Yang Guofu, a spicy hot brand that has been listed many times before, submitted a prospectus to the Hong Kong Stock Exchange today.
From the perspective of revenue in the past three years, Yang Guofu's revenue in 2019 and 2020 was 1.182 billion yuan and 1.114 billion yuan, respectively. By the first nine months of 2021, revenue reached 1.163 billion yuan, an increase of 60.82% year-on-year.
In terms of net profit, Yang Guofu achieved a net profit of 181 million yuan in 2019 and fell slightly to 169 million yuan in 2020. By the first three quarters of 2021, Yang Guofu's net profit reached 202 million yuan. Overall gross margin improved from 27.9% to 30.2% today.
In 2003, Yang Guofu opened the first "Yang Ji Spicy Hot" in Harbin. After opening the first franchise restaurant in 2007, Yang Guofu opened the road of scale, from Harbin to the whole country, gradually opened up popularity, with more than 5,000 stores, Yang Guofu will Zhang Liang, Mi Jie and many other spicy hot and fast food brands behind.
As of the end of September 2021, Yang Guofu has opened a total of 5,783 stores, including 5,759 franchised restaurants in China, 3 self-operated restaurants in Shanghai, and 21 overseas restaurants. Among them, the revenue contributed by franchised restaurants accounts for more than 90%.
With thousands of franchisees, Yang Guofu almost said that he was lying down to earn money. First of all, the franchise model is the mainstay, earning the franchise fee of the franchisee, and there is no need to pay for the rent and the labor cost of the store. At the same time, it also sells goods related to store operations to franchisees, including ingredients, seasonings, equipment, etc., minus the purchase cost, and the profits in the middle of resale once again enter Yang Guofu's pocket.
In addition to relying on franchised restaurants for revenue, Yang Guofu's income sources are diversified. Like many catering brands launching their own products, Yang Guofu's self-produced convenience foods and compound seasonings have entered the consumer market and become a new growth curve.
However, the expansion of stores has accelerated, and the revenue of franchised stores has declined year by year, and the decline in first-tier cities is more obvious. In addition, on the key franchisee management and food safety issues, Yang Guofu also faces a series of challenges. In the fiercely competitive spicy hot market, rapidly expanding players can only invest in the scale and cost of the competition.
Annual income of 1.1 billion, family shareholding of 96.97%
Turning spicy hot snacks into a business with thousands of stores, Yang Guofu has become the head brand in the Chinese fast food industry. Exporting a complete set of standardized franchise systems, Yang Guofu's scale has now reached 5783.
Yang Guofu's income mainly comes from restaurant operations, including franchised restaurants and a small number of self-operated stores. In 2019, restaurant operations contributed 1.182 billion yuan in revenue, reaching 1.114 billion yuan by 2020. As of the first nine months of 2021, the revenue from restaurant operations reached 1.126 billion yuan, an increase of 55.69% year-on-year.
The development of nearly 6,000 stores, the franchise fee, raw materials and other fees for franchised restaurants, this part of the income accounted for the majority. In 2019, revenue from franchised restaurants reached 1.036 billion yuan, accounting for 87.6% of total revenue; in 2020, it climbed to 1.056 billion yuan, accounting for 94.8% of total revenue. By the first three quarters of 2021, this part of the revenue reached 1.097 billion yuan, accounting for 94.3%.
While innovating to meet the tastes of the masses, Yang Guofu improved the traditional spicy scalding. Featuring 2 kinds of soup bases such as classic bone broth and sweet and sour tomato soup, as well as 1 kind of spicy mixing base for spicy mixing, plus providing hundreds of kinds of meat ingredients, Yang Guofu's per capita customer unit price is about 30 yuan.
According to the data of self-operated stores disclosed in the prospectus, the average unit price of Yang Guofu's self-operated stores in 2019 was 34.3 yuan, 32.3 yuan in 2020, and 29.3 yuan in the first three quarters of 2021.
From the procurement, production and store management to adopt a unified standard, Yang Guofu has standardized a bowl of spicy scalding. Ingredients are simple and easy to standardize, and the expansion of business scale can reduce procurement costs, so it sets a lower investment threshold, and Yang Guofu opens the door to franchisees.
Among Yang Guofu's more than 5700 store layouts, the franchised restaurants in third-tier cities and below are the most widely distributed, reaching 2594, and the rest are mostly distributed in second-tier cities, with 2322, and first-tier cities with 582. After making a name for itself, local catering brands such as Yang Guofu Spicy Hot also chose to go overseas and opened 21 restaurants overseas in the franchise model.
From the perspective of store opening speed, Yang Guofu adds nearly a thousand new stores every year. In 2019, 993 new restaurants were opened, 1475 new restaurants were opened in 2020, and in the first nine months of 2021, Yang Guofu opened 970 new restaurants. In Yang Guofu's store opening plan, holding on to high-tier cities and entering a larger sinking market, Yang Guofu will expand at a rate of 1,000 stores per year in the next three years.
In addition to the core restaurant operation business, after the layout of catering retail in 2021, Yang Guofu launched the first retail product self-heating pot in January last year, and has launched a total of 16 SKUs, including spicy hot pot, multi-person self-heating hot pot and hot pot soup base. As of the first nine months of 2021, the revenue of the retail sector reached 37.16 million yuan, accounting for only 3.2%.
Delicious and relatively affordable spicy hot soon gained a foothold in the Chinese fast food market. With the expansion of the franchise network, Yang Guofu entered the first echelon of the industry. According to Frost & Sullivan, Yang Guofu ranked first in China's Chinese fast food market and in the spicy hot market based on the total number of commodity transactions and the number of restaurants at the end of 2020.
Yang Guofu, who is not bad for money, is different from other catering brands that rely on external investment institutions. From the perspective of equity structure, Yang Guofu's equity is basically controlled by the Yang family. Among them, the founder Yang Guofu and his wife have the highest shareholding ratio, the husband and wife each hold 37.8%, and their sons hold 19.39% of the company's shares, totaling about 96.97% of Yang Guofu's shares.
There is no "new story" in the spicy hot market
For the capital market, Yang Guofu tells the story that China's restaurant chain rate is still low, and the spicy hot market is relatively blank opportunities.
According to Frost & Sullivan, it is expected that from 2020 to 2025, the compound annual growth rate of China's spicy hot market will be 11.5%, and the market size will reach 197.3 billion yuan by 2025. The franchise model is the main business model adopted by the chain spicy hot brand, and the chain rate is expected to increase from 22% in 2020 to about 26% in 2025.
Opening the first direct-operated store in Yonghe Street, Harbin, Yang Guofu Spicy Hot took the initiative to join the restaurant network, from the local to the national market, becoming a well-known Chinese fast food brand.
There are already many people who use lighter store models to break into the catering market and reach the scale of 100 stores or even 1,000 stores. According to the data of the narrow door meal eye, at present, Yang Guofu and Zhang Liang spicy hot sauce have achieved the scale of more than 5,000 stores, and the rest of the brands such as Mijie, Xiaogu Sister, diao si rattan pepper are also on the scale of more than 600.
New players have also entered the market quickly under the wind of catering financing in the past two years. For example, the spicy hot brand "Little Wild Pepper", which announced the completion of the 10 million-level A round of financing in June last year, has completed 3 rounds of financing so far, and is expected to add more than 500 new stores by the end of 2021, and will achieve the scale of 1,000 stores in 2022.
With the advantage of easy standardization, the degree of chaining of the spicy hot market has exceeded that of many catering categories. The data shows that in 2020, the restaurant chain rate in the spicy hot market was about 22%, higher than the chain rate of about 15% in the Chinese catering market in the same year.
Originally a snack originating from the Bashu region, spicy scalding has spread throughout the country from the northeast, thanks to improvements made by Yang Guofu to make it a standardized Chinese food.
In terms of taste, unlike the traditional spicy hot soup base with heavy oil and heavy salt, Yang Guofu's spicy hot soup has been improved, adding whole milk powder and beef bone powder to make a nutritious soup base with a fresh flavor and milk flavor. With a service model of self-selection and a single-person single-pot cooking method, consumers' dining experience is enhanced.
The location of the store is more flexible, the turnover rate is high, suitable for the development of dine-in and takeaway two models, and the spicy and hot business is gradually hot. One of the main advantages is the low investment threshold, which has attracted many franchisees.
Yang Guofu's official website shows that for townships to first-tier cities, the franchise fee in different regions is 19,900 yuan to 39,900 yuan, the store area is from 60 to 150 square meters, and the franchise fee and security deposit basically do not exceed 50,000 yuan. Another brand, Zhang Liang Spicy Hot, includes investment costs such as raw materials and equipment, and the initial investment is from 150,000 yuan.
In order to support the raw material demand of thousands of stores and reduce the cost of sales, in addition to purchasing from third-party suppliers, Yang Guofu also began to build his own supply chain. The Sichuan plant started operations in September 2018 and has six production lines, mainly for the production of self-produced seasonings and retail products.
However, Yang Guofu, who sits in nearly 6,000 stores, still faces challenges in the management of franchisees.
Not involved in the actual operation of franchised restaurants, more as a brand licensor and raw material supplier role, Yang Guofu's contact with downstream franchisees is relatively loose, and some suppliers are not directly managed through internal teams, but indirectly managed through third-party management partners. Previously, Yang Guofu's spicy hot stores have been exposed to food safety problems many times, which has had an impact on Yang Guofu's brand reputation.
In addition, in the revenue of the franchised restaurants, it began to show a downward trend. In 2019, Yang Guofu's average sales per franchised restaurant were 20,600 yuan, which fell to 20,100 yuan in 2020 and fell to 19,200 yuan again in the first three quarters of 2021.
Among them, the decline in single-store revenue in first-tier cities is the most obvious, with the average sales per franchised restaurant decreasing from 39,000 yuan in 2019 to the current 31,500 yuan. Therefore, while maintaining first-tier cities, Yang Guofu is increasingly focusing on the development of sinking cities.
At present, in the case of the gradual convergence of tastes and the lack of explosive models, the space left for the innovation of spicy hot brands is being compressed. Positioning itself in the mass market, with compatible tastes and relatively affordable prices, various brands such as Yang Guofu are more seeking differentiation in expanding categories and store models.
In the early days, each company fought for brand power, exchanging scale for consumer awareness. Nowadays, each company quickly replicates the small store model and aligns with the goal of a thousand stores, and can only compete more with the operational efficiency of offline stores. On the other hand, spicy and hot retail products are accelerating into major e-commerce platforms, with a price of between 20 and 30 yuan, and there is no obvious cost-effective advantage compared with dine-in, so online sales are difficult to say that they will usher in a flashpoint.