1. Core point of view: We visited Mr. Leng, vice president of Xiaonanguo (3666), in Shanghai at 2:00 p.m. on May 22 to exchange and discuss the latest developments in the company and the catering industry. We believe that Xiaonanguo's current multi-brand strategy is still correct, yet due to the downturn in the industry, the company will still be in a period of adjustment this year. The company's multi-brand strategy is currently running well, and the chairman has a good grasp of the company's steps. We have confidence in the management and can keep an eye on the company for a long time. Company side: The company's “Xiaonanguo” brand resumed positive growth in the same store in March and continued to improve in April. It is expected that the same stores will achieve a low growth rate throughout the year, and revenue will also increase year over year. Currently, the company still has a certain number of loss-making stores, and it is expected that stores that have not operated well will continue to be closed this year. Due to the high cost of closing stores, it will have a certain impact on the company's profit this year. From a long-term perspective, the company plans to increase the share of casual dining to around 50% by the end of 2015. We believe that casual dining has a lot of room for future development, and that the company's Xiaonanguo platform can connect to other brands to generate revenue for the company. Mr. Wang, the chairman of the company, had a good grasp of every critical moment in the company in the past and was responsible to investors. We maintain confidence in the company's management and the company's future development. On the industry side: Currently, high-end restaurants are still sluggish, and the government's crackdown on the “three public consumption” has not been relaxed. The original government consumption has now switched more to commercial consumption, and the pressure on high-end restaurants is still quite high. We believe that there is a lot of room for the development of casual dining in the future, benefiting from the continuous increase in consumer demand for diversified food, the continuous change in food preferences, and there is plenty of room for development in casual dining consumption, such as baking and popular catering. 2. Same-store sales situation: The company's same-store sales increased negatively in the first quarter, and same-store sales resumed positive growth in March, about a low number of units. The April quarter continued to improve month on month. This has something to do with last year's low base. Last year's May Day holiday was at the end of April, and this year at the beginning of May, the company sought positive growth in the number of units in the same store throughout the year. 3. Status of store closures this year: The company will continue to close stores this year. Currently, there are about 10 loss-making stores, and a small southern country store was closed in April. Currently, the cost for the company to close one store is around 5 to 6 million. The company believes that it can close up to 7 stores throughout the year. Most of the stores that closed last year were stores that had a lot of depreciation. Since some of the stores that lost money this year were relatively old, if the cost of closing was high, it would be more cautious to close stores this year. After closing 8 stores in 2013, the chairman subsidized 17 million dollars to stabilize performance, and the chairman is still responsible to investors. 4. Pricing in second-tier cities: The company believes that in the past, there were problems when pricing second-tier cities. It did not carefully consider the differences in consumption behavior between second-tier cities and first-tier cities, but quickly replicated the Little South China brand. As a result, after the introduction of the policy restricting the three public consumption in 2013, public funds for food and drink disappeared completely, which had a great impact on second-tier cities such as Tianjin and Suzhou. 5. Customer traffic situation: Currently, the company's passenger traffic is increasing, and terminal consumption of ASP has declined slightly. The positive growth in the same store is mainly brought about by the increase in customer traffic. 6. Operation situation of Nanxiao Pavilion: With the exception of the Shenzhen Airport store, all other Nanxiaoguan stores are operating well. 7. “Little South” store opening plan: Currently, only the first store has been opened in Shanghai, and the customer unit price position is relatively low. Currently, the company has no plans to open large-scale stores for the “Little South”, and it still plans to open 2 “Little South” stores throughout the year, mainly in Shanghai. 8. Multi-brand strategy: The company will continue to strengthen its multi-brand strategy in the future. While maintaining the original 3 brands of “Hui Gongguan,” “Xiaonanguo,” and “South Xiaoguan,” the company has also introduced “Uncle Chess” on the Xiaonanguo platform. Currently, there are 20 stores. Although “Uncle Chesi” has not yet joined, we believe that the company still has a good eye for brand implantation. Furthermore, in the future, the company will also actively cooperate with overseas companies to enter the field of Western food and light meals, and continue to adhere to the multi-brand strategy. 9. Labor costs: The company raised the salary of employees once in 2013 in order to retain talents. Currently, the treatment of frontline employees is average in the industry, and the performance assessment of employees is mainly based on customer traffic. The company believes that labor costs are still one of the main pressures facing the company.