In the next 5-10 years, the market size of China's catering industry will double. China's catering industry may become the last industry to produce tens of billions or even hundreds of billionaires in batches.
This article is a transcript of the speech of Chen Zhiqiang, founder of Wandian Profit Think Tank, at the "2024 China Catering Industry Summit", which was compiled and released by Red Restaurant.
Today, I would like to share some of our experiences in building 10,000 restaurants. The catering industry in this era is one of the fast-growing sub-industries, and we see that the development of the industry often presents the "rule of 70", that is, if the market size of an industry grows by more than 10%, it will double in 7 years.
Last year, data from the National Bureau of Statistics showed that the market size of the catering industry has grown by far more than 10%. In the next 5-10 years, the market size of China's catering and food industry will double, which will become a high probability event. In this process, many leading enterprises with 10,000 stores will usher in huge growth opportunities.
Looking back at the history of U.S. catering, we can see that companies like McDonald's and KFC have achieved tremendous growth when the U.S. economy has encountered problems. In recent years, the F&B industry has been challenging, but many of our customers have grown by leaps and bounds, such as Mixue Bingcheng, which has about 4,000 stores in 2018 and now more than 32,000 stores worldwide.
This means that in the current market, it has become a showdown between professional players, and companies want to achieve leapfrog growth, and the professional ability requirements of traders are becoming higher and higher. In 2021, we published "Wandian Profit 1", which analyzes the development process of catering enterprises from small to large, and our upcoming "Wandian Profit 2" focuses on the experience of the customers we serve to achieve leapfrog development in recent years, hoping to help everyone.
△ Chen Zhiqiang, founder and CEO of Wandian Profit Think Tank
the growth history of consumer giants,
It is also the history of creating a billion or even 10 billion yuan single product
Let's first understand what a "champion model" is.
Here's an example. At the 2021 Tokyo Olympics, "Asian Flyer" Su Bingtian became the fastest "professor" on the planet, running a record of 9.83 seconds at the age of 31. In the history of the world, there are only about 100 people who run in 10 seconds, and the average athlete runs his best at the age of 26 or 7, and Su Bingtian can run such a result at the age of 31 is very admirable.
How did Su Bingtian achieve this? His logic is to record all the actions and methods with data, and then compare them with the fastest runners in the world, and summarize a set of methodologies, which is the "champion model." Guided by the champion model and through high-tech equipment, we try to further improve every action and method, and finally form a system. After Su Bingtian shared this training method with other athletes in the national team, it also produced very good results.
Therefore, if you want to become a champion, it is not that the more you train, you will definitely be able to do well, but you must record the movements and form a scientific method to become a champion.
Returning to the catering industry, the "five most" and "seven effects" we summarized are also the logic of the champion model, and through continuous recording, analysis and optimization, we have created a benchmark and leading enterprise in the industry.
We have dismantled and refined the value chain of the entire catering industry, and summed up a set of profit models for 10,000 stores.
The five most refer to the most popular products, the hottest stores, the most stores, the best supply chain and the strongest headquarters.
Among them, the number of SKUs × the most popular products = the most popular stores, the most popular stores× the most stores = revenue, the revenue minus the cost of the optimal supply chain is the gross profit, and the gross profit minus the cost of the strongest headquarters is the net profit. Determine PE based on the stage of the brand, for example, if the brand has the ability to incubate or has the ability to have a platform, then the PE multiple will be very high.
The different areas included in the "Five Most" also correspond to different key indicators or elements.
The "most popular product" corresponds to whether it can create a single product of 100 million yuan, or even a single product of 1 billion yuan. We have studied the growth history of global consumer giants and found that the growth history of many giants is a history of building a billion-dollar single product and a single-product of 10 billion yuan, such as Apple's sales revenue of 100 billion US dollars by relying on an Apple mobile phone.
"The hottest store" refers to the ability to build 10,000 yuan of explosive stores, taking Micun bibimbap as an example, almost every store of Micun bibimbap has an average daily turnover of about 15,000 yuan, and an average monthly turnover of about 500,000 yuan. Moreover, the opening speed of Bibimbap in Yonemura is very fast, basically doubling every year, and the store will be opened in thousands of cities and thousands of stores.
For example, if your competitors sell a product for 8 yuan, but your cost is only 1 yuan, you can sell it to the franchisee for 2 yuan, so that the franchisee can sell it at the market price of 4 yuan, so that the competitiveness of your enterprise will be very strong.
Finally, there is the "strongest headquarters", that is, how to build the strongest iron army.
We can look at the "five most" from the perspective of Chinese culture, in fact, the relationship between gold, wood, water, fire and soil is common to many theories, if we can find the common ground of methodology, it is very valuable to enterprises.
For example, the most explosive product is the corresponding gold, gold gives birth to water; the optimal supply chain is water, only when the product is concentrated, the supply chain can have a scale effect; aquatic wood, the supply chain really forms an advantage, and the enterprise can open the most stores; and finally the wood makes fire, the store opens more, among which there must be a very hot store, and the experience summed up from the fire store is what the headquarters has to do, which is the relationship of "mutual growth".
The relationship between "Xiang Ke" is also very interesting, the one who conquers gets rich, for example, Jin Kemu, when your brand has explosive products and has many stores, it will naturally achieve high returns.
Take the ice cream and lemonade of Mixue Bingcheng as an example, lemonade is a 1 billion US dollar explosive product of Mixue Bingcheng, with sales of more than 1 billion US dollars, and the net profit brought to the company is more than 1 billion yuan, and lemonade can sell one or two hundred glasses of lemonade a day in almost every store. Based on the advantages of the supply chain, the speed of opening stores in Mixue Bingcheng will be very rapid.
China's catering industry
The last industry to mass-produce billionaires
According to the five most logical logics, we have summarized the "seven effects" through key data indicators, namely product effect, customer effect, human effect, ping effect, store effect, secret effect and chain effect.
"Quality efficiency" is the indicator of the most popular products, judging what revenue of a store and an enterprise is explosive, and the sales proportion of the top five or top ten SKUs is very important, which is the core logic of catering companies to achieve rapid development. If the top five products of a brand account for more than 50% of sales, its store revenue and supply chain efficiency will be greatly improved.
"Customer efficiency" refers to the unit price of customers or the income contributed by customers to the brand; "human efficiency" refers to how much income employees contribute to the company in a day, from the perspective of joining, 1000 yuan is a hurdle, if you can't do 1000 yuan, it is actually difficult to really motivate employees.
In addition, the "seven effects" also include "ping effect" and "store effect". If 10,000 stores are opened, and the daily revenue of a single store is at least 3,000 yuan, then 365 days a year is 1 million yuan. Based on the annual revenue of 1 million yuan for a store, after deducting 50%-60% of the cost, there is still more than 40% of the gross profit, and then deducting the cost of labor and rent, the mom-and-pop store may earn 20-300,000 yuan a year.
In the catering industry, it is possible to open 10,000 stores with a single store revenue of more than 3,000 yuan in subdivisions with a retail scale of more than 100 billion yuan, and achieve a turnover of about 10 billion yuan a year, which is the basic law. Among them, if the store is opened to 3,000 or 5,000 through the franchise model, and the revenue of a single store is more than 5,000 yuan, it will attract a large number of cross-industry resources.
Of course, there are many indicators to evaluate store efficiency, such as how much net profit a store contributes to the company every year from the perspective of the headquarters, which is a very important indicator. Generally speaking, a store can contribute 50,000 yuan of net profit to the headquarters every year, which is a good model. According to this data, if the brand has 2,000 stores, the annual profit will be 100 million, and if there are 10,000 stores, it will be 500 million yuan a year. If a store can contribute 100,000 yuan a year, 10,000 stores will have 1 billion yuan.
This set of models has been used since 2015, and has been applied to leading brands such as Mixue Bingcheng, Micun Bibimbap, and Fish You Together, and has been polished for nearly 10 years, which can accurately guide enterprises to improve the level of operation and management from headquarters to stores.
Based on the "Five Most" methodology, we can estimate the market value of a company by simple simulation.
Assuming that a franchised brand has 10,000 stores, a single store has a daily income of 5,000 yuan, the supply chain revenue accounts for 40%, the company's net profit can be 12%, and the listed company has 25 times PE, which can basically achieve about 18.2 billion terminal retail income in a year, the company's revenue can reach more than 7 billion, the net profit is about 1 billion, and the company's market value can reach more than 20 billion. This is what I understand, the basic appearance of the 10,000-store leader born in the future of Chinese catering.
In the future, the probability of doubling the size of China's catering market is very large, but after the doubling, the real dividends, including the dividends of income and net profit, will be eaten by the leaders of 10,000 stores, and China's catering industry may be the last industry to produce tens of billions or even hundreds of billionaires in batches.
The 5 core elements of building a 10,000-store leader
According to each link of the "five most", we have summarized the "985 model", which refers to the "9 modules", "8 tips" and "5 indicators".
01. The 985 model of the "most explosive product".
First of all, the most popular product link, we have summarized 9 modules from the three major sections of "the most chosen, the most delicious, and the most affordable". Among them, "the best choice" includes choosing the right category, choosing the right explosive products, and choosing the right combination.
If the selection of products is very complicated, the scale of the brand must be limited. Taking the tea beverage industry, which has grown rapidly in the past ten years, as an example, the owners of many tea brands are very young and grassroots, but because they chose the right industry, they finally achieved leapfrog growth.
Of course, in addition to the category, there are some core elements that need to be focused on in the creation of "the most popular products":
The first is the demand side. The essence of the demand side is "addictiveness", for example, watching Douyin will be addictive because short videos will stimulate us to secrete dopamine and endophenolphthalein. The same goes for what is eaten, such as fried food, fried skewers are popular because the food produces a Maillard reaction during the frying process, and the caramelized substance produced is highly addictive, and the same goes for milk tea. Therefore, the "addictiveness" of the selected category is a very important indicator.
The second is the supply dimension. The supply dimension refers to the freshness cycle, and the longer the freshness cycle, the larger the scale of the category. The preservation cycle is divided into the preservation cycle of finished products and the preservation cycle of raw materials, why the scale of making meat is larger than that of vegetables, because meat can be frozen and vegetables cannot. The shelf life and cost are very related.
In general, the large-scale 10,000-store leader must be a category with strong addiction and low customer unit price, so product selection is very important. In addition, if an enterprise wants to become bigger, it must have explosive products, which directly determines the long-term scale of the enterprise.
02. The 985 model of the "hottest store".
The model of "the hottest store" also includes 9 modules, 8 tips, and 5 indicators.
One of the core strategies to build the "hottest store" is to control the return on investment cycle, for example, the expansion of the franchise model with a return on investment in one year will be very fast, and when it can only be achieved in 18 months, the expansion speed will be slow, and it is difficult to expand quickly if it can only return to the cost in two years.
The second strategy is to pay attention to the door, which is simple and bright than blindly pursuing "tall". For example, the name should be concise, the positioning should be clear, and customers can quickly understand the format and products within 1 second through the door.
The third strategy is that the landing standards of the store have "three disciplines and eight attentions".
03. The 985 model of "the most open shop".
"The most open stores" refers to scientific site selection, rigorous investment promotion, and solid operation. There are also a variety of tips, such as the 10,000-store compass, as well as key indicators, including store closure rates, rent-to-sales ratios, etc. If you want to develop a 10,000-store leader, the store closure rate is a very core indicator, such as whether the store closure rate can be controlled within 5%, and Mixue Bingcheng has controlled the index at this level in the past 5 years, so its development speed will be very fast.
If you want to achieve "the most stores", the location is very important.
First of all, it is necessary to open stores intensively in key cities, and the provinces with the most stores are Guangdong, Shandong, Jiangsu, Zhejiang, and Henan.
The second is to build a base, and the 10,000-store leaders we see have opened nearly 20% of their stores in the top 10 cities in terms of the number of stores;
The third is the sinking market, and the 10,000-store leaders we see account for more than 40% of the cities below the third tier. For example, it took about three years to increase the proportion of county stores from more than 10 percent to more than 50% now, and the county market has become the most profitable area for fish and you together, including many township stores, which are also performing very well.
04. The 985 model of "optimal supply chain".
The "optimal supply chain" is not directly equivalent to the lowest cost, but to stabilize supply and steadily reduce costs. For example, the supply chain cost is reduced by 1 yuan, and the retail price is reduced by 3 yuan, so the reduced 3 yuan will be given to consumers and franchisees, so as to quickly seize the market of competitors, which is the basic logic.
Studying all the single products of Wandian faucets, as well as their layout strategies in raw materials, you will find that some brands want to do it themselves, some want to partner, and some want to participate in the control, and there are many enterprises in the supply chain, which have a lot of knowledge worthy of in-depth study.
"Maximum efficiency" means that the profit margins of a production-oriented supply chain may be more than three times that of a trade-based supply chain. I often tell Mixue Bingcheng that they are "international standards, Henan cost".
05. 985 model of the "strongest headquarters".
The "strongest headquarters" must manage guns, people, and money. Managing people well means building up the human efficiency of the headquarters. In the process of serving our customers, we will create a core executive training camp similar to that of a company. To implement the company's strategic initiatives, executives must have a unified mind and share the same desires.
The other is to manage money well, for the "strongest headquarters", capital operation and listing are very important. Although the catering industry has encountered many challenges in listing, the difference between listing and non-listing is still very big for the leading 10,000 stores. According to the experience of the world's listed chain giants, the time for them to open stores on a large scale is basically 3-5 years before and after the listing, and this cycle may have a total of 8-10 years, which is the brand to achieve leapfrog development, the most fierce 10 years of store opening, and may be 3-5 years after listing, and the expansion rate of the brand will tend to be stable. The self-confidence accumulated in the stage of listing will also form a huge potential energy for employees, franchisees and consumers.
After listing, it is also very important to be able to incubate multiple brands on the basis of existing brands. For example, it is very important whether Mixue Bingcheng can make coffee and new brands after making milk tea.
Thousands of stores can rely on one advantage to break through
But the Wandian brand cannot have shortcomings
There are almost 100 brands in China, and there are only 6 brands in 10,000 stores, what is the problem?
In fact, a thousand-store brand may be able to stand out from the encirclement by relying on a backbone and an advantage, but the Wandian brand cannot have shortcomings. It is very important to implement the "five most" and "seven effects" into the behavior of every employee of the company, every employee of the store, and every customer received by each employee through a set of ideological system, data system and IT system, and continuously improve the "five most" and "seven effects".
If an enterprise only achieves 0.9 of others in each link, only 60% of others may be in five links, and only 1/3 of others in 10 links.
In the current tea industry, only the top one or two may be really safe, and everyone doesn't know what will happen to the brands behind. All segments of Chinese catering, including those in China, will enter the professional knockout stage. Therefore, each link of the "five most" and "seven effects" is worthy of excellent enterprises, including leading enterprises and leading enterprises.
It is very important for the leading 10,000 stores to let go of themselves, truly based on consumers, franchisees, customers and various partners, and truly ensure that everyone makes money and give up the blind pursuit of profit margins.
The cultivation of a 10,000-store leader and industry leader needs to do work in efficiency and management, make the net profit level low, increase the turnover rate, and rationally lay out the leverage.