eir requirements. The Tourist Bureau was responsible for the supervision of the construction and operation of all hotels and restaurants in Beijing. They also had a lot of experience speeding up the construction of many Western hotels, and had many times participated in a joint venture in these operations. During these negotiations it happened that KFC was sold to Pepsico. During this time KFC was the second largest fast food chain in the world. It was initially thought that Animal Production had only come on board because of pressure from the Ministry of Light Industry, who wanted to win points with Reynolds, so the acquisition came at a bad time. As it turned out, however, Pepsico's connections with the government in Beijing were even stronger then Reynolds, so negotiations continued with a renewed interest. To convince the partners to become part of the venture, Wang offered a guarantee of five percent return on equity, much better than they could receive domestically. This sealed the deal in winning over the partners. KFC retained 60% of ownership, The Tourist Bureau received 27%, and Beijing Animal Production took 13%. This was the actual breakdown of assets that each partner was contributing to the arrangement. This deal was privately pre-approved as acceptable in negotiations with the Foreign Economic Development and City Planning Commissions. The approval of the partnership also required on the sharing of the corporation. With one-half coming from KFC and the other half split between the other two partners. The deal also stated that the chairman would be appointed by Animal Production and the vice-chairman would be appointed by the Tourist Bureau. This concerned Wang because of loss of control over operations. Wang countered by establishing the new store as a franchisee, with the franchiser being KFC's head office in Singapore. This would require 3% royalty payments to be paid to the head office, and require the store to pu...
