Image source @ Visual China
Wen 丨 Ju tide WAVE, author 丨 Li Fang, editor 丨 Yang Xuran
In the classic high-rating food program "China on the Tip of the Tongue 3", the CCTV team traveled to Niuhua Town, Leshan, Sichuan Province, and spent nearly 8 minutes telling the story of spicy and hot food.
But in fact, most of the time, spicy hot is just a small island in the vast ocean of Chinese food. If you pull back the time to twenty years ago when Yang Guofu and his wife started their business, you will see that this kind of street food can only be associated with words such as "spicy", "dirty and messy", "cheap" and so on.
If someone said at that time that spicy scalding could be made into a national chain restaurant brand, or even listed, it would probably be questioned or even ridiculed.
All this is almost achieved now, Yang Guofu spicy hot is on the way to the market, and Yang Guofu wants to make not only spicy hot money, but also more lucrative profits in the entire supply chain. Obviously this is a story that is quite in line with the taste of capital.
01, the franchise link first earn one
"The Chinese food supply chain contains a lot of possibilities, because it is multi-dimensional and in-depth, and many links in the entire supply chain can produce value-added content."
Although the number of Chinese food companies operating in the chain franchise method is large, there are few successful people. So much so that there is a joke in the field of Chinese fast food chains, "Most of the feet of Chinese restaurants cannot be stuffed into McDonald's shoes." ”
According to CCFA & China Renaissance Capital's "2021 China Chain Catering Industry Report", the chain rate of China's restaurants in 2020 is 15%, and before 2006, it is only 10%, which shows the slow pace of its development.
Spicy Hot is one of the fastest runners in this slow process. Since 2005, Yang Guofu began to take the route of chain franchise, and its chain franchise stores have doubled 6 times in the past decade, reaching 6,000 stores in the country, far exceeding the current number of McDonald's and Pizza Hut in China.
According to the current scale of Yang Guofu's 6,000 stores across the country, according to the franchise fee of 27,900 yuan / 12 years, the decoration fee of about 100,000 yuan, the equipment fee of 50,000 yuan, and the one-time food fee of 20,000 yuan of new stores, it is uncertain whether these stores will make money and make profits, but Yang Guofu has obtained more than 1 billion yuan of income.
Spicy scalding is probably the lowest threshold category in the restaurant industry
This does not include the subsequent distribution of main ingredients, seasonings, auxiliary materials and other benefits to franchisees by supply chain factories.
In addition, Yang Guofu's franchise fee also includes a refundable deposit of 20,000 yuan. This can also be regarded as a part of the working capital for Yang Guofu, which can be used without interest, and may be deducted for various reasons when the franchise store closes.
In addition to collecting franchise fees, decoration fees, equipment payments, etc., Yang Guofu built his own logistics base and supply chain factory, and delivered spicy hot raw materials to franchise stores across the country through factories and multiple logistics centers.
From the perspective of market scale expansion, Zhang Liang's asset-light external procurement management model is conducive to expanding the market scale as soon as possible, but relying on the profit model of franchise fee income, while simplifying management costs, it also limits the scale of revenue and profit margins.
In contrast, more than 80% of Yang Guofu's revenue structure comes from the sale of ingredients and seasonings to franchisees, and Yang Guofu is still increasing his investment in supply chain factories and logistics distribution. As early as 2018, Yang Guofu's trade services business segment (responsible for supply chain and supplier procurement and distribution) has reached 1.5 billion yuan a year.
An investor told Juchao that the Chinese food supply chain contains a lot of possibilities, because it is multi-dimensional and in-depth, and many links in the entire supply chain can produce value-added content. What is even more attractive is that it has sustainability and growth that are highly valued by the capital market.
Yang Guofu's rapid franchise model + diversified profit structure has not only achieved rapid development, but also reduced the demand for financing to a certain extent.
Vegetables and sauces can be used not only on spicy scalding. Categories such as skewers, fake vegetables and even hot pot are also the direction of Yang Guofu's supply chain expansion.
The advantage of most catering supply chains lies in the customer stickiness at the b end, and Yang Guofu is naturally deeply bound with franchisees and has strong decision-making power and control over supply, which means pricing power.
02, the meaning of drunkenness is in the supply chain
Many overseas companies have already played through the store (including franchise and self-operated) + supply chain model.
Yang Guofu proved that spicy hot snacks are a good business that can develop into a Chinese food franchise + supply chain.
In 2020, Yang Guofu's production center has reached an annual output of 13,800 tons, which can be used by 12,000 stores.
In addition to fresh ingredients, franchisees need to purchase nearby, other pot bottoms, staple foods, meat products, mushrooms, soy products, seafood, bamboo shoots, seafood, quick-frozen finished products / semi-finished products, fried materials and various types of seasoning products can be provided by Yang Guofu.
As long as enterprises continue to improve their product development and manufacturing capabilities, the business on the spicy hot supply chain can be said to be continuous. Taking Qianwei Central Kitchen as an example, it began to lay out the catering supply chain field very early, launched the explosive sesame ball in 2003, and in 2012, the sesame ball alone achieved sales of more than 100 million yuan, and then launched well-known products such as anxin fritters.
As of 2021, there are nearly 400 SKUs in Qianwei Central Kitchen's products, and the product matrix covers frying, baking, cooking, dishes and other four categories.
Although Yang Guofu and Qianwei Central Kitchen have become strategic partners, in view of the huge market, it is not excluded that Yang Guofu may expand the upstream business of the supply chain, after all, the downstream franchisee market is already very stable.
In fact, many overseas companies have already played through the store (including franchise and self-operated) + supply chain model.
For example, in the early days of 7-eleven and Rosen, many ingredients were provided by others, but the quality could not be guaranteed, and the profitability was not high. After that, they all invested a lot of time and money in food research and development and supply chain construction.
At present, Rosen and 7-eleven's own brands have accounted for more than 50% and more than 60% of the total sales of the entire franchised stores, respectively. The profit margin of the private brand is not only higher than the profit margin of the external procurement, the quality is also more guaranteed, and the customer's recognition of the brand will be higher.
Lawson and 711 convenience stores have a large number of private label goods
For example, Costco's growth speed and profitability far exceed those of international retail companies such as Walmart and Target, and its core competitiveness of long-term profitability is: a unique supply chain business model that is different from the difference between suppliers and consumers, and the production and sale of a large number of Costco's own brand products. Combined with costco membership system, the private brand is built into a "gripper" to "improve customer stickiness and repurchase" to earn more membership fees and achieve high returns.
Of course, in the catering market with a large base and mixed fish, industrialization and scale have always been a problem, and there are a large number of failure cases in the market. A recent example is Haidilao.
According to financial data, its sales costs, employee compensation, depreciation and amortization in the first half of 2021 have a total of 17.833 billion yuan, which is behind the wide coverage model of the industrial chain advocated by Haidilao.
The high cost and the huge number of employees forced Haidilao to raise the price of goods, so that there was an extreme situation where a few pieces of rotten bamboo were sold for dozens of dollars.
In contrast, Yang Guofu is equivalent to outsourcing the costs of employees and opening stores through franchise, and the related costs are apportioned to thousands of franchisees.
After charging a part of the fee through joining, Yang Guofu also further earned profits through the subsequent sales of ingredients in franchised stores. If joining is a one-time income, the sale of ingredients is to earn money for store operations.
It can be seen that the combination of franchisees + supply chain can be called one of the most important ways to achieve the industrialization of Chinese food, and the cost is much lower than that of Haidilao's self-operated model.
At the same time, this is also a huge test for Yang Guofu's brand value, franchise system, and food safety control.
03, it is difficult to be recognized by capital Chinese food
If capital runs to the profitability of the restaurant to investigate a catering company, it is likely to fail.
A-shares have always been very strict in the face of the listing of catering enterprises, and investors have many reasons for their lack of interest in the catering industry: difficulty in revenue cost recognition, difficulty in standardization, few chain brands, and difficult to solve food safety problems.
Especially for chain franchises, once there is a problem with the food safety of a franchise store, the entire brand will be implicated. In the franchise system of catering brands, this is a very easy problem - the ability and level of franchisees are naturally uneven, and it is difficult for the brand side to achieve meticulous and thorough constraints on them.
In fact, Yang Guofu's food safety problem has never stopped. According to a set of data released by the Beijing Consumer Association in January 2022, since the food safety inspection in October 2021, in the ranking of the number of stores with food safety problems in Beijing, Yang Guofu spicy hot ranked third with 17 stores, and Zhang Liang spicy hot ranked fourth with 15 stores.
For any catering enterprise, this is a practical problem that continues to plague the development of enterprises, it is difficult to completely eliminate, from the perspective of capital, which means that the safety of brand equity is difficult to guarantee.
Most of the catering companies that have been listed in A-shares, including Guangzhou Restaurant and Quanjude, belong to state-owned holdings, and state-owned assets actually "put a lock" on the safety of assets, but even so, the performance of these listed companies is generally not good.
In the Hong Kong stock market, the development of Haidilao as a leading enterprise once brought great hope to the entire industry - companies such as Jiumaojiu were also more sought after.
The capital market's judgment of Haidilao has changed completely
However, with the failure of Haidilao's epidemic expansion strategy, its extremely high price-earnings ratio began to fall in free fall, and the market's judgment of it returned to a "hot pot restaurant" in the conventional sense, no longer regarded as a benchmark enterprise that can unify the hot pot rivers and lakes.
The rise of Haidilao, and the process of being warmly sought after by the capital market, can be seen as the 1.0 era explored by catering enterprises in the capital market.
Today, the enthusiasm of the 1.0 era has dissipated with the reef of Haidilao, but in the past few years, anjing food, a prepared food represented by Qianwei Central Kitchen, and a seasoning company represented by Yihai International are essentially catering supply chain enterprises. Spicy hot will be this brand + supply chain model completely manifested, equivalent to telling a new story to the capital market.
In addition to the uncontrollable problems of "non-standardization" and "no brand", the obstacle to capital not waiting to see Chinese food is that Chinese food chains generally have small profits and high sales, that is, net profits are low and fluctuate greatly.
The comparison of the financial data of a group of listed catering enterprises can explain the problem in more depth: Quanjude has been losing money for many years, with an average net profit margin of -9.72% in the past three years from 2018 to 2020, and an average net profit of -22.77% in the past three years of International Sky Eclipse (formerly known as Xiaonanguo). The average net profit margin of Guangzhou restaurants in the past three years is 13.96%.
One of the reasons why the revenue of the three companies that also do traditional Chinese food chains is that the revenue structure of Guangzhou restaurants is different from the previous two: Guangzhou restaurants have their own food processing and manufacturing companies and more than 80% of their profit contribution comes from food manufacturing (such as quick-frozen food, etc.), rather than traditional Chinese food catering.
About 70% of Quanjude's revenue comes from catering, and merchandise sales account for less than 1/3. International Sky Food (more than 97% of the revenue comes from restaurant operations, and about 2% of the revenue comes from the sale of packaged food). The ceiling of the Chinese hot pot industry - Haidilao, although the average gross profit margin in the past three years is as high as 57%, the average net profit margin of sales is only 6.54%, and in 2020, the net profit plummeted by 86.80%, and the net profit margin was as low as 1.08%.
Capital is not only concerned about scale, but also about profit. However, through the above data analysis, it can be seen that if capital runs to the profitability of the restaurant to investigate a catering company, it is likely to fail.
The epidemic has trapped the catering industry for many years
But what about companies that provide supply chain services (and exclusive rights) to thousands of branded restaurants? That investors can most likely jump out of the thinking framework of investing in catering, which is a good thing for Yang Guofu.