TOKYO – A turnaround is taking longer to materialize for McDonald’s Holdings Japan. Local news reports state that the affiliated unit of Oak Brook, Ill.-based McDonald’s Corp. is in the process of closing more than 190 restaurants across the nation, while published reports in the United States suggest McDonald’s Corp. is looking to sell its stake in the unit.
For the third quarter of 2015, system-wide sales at McDonald’s Holdings Japan dropped 20.4 percent to ¥273,914 million ($228.7 million) compared to the year-ago quarter total of ¥344,016 million. Net losses for the quarter totaled ¥29,279 million.
McDonald’s Corp. has a share and interest of less than 50 percent in McDonald’s Holdings. McDonald’s Corp. receives royalties and a share of the bottom line. Accelerating the Japan unit’s turnaround is a priority for the company, Ian Borden, president of foundational markets, McDonald’s Corp., noted during an investor meeting held in November.
“Japan's performance has not been meeting expectations,” Borden said. “Much of this can be explained by the significant setbacks from two major food incidents in the last 16 months. However, the brand was also losing relevance prior to these incidents and becoming more functional, driven by low price versus loyalty or a strong consumer connection.”
The company plans to remodel approximately 90 percent of all restaurants by 2018, while 131 restaurants will close by the end of 2015. McDonald’s Japan also has sharpened its focus on improving customers’ dining experience by raising standards for hospitality and cleanliness. “As for brand engagement, we are reconnecting with customers through compelling McDonald's brand stories after an eight-year absence,” Borden said.
“Next, the leadership and management structure of our Japan business has been strengthened,” Borden added. “The team has added experienced new leaders in key positions, and the market has reorganized into a regional structure to move field staff closer to customers and franchise partners. I am confident that the Japanese team is focused on the right initiatives to turn the business around. But turnarounds by nature are not linear, so we expect results will remain choppy in the near term.”