It's become a national phenomenon in China, partly because it's at the heart of one of the country's most viral internet memes, where people write melodramatic stories that end with a sudden twist — a request for 50 yuan, or $7, to buy a Crazy Thursday feast.
"I was fired today," one such post reads. "I didn't want to go to work. My performance was terrible. No one cares about me. Send me 50 yuan for Crazy Thursday."
The bizarre trend boasts over 3 billion views and 31 million posts on Weibo, China's version of X.
McDonald's fans have their own entry in the Chinese zeitgeist — a make-believe pseudo-Christian religion called the "McMen," which sounds like "Amen" when said in Mandarin.
Such is the cult-like success of these two American fast-food brands in China, a market that's barely been touched by the luster of Arby's, Chick-fil-A, In-N-Out, Five Guys, and other US favorites.
Both KFC and McDonald's have announced aggressive, ambitious expansions in China's post-COVID era, at a time when most Western-led firms have lost faith in the country's stalling economy . Key to their drive, experts say, is perceived opportunity in China's less-developed cities, where these brands' reputations precede them, rent is lower, and consumers are more optimistic.
"Sales are declining in Tier One and Tier Two cities because the market is too saturated," Shaun Rein, founder of consultancy China Market Research Group, told Business Insider. "But there's huge growth potential in the lower-tier cities."
KFC or McDonald's might be considered America's cheapest food options. But in China's less affluent hubs, they're a premium pick that both chains think these cities are ready for.
"What's happened is that somebody in an eighth-tier city is looking at KFC as an aspirational purchase," Rein said. "And so is saving up money and excited to try Western food and a bit of Western living for the first time.
"Kind of the way it was in Shanghai 25 years ago," he said.
An expansion rate surpassing America's
KFC, run by Shanghai-headquartered Yum China, has historically enjoyed the lion's share of the country's fast-food cravings. In December, its store count hit 10,000 restaurants, more than double the 4,300 KFC locations in the US.
KFC's 10,000th outlet opened in Hangzhou in December.
LONG WEI / Feature China/Future Publishing via Getty Images
Yum China also runs Pizza Hut and owns a combined 15,000 pizzerias and chicken shops in the country.
In April — as the national economy still struggled to gain momentum — Yum China said it planned to open another 5,000 stores in two years. That's the third time it's doubled its expansion rate in the last decade.
"It took us 25 years to build the first 5,000 stores in China, 8 years to build the next 5,000, and just 4 years for the last 5,000," the company wrote in a note to shareholders.
According to state media , about half of these McDonald's stores are already in third- and fourth-tier cities.
Hopes for a new middle class in China
Cities in China are unofficially grouped into tiers according to their status, size, and wealth. Beijing, Shanghai, Guangzhou, and Shenzhen comprise the most prestigious first tier, while others like Chengdu and Chongqing trail closely.
But optimism is plummeting in these hubs, even after zero-COVID ended in 2022. Multinationals and investors are leaving in droves, concerned about financial restrictions, a poor economic outlook, and the looming threat of conflict with the US.
Consultants like Rein believe the cities below the second tier — think lesser-known places like Nanyang or Anshan — present more opportunity for an upswing.
"We're telling most of our clients to look at third, fourth, fifth-tier cities," he said.
Analysts think third-tier cities like Suqian in Jiangsu province are stronger bets for growth than in metropolitan hubs like Beijing and Shanghai.
Costfoto/NurPhoto via Getty Images
A spokesperson for Yum China told BI that over half of its new KFCs are built in lower-tier cities, where rent and labor costs are cheaper.
"And the ticket average is as good in as in higher-tier cities," they said. "For now, we are mainly serving middle-class consumers in these markets."
Analysts and brands are betting these cities will be the birthing ground for the next generation of China's middle class, buoyed by a lower cost of living and an under-30 workforce three times as large as that in higher-tier cities.
More importantly, there's hope that consumers there will look to upgrade their lifestyles with new clothes or foods. Some analysts, like Allison Malmsten from Daxue Consulting, point to indicators like cheaper housing — seen by many young Chinese as an essential purchase.
"The housing market is a major determinant of consumer confidence in China," Malmsten, a strategy consultant, told BI.
Securing that crowd would be a major boost for brands like KFC and McDonald's . Both have seen slumping sales in their global operations. Yum China's stock price has fallen some 43% in the last 12 months, from highs of $58 in September 2023 to $33.66 on Wednesday.
But the potential scale awaiting them is massive. China's third-tier cities alone host a combined 330 million people, equivalent to almost the entire US population. Those in tier four and below are home to nearly double that number.
China's central government has pushed hard to develop these regions in recent years, urging local officials to take on billions in debt to fund infrastructure like high-speed rails, highways, and airports.
China has poured so much money into infrastructure spending that the central government issued a guideline this year for local officials to slow down loan-taking.
McDonald's did not respond to a request for comment from Business Insider.
Chinese KFC has nearly doubled its menu items
Expanding during a sluggish economy might make sense for fast food brands, which are often classified as recession-proof as consumers downgrade their spending.
Fast food's low-cost identity may be fading in the US due to price hikes, but in China, McDonald's and KFC never held the reputation of the lowest-cost food. Local shops and restaurants were almost always cheaper.
Malmsten said KFC's strength in China lies in its "barbell strategy" of offering consumers both cheaper and more expensive options, such as wagyu beef products.
"The rich are comfortable to spend, while the middle class chooses cheaper options," she said.
The size of the chicken chain's Chinese product line is monstrous, typically numbering 50 items per menu compared to 29 per menu in the US.
Yum China rolls out a new product roughly weekly, from spicy noodles to beef wraps to congee.
KFC aggressively debuts dozens of new items yearly in China, from noodles to specialized burgers to egg tarts.
Cui Nan/China News Service/VCG via Getty Images and Wang Gang/VCG via Getty Images
"It's East meets West on a serving tray," said Jonathan Bernstein, CEO of London-based Yonder Consulting's Asia operations.
Bernstein told BI that US fast-food brands in China aggressively try to match local tastes largely because homegrown competitors like Dico's and Real Kung Fu threaten to gobble up market share by offering more Chinese-tasting burgers or meals.
Visitors in Shanghai thronged a McDonald's during one of its Lunar New Year promotions.
CFOTO/Future Publishing via Getty Images
Malmsten said an expanded product range could be a unique boost for KFC and McDonald's in smaller cities.
"In lower-tier cities, these chains might be the only option for a Western meal while still having Chinese breakfast options like congee and youtiao," she said, referring to traditional fried dough sticks sold by both McDonald's and KFC.
Analysts from Yonder Consulting said that American fast-food brands have a track record of being first-movers in China, snagging prime locations in its first-tier cities ahead of mainstream demand decades ago.
"Now, they are doubling down further on this strategy by expanding into the inland regions of China, especially Tier Three and Tier Four cities with a growing middle class," they told BI.
Yum China has also been expanding aggressively in the country's burgeoning coffee scene, establishing a popular spin-off called KCoffee.
CFOTO/Future Publishing via Getty Images
Both brands will likely be assisted in these new territories by the Chinese internet, with free advertising from the deluge of Crazy Thursday and McMen memes in one of the world's most online countries.
In an analysis of the Crazy Thursday trend , Daxue Consulting said it's likely the meme's emergence in 2021 contributed to a post-pandemic rebound in KFC's annual revenue to $7.2 billion in 2022.
Rein noted that American fast food is often seen by Chinese consumers as safer to eat because its ingredients are typically standardized — a major boon in a market riddled with food scandals.
"They've got a good reputation for good tasting, affordable food. That's something that's needed in the weak economy," said Rein.
Get updates delivered to you daily. Free and customizable.
It’s essential to note our commitment to transparency:
Our Terms of Use acknowledge that our services may not always be error-free, and our Community Standards emphasize our discretion in enforcing policies. As a platform hosting over 100,000 pieces of content published daily, we cannot pre-vet content, but we strive to foster a dynamic environment for free expression and robust discourse through safety guardrails of human and AI moderation.
Comments / 0