The restaurant owner’s dilemma

“The

curse on the tip of the tongue.

The

”

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Source: Yuanchuan Sea Research (id:aotekuaitan)

The

In 2011, a TVB reporter from Hong Kong who came to Chongqing to interview found a phenomenon on the street: it seems that there is a “village foundation” next to every KFC in Chongqing.

Not only is the location close to each other, but the decoration of “rural base” is also mostly in red and white colors. The Chinese name is matched with the three letters of “CSC”. The ordering service is Western-style. In addition to the different menus, CSC rural base is similar to KFC KFC. In this regard, TVB reporter joked: it is said that only coastal cities have innovation, so we also have innovation in the inland.

Hong Kong journalists are still not fast enough to see the world. As early as 2007, shennanpeng, who was on a business trip to Chongqing, successfully got the investment from Sequoia China and HNA Asia. These two institutions will be influential in the Internet investment circle in the future, which also shows how popular the rural foundation was in those years.

After receiving the investment, the rural base expanded rapidly and applied for listing on the New York Stock Exchange in 2010. Li Hong, the founder, and his team flew to Hong Kong, Singapore, Boston, San Francisco and other places in a private plane rented by the investment bank. They gave roadshows to more than 300 fund companies, telling the story of the rise of Chinese chains and their ambition to be “China’s McDonald’s”.

On the day of listing on september28,2010, the vice president of the New York Stock Exchange specially greeted the village foundation bell ringing team with a Chinese dumpling. The team was full of joy and rang the bell for listing. With a “Dong” sound, the shares of the village foundation closed at $26.45, nearly 50% higher than the issue price of $16.50. Li Hong’s value was even closer to Zhang Lan.

Six years later, the rural base delisted. When it was listed, investors spent 10 yuan to buy it. When it was delisted, there was about 3 yuan left.

There is nothing new about the story of rural base. Like countless chain restaurants trying to move from the region to the country, its ambition has fallen rapidly with the growth of the number of stores, and obstacles such as difficult to manage stores, picky diners, soaring costs, increasing revenue without increasing profits have emerged one by one. In front of the rural base, it seems that there is an invisible ceiling.

This ceiling does not have a strong sense of existence for restaurants with only one or two stores, but when the number of chains exceeds 5, it cannot be ignored; 50, it will show ferocity; When there were 500 restaurants, it became a hard gas wall, which trapped almost all Chinese catering enterprises and prevented all the futility of becoming “China McDonald’s”.

In a country where “food is the most important thing for the people”, China’s catering industry has always been full of stories, noise and freshness. This industry has not only cultivated a famous son-in-law in Taiwan Province, but also gave birth to Singapore’s richest man. Heroic catering sons and daughters have emerged one after another. After countless times of head breaking and blood bleeding in front of iron walls, the big and small catering bosses have to admit one thing:

Catering in China is actually a hell of a job.

Story of turnover rate

A newly graduated consumer analyst who is 20 years older than himself often uses a question to embolden himself: what is your “single store model”?

Every boss who smells of scallion and lampblack wants to finance and expand, he must have a 100 point spirit for the word “single store model”. As a matter of fact, there are so many different food tastes that it is difficult for investors (especially overseas) to judge whether boiled rice or braised chicken is more popular, but the “single store model” is the common catering language of global capital.

To calculate the single store model, Chinese restaurant owners should first replace traditional kitchen terms such as fried, boiled, stewed, stewed, baked, etc. with modern catering neologisms: human efficiency, flat efficiency, product efficiency, timeliness, moving line, re purchase, customer order, SOP, SKU, OFC, yield, net material rate, cost rate… And the hottest word – turnover rate.

Turnover rate is not the only indicator to measure whether a restaurant can make profits and expand, but it must be the most famous one. The reason is that it is simple and universal enough to observe the marginal benefits of a restaurant enterprise across companies, and its external performance is a queuing equal sign that can trigger communication effects, which is the favorite of the capital market and the media.

Of course, in the early stage of Chinese catering, no one cares about the turnover rate.

The first generation of “food kings” in China were state-owned restaurants represented by Quanjude. In the 1980s, the probability that they appeared in the news broadcast was much higher than that you saw on the street. Half of the tourists were business banquets and half were foreign tourists. In that era when food stamps were needed to go to restaurants, ordinary people simply could not afford them.

In the second season of the round table school, chenxiaoqing told a story about a state-owned hotel in Beijing in the 1980s, which was pasted on the wall with “never beat customers without reason”, which made people feel warm. Therefore, there was absolutely no such thing as turnover rate of western capitalism at that time. The turnover rate of the state-run waitress could indeed be counted.

State owned hotels in the 1980s

The second generation of meal kings belong to Shunfeng, Jingya, Hunan Hubei and South beauty. The birth background is two major changes in the 1990s. First, in 1995, China officially implemented the five-day work system, and people have more entertainment outside of work; Second, the reform of the tax sharing system launched in 1994 has enriched a number of so-called high-end catering chain enterprises.

The ultimate representative is xiangeqing. Its core competence is not to turn over the stage, but to select the site: Dinghui Temple store in xiangeqing is 200 meters away from the cadre’s rest room of the General Staff Headquarters, Yuetan store is 300 meters away from the national development and Reform Commission, and Xidan store is simply opened in the armed police guesthouse. This ability finally sent it to a program more fierce than the 315 Party – the integrity documentary of the Central Commission for Discipline Inspection.

After the promulgation of the eight regulations in 2012, the old story of medium and high-end catering has been completely ended. A group of mass catering chain enterprises have taken over the position of “food king” of South Beauty in Hunan and Hubei. What supports them is no longer the Chinese Time-honored Brand plaque and the three public consumption political and business relations, but a complete set of industrialized catering system from cold chain technology to the central kitchen.

When the efficiency index of restaurant operation can be quantified, “turnover rate” becomes the main character and a high-frequency word spoken by the media, VC and restaurant business owners.

This is also a helpless choice – it is not easy to improve the turnover rate, but it is more difficult to optimize other indicators. For example, increasing the customer unit price and turnover rate can increase benefits, but for China, where the Engel’s coefficient is still above 30%, price increase is tantamount to death. Consumers prefer to spend time queuing rather than saving time.

There is also a strange but interesting phenomenon, that is, the more people queue up in the stores, which may be the psychology of Chinese consumers – herd effect. The more people queue up, the more they queue up. Queuing can create queues. Restaurants with queues feel “worthwhile” no matter how long they wait. Restaurants without queues will be passed by most consumers.

How to improve the turnover rate? Catering enterprises can also disassemble the meal time carefully with elementary school mathematics knowledge: meal time = seating time + meal ordering time + meal preparation time + meal delivery time + meal time + checkout time + tooth picking and mouth wiping chat time. To pursue the ultimate turnover rate, it is necessary to spend time in every link.

Thus, a wonderful competition around “turnover rate” began.

Industrialized canteen

Restaurants that pursue turnover are sometimes like scum men: I hope you come often, but I hope you don’t stay too long. It’s best to leave quickly after playing poker so that he can make an appointment.

In order to achieve this goal, on the one hand, restaurants should have a set of real skills. Whether it is taste or cost performance, they should always have unique skills that can attract customers to line up. After all, restaurants that no one lines up do not even have the foundation to turn the tables; On the other hand, from the moment you enter the store, the restaurant has designed countless routines to make you run quickly.

There are “customer screening methods”. For example, Taier pickled fish under the “jiumaojiu” listed company in Hong Kong stock market clearly stipulates that “more than four people are not allowed to eat”, and emphasizes that “the store does not accept table sharing and no extra seats”. This has isolated a large number of passengers who chat while eating. Its turnover rate was 4.8 in 2019 before the epidemic.

There is a “hint check-out method”. For example, if you have a meal in a restaurant and find that the waiter is very attentive, come and take away the plates immediately after eating a dish. Don’t think too much. On the one hand, they are indeed keeping the table clean. On the other hand, they are also using the method of frequently taking empty plates to remind you to eat quickly and then check out and leave.

There is a “trick to get rid of people”. For example, a restaurant will ask several waiters to wear special clothes, carry the radio, play fast-paced pop songs with high scores, and then the waiters will dance with embarrassment, which not only creates a young atmosphere, but also makes the customers unconsciously speed up the meal.

There is a “big way to create crowding”. For example, many restaurants will install an additional push-pull partition during decoration, which can separate about 1/3 of the restaurants. When there are few people in the store, the barrier is pulled up, and the business area of the restaurant is deliberately reduced. The popularity of the restaurant looks very high. When the remaining space is full, it can even create a queue.

These are all minor incidents. To really improve the turnover rate, we need to work hard on the dishes.

The first measure is to reduce SKU, that is, to reduce the variety of dishes. On the one hand, it can reduce the time for customers to choose, on the other hand, it can reduce the meal preparation time, reduce the kitchen area, and reduce the dependence on chefs. Of course, it is necessary to maintain oneortwo popular items (or large items) while reducing SKUs, otherwise it is difficult for consumers to pay.

In the past, most Chinese restaurants were prone to hundreds of SKUs, and the menu was a thick one. Nowadays, the menu of most Chinese chain restaurants is often a thin piece of paper, and the SKU will be reduced to 30 or 20 courses. It is not surprising that some fast-food chains, such as Ramen, grilled fish, rice noodles, dumplings and so on, have less than 10 courses.

The second measure is to speed up the meal delivery. There are many ways to do this. For example, the main item of Xibei, niudagu, is cooked in advance, and customers can serve it within a few minutes after placing an order. Most of Xibei’s other dishes are easy to make or semi processed. Otherwise, how dare the waiter use an hourglass to time you?

The faster way to make a meal is to use the cooking bag. The central kitchen of chain restaurants disassembles the cooking process one by one, makes prefabricated packages through the central kitchen, and then uses the cold chain to deliver to the store, leaving only the last process in the store. The advantages are low cost, fast meal delivery and uniform taste, while the disadvantages are that customers cannot know.

The third means is to choose the track and win at the starting line. For example, the hot-pot/" 22375 rel="nofollow" target="_self">hot pot track is far better than other cuisines, so the largest number of large-scale enterprises have been born. However, ramen, rice noodles, dumplings, fried chicken and other categories have high penetration rate and high consumption frequency, so there is no need to carry out market education again. It is also a good track.

In the past two years, catering brands that have brushed the screen, such as Laoxiang chicken, chenxianggui, Ma Jiyong, Mr. rice (a brand under the rural base), have basically used what they can – track selection, explosive product strategy, SKU reduction, in store process simplification, self-service, etc. They are the latest batch of contestants to rush to the tower of “China McDonald’s”.

Those who do not follow these strategies will only be killed by those who take the lead in doing so.

If you look back at these so-called successful Chinese chain restaurants, you will find an interesting fact: you have to queue up for meals, the menu SKU is limited, the dining time is urged, the service is basically self-help, and the food is usually the basic carbon water that is inexpensive and can be satisfied – isn’t this the school canteen or the site canteen?

However, if a catering enterprise can not only maintain a very high turnover rate, but also form a long queue at the gate, which is comparable to the efficiency of the industrial canteen, but also make the migrant workers have the illusion of a quality life, and even be willing to punch in the circle of friends of Tiktok sweet potato. If this is done, will the enterprise be able to rest easy?

The answer may be No. Or in other words: when you make the best of a catering enterprise, everything may still be in vain.

Curse on the tip of the tongue

There is only Haidilao that can make Chinese catering to the extreme – it has inspired countless catering enterprises, but it also foreshadows their destiny.

Needless to say, Haidilao used to be a bull. Here is a quote from an investor: “at present, none of the catering enterprises can surpass Haidilao in terms of business innovation. It is a small presence at a glance. It can not surpass it in terms of quality control, employee motivation, supply chain and management mechanism.”

Haidilao is regarded as a myth by the capital market and has become a bright light in China’s catering industry. Although it is said that “I can’t learn”, countless restaurant owners have a dream that “I will become you when I grow up”. What they particularly envy is that Haidilao’s turnover rate can be maintained between 4 and 5 for a long time under the condition of continuous expansion.

This turnover rate has brought unimaginable dividends. For example, the rental income ratio of many Haidilao stores is only 5%, which means that only 5% of the income is used to pay rent, while the average value in the industry is 10%-15%. Many mall landlords are willing to give Haidilao rent relief because it can bring traffic to the mall.

In 2010, when Haidilao had only 51 stores, Zhang Yong was full of pride in his turnover rate: “many people can’t learn from Haidilao, just can’t turn on the platform, and if they can’t turn it over, they will lose money. What I earn is the last bit (turnover rate), which has been paid to employees and suppliers, and the company’s profits lie in the part that has been turned over.”

By 2020, Haidilao will expand its stores against the trend, making the market crazy. The logic is that small restaurants are cleared under the epidemic, the stalls in the shopping center are rented out in a preferential way, and Haidilao takes the opportunity to make a bargain. In this year, Haidilao opened 544 new stores, more than the sum of the previous two years, and its market value once reached HK $450billion.

But suddenly, the turnover rate of Haidilao has decreased from 4.8 times / day in the same store to 3.5 times / day in 2021, and the underground sliding is visible to the naked eye.

Is the expansion leading to the decline of quality? I’m afraid not. As a black sea member of Haidilao, the author basically eats Haidilao every month (except these two months). I feel that there is no change in the taste of Haidilao’s dishes, the saturated service, and the embarrassing, social and favorite birthday song.

Is it purely affected by the epidemic? I’m afraid not. In fact, in the second half of 2020 and the first half of 2021, when the impact of the epidemic has almost subsided, the turnover rate of a large number of old stores in Haidilao has declined compared with that in the same period, while many new online popular brands are making rapid progress, and the turnover rate has recovered rapidly or even reached a new high.

Is the hot-pot/" 22375 rel="nofollow" target="_self">hot pot industry up to the ceiling? I’m afraid not. As we all know, the concentration of the hot-pot/" 22375 rel="nofollow" target="_self">hot pot industry is very low. Although Haidilao ranks first in the chain in this field, its market share may be less than 4%. A large number of waist competitors such as Banu, Cuocuo, Peijie, brother Zhou and other new brands are still running horses around the country.

The reason may be the last thing Haidilao wants to admit: customers may not like eating so much.

When looking for “China McDonald’s”, the capital market and restaurant owners often have an illusion that Chinese food, like western food, can form a Matthew effect once standardized, and the leading effect is particularly obvious. Like McDonald’s, Burger King, KFC and other giants, the dishes can survive without updating for decades.

But the difference between Chinese food and Western food is that Chinese people have too many choices in food. Even for satiety food, Chinese people also have choices of pasta, rice noodles, steamed buns, dumplings, covered rice and so on. Each category has more than a dozen or even dozens of subdivisions. And the choice of more than 100 yuan per capita is so many that foreigners are stunned.

In the category of mid-range hot-pot/" 22375 rel="nofollow" target="_self">hot pot, although the taste of Haidilao is stable, it is far from reaching the level of unifying the taste buds of the Chinese people. Its competitors at the same price compete for excellence, constantly pushing through the old and bringing forth the new to provoke the desire of diners. When you are a little tired of the same taste and service, it is difficult not to step into other stores.

Haidilao is not unaware of this problem. It is also constantly developing vegetables and pasta. However, in every field it has entered, there are competitors who have reached the extreme. Is it so easy to establish a new brand? Chinese restaurants can not be like McDonald’s. in 70 years, only a few core SKUs can keep the stomach of diners forever.

All Chinese food enterprises will face the problems faced by Haidilao. Once the tastes of diners change, those efforts to improve the turnover rate will be vulnerable.

Some people may argue that people will always like ramen, dumplings and rice covered with rice. These basic categories will continue to flourish. This actually underestimates the innovation speed of Chinese restaurants. No matter how delicious the Ramen you make, I’m afraid there will be an opponent who improves and innovates and is cheaper than you. The cases of Ajisen ramen and Qingfeng steamed stuffed bun are in front of you.

The turnover rate and the indicators in the “single store model” can predict the profits of an enterprise, but can not predict the taste buds of diners. The more food desert countries are, the more likely they are to have a long-lasting chain of restaurants – diners have low requirements and are easy to meet. For countries with prosperous food, the catering industry may naturally be scattered.

The vastness of Chinese food is a happiness on the tip of the tongue for Chinese people, but it is a curse on the tip of the tongue for catering enterprises.

Eighty one difficulties in catering

Xu Xin once asked a VC colleague who came to ask for advice on catering investment experience: “don’t you give up on the catering track?”

There is a reason why this is a little emotional. In 2007, Xu Xin invested real efforts in today’s capital, and also had the desire to explore “China McDonald’s”. At that time, zhenkungfu was known as “the first brand of Chinese restaurant standardization”, but later it fell into a series of dog blood incidents such as divorce, coercion and imprisonment. Now the store still exists, and the momentum has long disappeared.

Over the decades, countless enterprises have tried to build a catering Empire, but this industry has buried too many names that were once popular, from ronghua chicken, red sorghum, a tea and a seat in the fast food, to the middle-end little sheep, Tanyutou, Qianbao, to the high-end Jingya, Hunan Hubei love, South beauty, and countless people have lost their halberds.

While the local chicken, chenxianggui and Mr. rice are expanding rapidly, the former Real Kung Fu, King Yonghe and Ajisen Ramen are faltering. When Shen NANPENG invested in the rural foundation and Xu Xin invested in real Kung Fu, he did not necessarily expect that they would decline so quickly. What pit awaits those who have invested in new consumption these years?

After 2020, there will be no easy and easy way for the catering industry from fly restaurant to chain giant.

Those wife and husband shops have to avoid the huge pitfalls of joining in, and they also have to start their business from dawn to dusk. Even if everything goes well, most of them can only earn the couple’s wages; Those catering enterprises with a certain scale have to deal with the consumers who are too shy to accept the price increase on the one hand, and the three mountains of food materials, labor and rent on the other.

For those large-scale chain restaurants that have passed thousands of rolls, polished the “single store model” to perfection, achieved the extreme turnover rate and formed a scale, they should be vigilant against changes in consumer tastes. They have been able to overlook the spire of McDonald’s from a distance, but the curse on the tip of their tongue will stop them like an air wall.

The black swan treated them equally: in Shanghai in May, the entrepreneurs of chain stores vented in their circle of friends, and the little boss of the mutton restaurant shouted behind the iron plate.

Catering in China may be as predicted by the autobiography written by Qiao Ying, the founder of the chain restaurant “Red Sorghum” in the 1990s: the main title is “I challenged McDonald’s” and the subtitle is “an inspirational book written in prison”. The bosses of Chinese restaurants are doomed to go through the “9981” difficulty.

End of the full text.

References:

[1] My nine lives, Zhang Lan

[2] Inside story of South Beauty’s “face changing”: the industry said that Zhang Lan should not lead wolves into the house, International Finance News

[3] Zhang Yong: hope Haidilao will always be in its infancy

[4] A record of 33.8 turnovers in a single day, in-depth analysis of the entrepreneurial history of Xiaomian, Songqi

[5] Exclusive interview with wangqinsong, founder of green tea restaurant: the turnover rate of fast fashion catering is the life and death line, and the internal reference of restaurant owners

[6] Can you learn Haidilao, Huang Tieying

[7] Haidilao in the eyes of old employees: fake smile until the manager earns 200000 yuan a month, Vista hydrogen business

[8] The brand suddenly announced that it would be closed forever! Red Star News

[9] Country base: a woman’s kitchen world view, business

[10] The third in-depth study of the catering industry series: who is the key factor affecting the valuation of the leading restaurant? Guosen Securities

[11] Huaan securities, a leading online restaurant with brand, scale and operation capability

[12] The development of Direct stores is the strategic focus in the future, and commodity sales may become the second growth point. Guodu securities

Author: boss Dai / lidanjing; Editor: limotian; Source: Yuanchuan Sea Research (id:aotekuaitan), reprinted with authorization. Reprint authorization and media business cooperation: Amy (wechat: 13701559246); Join the community: Cherry (wechat: 15240428449). Food people are “watching”