China Times (www.chinatimes.net.cn) reporter Huang Xingli reported from Beijing
After blind expansion in 2020, Haidilao began to shrink.
On the evening of November 5, Haidilao issued an announcement that it would gradually close about 300 stores that did not meet expectations before December 31, 2021, and some of them would temporarily rest and reopen at the opportunity, with a maximum rest period of no more than two years.
In the announcement, Haidilao mentioned that in order to improve the Group's operating performance, the "Woodpecker" plan will be launched, which will be fully responsible for Yang Lijuan, executive director and deputy CEO of Haidilao, which includes continuing to pay attention to stores with poor operating performance and shrinking the Group's business expansion plan in a timely manner. For the store closure plan, Haidilao said in an interview with the "China Times" reporter that the closure of the store will not lay off employees, and will properly place the employees and management involved in the store.
In fact, prior to the release of this contraction strategy, Haidilao's stock price had been weak for many days, and as of the close of trading on November 5, 2021, Haidilao closed at HK$21.05 per share, up 5.46%, with a total market value of HK$114.91 billion. Compared with the all-time high of HK$85.8 on February 15 this year, Haidilao's stock price fell by 75% in less than nine months.
"Broken tail" after expansion
At the same time as the release of the 300 store closure plan, on the evening of November 5, Haidilao also released a letter "to friends who care about Haidilao" through the official Weibo, saying that some store operations did not meet expectations mainly due to the rapid expansion strategy that began in 2019.
Haidilao mentioned that due to the impact of site selection errors and insufficient excellent management personnel in the expansion, the expansion results were not as good as expected.
In fact, in a meeting minute circulating online in June, prior to the announcement of the closure in November, Daniel Zhang, chairman of Haidilao's board of directors, had already reflected on Haidilao's expansion strategy last year.
At that time Daniel Zhang pointed out that in June 2020, he judged that the epidemic would end in September, but his judgment of the trend was wrong. "I further made plans to expand my store in June last year, and now I look at it with blind confidence. It was January when I realized the problem, and It was March when I reacted. ”
For Haidilao and even all catering enterprises, 2020 is destined to be a year that cannot be bypassed in memory, but this year is left for some catering companies with gray memories of "closing the door", but what is left for Haidilao seems to be the opposite - this year is the year of its rapidest expansion since its establishment.
According to public data, as of the end of 2018, the total number of restaurants in Haidilao was 466. In 2019, Haidilao added about 308 new stores, but in 2020, even if it suffered from the impact of the epidemic, Haidilao still opened as many as 544 stores. In the first half of this year, Haidilao continued to add 299 stores.
For the expansion idea, on November 5, Haidilao related people told this reporter that the idea of Haidilao store expansion is to increase the coverage of stores through encryption, that is, encryption in first- and second-tier cities, and distribution in third- and fourth-tier cities, to increase store coverage and solve the problem of too long-term impact on the dining experience.
For the closure and integration of about 300 stores that did not meet expectations, Haidilao believes that it is for the long-term healthy development of the company and decisively 'break the tail' to improve management efficiency and operation level.
However, according to official data, as of June 31, 2021, the total number of stores worldwide reached 1597. That is to say, after subtracting about 300 that are about to close, the total number of Haidilao stores is still about 1300, which is still the largest chain hot pot restaurant enterprise in China.
Set the criteria for "opening a new store"
In the process of Haidilao's expansion, the turnover rate data has frequently triggered discussions among industry insiders.
According to the financial report data, in 2019, the average overturning rate of Haidilao fell for the first time, from 5.0 times / day in 2018 to 4.8 times / day in 2019, and in 2020, the overturning rate under the influence of the epidemic tended to shrink, with an average overturning rate of 3.5 times / day last year, and in the first half of this year, this data was reduced to 3 times / day.
A few days ago, some people in the catering industry pointed out in the process of communicating with reporters that with the continuous improvement of restaurant network density, the decline in the turnover rate is inevitable, after all, the consumer population in the service radius of each store is basically stable, and as the number of stores increases, the overturning rate will inevitably be affected.
Regarding the relationship between the contraction business and the turnover rate, Haidilao specifically mentioned in the announcement on November 5 that if the average turnover rate of the Group's stores is less than 4 times / day, in principle, it will not open new branches on a large scale.
Haidilao pointed out to reporters that Haidilao's store expansion ideas have not changed, the overturning rate is controlled within a reasonable range, if the excessive turnover rate needs to sacrifice the dining experience, there is still the possibility of increasing the distribution.
From its inception in 1994 to its official listing in 2018, Haidilao lost money in the first half of last year, and then turned around throughout the year. In the first half of this year, with the recovery of the epidemic, Haidilao's performance was a "breath of relief": Haidilao's first half report showed that it achieved revenue of 20.094 billion yuan, an increase of 1105.9% year-on-year; net profit of 96.5 million yuan, up 110.0% year-on-year. Compared with the data released by the National Bureau of Statistics, the catering revenue in the first half of this year was 2,171.2 billion yuan, an increase of 48.6% year-on-year, and it can be seen that the growth rate of Haidilao is acceptable.
It is reported that in addition to closing stores and continuing to pay attention to stores with poor operating performance, Haidilao also announced that it will begin to rebuild and strengthen some functional departments and restore the regional management system.
This also means that in addition to the closure of stores, Haidilao's internal adjustment is continuing. Haidilao told reporters that starting from June this year, the regional overall coaching model will be improved to a large and community management model. Haidilao stores are divided into regions and districts according to their locations, the regional manager coordinates the operation of each region, and the community manager directly conducts on-site inspection, assessment and counseling for the stores in their respective regions.
For the haidilao store closure storm, Chinese food product analyst Zhu Danpeng pointed out in an interview with this reporter on November 5 that it is because of the problems in the entire internal management of Haidilao, the first is that the site selection is sloppy, so that the revenue turnover rate of the entire store can not reach the established goal; the second is that the entire organizational structure can not match the increasingly high-intensity competition, the third is that the cultivation of excellent talents is still relatively lacking, and the fourth is that the entire corporate culture also has certain deficiencies. However, Zhu Danpeng also believes that from a comprehensive point of view, surviving with a broken arm in Haidilao should be a more correct and wise approach.
It is worth noting that in June this year, the "2020 Top 100 Catering Enterprises and Top 500 Catering Stores Analysis Report" released by the China Cuisine Association and other institutions pointed out that in 2020, affected by the epidemic, the top 100 catering enterprises have adjusted their strategic layout, and the number of stores of 27.1% of the top 100 enterprises has been reduced to varying degrees, which is the highest level in recent years. Perhaps, with the recurrence of the epidemic, the adjustment of the catering industry continues.