Why Starbucks & Burger King Are Handing China Control to Local PE & Why Scale Alone Isn’t Enough

In late 2025, two major Western food chains—Starbucks and Burger King—have restructured their China operations through equity divestments to Chinese private equity firms. These moves reflect a wider strategic recalibration, prompted by intense local competition, changing consumer behavior, and the need for scale in underpenetrated regions.

Starbucks’ deal with Boyu Capital involves selling a majority stake—60%—in its China retail business for US$4 billion. Starbucks retains 40%, plus ownership of the brand and IP. The valuation of the business exceeds US$13 billion, when accounting for the sale proceeds, the remaining equity, and future license royalties. With 8,000 stores in China today, Starbucks aims to expand to 20,000 stores over time. Competitors like Luckin and Cotti have eroded its market share, which dropped from roughly 34% in 2019 to 14% in 2024. [2][3][4]

Burger King’s deal is smaller in scale but similar in structure. CPE invests US$350 million to acquire an 83% stake, while RBI retains 17%. The joint venture targets aggressive expansion—over 4,000 stores by 2035, up from approximately 1,250 currently. It features a 20-year master development agreement to guide long-term growth and align interests. [1][6]

Common strategic levers in both transactions include: injecting local capital and management expertise; improving agility through local operational control; shifting expansion focus to lower-tier cities; and prioritizing cost efficiency and localization in product, pricing, and consumer engagement. Both firms are also moving toward more franchised or JV models to reduce capital intensity and regulatory/market risks.

However, these strategies come with trade-offs. Key execution risks include regulatory approval for foreign transactions, cultural and quality control over the brand, potential dilution of margins, and the challenge of expansion into smaller cities where unit economics are weaker. Moreover, maintaining customer perception of premium status in the face of cheaper local alternatives is vital for Starbucks, while Burger King must balance scale with maintaining global brand standards under predominantly local control.

These moves also signal a broader trend: foreign consumer brands voluntarily ceding majority control in China, not by compulsion, but as a strategic response to domestic competition and market realities. They follow precedents like McDonald’s and Yum Brands’ partnerships or spin-outs and suggest that local ownership/control is increasingly seen as critical not only for regulatory compliance but for operational success.

Open questions remain: How will both companies manage strategic alignment with local partners over time? To what extent will retained stakes and licensing provide strong returns amid competitive pressure? Can scale in lower-tier cities ever compensate for pricing pressures? And what does this mean for future foreign investment models in China’s fast food and retail sectors?