Pret A Manger has announced plans to expand into Hong Kong in Q1 2002. Sandwich bar operator Pret A Manger is expanding rapidly now that it can depend on cash from part owner McDonalds. The burger giant’s arms-length approach appears to be working, without the loss of consumer confidence some observers worried about. The Pret A Manger venture could prove to be the model for extending McDonalds’ business.

McDonald’s is following two approaches to deal with the saturation problems its mainstay burger business faces in developed markets such as the US and the UK. One approach has been to open new ‘McBranded’ ventures that exploit the brand among new categories and new consumer groups. These include a string of failures, such as McPizza, Big Xtra and Arch Deluxe. The McCafe concept, which has a reasonable presence in overseas market such as Australia, has yet to prove itself in the States.

The other method involves buying their way into other businesses more closely aligned with today’s growth trends, such as Pret A Manger in which it owns a 33.4% stake. Both tactics aim to expand McDonald’s international business from its current 60% to reach 70%.

With a more upscale image and wholly different offering, Pret provides McDonald’s with a distinct channel for expanding its foodservice business. The sandwich bar business offers sandwiches, salads, sushi, and desserts, along with teas and coffees. A key feature of its proposition is the emphasis on high-quality, daily-fresh ingredients and their, handmade sandwiches.

In July, the chain entered the US market with 30 outlets planned over the next two years. Now the company is turning its attention to the Asian market, ahead of schedule, with 10 stores planned before the end of the year. The medium term aim is to move into Singapore, Tapei and eventually get another foothold in the Chinese market by opening in Shanghai. This expansion ambition is possible due to McDonald’s funding capacity and expertise in securing prime city-center locations.

While its core business is not going anywhere fast, ventures such as Pret A Manger may eventually enable McDonald’s to grow whilst staying “behind the scenes”. The fate of Pret A Manger’s expansion in developed markets such as the US and Hong Kong will provide McDonald’s with the litmus test for further buying into such successful chains – or even leveraging that knowledge to develop its own diversified, new chains.

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