Reporter | Lu Yibei
Edit | Ya Han Xiang
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According to the Hong Kong Stock Exchange, Village-based Fast Food Chain Holdings Limited (hereinafter referred to as "Village-based Group") formally submitted a prospectus on 25 January, with Goldman Sachs and CMB International acting as joint sponsors.
Founded in 1996, the village was originally called "Village Chicken", and in the early days it was just a small Restaurant of Sichuan cuisine with chicken as the main ingredient. In the past 26 years, the Rural Base Group, which adopts a standardized and chained business model, has become a Chinese fast food giant with two well-known chain fast food brands, Rural Base and Mr. Rice, with a total of 1,145 stores. Its prospectus quoted Frost & Sullivan as saying that in terms of the number of chain restaurants and revenue generated in 2020, Village Foundation is China's largest directly operated Chinese fast food group.
According to the prospectus, the revenue of The Village Foundation for 2019, 2020 and the nine months ended September 30, 2021 was RMB3.257 billion, RMB3.161 billion and RMB3.424 billion, respectively, most of which was derived from restaurant operations, including restaurant business and takeaway business; in terms of net profit, for the nine months ended September 30, 2021, the net profit of the Rural Foundation reached RMB163 million, compared with a loss of RMB13.8 million for the same period in 2020.
Both Village Ki and Mr. Rice take the affordable urban canteen route.
The village-based restaurant specializing in Sichuan cuisine has maintained 25 to 30 product SKUs, including ace products that have been sold for 20 years, such as kung fu chicken thigh rice, marinated meat rice, sauerkraut meat shredded rice noodles, etc., as well as new products that will be launched every month. In terms of pricing, the village base is mainly cost-effective, and you can eat a set of packages containing staple foods, side dishes and drinks for 20 or 30 yuan per capita.
In terms of standardized operation, the central kitchen of the village base uniformly makes sauce every day and distributes it to each store, and the remaining stir-frying links are all handed over to the stores to complete. Its store design is simple and bright, there is a standardized dining model, and the location of the store is more inclined to choose a larger location around the department store or the community.
Image source: Weibo @ Village Base
According to its prospectus, in 2019, 2020 and the first three quarters of 2021, the average daily sales of a single store of the village-based restaurant were 13,711 yuan, 11,873 yuan and 12,116 yuan, respectively; the unit price of customers was 26.6 yuan, 25.6 yuan and 25.9 yuan, the turnover rate was 2.8, 2.2 and 2.8, respectively; and the average daily ping effect of a single store was 53.0 yuan, 49.7 yuan and 56.4 yuan, respectively.
As of September 2021, there are a total of 602 stores in the village base, the vast majority of which are concentrated in Chongqing and Sichuan, with 343 and 222 stores respectively, and only 37 stores in other regions, with a strong regional strength.
In contrast, Mr. Rice, another brand owned by the Village Group, covers a wider range of markets with differentiated operations.
Founded in 2011, Mr. Rice mainly provides freshly stir-fried dishes from different regions such as Hunan, Jiangsu, Zhejiang and Guangdong. It is characterized by a weigh-down (rather than per-dish) and small bowl (as opposed to a whole staple) model. For workers, this model offers more options on a limited budget.
Image source: Weibo @ Mr. Rice rice rice
In terms of stores, Mr. Rice is mainly located in the central business district of the metropolis, and because of its relatively light and diverse taste of dishes based on the countryside.
As of September 30, 2021, Mr. Rice Restaurant has a total of 543 stores. Its performance is that in 2019, 2020 and the first three quarters of 2021, the average daily sales of Mr. Rice's restaurant were 10,207 yuan, 9,882 yuan and 12,268 yuan, respectively; the unit price of customers was 22.7 yuan, 21.5 yuan and 22.0 yuan, the turnover rate was 3.3, 3.4 and 4.2, respectively; and the average daily ping effect of a single store was 45.9 yuan, 49.0 yuan and 65.5 yuan, respectively.
At present, the contribution of Rural Ji and Mr. Rice to the overall revenue of the Group is relatively close, accounting for 54.1% and 45.9% of the first three quarters of 2021, respectively.
In fact, as early as September 2010, The Village Foundation was listed on the New York Stock Exchange. The rapid expansion driven by capital is the focus of this round of listing of the rural base.
In 2007, Village Foundation received a $13 million Series A investment from Sequoia China and Haina Asia. The three parties jointly injected 20 million US dollars (about 150 million yuan) to build The Village Foundation into the first brand of Chinese fast food and list it overseas within three years.
At the time of the 2008 financial crisis, the "bottoming" expanded rapidly, paving the way for the first listing of the village base.
In 2007, Cunji had 45 stores in the mainland, and by the first half of 2010, it had expanded to 101. According to the prospectus at that time, its revenue in the first half of 2010 was 326 million yuan, an increase of 53.75% year-on-year, and its net profit was 27.72 million yuan, an increase of 36.75% year-on-year. In September of the same year, Village Ki officially rang the bell on the New York Stock Exchange, becoming the first Chinese fast food brand listed in the United States.
The boost of capital has put the development of the rural base into the fast lane. As of the end of the third quarter of 2015, the total number of stores reached 355 (including 82 stores under the Later Mr. Rice brand). The operating area also rushed out of the southwest, covering 30 cities across the country, including Beijing and Shanghai.
However, the good times are not long, and the excessively rapid expansion rate has brought negative effects, and since 2013, the performance of the rural base has suffered a continuous decline in profits. By 2016, the village base launched privatization and was delisted.
Nowadays, after experiencing twists and turns, the village base has once again chosen to speed up the opening of stores at the time of the epidemic to "bottom out". The total number of stores increased from 638 in January 2019 to 1,145 at September 30, 2021. During this period, in June 2020, Rural Foundation once again received hundreds of millions of yuan of investment from Sequoia Capital.
And the village base will continue to expand stores. According to the prospectus, the net proceeds raised from the IPO will be mainly used to expand the restaurant network, deepen market penetration and renovate existing restaurants as needed; strengthen supply chain capabilities, as well as lease additional regional warehouses equipped with frozen and refrigerated storage space for temperature-sensitive ingredients; strengthen technical capabilities to further improve operational efficiency; and for general corporate use.
The similar background of the two listing attempts of The Village Base may reflect the pressure resistance of Chinese fast food chains, but it remains to be seen whether the road to listing will repeat the same mistakes. Rural Ji also mentioned in the prospectus risk factors that the Chinese fast food restaurant industry in which it is engaged is more competitive, and its market share may be affected by factors such as food quality and safety, taste, and price. Competitors come from various market segments and regional markets.