Qiao Jiangnan's "Rejuvenation throttle" reveals risk of restaurant chain franchise

For Qiao Jiangnan, who has announced a high profile announcement several years ago, the past month has been “Black September”. Following the September 2nd visit to Qingdao, the "dead fish for live fish" was exposed. On September 17th, after the Nanjing branch became embroiled in the waste oil crisis, all the contradictions between its repurchased franchisees and franchisees continued to ferment. The hidden troubles of Qiao Jiangnan in quality supervision and management are gradually enlarged.

After experiencing the "Black September", the road to listing South Beauty will undoubtedly become even longer. Coincidentally, the company has publicly issued a prospectus, and the listing appears to be relatively stable. Xiaonan Guo unexpectedly cancelled the Hong Kong IPO last week. The listing of the catering industry is still struggling. Some industry experts believe that the catering industry has been difficult to break through the curse of "difficult to market", the short board of standardization management or one of the most critical issues.

Repurchase of franchised stores to pave the way for the listing The September Qiao Jiangnan can be said to have staged a "fantastic" drama in the catering industry. Following September 2, the Qingdao branch was exposed for food safety issues such as “Dead fish for live fish”. On September 17th, South Beauty Nanjing 1912 shop was trapped in the “secondary throttle”, and the franchise was accused of turning the food after the fryer. The oil is precipitated and cooked to staff. As the first franchise store in South Beauty of South Beauty, the turmoil in the Nanjing store sparked a wave of waves. The incident eventually evolved into a fierce battle between Qiao Jiangnan and franchisees. South Beauty said that it had already withdrawn its franchise cooperation relationship, while the franchise side counterattack said that there is an unequal relationship between franchising and direct sales stores.

Zhang Lan, the founder of Qiao Jiangnan, started the franchise three years ago. However, for the sake of strengthening brand control, Qiao Jiangnan gradually withdrew from the previous year. In the beginning of this year and July, South Beauty has already lifted its franchise agreement with franchisees from Qingdao and Guiyang. It is understood that South Beauty currently has more than 50 stores in the country, and it also has five franchise stores in Baotou, Taiyuan, and Qinhuangdao. However, the reporter found in the branch store map of his official website that the franchise was not included in the map of South Beauty.

“First, increase brand awareness through franchising, expand market share, and then seek to go public. Pre-listing catering companies need to find capital investors, investors invest a certain percentage of equity, and how much equity should be compared with the assets of catering companies. Stores are franchisees and their revenues and profits are not included in the company’s financial statements. Therefore, capitalists usually require catering companies to separate their franchise stores from their overall assets. This has led to the frequent repurchase of catering companies for listing. The phenomenon of franchise stores, "a well-known franchise expert, China University of Political Science and Business Ph.D. Li Weihua said in an interview with this newspaper that the Qiaojiang South repurchase franchise could pave the way for its listing. In March of this year, UBS Securities, an underwriter of Qiao Jiangnan, filed a listing application with the Issuance Department of the Securities and Futures Commission. However, no written feedback has been received so far.

Repurchase of franchise stores, catering chain can improve the company's internal control capabilities, reduce the audit node, more conducive to listing. Little Sheep, which has been listed in Hong Kong, had the same experience. Little Sheep had a frenzy of expansion through its franchise model. At its peak, its number of franchise stores exceeded 700. In order to solve the management problems left by the rapid expansion, Little Sheep began to phase out, rectify, and acquire franchise stores. Until the time of its listing, Little Sheep's store had only 350 stores, 103 direct stores, and 247 franchise stores.

The road to food and beverage companies listed on the rough roads of Jiangnan's listing is only a microcosm of the difficulties in the listing of restaurant chains. Earlier it was reported that the China Securities Regulatory Commission raised the criteria for listing food chain companies. The specific details are: "The annual profit standard of the catering company to be listed will be raised from 30 million yuan to 50 million yuan." Although this news has not been finally confirmed, but the catering business is getting higher and higher threshold is an indisputable fact.

The Cantonese food restaurant Shunfeng Group and the time-honored “Do not care” have also submitted A-share listing applications in 2010, which to date have been unsuccessful. Jingya Group, which has a strong private equity investment, is still rejected outside the A-share market.

However, even if it breaks through the checkpoints of the regulatory authorities, it cannot be listed on the market. Although the prospectus was issued on the 15th of this month, Xiao Nanguo suddenly stopped calling IPO to Hong Kong last week. Xiaonan Guo said that in view of the recent excessive market volatility, after consulting the joint bookkeeping bank, the company believes it is unwise to continue to promote the global offering at this stage.

It can be seen that, apart from the increase in the threshold for the listing of food and beverage chains, the listing of restaurant chains faces numerous market risks. Especially in the context of the current high raw materials, renting and personnel costs, food safety and consumer confidence, etc., will have a major impact on catering companies. This has been a big blow to many restaurant chains with publicly listed impulses. Under the background of increasing costs and raising the threshold for listing, the issue of how restaurants can seek a path that can still be rapidly expanded has gradually emerged.

What does the link mean in standardized management? The so-called standardization management can be divided into the standardization of brand marketing and the standardization of brand operation. The former requires that the restaurant chain must have a unified standard in the expansion process from store design, site selection, decoration to local marketing programs. The latter includes the standardization of procurement, product production and services," said Lin Yue, chief consultant of Lingyan Management Consulting. The latter is more complex and the current restaurant chain still needs to be improved. “For example, with the expansion of the scale of restaurant chains and the increase in the amount of raw materials purchased, how to solve the problem of differences in quality between raw materials and north and south is something that every chain catering company needs to consider. For example, if the weight of each vegetable’s raw material and even the number of seasonings are Unified standards to ensure the standardization of dishes quality."

From the outbreak of quality and safety incidents such as "replacement of dead fish" and "return to pan oil" to the escalation of disputes with franchisees, South Korea's Qiao Jiangnan broke out in the shortcomings of management.

Lin Yue believes that whether the restaurant chain, especially the Chinese restaurant chain, can be successfully listed, and how standardized management level will be a key issue. He believes that if there is no perfect standardization management process, the ability of the restaurant chain to replicate the expansion will be reduced.