Burger chain Five Guys to open first Beijing store as US fast-food chains expand in China

Following the launch of the first China outlet in Shanghai in 2021, the company said in a statement last week it plans to open three stores in Beijing at popular shopping centers targeting younger consumers, with construction hoardings indicating that openings are imminent.

Chains including Wendy’s, Chili’s, Texas Chicken and Popeyes are seeking to capture a share of the world’s second-largest consumer market as they encounter saturation in their home market, analysts said.

A person holds a burger outside of a Five Guys restaurant. Photo courtesy of Five Guys

“Some smaller American chains are seeking opportunities in China to offset saturation in their domestic markets,” said Sandy Lim, China consumer analyst at S&P Global Ratings.

“Despite fierce competition, there are still pockets of demand within China’s large catering market,” she said, as quoted by the South China Morning Post.

Unlike earlier foreign brands that relied on direct operations managed by overseas headquarters – exposing them fully to profits, losses and market volatility, with some eventually exiting China – many U.S. brands now prefer franchising models, Lim added.

Nasdaq-listed Wendy’s announced in May that it plans to open up to 1,000 stores across China over the next 10 years. The company has signed a new franchise agreement with an experienced local restaurant operator, whose name remains undisclosed, according to its first-quarter earnings report.

Same-store sales for the burger chain in the U.S. fell 7.8% year on year in the first quarter, while system-wide sales in international markets increased 6% from a year earlier, according to its earnings report.

U.S. fast-food chain Texas Chicken will open its first China store in Shanghai this summer. It has partnered with Deke Shengtang, a leading local operator with multiple quick-service restaurant brands, to develop at least 600 restaurants nationwide over the next few years, the company said in an April statement.

Another U.S. chain, Chili’s, opened its second Beijing store in May. Louisiana-based fried chicken brand Popeyes returned to Beijing in April, two decades after exiting China in 2003. The chain also operates more than 80 outlets in Shanghai.

Fu Yifu, a special research fellow at Su Merchants Bank, told the South China Morning Post inflation had continued to weigh on household spending power in the U.S., while the penetration of Western fast-food brands in China continued to increase.

Early entrants such as KFC, McDonald’s and Starbucks have developed localized franchising models to reduce risks. Five Guys is targeting quality-focused consumers in first-tier cities. As Chinese consumers are no longer automatically drawn to foreign brands, these companies need to rely on differentiated products and localized operations to expand, Fu said.