It seems Ronald McDonald has bitten off more than he can chew in the nation's east, with the impending closure of the city's longest serving McDonald's restaurant.

Hugely popular during the 1990s, the Huaihai Zhonglu store will wind down next month due to sliding profitability, China Daily has been told.

The outlet has been facing increased competition from the likes of fried chicken heavyweight KFC and also from within its own ranks - there is a larger McDonald's store less than 1 kilometre away.

A senior executive with Shanghai GuangMingCun Restaurants, the property owner of the doomed 500-square-metre location, said: "We have signed a contract with another business to rent the space but the contract still needs approval from the district government."

McDonald's Corp yesterday confirmed the outlet's closure, but said it has no direct connection with the company's overall performance in Shanghai.

Bu Hua, a publicity officer with Shanghai Hualian McDonald's Co Ltd, a joint venture between McDonald's and Shanghai-based Hualian Supermarket Group, said he was not able to disclose any further information.

Experts have mixed views as to why the global giant - recognizable for its golden arches and clown mascot Ronald - is being forced to make such a move.

Zhu Lianqing, an economist with the Shanghai Academy of Social Sciences, said the rapid expansion of McDonald's in China has placed too much pressure on its profits.

"The golden times have passed by," said Zhu. "It's better for them to slow down a little bit in Shanghai and consider their profits a little more."

Jonathan Shih, general manager of McDonald's (China) Co Ltd, told local media earlier this year the company was considering measures to further trim the fat off its operation, including shutting down a number of struggling outlets.

But regardless, Shih said the company is looking past the number of stores it presently has in Shanghai.

"The market in Shanghai still has great potential," he said during a promotional activity for the company at the weekend. "Our goal is far above the 64 stores we already have here."

The Shanghai store facing closure opened in 1994.

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