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McDonald''s Corporation is the world''s leading food retailer with 31,108 restaurants in 119 countries serving 46 million customers a day. McDonald''s has always been a franchising company. About three quarters of its stores worldwide are franchises. Franchisees have played a significant role in McDonald''s success. However in China it is a different story. Barring a pilot franchise in Northern China''s Tianjin Municipality, all 566 McDonald''s restaurants are either wholly-owned by the company or jointly-owned with Hualian or Beijing Sanyuan foods. The Chinese government is likely to allow franchisees to operate in the country by early 2004 only. Franchising has been a fast growing business area in China since 2002. The franchising models prevailing in China today have the externalities of Western franchising, yet ambiguities pervade. The case discusses McDonald''s franchising model, its business, strategy and the roadblocks to its franchising efforts in China. The teaching note was written by Sreenivas Rajan.