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began to face up to the power of capital.
Small fast food chains on the street are intensively sprinting to the capital market to win the titles of “spicy hot first”, “noodle restaurant first” and “fast food first”. Since January 2022, six well-known catering enterprises, including Yang Guofu, Laoxiang chicken and Hefu Laomian, have updated or announced their listing plans. In addition to Laowang, green tea restaurant and old aunt, which released plans in the second half of last year, a total of 9 catering enterprises are in the process of IPO.
Soon, the news of catering enterprises getting together and listing attracted widespread attention because it was abnormal. An industry insider told Caijing Tianxia weekly that it is unusual for catering enterprises to frequently spread listing plans recently. The number of catering enterprises listed in the past many years has been in single digits, but now it has exceeded the number of ten years in just one month. “We can’t understand it when communicating with people in the industry.”
Data show that from 1999 to 2009, the number of listed catering enterprises in China increased by only 5, with a total of 8. Ten years later, by 2019, there were only seven more, and the total number was 15. So far, the number of catering enterprises registered in the capital market in China is 21.
Why are catering enterprises suddenly intensively IPO? What are the considerations behind their mass listing?
The horn of getting together for listing sounded
More than 20 years ago, Mr. and Mrs. Yang Guofu, who lived by setting up a stall in Harbin, probably didn’t expect that they would turn over by selling spicy irons and lead the company to the capital market.
On February 8 this year, the CSRC accepted the approval of overseas initial public offering submitted by Yang Guofu Malatang, which is only four working days from its submission. Once approved, Yang Guofu Malatang can go to Hong Kong to submit a prospectus and officially sprint to the “first share of Malatang”.
For Yang Guofu Malatang, “migrant workers” should be no stranger. This Malatang brand, which is laid out in the streets and alleys across the country, is the first choice for many people to solve lunch. It can eat a large bowl full for tens of yuan.
Yang Guofu and his wife didn’t do spicy hot business at first, but set up a stall to sell fruits and vegetables. Later, they sold roast squid and roast ham sausage, but their income has not improved. By chance, they found Malatang, a street snack, and began to do Malatang business in 2000. Their first store opened in Yonghe street, Harbin in 2003, but it was called Yangji Malatang at that time and changed its name to Yang Guofu Malatang the next year.
Over the past 20 years, Yang Guofu Malatang has grown step by step through the franchise model. At present, it has covered 23 provinces and cities across the country, has more than 6000 stores, and has opened five stores in Canada, Australia and other countries. In order to achieve faster development, Yang Guofu Malatang, a catering chain born in Northeast China, moved its headquarters to Shanghai in 2018.
Little spicy hot makes Mr. and Mrs. Yang Guofu earn a lot. Just collecting the franchise fee is a lot of income. It is understood that the annual franchise fee for opening a Yang Guofu spicy hot restaurant in first tier cities is 27900 yuan and 23900 yuan in other provinces and cities. After calculating the franchise fee, Yang Guofu and his wife have to charge hundreds of millions of yuan a year.
Yang Guofu himself disclosed that the group’s revenue in 2019 was 1.3 billion yuan, of which the franchise fee accounted for about 20%. In 2020, the revenue also exceeded 1.2 billion yuan, and the turnover of stores was 67 billion yuan.
Hefu Laomian, which announced its listing plan almost at the same time as Yang Guofu Malatang, plans to sprint to “the first share of noodle shop”. On January 29, Jue Wei food announced the overseas listing plan of Hefu Laomian, saying that the company had received the notice from Shenzhen netju, a wholly-owned subsidiary, and its shareholding Hefu Laomian was ready to implement the overseas listing plan.
It is understood that Hefu noodles, established in 2012, is positioned as medium and high-end. The brand positioning is to “let consumers find noodles in their study”. The store decoration is very Chinese style, and the average price of a bowl of noodles is 30-40 yuan. In the third year of its establishment, Hefu Laomian gained the favor of capital and won the first round of investment of 30 million yuan. Together with the five rounds of financing later, it raised six rounds in six years, with a total financing amount of 1.645 billion yuan and a valuation of 7 billion yuan in the last round.
Jue Wei food announcement shows that at present, the largest shareholder of Hefu Laomian is the legal representative Li Yabin, with a shareholding ratio of 21.61%. The shareholding ratios of Shenzhen netju, Nantong heshenghui and Tencent are more than 10%, 16.92%, 11.54% and 11.02% respectively.
Compared with the two, the IPO of rural base is faster. On January 25, the village foundation submitted a prospectus to the Hong Kong stock exchange, saying it planned to be listed on the main board of Hong Kong. This is a fast-food enterprise. It was established in Chongqing in 1996. It mainly deals in Sichuan Chongqing spicy fast food. Its main dishes include Sichuan Chongqing pickled vegetables, noodles and so on.
The stores of rural base are mainly concentrated in Chongqing, Sichuan, Hubei, Hunan and other places. According to the prospectus, by the end of September 2021, there were 1145 stores in rural base, including 602 in rural base and 543 in Mr. rice. In 2019, 2020 and the first three quarters of 2021, the revenue of rural base company was 3.257 billion yuan, 3.161 billion yuan and 3.424 billion yuan respectively.
Not only the rural base is competing for the “first share of fast food”, but also two rural chickens and old aunt are also competing for the throne of the first listed company. Although it’s silly for three companies to put their names together, they make very different fast food.
The old aunt, established in 2000, focuses on the sour and sweet taste of Jiangnan. Its headquarters is set up in Zhejiang. Its main dishes include Jiangnan braised fish with Jiangsu and Zhejiang flavor, plum dried vegetables and pork, etc. according to public information, there are nearly 400 stores. The last native chicken is “people as their name”. It is a fast-food enterprise that takes chicken as its main product. Its main dishes include chicken, chicken soup and other products. The “cluck cluck” time report, which was once popular on the Internet because of the official playing stem, comes from the local chicken company. At present, it has 1089 stores.
Unlike most of the above catering enterprises sprint Hong Kong stocks, the two intend to sprint into the more difficult A-share market. My uncle started the listing guidance and filing in October last year, while the local chicken announced on January 6 this year that it had completed the pre IPO round of financing, and will continue to sprint for A-share IPO in the future. After delisting on the New York Stock Exchange in 2016, the rural base, which was listed for the second time, chose to list in Hong Kong stocks with lower threshold, which does not rule out the possibility that it wants to list faster than the local chicken and the old uncle.
More traditional Chinese catering brands have also added several firewood to this wave of listing boom. Qixintian, a Seafood Hotpot catering brand famous for “eating two in one pot”, calmly submitted its first prospectus on January 12 after 16 years of establishment. In addition, green tea, Laowang, Xibei and Banu hot-pot/" 22375 rel="nofollow" target="_self">hot pot have all embarked on the road of listing.
Zhejiang cuisine brand green tea restaurant told Caijing Tianxia that the company’s current listing is in progress, and it is inconvenient to disclose the specific details. When asked whether it will be listed this year, green tea restaurant said that everything is still unknown.
Why are catering enterprises suddenly intensively IPO? There are many reasons. On the one hand, it is related to the epidemic situation, on the other hand, it is related to development and the boost of capital.
“It is the inevitable result of various actions for catering enterprises to get together and go public.” Wang Hongtao, Executive Deputy Secretary General of China chain operation association, told Caijing Tianxia weekly that it was difficult for the earliest catering enterprises to be listed because they mainly received cash, so there was no way to confirm their income. Now, with the popularity of mobile payment, there is a clear confirmation of income, which is more standardized. Therefore, the regulatory authorities have an open attitude towards the listing of catering enterprises in recent years.
Wen Zhihong, a chain industry expert and general manager of Hehong consulting, also believes that the great reason why catering enterprises choose to go public now is the favorable policy. “Policy is a very important factor, which will directly affect the capitalization path of catering enterprises.” A shares are subject to a comprehensive registration system, and the regulatory authorities no longer endorse the issuer. The performance, value and future development prospects of the enterprise are freely judged and selected by investors, which is undoubtedly a huge outlet for domestic catering enterprises.
In the past, limited by the loopholes in the financial norms of catering enterprises and labor employment and other factors, the A-share market has always been vigilant towards catering enterprises. At present, there are only five catering enterprises listed in A-share, namely Guangzhou Restaurant, Tongqing building, Xi’an Catering, Quanjude and Zhongke cloud. In 2020, Tongqing building, an Anhui catering enterprise, was successfully listed on the A-share market, which is regarded as a signal of recognition of catering enterprises in the A-share market.
“From the perspective of the catering industry itself, the cognition of the bosses of the catering industry has also changed in recent years.” Wang Hongtao believes that the epidemic in 2020 has a great impact on catering enterprises, which has changed the ideas of some entrepreneurs and is less exclusive of capital.
At the beginning, Yang Guofu did not consider the power of capital and listing. In 2018, when the reporter asked whether to consider listing in the future, Yang Guofu firmly denied, “at present, it’s not considered. It’s more practical to be the first leader in catering.” It is understood that several head institutions wanted to invest in Yang Guofu Malatang before, but they were all rejected. Finally, the capital had no way but to invest in a new brand.
The reason why Yang Guofu refused at that time was that the company’s cash flow had always been very good, not bad at all. However, Yang Guofu’s mentality changed in 2021. He revealed that considering the future development, the company may introduce foreign funds, mainly depending on the power behind the funds, hoping to bring new ideas to the development of the enterprise. The company has incorporated listing into the five-year plan, and domestic A-share is the ideal place at present.
“There is no epidemic. We think catering is a cash epidemic industry. It’s no problem to do business, make money, and then develop ourselves.” Jia Guolong, the founder of Xibei, directly explained the reason, but the epidemic made him realize that his strength was still limited. If you want to have great development, you have to use the power of capital. Listing can mobilize the energy of capital.
In the prospectus, catering enterprises have ambitiously listed the future expansion scale of stores: qixintian plans to open 300 new stores in the next three years; Rural base plans to open 230 and 420 new rural base and Li rice restaurants in the next two years. Li Xuelin, founder of Hefu Laomian, once said in an interview that his store target is 1000, while Yang Guofu, who has far exceeded other brands in the number of stores, put forward a plan to open 10000 stores by 2025.
It takes money to open so many stores. Listing and fund-raising has become a good choice. Wen Zhihong told Caijing Tianxia that at present, Chinese catering enterprises have entered the capitalization stage, so more and more catering enterprises have decided to IPO.
Of course, listing is also related to the chain development of catering brands to a certain stage. Ge Xiantong, the person in charge of strategic investment business of aunt Hushang, told Caijing Tianxia weekly that the epidemic has indeed made many catering enterprises start to reflect on their anti risk ability, but subjectively, it is because many catering brands have reached a certain volume after years of development. If they want to achieve further development, they need to rely on the power of capital.
Ge Xiantong believes that many start-up catering enterprises have received capital assistance one after another, which has also stimulated the head catering to speed up the listing layout. “Selling noodles is better than doing business all over.” Taking the hottest pasta track in 2021 as an example, in July alone, four brands including Chen Xianggui, Wuye mix noodles, meet Xiaomian and Hefu Laomian announced to obtain financing, with a total financing amount of more than 1 billion yuan, of which the highest is the e-round financing of 800 million yuan of Hefu Laomian.
The boost of capital did play a role. In 2020, there were 115 financing events in the domestic catering industry, and the financing amount exceeded the sum of the previous five years. By 2021, there will be more financing events of domestic catering track, more than 220, and the disclosed financing amount will exceed 50 billion yuan. According to the analysis of the report on China’s chain catering industry in 2021, with the emergence of a single high amount of investment in the later stage, a number of catering industry companies with a net profit of tens of millions or even hundreds of millions of yuan may be listed in the next five years, and the catering industry may lead a wave of IPO trend in the consumer industry.
Although catering enterprises are listed together, it is not easy for listed enterprises to win the favor of investors in the secondary market.
Take the listed Yum China, Haidilao, jiumaojiu and Sipu Sipu for example. Their performance is very poor. Yum China and Haidilao, the two giants with a market value of 100 billion yuan, fell 13.24% and 70.5% respectively in 2021. As of the closing on February 15, the two shares closed at HK $398.8 and HK $19.94 respectively, with a total market value of HK $167.1 billion and HK $111.1 billion respectively, a decrease of HK $59.8 billion and HK $366.8 billion compared with the peak.
Hundreds of billions of giants were abandoned by investors, and hundreds of billions of younger brothers were not spared. The total market value of jiumaojiu decreased by 41.86% in 2021. On February 15, jiumaojiu fell slightly by 0.83% to close at HK $19.2, with a total market value of HK $27.9 billion, a decrease of HK $28.2 billion compared with the peak. Sipping sipping’s market value is only HK $6.2 billion, not HK $23 billion.
Behind the sharp decline in the market value of catering enterprises, the core is caused by poor performance. According to the 2021 financial report of Yum China, its adjusted net profit was US $525 million, down 15% from the same period last year. After the financial report was released, 10 investment banks, including Goldman Sachs, Morgan Stanley and Furui, lowered the target price of Yum China.
Haidilao, which made a wrong judgment, entered the stage of large-scale store closure. In November 2021, Haidilao announced that it would close 300 stores before the end of the year, which is equivalent to the number of new stores opened in 2019. From the financial report, the net profit of Haidilao in the first half of 2021 was 96.5 million yuan. Although it increased year-on-year, it has not yet recovered to the level before the epidemic.
Jiumaojiu, which has also entered the stage of strategic contraction and closing like Haidilao, has reduced the number of stores from 143 in 2019 to 83 in 2021, with an average reduction of 20% in the number of employees per restaurant. Although the financial report shows that the net profit of jiumaojiu in the first half of 2021 has turned from loss to profit, major investment banks have lowered their ratings.
In terms of financial data, catering enterprises preparing for IPO have released their transcripts. The revenue of Hefu Laomian in the first half of 2021 was 846 million yuan, and the net profit was 13.85 million yuan. The net profits of qixintian and rural base in the first three quarters of 2021 were 259 million yuan and 163 million yuan respectively. Whether this report card can win the favor of investors remains to be verified by time.
However, the past performance of the rural base listed for the second time in the capital market can also be used as a reference. When it was listed in 2010, because it was China’s first catering enterprise listed on the main board of the United States, the rural base had unlimited scenery for a time, and opened sharply higher at $25 on its first day of listing. However, in the second year of its listing, the rural base had a net loss of 7 million in the whole year. By the time of privatization and delisting in 2016, the privatization price was only $5.23/share.
“After listing, enterprises will basically encounter a curse. Almost all listed companies make rapid progress after they get the money in the first year, which deviates from the normal rhythm of the catering industry and their own development.” The person in charge of the rural foundation once reflected.
Listing for catering enterprises is like the college entrance examination to life. It seems to be the end, but in fact it is only the beginning. For Yang Guofu who have hardly been in contact with capital, it is still a great challenge for them to use the hands of capital to dig out bigger business and tell the stories loved by the capital market in the world of capital.
“People who don’t understand the rules of the capital market are like people who can’t swim and plunge into the swimming pool,” Wen Zhihong said. In the future, under the tide of capital, whether Yang Guofu will take advantage of the tide or sink the ship is unknown.
Catering has always been a highly competitive market, constantly experiencing the cruel survival of the fittest. According to the data, in 2021, 1 million catering related stores were cancelled, including nearly 400000 fast food restaurants, nearly 100000 hot-pot/" 22375 rel="nofollow" target="_self">hot pot restaurants and nearly 350000 milk tea stores. Therefore, for catering enterprises, listing is not the most important, the important thing is to live.
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