After the first share of hot pot and the first share of new tea, with the number of franchise stores approaching 6000 nationwide and the average annual revenue of more than 1.1 billion yuan, the catering brand “Yang Guofu”, which has been established for 19 years, has once again aroused the popularity of Hong Kong stock catering track, and is making every effort to sprint for the title of “spicy hot first share”. On the evening of February 22, Shanghai yangguofu enterprise management (Group) Co., Ltd. submitted a listing application to the Hong Kong stock exchange.
However, among the nearly 6000 restaurants, there are only three direct stores, and the franchise stores almost support Yang Guofu’s “all rivers and mountains”. Maybe become a franchisee and lose a franchisee. The huge franchise system makes Yang Guofu’s franchise management a “hard injury”, and food safety has become the focus of the brand. This time, can Yang Guofu knock on the door of the capital market?
Sprint “spicy hot first”
Rumors about Yang Guofu’s listing have come true. According to the announcement of the Hong Kong stock exchange, Yang Guofu submitted a listing application to the Hong Kong stock exchange, with CSCI as its sole sponsor. How much money does Malatang make? According to the prospectus, in 2019, 2020 and the first nine months of 2021, Yang Guofu’s income reached 1.182 billion yuan, 1.114 billion yuan and 1.163 billion yuan respectively, and the profits in the same period reached 181 million yuan, 169 million yuan and 202 million yuan respectively.
If it can be listed successfully, Yang Guofu is expected to become the “first share of Malatang”. The performance of several years and even the listing in Hong Kong this time can be regarded as a “meritorious hero” by the franchise store. The listing application shows that its franchise restaurant business revenue continues to grow, from 1.036 billion yuan in 2019 to 1.056 billion yuan in 2020. Meanwhile, the revenue increased from 667 million yuan in the first nine months of 2020 to 1097 million yuan in the first nine months of 2021.
The franchise restaurant is almost Yang Guofu’s “all rivers and mountains”. As of September 30, 2021, there are 5783 restaurants under Yang Guofu brand. From the perspective of store attributes, there are only three direct stores, 5759 franchise restaurants in 31 provinces and cities in China and 21 overseas franchise restaurants. It can be seen that the proportion of franchise stores has reached 99.9%, which is self-evident for Yang Guofu.
Yang Guofu also said in the listing application that Yang Guofu’s business operation largely depends on the relationship between the brand and franchisees and the operation of franchised restaurants. By the end of 2019 and 2020, as well as by September 30, 2020 and September 30, 2021, the revenue from franchised restaurants was RMB 1035.7 million, RMB 1055.6 million, RMB 667.1 million and RMB 1096.6 million respectively, accounting for 87.6%, 94.8%, 92.2% and 94.3% of the total revenue of the relevant year or period respectively. The income generated by Yang Guofu’s franchise restaurant mainly comes from franchise related expenses and sales of unified purchased goods.
Zhu danpeng, an analyst of China’s food industry, believes that with the continuous transformation of market forms and the increasingly fierce competition in the catering industry, Yang Guofu’s choice of listing at this time can improve the brand effect and scale effect, so as to further strengthen the comprehensive competitiveness of the brand and weaken the operation risk of the brand. Although it is related to the quality and integrity of the enterprise’s supply chain, it can bring certain advantages to the enterprise’s product security and customer loyalty. This is also the direction that Yang Guofu needs to improve.
Food safety is a barrier
Such a huge franchise system also increases the difficulty of Yang Guofu’s management, and it is difficult to achieve the standardization, chain and branding of stores. As the “hardest hit area” of food safety issues, Yang Guofu has been controversial for many times because of food safety issues. For example, in July last year, Yang Guofu’s store was exposed to rat excrement all over the warehouse, the ingredients were still used after being bitten by rats, and the overnight ingredients not put in the refrigerator were mixed with fresh ingredients. Subsequently, Yang Guofu issued an apology statement for the food safety problems of the franchise stores. In addition, on January 15, the Beijing Consumer Association also reported and sorted out the recent major food safety inspection. Among them, 17 stores of Yang Guofu Malatang had food safety problems.
In this regard, Yang Guofu also said in the listing application that the franchise business makes Yang Guofu face multiple risks, some of which may have a negative impact on the income of franchisees, thus affecting Yang Guofu’s brand reputation. Each risk related to franchise may have an adverse impact on Yang Guofu’s business and performance.
Lai Yang, vice president of the Beijing Institute of business economics, said that the enthusiasm of investors depends on the actual operating ability and performance of enterprises. Among the enterprises listed on the Hong Kong stock exchange, there are not a few enterprises whose share prices have fallen sharply due to improper operation. For Yang Guofu, it is very important to provide support to franchisees in terms of supply chain and food safety standards. If the support is not enough, franchisees may have business problems such as food safety, which will damage the reputation of the enterprise. When such negative events accumulate to a certain extent, they will affect consumers’ trust in the brand and brand revenue.
Zhu danpeng pointed out that Yang Guofu’s cost performance is high, the products also meet the needs of young consumers, and the market space is large. However, the franchise mode has high requirements for the management of enterprises, which is easy to form problems that are difficult to control, which is also a point that Yang Guofu needs to attach great importance to in the future layout. Food safety is the foundation of enterprise development. After food safety is guaranteed, enterprises can better guide consumers in terms of products and consumption scenes.
Lai Yang believes that the profit and loss of franchise stores have a limited impact on the brand, so Yang Guofu’s risk of adopting franchise mode is relatively low. If the brand reputation is good, it is easier to attract franchisees and form a virtuous circle. However, the listing of enterprises is not once and for all. If Yang Guofu obtains financing after listing, he also needs to invest in brand image, business model and products to continuously improve brand competitiveness and bring more freshness to consumers.
Malatang has developed into a 100 billion market
It is worth noting that the Malatang market is developing into an important part of China’s fast food market. Calculated by the sum of total commodity transactions, China’s Malatang market increased from about 96.8 billion yuan in 2016 to about 130.6 billion yuan in 2019, with a compound annual growth rate of about 10.5%.
Except physical stores