Tech Planet (WeChat ID: tech618)
writing | Zhai Yuanyuan
Following the opening of tea and coffee brands such as Xicha, Naixue's tea and Ruixing, the ceiling and undersea restaurant in the hot pot industry also recently opened their franchise.
Different from other industries, Haidilao directly raises the cost threshold to tens of millions. Joining a milk tea or coffee shop only costs a few hundred thousand to one million yuan, while joining a Haidilao directly increases the threshold by ten times, up to 10 million yuan.
Strong capital reserve is the first threshold for Haidilao to select franchisees. According to the joining procedure of Haidilao, all those who want to join in need to submit the application for joining in through their official website, and then go through the links of "qualification review - communication of cooperation intention - negotiation of the joining committee - signing of cooperation agreement - store opening preparation".
When submitting the franchise application, it can be clearly seen that the lowest level set by Haidilao for the inventory of the total assets of the intended franchisee is 10 million yuan, and the lowest level of funds that can be invested in Haidilao is 10 million yuan. There are no hundreds of thousands to millions of options.
The investment cost of Haidilao single store has directly raised the joining threshold. According to the evaluation of Soochow Securities, the investment of Haidilao single store is about 8-10 million yuan.
But even though the threshold for joining is very high, many people still flock to it.
Controversy followed. "Is joining in order to earn money and cut leeks?" "Why do you want to give up your business to others to earn money?" "Joining in is the beginning of a brand's decline." The voices of doubting the purpose of Haidilao's opening up and joining in began to rise one after another.
After 30 years of establishment, we chose to open our franchise at a time that is "not the highest market value", "not the most profitable", or "the craziest store expansion". Can Haidilao tell the new story of franchise? Is it a good business to join the hotpot industry?
Haidilao "McDonald's" franchise
The end point of direct marketing is to join, and the industry's insider joining has reached the hot pot industry.
Adhering to direct marketing for 30 years and achieving the best service, Haidilao finally failed to resist the general trend of joining in the whole industry and chose to open its franchise this year.
On March 4, Haidilao announced that it would implement the franchise mode of Haidilao Restaurant and further promote the expansion of the restaurant network with a diversified business model. To this end, Haidilao has set up a franchise business department to develop franchise related model details and business cooperation processes.
The threshold for joining is not high at the subjective level. Haidilao requires its franchisees to agree with Haidilao's corporate culture and values; Willingness and planning for long-term development with benthic salvage; Have the financial foundation for multi store development; Have local property resources and enterprise management experience.
But the threshold of objective level is very high. The franchise application form submitted on the official website of Haidilao shows that the intended applicants need to fill in three provinces of intention to open stores, expect the number of stores to be opened in the next three years, the funds that can be invested in Haidilao, the expected return period, the annual income of individuals, and the total assets of individuals.
A catering person who applied for joining Haidilao said that although Haidilao did not directly announce the clear joining standards to the public, nor did it have a guiding answer, it is certain that the more stores it expects to open in the future, the more funds it can invest, and the more personal total assets, the greater the probability of winning the franchise qualification.
With assets of 10 million yuan and local property resources, these two standards have filtered out most applicants. Many people believe that the density of hotpot stores in first tier cities is too high, and the market is approaching saturation. Haidilao's joining this time aims at sinking markets. The "county tycoons" with local property resources are the key mining objects.
However, at present, Haidilao does not restrict the first and second tier cities to join. In addition to Hong Kong, Macao and Taiwan, other provinces in the country can choose from the three provinces of interest in the franchise application.
Perhaps Haidilao itself has not considered the specific details of the landing of the franchise, and currently only selects partners with strong strength. The customer service of its official franchise hotline could not answer basic questions such as franchise fees and standards. The only way for the outside world to understand the franchise policy of Haidilao is to fill in the franchise application on its official website. If the conditions are met, Haidilao staff will contact the applicant in 7 working days.
At present, there is only one way to communicate with Haidilao. On social media, some people have said that they have received the notice of application failure. However, there was no more detailed explanation of the specific nonconformities.
According to Tech Planet, unlike the alliance of milk tea and coffee industry, Haidilao's alliance is closer to McDonald's trusteeship model. An insider close to Haidilao told Tech Planet that the franchise model of Haidilao borrowed from McDonald's, Parkson and the cross industry Huazhu model. The headquarters provides franchisees with systematic operation management, talent training, supply chain support, etc., and franchisees are more of a "sitting on the dividend" shake off manager.
If you join a Haidilanmen store, you may not charge a brand usage fee, but you will receive a share. The applicant flew to Tech Planet through two interviews with Haidilao franchisees and said that Haidilao franchise stores are divided into three levels: A, B and C. The lowest level C invested 12 million yuan, and the difference between each level is about 2-3 million yuan. Because the investment cost of stores in different cities, different locations and different areas is different, the specific investment cost is still discussed on a store by store basis. In terms of franchise fee, the initial brand may only receive a deposit, and no brand use fee will be charged. In terms of revenue, Haidilao headquarters will draw 2% - 5% of the monthly turnover of franchise stores. For these information, Haidilao replied that they were not true.
The return period is long, and the service is difficult to copy
Milk tea, coffee, noodles, convenience stores, snack bars, numerous businesses in the past have realized large-scale expansion through joining. Franchisees use their own money to support the brand with a scale of 10000 stores and a market of 100 billion yuan. In this process, some people earn a lot of money with the brand, while others fail to get dividends, or even lose their money.
The grand joining mode is also said to be "cutting leeks". The open joining of brands means that they will inevitably be questioned and challenged. Haidilao now faces the same dilemma.
In terms of profitability alone, Haidilao is not short of money. The positive profit forecast released by Haidilao on February 20 shows that the annual revenue in 2023 will be no less than 41.4 billion yuan, and the net profit will be no less than 4.4 billion yuan.
However, the voice of doubt thinks that, for such a profitable business, why does Haidilao not go off to do direct expansion in person, but to open its franchise?
In 2023, the number of new stores opened in Haidilao will be the lowest in the past 10 years. The annual performance forecast of Haidilao shows that only 5 new stores have been opened in the first half of 2023. 24 stores were closed in the early stage of the recovery of COVID-19 epidemic, and 18 restaurants with poor business performance were closed at the same time. By comparison, from 2022 to 2019, the number of new stores opened by Haidilao each year is 24, 421, 544 and 308 respectively.
The growth of direct stores almost stagnated, which indirectly affected the judgment of the outside world on the long-term development confidence of Haidilao. During the epidemic, Zhang Yong, CEO of Haidilao, admitted that Haidilao made mistakes in expansion, saying that the expansion plan was blind confidence and was still paying for the blind expansion in the previous two years. Now that the epidemic is over, Haidilao, which closed its stores to stop losses and successfully turned losses into profits, has chosen to expand by joining instead of recovering its growth rate in the past. Industry insiders said that it is inevitable that people will have an excessive interpretation, "Did you transfer the business risk to the franchisees?"
A catering industry practitioner and investor told Tech Planet that he was not very optimistic about joining Haidilao. Although Haidilao has obvious brand advantages, it is actually difficult for Haidilao, which is famous for its services, to copy its services to other stores without distorting its actions, because the services are non-standard products, and "it is likely to become and lose services".
Successful giants in the catering industry, such as KFC, McDonald's and Subway, sell their products in the form of fast food, and the products are relatively standardized. If a single franchise store wants to ensure that its services do not shrink, it is bound to increase its input costs. Unlike direct stores, its service costs will be diluted with the whole group's business. The priority of franchise stores must be profitability, not extreme service.
Secondly, Haidilao's rent advantage may be weakened in franchise stores. The rent of Haidilao's direct stores accounts for 4%, much lower than that of most restaurants, which accounts for 10% - 15%. Many shopping malls value the past passenger flow of Haidilao, and reduce or even exempt the rent of Haidilao. However, if it is a franchise store in the future, the rent price is likely to be raised due to the bidding of the franchisee, so the rent advantage will naturally disappear and the profit space will be compressed.
Franchisees who are good at money can't make decisions without any burden when facing the investment cost of 10 million yuan. Lufei told Tech Planet that he communicated with Haidilao's franchisees for two rounds and decided not to join Haidilao temporarily after comprehensive consideration.
In his opinion, the return period is too long, at least one and a half years. In addition, the business of Haidilao is not easy to do now. In the city where Haidilao is located, insiders of Haidilao told it that the turnover has declined sharply, only two-thirds of the previous one. The gross profit of single store Haidilao is 52%, and the net profit is about 7% - 8%. The input-output ratio is not very high.
Is it easy to do business in the sinking market?
The density of hotpot stores in the first tier cities is approaching saturation. In order to seek the incremental market, brands focus on the sinking market. This underlying logic is easy to understand. But is the business sinking into the market really easy to do?
Hot pot market has many brands, and competing for franchisees has almost become a "zero sum game".
In terms of open franchise time, Haidilao does not occupy the first mover advantage. At the beginning of February, the catering brand Jiumaojiu announced that it would gradually open its Taier pickled fish and "Mountain outside Mountain" sour soup hot pot. Like Haidilao, Jiumaojiu's sour soup hot pot also aims at the regional rich with property resources.
The staff in charge of joining in Jiumaoju said to Tech Planet that there are four levels of joining standards: having experience in large-scale catering operation and management, having functional teams with strong business capabilities, having high-quality resources in local malls, and the last level is cash flow and fixed assets. "There are too many rich people, and the fourth level we join is the rich people". Franchisees need to have cash flow of more than 3 million yuan and fixed assets of more than 20 million yuan.
The staff of Jiumaoju said that the investment cost of joining a sour soup hotpot was about 2 million yuan. The return period is generally 18-20 months, conservative for 2 years. The first batch of sour soup hotpot has opened 50 franchise quotas, most of which have been signed up, and it is expected to open in May and August this year.
The target audience of franchise is highly overlapped, and the difficulty of brand franchise increases sharply.
It is not easy to join in the sinking market. The return cycle, consumption power and repurchase are factors directly related to the speed of brand joining.
The current cycle of hotpot franchise is usually one and a half to two years, and some brands claim it for 7-8 months. The heavy investment mode and light investment mode, which mode is more attractive to franchisees, also need to put a question mark.
The hot pot brand Nan Hot Pot has been open to the sinking market for nearly a year, and now there are only about 10-20 stores. Its staff said to Tech Planet that Nan Hot Pot opened the sink market to join in the second half of last year, specifically adjusted the joining fee in the sink market, reduced the joining fee, and relaxed the store area to launch a small store model.
Even so, the way to join is still slow. At present, the total number of Nan Hot Pot stores is more than 600, most of which are in the first and second tier cities, and there are only about 10-20 franchise stores in the county. The staff disclosed that the franchise cost in the county seat is 250000 yuan in five years, the investment cost for opening a standard store (300 square meters) is about 1.4 million yuan, and the investment cost for small store type (200 square meters) is 700000-800000 yuan, and the return period is about 7-8 months.
The turnover rate of hotpot stores in the county may not be too high. The annual performance forecast of Haidilao shows that in the first half of 2023, the passenger flow of Haidilao will recover significantly, receiving 174.6 million customers in total, the overall turnover rate is 3.3 times/day, and the turnover rate of the same store is 3.5 times/day. However, the turnover rate of the sinking market is almost difficult to reach 3, and the daily operating income is also a challenge.
Taking Nan Hot Pot as an example, its staff revealed that the unit price of customers in the county stores was about 120 yuan, the average turnover rate was about 2.5 yuan, the daily turnover of better stores was about 10000 to 15000 yuan, and the daily turnover of bad stores was about 8000 to 9000 yuan. At such a turnover level, it is hard to say that the profit and loss balance can be achieved in the asset heavy hot pot industry.
The staff of Xiaolongkan, another hot pot brand, said that the turnover rate could reach 8 to 9 in good times, but only 2.
Although during the Spring Festival, the market was buzzing about the county economy and the upgrading of consumption in the county, it may be questionable whether the county's consumption power can still maintain a high level if the bonus of the returning army is ignored.
The catering industry has recovered in the past two years, but not a few hot pot stores have closed down. Since the first loss of hot pot in 2021, Xiabu Xiabu has suffered losses for the third consecutive year, with a cumulative loss of nearly 800 million yuan.
Whether Haidilao's high-end brand appeal will encounter acclimatization in the sinking market is full of uncertainties.
(Statement: This article only represents the author's view, not Sina.com's position.)
