On March 28, at the "2024 China Catering Industry Summit", Li Jian, Chairman and CEO of Xinliangji, delivered a blockbuster speech, and the audience applauded continuously. Based on his more than 20 years of entrepreneurial experience, Li Jian analyzed the general trend of Chinese food industrialization, and brought new ideas for catering entrepreneurs to explore the direction of entrepreneurship and restaurant enterprises to break through against the trend.
This article is a transcript of the speech of Li Jian, Chairman and CEO of Xinliangji, at the "2024 China Catering Industry Summit", which was compiled and released by Red Meal.
As a veteran of catering entrepreneurship who has been deeply involved in the industry for 29 years, I have never left the catering and food field, from being a staff restaurant to founding Xinladao and Xinliangji, I have not only made a catering brand over the years, but also set foot in the supply chain, and currently I am also doing some knowledge sharing on Douyin to empower the industry.
Based on my experience over the years, today I would like to share with you my thoughts on the future of the catering industry, with the theme of "Opportunities and Challenges in the Golden Age of Chinese Food Industrialization".
△ Li Jian, chairman and CEO of Xinliangji Company
The industrialization of Chinese food will enter the golden 20 years
Earlier, I proposed that the industrialization of Chinese food (judging by the context, "Chinese food" should refer to Chinese catering) may enter the golden 20 years.
The logic of this concept is mainly deduced from two key data, one is the market size of China's restaurants, and the other is the chain rate of China's restaurants.
In terms of scale, in the next 20 years, the entire market size of Chinese food has the opportunity to reach 20 trillion. Last year, the size of the national catering market was 5 trillion yuan, calculated by a compound annual growth rate of 8%, it can reach 10 trillion yuan in ten years, and it will reach about 20 trillion yuan in another ten years.
Why is the growth rate about 8%? What is my basis? Suppose we think of the entire Chinese catering market as a "restaurant", then the growth of the restaurant's turnover comes from two dimensions: one is what we often call the number of visitors, that is, how many customers will eat in the restaurant, and the other dimension is the unit price of the guests who eat. In the future, the number of customers will be multiplied by the average order value to get the turnover of this restaurant.
The growth logic of the number of visitors is as follows: first, about 30% of the rural population has not experienced urbanization and has not yet entered a restaurant, and if the urbanization process continues in the next 10-20 years, this means that the number of visitors to the "restaurant" will increase. For example, 60 of my 90 meals in the morning, noon and evening in a month may be in the restaurant, while my employees may only have 20 meals in the restaurant, but I believe that with the improvement of their living standards, the frequency of entering the restaurant, that is, the repurchase rate, will continue to increase.
In other words, in a large restaurant like China, there is a great opportunity for growth, whether it is the number of new visitors or the number of old customers who have entered the city. Of course, we also see that these opportunities are mainly concentrated in sinking cities rather than first-tier cities, taking Beijing as an example, it is difficult for consumers to repurchase, so the catering in Beijing, Shanghai, Guangzhou and Shenzhen is very involuted, and there are new customers in the sinking market areas.
Will the average order value increase? Because the CPI is growing every year, the prices of raw materials such as grain, pork, and vegetables are also rising slightly every year, and it is reasonable that the unit price of restaurants will increase with the increase in prices.
Then, if the number of visitors increases by a part, and the average order value increases by a part, I believe that the overall turnover of this "restaurant" can achieve an increase of 7%-8%, or even higher.
Therefore, the first conclusion is that the volume of China's catering industry in the next 20 years will be extremely huge, with a probability of reaching 20 trillion.
From the perspective of chain rate, although the volume of the Chinese food industry is large, the concentration is very low, and there is a lot of room for growth in the future. How low is the concentration? Yum China, which ranks first, and Haidilao, which ranks third, together account for less than half of the industry's share. Haidilao is the largest restaurant chain enterprise in China, with a market value of about 40 billion, which can only account for less than 1% of the whole industry, which shows that the concentration of the catering industry is very low.
Referring to the United States, Japan, and other developed countries, their chain rate is about 50 percent, and China's official data released last year showed that the chain rate exceeded 20 percent, and there is still room for 30 percent to rise between 20 and 50 percent.
Of course, there are many categories of catering in China, and it is unlikely that it will complete a high degree of chaining with few products and few brands like the United States, so we "give a discount", assuming that after 20 years, China's restaurant chain rate will reach the upper limit of 35%, that is, 35% of the total market size of 20 trillion will be provided by chain enterprises, 20 trillion × 35% = 7 trillion, then it is very likely that the turnover created by chain enterprises will reach 7 trillion after 20 years. The 7 trillion may be derived from the continued growth of Haidilao, Yum, etc., or it may come from the efforts of brands that are still unknown today.
At that time, how many thousand-store chain enterprises will be accommodated in the 7 trillion yuan market? Let's deduce again, assuming that a brand has 1,000 stores and each store sells 10,000, this thousand-store brand can sell about 3.5 billion yuan in the whole year. 7 trillion divided by 3.5 billion equals 2000, that is, there will be about 2000 catering brands with an annual revenue of 3.5 billion in 20 years.
Of course, the above is just a simple calculation, and the actual situation is much more complicated than that. But based on this logical deduction, I believe that the golden age of Chinese food industrialization has just begun, not ended.
It has been 40 years since China's first private catering company was listed, and I have been in business for 20-30 years, and I have witnessed most of the history of the development of the catering industry. In my judgment, the history of the past thirty or forty years is only the beginning of Chinese cuisine, just like when we serve food, this is just a cold dish.
The industrialization of Chinese food is only now beginning to enter the right track. I observed that the "mask three years" is an important watershed, which has made most catering companies re-examine the way the industry should be, and at the same time, it has also cleared up some impetuous and exaggerated catering forms or brands, and the catering people who pursue long-termism have been rewarded. In the past three years, the restaurant company has grown up and regained confidence. These outstanding entrepreneurs will drive the restaurant industry into a golden age in the next ten or twenty years.
Based on the above judgment, I have also begun to make some attempts in recent years, for example, I did Xinliang Kee based on the supply chain of the catering industry, and later I made personal IP to empower the industry, and I will also make some investments while empowering, hoping to help excellent catering companies and achieve their dreams.
The time to start your own brand may have been missed
If we firmly believe that such a golden age of Chinese food industrialization can come, what are the opportunities and challenges?
Before seeking development, catering enterprises must think clearly about their respective ecological niches in the environment, and there are four types of ecological niches.
First, the attacker.
Now they have formed a good brand power, organizational power and are still developing good brands, they will definitely be the beneficiaries of the biggest dividends. The efficiency of chain stores is much higher than that of individual single stores, especially in the fast food and casual catering tracks that just need food and clothing, because these tracks are efficient businesses, and they must improve the efficiency of customer acquisition, management, talent, and store.
If Yum, Nancheng Xiang, and Haidilao open a store within three kilometers of your restaurant, they have higher efficiency, better quality and lower price, and more brand power, then they will slowly conquer the city and eat away at the business of 1-20,000 people within three kilometers of three meals a day. They are the attackers, and they are also the most promising chain brand models in China in the future, and I will talk about the characteristics of these companies later.
△ Image source: Nancheng Xiang
Second, the facilitator.
I am not optimistic about the pure direct sales model, especially if the brand also hopes to expand across the country. Because I came here as a direct business, the marginal efficiency will decline after the expansion of direct sales, and the better model is a high-quality franchise, similar to the model of rice village bibimbap, and recently Haidilao has also opened up to join.
Share some of the cases of super franchisees that I have seen. For example, there are some super franchisees overseas that are even listed companies, and a brand that makes pizza in China is listed in Hong Kong, but it is actually a super franchisee.
There are also many successful individual franchisees or super franchisees in China. In China, the franchisee group will become more and more mature, starting from tea drinks, and slowly entering the field of formal meals and casual meals. Some franchisees may not be good at branding, or they may feel that it is very tiring to be a single-store brand, and they have money, resources, stores, management skills, good local connections, and also know how to join, so they choose to "hug their thighs" and specialize in being super franchisees.
If you want to do catering, maybe you can be a super franchisee and a partner, maybe you will become the undertaker of many brands in that city, and you will also share the dividends as a helper in the catering ecology.
Third, the retainers.
Survivors are companies that focus on small areas with unique advantages, they may have their own good store locations, unique products, and do not blindly expand. In the future, there will still be some customers who will like this kind of small, beautiful, unique and non-chain brand. But you have to make a unique value, and you can't blindly expand the whole country to open stores.
Fourth, the out-of-game.
Most catering entrepreneurs will become out-of-the-box, in fact, catering is a business three kilometers away, and when there is no new increment, it will face stock competition. It turns out that the people who are living well within the three-kilometer radius may be because the master has not come on the one hand, and on the other hand, there are new guests who have been entering. Now that the new increment is gone, and there are only people within two or three kilometers of the existing customers, there is unfortunately another "master", so the restaurant that does not have a strong moat, product capacity and efficiency will be robbed of at least one meal of business by the master.
What I just described is the feeling of many companies under today's involution. Maybe there will still be 10 million restaurants in the future, but from 10 million owners to only 3 million owners, many owners have been eliminated in the process.
Every catering entrepreneur must think about whether you want to be a firm attacker in the new ecology, or give up independence to "hug your thighs", or you have to establish your own unique value, have core competitiveness in a small area, and strive to survive. Of course, you can do nothing, but there is a high probability that you will be eliminated.
In the process of Chinese food industrialization, four ecological niches will be formed, and each of us entrepreneurs should understand their own positioning in the ecology, find their own positioning, and do their own position. There's nothing good or bad between different positioning, just what suits you. As long as you feel that you want this ecological niche and you can achieve it at the same time, then you have the opportunity to make a lot of money in catering.
However, it is very difficult for such people to make money if they are not firm enough in cognition, do not judge the future development trend in place, do everything randomly, or even continue to start a new form of catering business with the old way of thinking in the past, especially it will be more and more difficult to start a business from high-tier cities, because there are almost no new consumers in these cities.
Now if you go to the big shopping malls in Beijing, how can there be any opportunities for non-brand shopping malls? The end of non-brands is to be "cannon fodder", and those that are popular are all good brands. This situation may reach Wuhan in 10 years, and Qianjiang or even the county seat in 20 years, which is an irreversible economic law and the wheel of history.
High-quality franchise is the simplest and most efficient business model
Based on the above background, what is the optimal business model for the future?
Our business model is three, direct operation, franchise, and a partnership direct sales model created by the Chinese. I looked at about a few thousand samples, analyzed the efficiency of different models, and came to some conclusions.
For catering categories with a simple model and a small amount of labor, the best model is high-quality franchise, while for Chinese restaurants with a slightly more complex model and a very complex model, the best model is a partnership system that mobilizes the enthusiasm of employees, or a direct partnership model.
I am not very optimistic about the model is the national expansion of pure direct sales, pure direct sales are no problem, but the national expansion of pure direct sales will be very uncomfortable, because with the growth of marginal costs, as well as the lack of back-office efficiency, and not enough incentives for employees, it may make the national expansion of pure direct sales more and more tired. Catering is about people's business, externally related to countless customers, internally related to many employees, in the process of development does not solve the problem of people's hearts, it is difficult to develop in the long run.
The biggest problem of direct sales is that it can not motivate human nature, if tens of thousands of employees can not form the idea of "I am willing to do", only rely on internal management or some performance to promote, so that they feel that "you must do it", this model is no problem when the enterprise is in the dividend period of catering development, but it is difficult in the current era, because there is no bonus period. Now it is difficult to operate stores, if you still have to establish a headquarters, you also have to find a way to solve the problems of supply chain factories, informatization, and the capital market is sluggish, which means that you have to go through a lot of "black holes".
Therefore, the simplest and most efficient model is high-quality franchise, and the more complicated model is direct partnership, and the direct sales model is more suitable for catering companies that stick to one side, but don't do national expansion after choosing direct sales.
The core logic behind which of the three modes to choose is actually the understanding of human nature. A good business model should be able to solve the problems of "I am willing to do", "I can do it", "I am in awe" and "I inherit". As long as there is a system that can solve the four dimensions of human nature, it is probably a good business model or organizational model.
Chain catering is a business that must solve the problem of organizational ability, and if the organizational problem is solved, the problem of catering development is basically solved. But the problem is that this organization is too challenging, there are more people, less money, more things, and fierce competition, so the good brands that win in the end are not necessarily very productive, but they are basically very organized.
If we want to build a strong organization, we need to return to the individual desires in the organization, if you want to be promoted and make a fortune, if you want to start a business, he also wants to be the boss. If we are detached from human nature and only focus on our own needs, we will not be able to command thousands of troops.
We used to have some problems with the franchise model, because there are many fast recruitment companies on the market, which makes everyone feel not good. With tea and fast food driving the high-quality franchise model, it is now necessary to re-examine the franchise model.
The question is how do we make high-quality franchises, not cut leeks. In fact, high-quality franchise is more difficult than direct marketing, it is more difficult direct marketing, not to say that direct marketing can not do it and let it go, then you will definitely not be able to do high-quality franchise. Catering entrepreneurship is nothing more than choosing one of these three models, as if there is no fourth model at present.
Good founders: have dreams, have ideas, and are good at using tools
Once the business model is decided, entrepreneurial traits become the first element. Or fundamentally, for a business, the entrepreneur comes first. Everything is done by people, and the same is true for catering.
The characteristics of an excellent founder are very scarce, and being able to achieve such a grassroots business in the scale of tens of millions or billions of dollars is very high for the overall requirements of people.
What makes a good founder? I have a set of ways to look at people, basically looking at the "top, middle and bottom".
The founder first looks up, he has to have a dream, can toss, and wants to do great things, Tianxingjian gentleman is constantly striving for self-improvement, you don't care if he is bragging and fooling, anyway, he has big dreams. If this point is not in the founder, it is likely that it will be difficult for him to do a big thing, because he can't even think about it.
Catering is a business about people, the closest to human nature, and the closest business is eating. You can't just have dreams, and if you're a completely selfish person, you can't do business.
Therefore, the founder must have empathy and empathy. He can't empathize with ordinary consumers, he can't be his own boss, he doesn't know the mentality of people who eat 18 yuan ramen, he can't live in a high-rise building by himself, he doesn't think about the state of employees who only earn 3,000 yuan, he must have strong empathy and empathy, in order to make good products, good models, and good systems, so that he won't float away after earning a little money, and he will stay away from customers and employees.
Catering is not high-tech, it is a business that everyone contributes every day, as long as you are far away from your employees and customers, you can't understand them, sorry, the cost of consumers leaving you is very low, it is to turn a corner and walk 5 meters more to the restaurant next door. Many excellent F&B entrepreneurs are entrepreneurs with very good empathy and empathy.
The middle dimension is called thinking with logic and tools for doing things. I'll talk about logic first, the logic of catering is quite complicated, especially for chains, it needs to build a comprehensive system, if a boss can't think clearly, can't say it, it is difficult to do a complex chain well, so I say that logic is very important.
△图片来源:Midjourney
F&B founders should never cross the river by feeling their stones. There are so many successful people in the catering industry, why should we spend our precious lives to find out how to solve the design, equipment, and distribution from scratch? We should use tool people to help us solve problems, such as successful entrepreneurs, successful professional managers, and good supply chain enterprises...... Why don't you go to these "tools" to help you? If you just want to do everything on your own, then you can only do a very small business.
A good entrepreneur must be good at using tools, especially good at using "tool people", he can always link to very efficient tool people to help him solve some problems, he knows that as long as money can be solved, it is not a big deal.
The above theories about the bottom, middle, and top are my understanding of excellent founders. When people ask me what kind of company I will invest in and what kind of founder I will invest in, I look at these three points, even if the founder only has two stores now, I think he has the opportunity to achieve 1,000 stores.
The five growth stages of a chain business
The development of chain restaurant enterprises will definitely go through different stages, and I have summed up 5 stages: the ultimate single store - the almighty boss - the organization of the system - the valuable company - the magic power of immortality. I have experienced the first four, and I have not yet experienced the supernatural power of immortality.
Extreme single stores are very common, and single stores earning three to five million a year continue to emerge in every city. The ultimate single store reflects the entrepreneurial ability of the boss and the product power of the restaurant, which is even sometimes appreciated by God and cannot be taught by others.
With this ability, if the restaurant owner himself has a little bit of charlatanism and is willing to share some money with partners and employees, there is a high probability that he will be able to become an almighty boss, and there is no problem in opening 10, 20 stores, or even one or two hundred stores. The vast majority of restaurant companies in China can only reach the stage of omnipotent bosses.
The third level is the systematic organization of restaurant enterprises, and I have not seen too many enterprises break through to the third level in the past 30 years. Because to achieve advancement from the almighty boss, it is necessary to establish a system and rely on the organization to promote catering management, which is very difficult. A limited number of enterprises such as Haidilao and Xibei have broken through the third hurdle, but most of them are still done by the boss with a few very capable subordinates, rather than iterating to the system to promote management.
Without the organization of the system, the enterprise cannot be valuable, because this kind of enterprise is inseparable from the boss, and investors value the overall development prospects of an enterprise, rather than the personal value of the boss. For those companies that have established a systematic organization, the role of the boss is no longer so obvious, such as Haidilao Zhang can always rest, not to mention KFC, you don't know who it always is.
△图片来源:Midjourney
As for the last level of "the magic power of immortality", catering has a cycle, 10 years of consumption generation, today's customers are old in 10 years, no longer eat hot pot, what should you do if new consumers think you are very low? 1000 stores together to renovate and iterate? This is a very big topic. Therefore, this is the fifth stage of the future development of chain enterprises.
You can make some money in the first stage, you can make more money in the second stage, but if you want to break through the third stage, you really have to have a scientific way to disrupt the change. If there is no disruption and change, most enterprises will not be able to reach the fourth stage, and may eventually only become a cyclical product, and the enterprise will begin to decline after 5 years, and the development momentum may be very weak after 10 years.
The above are my thoughts on the next 20 years of Chinese food industrialization, and these thoughts also guide my own development, guide my own investment, and guide my own judgment on the project. To be able to have the opportunity to devote yourself to such a large and unindustrialized industry in the current era, the world is our side of the scenery, thank you!