sized aspirations.

Yum Brands KFC in China

"We're going to share what we have learnt in China," Yum! Chairman and CEO David Novak was recently quoted as saying in the Financial Times, "because we think that the model can be adapted in [other] emerging markets."

Yum! made it its mission to tailor menus to local tastes in China and will undoubtedly employ this strategy in India, as well. (In addition to the brand's classic fried chicken, menu options at its KFCs in China include beef, seafood, rice dishes, fresh vegetables, and soups. Pizza Hut offers menu items similarly skewed toward Chinese tastes.)

But the piece de resistance of Yum!'s plan should sound very familiar to a certain hamburger-loving clown.


Thanks for the Great Idea, McDonald's

Drive down most highways in the U.S. or through most small towns, or walk through most big cities, and you'll notice that McDonald's restaurants typically have the best visibility and are almost always the easiest to access.

In part because it's been around for so long, McDonald's has always gotten the jump on the prime locations for its restaurants. This is especially clear in the U.S.

This focus on grabbing the best real estate for its outlets has been a winning corporate strategy for McDonald's -- so effective that Yum! used it to great success in China, and is now applying the same strategy to win the fast-food battle in India.

"What we're doing in India is we're getting flagship locations just like we [did] in China," Novak told the Financial Times.
Right now McDonald's has just 160 outlets in India. Yum! boasts more than 200 KFCs already, with a total of 550 expected by 2015. There are currently 160 Pizza Huts open, and Taco Bell is just starting to get ramped up.

And, like it did in China, Yum! will move into the second- and third-tier cities in India once the flagship locations are established. Because labor and rents are significantly cheaper in those cities, profits will be higher than in the first-tier cities, which should help the company's margins overall.

By slyly adopting one of McDonald's own best strategies, and developing some of its own, Yum! has gotten the jump in India and looks set -- once again -- to beat McDonald's at its own game overseas.

John Grgurich is a regular contributor to The Motley Fool and has no positions in either McDonald's or Yum! Brands. Motley Fool newsletter services have recommended buying shares of McDonald's.

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dannyted

Yep, let the rest of the world migrate from their own relatively healthy diet to the toxic waste of the U.S. fast food chains. God Bless America!!

June 08 2012 at 4:10 PM Report abuse rate up rate down Reply
1 reply to dannyted's comment
jankantius

I like MacDonalds... but if I eat it more than once a month it makes me gag.

June 09 2012 at 12:59 AM Report abuse rate up rate down Reply
mmmgoblue

Yum, yum. No surprise. The world loves KFC. A friend of mine from Tehran said even after the 1979 revolution KFC stayed in business due to it's popularity. They also liked Jack Daniels (consumed in private homes of course).

June 08 2012 at 2:45 PM Report abuse rate up rate down Reply
jmcoghillmcn

I learnt something today!

June 08 2012 at 2:22 PM Report abuse rate up rate down Reply
Alexander

Romney vs Frankenstein (Obama)

Put simply, better the devil you don't know. Vote Romney

June 08 2012 at 1:53 PM Report abuse -4 rate up rate down Reply
solafide317

"learnt" ? really? how about "learned".....

June 08 2012 at 1:18 PM Report abuse rate up rate down Reply
bestbunny10

How sad that the giant American food chains are gaining so much ground in India and China. They say tht they are catering to the local food taste with healthier options...Really?? Its still fast food.. These countries have never been associated with obesity...now its just a matter of time for us to give them more health problems. The local foods are so much healthier.

June 08 2012 at 12:41 PM Report abuse rate up rate down Reply
1 reply to bestbunny10's comment
solafide317

yes very sad - we should be eating THEIR food - not vice versa!

June 08 2012 at 1:18 PM Report abuse rate up rate down Reply
George

As an independent, low roller, speculator in equity stocks, I have been consulting a popular "money magazine" for several years now. Some time ago, they accurately suggested YUM would be a preferable option in which to park funds.

June 08 2012 at 11:11 AM Report abuse rate up rate down Reply
kendelvalle

Sprinkle birth control powder in the food!

June 08 2012 at 10:43 AM Report abuse +1 rate up rate down Reply
davefromfwb1

So they give them healthy food choices because that's what they want....but here in America they just stick with the burgers, fries, soft drinks and deserts. Makes you realize America is one grossed out fat country.

June 08 2012 at 9:25 AM Report abuse rate up rate down Reply
itemsold

They offer beef, seafood, rice dishes and fresh vegetables in China and we get...hmmm. Doesn't matter to me, I guess. We rarely eat out anywhere and probably get chicken from KFC once or twice a year at best. Still, just another reason why it seems as though every other American these days is forty or more pounds overweight.

June 08 2012 at 9:09 AM Report abuse +1 rate up rate down Reply