Author| Zhang Chao Editor| Luo Lijuan
The "spicy hot first strand" is coming!
On February 22, 2022, Shanghai Yang Guofu Enterprise Management (Group) Co., Ltd. (hereinafter referred to as "Yang Guofu Group") quietly submitted a listing application to the Hong Kong Stock Exchange, sprinting for the "first hot share", with CITIC Construction Investment as the sole sponsor.
According to the prospectus, in the first nine months of 2019, 2020 and 2021, Yang Guofu Group's revenue was 1.182 billion yuan, 1.114 billion yuan and 1.163 billion yuan, and the profit in the corresponding period was 181 million yuan, 169 million yuan and 202 million yuan, respectively.
Yang Guofu's financial situation in the first nine months of 2019-2021
Last year, Yang Guofu said during the exchange with all-weather technology that the revenue in the next five years hopes to exceed 10 billion yuan, and "the catering sector may reach 3.5 billion yuan".
Nineteen years ago, Yang Guofu was just a small shop at No. 52 Yonghe Street in Harbin, relying on the support of the student party and workers, running a spicy hot business of a few cents and a few dollars and a bowl.
With the unique taste of the soup base with milk and sugar, the sales positioning of affordable prices, and the reputation of consumers, Yang Guofu's spicy hot became a hit and quickly opened franchise stores across the country.
As of September 30, 2021, there were 5,783 restaurants under the Yang Guofu brand, including 3 self-operated restaurants in Shanghai, 5,759 franchised restaurants in 31 provinces and cities in China, and 21 overseas franchise restaurants in Australia, Canada, South Korea, the United States, Japan and Singapore.
According to Frost & Sullivan, Yang Guofu ranked first in China's Chinese fast food market in terms of total merchandise transactions for the year ended December 31, 2020, as well as the number of restaurants.
Especially in the past two years, offline catering has been affected by the epidemic, and Yang Guofu has still successfully made profits in such an extraordinary period. We tried to look for some clues from the prospectus and explain the reasons behind this.
Make money by brand franchise business
In the past, due to the low level of financial informatization of offline catering, there have been few listed companies.
In 2022, a wave of street food restaurant listing swept in, and a number of well-known catering companies such as Yang Guofu, Hefu Lao noodles, Village Ji, and Lao Niang's uncle announced their listing plans.
The listing of the pile not only arouses market attention, but also makes people curious, where is the "bottom line" of the listing of small shops on the street?
According to the prospectus disclosed by Yang Guofu Group, the company's revenue is divided into three parts: franchise restaurant income, self-operated restaurant income and others. Among them, the revenue of the franchise restaurant business line comes from the franchise fee and system maintenance fee charged and the sale of goods to franchisees, which is also the company's main source of income at present.
In the nine months ended 30 September 2019, 2020 and 2021, the revenue of Yang Guofu Group's franchised restaurants was RMB1.036 billion, RMB1.056 billion and RMB1.097 billion, accounting for 87.6%, 94.8% and 94.3% of the total revenue of the Period, respectively.
It is worth mentioning that in order to alleviate the negative impact of the new crown epidemic, Yang Guofu Group has actually adopted a more preferential franchise policy - reducing the franchise fee and system maintenance fee, but the related income has still achieved growth. The company attributed this to the continued expansion of its network of franchised restaurants.
In the final analysis, Yang Guofu Group is essentially engaged in the brand trademark business, and obtains benefits by opening up the franchise to release the brand. This requires the company to maintain and develop a good brand image and ensure the competitiveness of the brand.
In the early years, Yang Guofu, who developed by relatives and friends, was spicy and hot, because most stores were not equipped with professional management personnel and information systems, the problems of irregular store decoration, poor store environment, and difficulty in controlling food quality were common, which caused Yang Guofu himself a headache.
In order to ensure the unification of food quality and the standardized operation of stores, between 2009 and 2010, the company carried out a drastic reform, on the one hand, suspending external franchisees, on the other hand, re-evaluating and screening franchisees in cooperation, and renovating stores that did not meet the requirements.
After that, all franchised stores, in addition to strict regulations on decoration and food display, must also use the food supplied by Yang Guofu Group and the control system provided. Franchise stores are self-financing, and the Group can continue to make profits as long as it continues to expand its store network.
It should be pointed out that most of the revenue of Yang Guofu Group does not come from the simple franchise fee income, but more from the income obtained from the sale of self-produced goods and ingredients, seasonings and other products to franchised stores. The proportion of these two parts of revenue in the company's total revenue is also increasing year by year, from 76.7% in 2019 to 80.5% in 2020, and these two proportions have reached 83.6% in the first nine months of 2021.
Income structure of Yang Guofu Group
From the prospectus data, the profitability of Yang Guofu Group is relatively stable: the profit in 2019 reached 181 million yuan; in 2020, the impact of the epidemic decreased by 6.7% year-on-year, and there are still 169 million yuan; in the nine months ended September 30, 2021, the profit during the period reached 202 million yuan, an increase of 113.9% year-on-year.
In the past three years, the number of restaurants under the Yang Guofu brand has also achieved rapid growth, from 4721 stores in 2019 to 5783 in September 2021, with franchised restaurants as the main force of expansion and the sinking market as the main position.
Statistics on the number of restaurants under the Yang Guofu brand in the first nine months of 2019-2021
According to the prospectus, among the increased franchised stores, the third-tier cities and below are the core areas of Yang Guofu Group's store expansion in recent years, with an increase of 493 during the statistical period.
Towards the retailing of food and beverages
With the gradual expansion of brand business, Yang Guofu Group has also begun to develop from the B-end to the C-end, and has embarked on a path of catering retailing.
In fact, the retailing of catering is not the first initiative of Yang Guofu Group, but the result of multiple factors such as the impact of the epidemic, the transformation of consumer preferences, and the enhancement of the strength of the brand supply chain. In recent years, traditional catering enterprises, including Xiaonanguo and Xibei Shinomian Village, have transformed into retail, not only carrying out online takeaway and group meal business, but also selling retail food through e-commerce channels.
Yang Guofu Group's plans to develop its retail business can be traced back to 2020. In March of that year, it established a company called Shanghai Yuna Supply Chain Management Co., Ltd., which was legally owned by Yang Guofu's cousin Han Jing, who was also the main operator of Yang Guofu's Tmall flagship store.
In January 2021, Yang Guofu Group officially launched its first retail product to the market, the spicy hot self-heating pot, taking an important step towards the development of retail catering. As of 30 September 2021, Yang Guofu Group has launched a total of 16 SKU retail products, including spicy hot pots, multi-serving self-heating hot pots and hot pot soup bases.
In the first nine months of 2021, yang guofu group's retail business revenue was 37.163 million yuan, accounting for 3.2% of the total revenue. Relying on the inherent offline franchise stores, Yang Guofu Group has formed an offline distribution network covering a wide range of cities across the country; as of September 30, 2021, more than 3,900 franchised restaurants continue to distribute their retail products, and offline distribution channels have become the main source of income for Yang Guofu's retail business.
Revenue from the retail business of Yang Guofu Group in the first nine months of 2019-2021
Although from the perspective of revenue contribution, the proportion of retail business in total revenue is not high; but from the perspective of income structure, Yang Guofu has finally explored a new path to adapt to changes in consumer demand outside of franchised stores. And this is largely due to the establishment of its supply chain system.
In September 2018, Yang Guofu Group built and put into operation a self-operated factory with an area of about 44,000 square meters in Chengdu, Sichuan Province, which is composed of three parts: R&D center, large laboratory and production workshop, covering spice production line, air delivery production line, beef bone meal production line, soup base production line, convenience food production line, and blending oil production line. Among them, the convenience food production line mainly serves the retail business.
According to the prospectus, the plant is designed and manufactured in accordance with the EU BRC sanitary standards and 300,000 GMP requirements, focusing on the production of homegrown seasonings and retail products. In addition to the ability to closely combine R&D and production, the biggest feature of the Sichuan factory is the automation of facilities, for example, the seasoning ratio of soup base can be simplified through the "one-click programming adjustment system".
In 2021, Yang Guofu said during the exchange with all-weather science and technology that the revenue in the next five years hopes to exceed 10 billion yuan, "the catering sector may reach 3.5 billion yuan, and the entire condiment retail sector will reach 6.5 billion yuan."
The introduction of intelligent equipment in the Sichuan factory has helped Yang Guofu Group to achieve the expansion from offline catering to online retail, accelerated the process of food industrialization, and also made it one step closer to the goal of 10 billion revenue.
The Yang family is the biggest beneficiary
As the founder of the company, Yang Guofu's Yang family (Yang Guofu himself, wife Zhu Dongbo, son Yang Xingyu) is undoubtedly the biggest beneficiary behind the IPO.
According to the public prospectus, the shareholders of Yang Guofu Group before the IPO were Yang Guofu, Zhu Dongbo, Yang Xingyu, Shanghai Fuguoguo Enterprise Management Partnership (Limited Partnership) and Shanghai Sheng'enfu Enterprise Management Partnership (Limited Partnership).
Yang Guofu Group's pre-IPO shareholding structure
Among them, Yang Guofu and Zhu Dongbo each held 38.9% of the shares, Yang Xingyu held 19.39% of the shares, and the three signed the Yang Family Concerted Action Agreement in December 2021; Shanghai Fuguoguo and Shanghai Shengfu were established as employee incentives and third-party management partner incentives, respectively.
This means that the Yang family controls more than 97% of the equity of Yang Guofu Group and is the absolute controlling person; Yang Guofu Group is a veritable family business.
From being lonely and nameless to sprinting "spicy hot first stock", Yang Guofu has proved to the market in nineteen years that the once "dirty and messy" street shops can also successfully counterattack, and there is also big business in the small rice bowl. However, to achieve a scale of 10 billion in revenue, the test in front of Yang Guofu is not small, and whether he can maintain his brand image and competitiveness for a long time is the primary problem.
The prospectus clearly states, "The Company's business depends to a large extent on the market recognition and popularity of the Yang Guofu brand, and if we are unable to continue to maintain, develop and enhance our brand, our business, financial condition and operating results may be materially adversely affected." ”
On the other hand, the fierce competition in the catering market will also increase the external pressure of Yang Guofu Group.
In the spicy hot market, although Yang Guofu retains the position of leader, other chain brands are opening stores on a large scale. Its main competitor, Zhang Liang, has more than 80 directly operated stores and more than 5,500 franchised stores in the country by the end of 2020, covering all large, medium, and small cities across the country.
In the catering retail market, self-heating convenience foods have emerged in an endless stream, not only self-heating hot pot, but also self-heating rice, self-heating snail powder, etc., players also from traditional hot pot chain brands to innovative enterprises, with different backgrounds.
In response to the ever-changing market environment, Yang Guofu also needs a more diversified product portfolio and multi-dimensional operating methods to enrich the income structure and enhance the competitiveness of the industry.