Haidilao's overseas business plans to go public, is the capital honey or poison?

Chief Business Review

2024-05-14 11:35Posted on the official account of Shanghai Chief Business Review

Haidilao is going to be listed again.

In September 2018, Haidilao successfully landed on the Hong Kong Stock Exchange. On May 1 this year, some media reported that Tehai International, the main body of Haidilao's overseas business, had officially submitted documents to the U.S. Securities and Exchange Commission to be dual-listed on the NASDAQ to raise about $100 million.

In recent years, catering has become a hot spot in the capital market. With the help of capital, China's catering enterprises are changing from large-scale and chain in the early stage to high-end and overseas development. As of last year, Haidilao's overseas business had opened 115 self-operated restaurants in 12 countries, achieving a net profit of US$25.3 million for the year. At the same time, Yang Guofu Malatang and Mixue Bingcheng also began to go to the world.

Capital and catering companies don't just get married. In 2018, Jia Guolong, the founder and CEO of Xibei, once publicly stated that "Xibei will never be listed". Yang Guofu Malatang also publicly refused to raise funds and go public.

The general environment of the past three years has made these catering tycoons begin to slap their faces, and catering brands have no choice but to start "rushing" to capital. Due to the serious impact of the epidemic on the catering business, listing is the fastest way to solve the problem of capital chain. Since 2021, Chinese catering companies have ushered in a wave of financing and listing, with Nai Xue, the "first share of new tea drinks", and Helens the "first share of taverns" entering the capital market one after another.

However, as the catering track has entered the listing boom, the investment and financing of related enterprises have quietly decreased in recent years. In the first quarter of 2024, 460,000 restaurants across the country will close down, a year-on-year surge of 232%, among which there are many long-established chain restaurant brands with capital behind them, such as Manji Dessert and Cuonei Xiaojuncun.

Why is it that with the help of capital, domestic catering enterprises will still have a situation of intensified involution and ice and fire? What are the criteria for capital to choose catering enterprises? Will the expansion of capital in the catering industry eventually kill the small shops around us? 

The banknote capacity cannot bear the involution of the industry

During the May Day holiday, you can also see the grand queue of thousands of Internet celebrity stores on social media, the popularity of local delicacies such as Tianshui Malatang and Zibo barbecue is still hot, and a wave of street retail restaurants starting from Chabaidao has also successfully hit the IPO.

However, when many catering entrepreneurs are immersed in the dream of capital weaving and fantasize about impacting another era of 10,000 stores, the reality is extremely cruel. According to statistics, the consumption power of the catering market in April this year alone fell by 5% year-on-year. In the face of catering enterprises that have closed their stores large and small, some industry insiders said frankly: "In recent years, the new restaurants and catering brands have more or less lacked respect for the industry and had misunderstandings."

Unlike most of the catering people in the past, they have experience in the catering industry. After capital intervened in the catering industry in 2021, a large number of practitioners with pure marketing backgrounds began to enter the catering field. Many entrepreneurs who have no experience in the industry have a set of marketing models, coupled with the network traffic and funds brought by investment institutions, there is indeed an opportunity to increase sales in a short period of time, but today's Internet has entered an era of scattered channels, relying on a hot event to gather traffic in a short period of time, often the fire is faster and cooler. Under the intervention of capital, the entire catering industry has generally shown "heat advance", and the cycle is shorter, which has directly led to the intensification of fluctuations in store opening and closing, and involution has become the mainstream of the industry.

Of course, there is another factor from the general environment, real estate and other pillar industries have continued to decline in the past few years, and the decline in the income of some industry groups will most likely lead to a big decline in the overall consumption of the market, and the direct result is that almost all industries that can be seen have fallen into a cruel price war. Once capital invests in a catering company, in order to gain a large number of customers in a short period of time, in addition to creative marketing methods, most catering brands will choose low-price strategies.

For example, in the catering industry, the price index of major catering formats such as hot pot and dinner fell by about 10% last year; There are also new tea drinks, whose value index fell by about 20% last year. Even McDonald's, Starbucks and other once-leading catering companies have begun to launch 9.9 yuan packages, and the price has become the most direct way for catering companies to resist the decline in consumption.

The consequence of the price war is to quickly consume profits, and catering companies that are already small profits will quickly fall into losses, so there will be a restaurant chain enterprise that is developing rapidly while facing large-scale closures.

In this context, the integration of the entire catering industry will intensify, the polarization of ice and fire will also intensify, and weak stores and small chains will die in a large area. However, the nature of capital is still profit-seeking, how will they choose catering brands more carefully?

5 Iron Rules for Evaluating Catering Enterprises

For the catering industry, capital is undoubtedly a helper on the road to entrepreneurship, which can achieve the goal of growing from small stores to 10,000 stores. And capital is also doing everything possible to find projects that can make their own investment complete dozens of times the return, so where is the overlap between the two?

Based on the evaluation system of several investment institutions, here is also a summary of 5 relatively common enterprise evaluation standards, which meet this set of standards, and it is almost a sure profit for the institution.

First of all, the first is the ultimate single-store model, which is the premise of everything. For investment institutions, if a single store is not profitable, how to copy it? It is generally believed that a single store that makes money, or an extreme single store model, has a net profit of more than 25%. If the scale is a larger chain restaurant enterprise, the average net profit of a single store is also 20%.

In recent years, the more classic single-store model is Master Bao, who has been popular all over the country. This catering company, which started from a husband and wife shop and specializes in selling meat floss and small shellfish, relies not only on queuing, but also on an amazing single-store profit model. As a catering brand with a front store and a back factory, the extreme utilization rate of business area and the profit of more than 100,000 yuan for a single store at one time made this kind of model operation quickly favored by capital and then copied the chain.

Secondly, it is a high-quality franchise. Today's catering franchise enterprises have gone through the era of living purely by collecting franchise fees. Most high-quality catering franchise companies will strictly screen franchisees, and they can not join by paying money. The company will not only give this franchisee a very complete training system, including the training of store staff and site selection, the characteristics of this catering franchise enterprise is that the taste of each franchise store is similar, and most of the profitability is good.

Third, it is necessary to have a deep supply chain. The industry believes that the so-called deep supply chain must reach at least 70% of the distribution rate of enterprises to stores. Otherwise, if there are a large number of food and beverage outlets, it is difficult to ensure that the taste of each store is the same, and food safety problems are easy to occur. Of course, behind this is a strong central kitchen, and even a complete self-operated supply chain system like Mixue Bingcheng.

Fourth, capital is still very optimistic about the sinking market. The current domestic catering can do the sinking market, which shows that the unit price is very low, and the model of a single store is not very suitable for rapid fission. There are 2,800 counties in China, and there is still a demand for consumption upgrades, and a large number of brands are needed. Wandian catering brands such as Zhengxin Chicken Chop and Juewei Duck Neck are actually through county fission.

The last one is full digital empowerment, where digitalization is not only about operating systems, development systems, but more importantly, new media communication. Enterprises can take the initiative to obtain traffic, Haidilao's employees skip subjects three out of the circle, and with the help of other platforms or big Vs, all kinds of store exploration experts recommend. Now that online community marketing has become an important part of customer acquisition for catering enterprises, the marketing cost of catering enterprises with network marketing capabilities is lower and the expansion speed will be faster.

There are also a few old and difficult problems

"The catering industry has boundaries, unlike Internet companies, the larger the business scope, the lower the cost." Haidilao CEO Daniel Zhang once reluctantly expressed the difficulties in business operation to investors after listing. After all, catering is a traditional industry, and some systemic problems cannot be changed with technological innovation.

For example, the problem of "standardization" of Chinese food. Unlike Western-style fast food, which is simple and quick to process, Chinese food involves a large number of different raw materials, and the supply chain is much more complex. In addition to the modeled catering forms such as ramen, pastries, and spicy tang, it is difficult to quickly replicate and expand through "single products".

In fact, at this stage, the most direct way to solve the standardization problem of Chinese food is prefabricated dishes, and many companies have also begun to invest in the track of prefabricated dishes in recent years. However, in the face of policy regulation and the demand of some consumers for pyrotechnics, whether pre-made dishes can be used as a standardized solution has become uncertain.

Another difficulty is geographical restrictions, China's market is vast, and the goal of capital investment in a chain restaurant brand must be to spread all over the country, but the difference in the taste of people in various places is still an insurmountable gap. It is difficult for Wallace to grow big in first-tier cities, and most of the stores of Lao Xiang Chicken are stationed in Anhui Province, while Lao Niang's uncle mainly focuses on the Yangtze River Delta region.

Expansion, chains, prefabricated dishes, for ordinary people, the biggest impact of the capitalization of catering is undoubtedly that what you eat is more patterned, and the small shops around you will gradually be replaced by various chain stores.

In the future, the new catering brands will not decrease, and the closure will not stop, consumers from various channels will be attracted by low prices, various marketing gimmicks and good taste, but the best time for enterprises to make profits has passed, and the competition in the stock era is not only channel marketing, but also the quality of products.

Resources:

1. Capital "disrupts" the catering industry? Tidal Business Review

2. Millions of stores are losing money, and the catering is about to "avalanche"? How to survive? Catering O2O Media Luo Hua

3. Before the halfway point of this year, there were 7 celebrity catering "accidents", and the restaurant owners were involved

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Personal opinion, for reference only