This is an English adaptation of a FoodBud historical article originally published on November 11, 2021.
On the evening of November 11, 2021, filings showed that Haidilao planned to place 115 million shares at HK$20.33-21.00 per share, raising up to US$310 million, or about RMB1.98 billion.
The financing plan followed Haidilao's November 5 announcement that it would gradually close around 300 underperforming restaurants by December 31, 2021. Some sites would be temporarily suspended and could reopen when conditions allowed, with the suspension period capped at two years. Haidilao said the closures would not involve layoffs and that affected employees and managers would be properly reassigned.
According to Haidilao's 2021 interim report, first-half operating cash inflow was RMB2.56 billion, with net operating cash flow of RMB2.0 billion.
But the company also spent heavily on expansion and investment:
Labor costs rose sharply, from RMB4.07 billion in the first half of 2020 to RMB7.16 billion in the first half of 2021. With around 300 stores being closed, a no-layoff commitment, high labor costs, and short-term debt, FoodBud argued that a share placement would help reduce the risk of a liquidity squeeze.
In a recent external communication round, Haidilao addressed several operational questions.
Haidilao attributed weak table turnover partly to lower consumer willingness to dine out, but said management issues were more important. Over the previous one to two years, the company said its management model had not kept pace with rapid scale expansion. Management spans became too wide, talent reserves were insufficient, and the company needed to improve its organization and employee development.
COVID-related changes also affected traffic. Family dining frequency fell, reducing the impact of Haidilao's service strengths for children and older guests. Friend gatherings and business meals recovered faster, while women around age 30 remained a significant customer group.
In the most recent half year discussed, table turnover was below 2 times, with losses at some stores. Haidilao cited poor site selection and said the traffic redistribution effect after store closures had weakened, while the loss-reduction effect had not yet fully formed.
At headquarters, Haidilao had around 3,000 employees, with headquarters labor accounting for about 3-4% of total expenses. For incubated brands, some had been eliminated; others with potential could receive further investment. Brands such as Shiba Chuan and Chaoji were not ready for rapid expansion, with Shiba Chuan expected to have at most 4-5 stores.
Vegetable prices in northern China had risen significantly. Imported beef costs were also affected by the mad cow disease outbreak in Brazil. Haidilao said its regional teams had made slight price adjustments.
After cutting prices in August to drive traffic, Haidilao said the total price increase would not exceed the August reduction, though individual menu items would rise. With recent increases in vegetable and beef prices, gross margin pressure was significant. Related-party supplier Shuhai had a price-review mechanism twice a year; over the longer term, cost pressure might be transmitted into the following year and the year after, depending on raw-material trends.
After August, Haidilao reorganized its product department by integrating procurement and R&D and hiring top chefs to respond to local customer demand. Previously, product teams were placed locally, which made standardization, scale, and food-safety control harder.
By bringing product work back to headquarters, Haidilao planned to analyze member data and gradually build processes for assessing returning-customer feedback, younger consumers' demand for individual items, regional preferences, and product acceptance.
Management's near-term focus was on two risks: making internal management fit the current scale and improving employee training. Haidilao said it would restore regional management structures, restart Haidilao University, and bring appointment authority back to headquarters.
It also planned standardized training for processes, rules, and business roles, while reinforcing mentorship and culture transmission to front-line employees. Future large-scale store openings would depend on regional COVID-control measures and progress on internal improvements.
Store manager assessment and appointment were returned to Haidilao University, with stricter evaluation required for promotion. Poor performers could be placed on elimination lists. Haidilao said its employee compensation remained better than peers and retention was high.
Evaluation frequency changed from quarterly to monthly, shortening the elimination cycle. The company said communication with store managers had increased and acceptance was relatively high.
The mentorship system remained a core principle for talent selection. Store manager assessment and training still involved experienced store managers, and the profit-sharing ratio was unchanged. Appointment now required both company feedback and completion of the mentorship track.
Headquarters would approve store manager appointments. Store selection opportunities would be based on performance reviews, and unsuitable candidates or stores would not be approved. Haidilao described the requirement as matching the right person with the right store.
For innovation-oriented roles, Haidilao said it would use reasonable assessment mechanisms and external evaluation standards. Internal standards included whether dishes could be developed, how well they were accepted, whether they became hit products, and how much profit they generated.
FoodBud noted that 2021 was difficult for restaurant operators. Chayan Yuese had also recently announced store closures.
On November 10, 2021, Chayan Yuese said it had temporarily closed about 80 stores in Changsha. This was its third concentrated closure that year, after closures during the early-year stay-local holiday period and another round in late July linked to recurring public-health disruptions.
Note: Financing, closure targets, cost figures, and forward-looking plans in this article are historical and reflect information reported in November 2021.