McDonald’s Holdings Co. (Japan) is accelerating the closures of outlets to cope with its deteriorating earnings traced to its loss of customer trust.
The company is planning to shut 190 restaurants in the nation, including large outlets in urban areas, by the end of January.
McDonald’s appears to be the sole loser in the current Japanese market, with some rivals seeking to open outlets at the locations of closed McDonald’s restaurants.
The plight of the Japanese arm of global hamburger chain McDonald’s Corp. has hinged on a series of scandals, including the use of out-of-date chicken from a Chinese supplier and the discovery of foreign objects in its products.
For the business year ending on Thursday, the Japanese arm is projected to log a net loss for the second consecutive year. The company is closing outlets with “low profitability and growth potential,” an official said.
At the end of November, the number of McDonald’s restaurants in Japan stood at 2,975, falling below the 3,000 threshold for the first time in 17 years. The figure was about three-quarters of the peak level of 3,892 at the end of December 2002.
Still, the restructuring effort does not seem extensive enough to an executive of a rival restaurant chain. “McDonald’s needs to close some 1,000 outlets for a V-shaped recovery,” the official said.
Unhappy with the continued dismal performance of McDonald’s Japan, the U.S. headquarters, which currently owns about 50 percent of the Japanese unit, is considering selling a stake of up to 33 percent.
“Whether the planned sale will lead to a turnaround of McDonald’s Japan depends on the buyer,” said Seiichiro Samejima, senior researcher at the Ichiyoshi Research Institute.
Rival hamburger chains Burger King Japan and First Kitchen are seeking to replace McDonald’s at some sites, hoping to take over customers of former McDonald’s restaurants.
McDonald’s Japan also faces a new competitor, Shake Shack, a tough rival for the McDonald’s chain in the United States that opened its first Japanese restaurant in Tokyo in November.