US fastfood giant McDonald's and Fazoli's, a fast-casual Italian restaurant concept based in Lexington, Kentucky, have agreed to form a joint venture to develop 20 to 30 Fazoli's restaurants in three US markets.

McDonald's will also have an option to purchase the entire company at a later date. The agreement finalises a deal originally outlined in a letter of intent signed by the two companies last April.

Fazoli's operates more than 400 restaurants in 32 states. The menu includes Italian favourites like spaghetti and meatballs, fettuccine Alfredo, lasagne and ravioli, along with its signature Submarinos and panini sandwiches and salads.

The joint venture will be headed by Raymond Mines, former executive vice president of system relations for McDonald's. The joint venture will take over management of the existing Fazoli's market in Denver and will introduce the brand in two new markets, which are still being identified.