Financial Services Association, April 12 (Reporter Xu Cihao) As the restaurant economy recovers, major brands are opening up to join at an accelerated pace. Even the hot pot giant Haidilao has put down its direct gold plaque and implemented a franchise model.

Not long ago, Hefu Noodle, known as a high-end Chinese noodle restaurant, was officially opened to join. The terms of joining promised a turnkey cooperation fee of 698,000 yuan and never cut chives.

Some industry insiders analyzed that brands that originally insisted on direct management, such as Hefulao Noodle, Haidilao, and Pei Jie Lao Hot Pot, are now choosing to open up to join. This is indeed an inevitable trend in the development of the industry.

Although recently, Hefu Laomian posted a statement on social media to refute rumors of its layoffs and claim to be profitable in 2023, Hefu Noodle, which focuses on the direct management model, had a cumulative loss of 900 million dollars in 2020-2022, which also cast a shadow over its prospects for recruiting franchisees.

Zhu Danpeng, an analyst in the Chinese food industry, said, “Hefu Rao Noodle is joining now. To put it bluntly, capital is giving it a beating.” Zhu Danpeng believes that the business situation for noodles in Israel is “operating with illness.” “698,000 is too expensive, direct management is not possible. Will franchisees trust their brand's ability to operate?”

Regarding the brand's recent business situation, the Xinconsumer Daily reporter recently contacted the relevant person in charge of Hefu noodles several times, but as of press release, there was no response.

698,000 yuan can join Hefu Noodle

A reporter from New Consumer Daily saw through the Hefu Franchise Mini Program that Hefu Laomian announced the franchise policy with a single-store turnkey cooperation fee of 698,000 yuan, including design, decoration, and standard equipment. At the same time, it also provides service support for franchisees, including store evaluation, bag entry, opening support, takeout services, marketing planning, supervision and inspection. The requirements for franchise stores are 80-100 square meters, and the payback period is about 12-18 months, depending on the store situation.

According to the Hefu Noodle Franchise Application Page, there are three options for the franchisee's investment budget: less than 500,000, 500,000 to 1 million, and 1 million to 2 million. The Hefu franchise applet also shows that it has not established an investment agency with any third party.

At the same time, Hefu Noodle also introduced the current status of the brand in the announcement. For example, as of December 2023, there were more than 600 Hefu Noodle stores in 80 cities across the country; the number of members exceeded 25 million. At the same time, it has one of the largest central factories of 100,000 square meters in China, has the supply chain distribution capacity of 8,000 stores, has iterated more than 200 menus, and has stocked more than 3,600 new products.

Looking at the restaurants directly managed by Hefu Lau Noodle, according to data from Narrow Gate Meals, as of April 12, 2024, there were 558 stores, with 160 stores opened last year, covering 71 cities in 23 provinces across the country. Among them, the top five provinces were 115 in Shanghai, 90 in Jiangsu, 85 in Beijing, 67 in Zhejiang, and 62 in Guangdong.

Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Huace Brand Positioning Consulting, said in an interview with a reporter from New Consumer Daily that from the perspective of industry competition, brands that originally insisted on direct management, such as Hefulao Noodle, Haidilao, and Pei Jie Lao Hot Pot, are now choosing to open up to join. This is an inevitable trend in the development of the industry.

According to Zhan Junhao, with the rapid development of the catering industry, market competition is becoming more and more intense, and brands need to find new growth points in order to expand their market share. The franchise model can help brands expand rapidly, increase market coverage, and enhance brand influence. At the same time, the franchise model can effectively reduce the financial pressure on the brand and achieve capital return by charging franchise fees, management fees, etc.

Tang Bin, an expert at the Whale Platform think tank and chairman and CEO of Fengxiang Marketing Consulting, believes that the sudden liberalization of Japanese noodles, which has always been directly managed, actually reflects the brand's current weak management and expansion difficulties. High-end pasta faces growth difficulties in the context of declining consumption. Direct sales are too expensive. Only by opening up franchises and quickly gaining ground can there be a possibility of further financing or even going public.

The cumulative loss for 3 years exceeded 700 million yuan, and they claim to have reversed their losses in 2023

High customer unit prices, study-style dining environment, and location in high-end shopping malls have made Hefu Noodle one of the most topical brands on the Chinese noodle circuit in the past three years. At the same time, it is also loved by consumers, and capital has also ended up “eating noodles.”

According to industrial and commercial data, up to now, Hefu Noodle has completed 6 rounds of financing exceeding 1.6 billion yuan. The shareholders behind it include Huaying Capital, Longhu Capital, and Tencent.

In July 2021, Hefu Laofu Noodle completed an investment led by CMC Capital. Zhongwei Capital, Longhu Capital, and Tencent Investment followed up financing of 800 million yuan, setting the highest financing record in the domestic noodle chain industry. The post-investment valuation of Hefu Laobian reached 7 billion yuan.

With frequent financing, Hefu Lau Noodle has directly managed stores across the country to create brands such as Tefu Lau Noodle, Alanjia Lanzhou Beef Noodle, One Cup of Ramen, and Fortuna Meat Skewers.

According to relevant financial data, in 2020-2022, Hefu noodles achieved operating income of 1,107 billion yuan, 1,732 billion yuan, and 1,456 million yuan respectively, but net profit was loss of 206 million yuan, 211 million yuan, and 299 million yuan respectively. In 3 years, Hefu Restaurant lost 716 million yuan.

It is worth noting that recently, Hefu noodles have been mired in a wave of prepared dishes and layoffs.

On the eve of March 15 of this year, “Hefu noodles revealed to contain pre-made dishes” became popular. According to media reports, there are eight words “healthy ingredients, healthy and not expensive” on the promotional image of the takeout app Zhongrao noodles, but on social platforms, consumers often claim that employees of Hefu noodles are in front of them and squeezed the contents of the cooking package into the noodle bowl.

Recently, news broke in the media that since the end of last year, Hefu Noodle has begun multiple rounds of layoffs. The layoff ratio has reached more than 20%, and the number of employees involved may exceed 1,000. The news quickly attracted widespread public attention, and many netizens expressed surprise and concern.

On April 2, Hefu Laomian issued a solemn statement on social media to clarify the rumors of layoffs. The statement said that the company did make certain organizational adjustments recently, but the number of layoffs was only about 120 people, or 1.4%, which is far from the “20% to 30% layoffs” reported on the Internet.

Regarding the reason for this organizational adjustment, Hefu Laomian said that this is a normal decision made by the company to cope with market changes and enhance competitiveness. The company has always been committed to optimizing the organizational structure and improving operational efficiency. This adjustment is also aimed at better adapting to market development needs.

At the same time, Hefu Rao Mian revealed that it had already turned a loss into a profit in 2023, and the specific business conditions are still unknown.

It is worth mentioning that Li Xuelin, founder of Hefu Noodle, said at the 2023 Hefu Noodle Strategy Upgrade and New Product Launch Conference at the end of last year that Hefu will seek “5000+ business partners” to open joint ventures and officially enter the “direct+joint venture” model to explore multi-tier markets. It is expected that by 2026, the number of its Hefu noodles stores will exceed 2,000, and Alan's will exceed 1,500.

Meanwhile, Li Xuelin revealed that Hefu Noodle will target the sinking market and sink to 2000+ county-level units to encrypt the city's store network. In addition to the domestic market, Hefu uses Hong Kong as a bridgehead to go abroad and explore markets in many countries such as Japan and Singapore.

In fact, under the recent fierce market competition, many new Chinese noodle restaurant brands have experienced growth bottlenecks.

Previously, Chen Xianggui said that 350 new stores will be opened in 2022. Baman Rice Noodle also plans to open 1,000 stores in 2022, and Mee Xiaomian announced that it will open 1,000 stores by 2024. However, according to data from Narrow Door Restaurant, up to now, the total number of stores where Chen Xiang Gui and Xiaomen met is only 200-300, while the number of Baman's rice noodle stores is only over 100.

According to Zhu Danpeng, pasta, as a food segment, has become a tool or means to enhance the ability to withstand risks as competition continues to intensify. Starting in 2023, the entire consumer market has entered an era of both market price ratio and cost performance ratio. As an influencer brand, Hefu Rao Noodle was still popular among consumers a few years ago, but now it has revealed many problems. Although the overall price of noodles in Hefu has declined since this year, this should have been a last resort. Its original high price position has already made consumers feel unhappy.

“There are many brands of noodles. In the face of increased competition in the industry, brands that have both cost performance and quality are more recognized by consumers.” Zhu Danpeng said.