Element Fresh Files for Bankruptcy Liquidation After Sale Talks Stall

This is an English adaptation of a FoodBud historical article originally published on December 17, 2021.

In early November 2021, Bloomberg reported that Shanghai-based light-meal restaurant chain Element Fresh was exploring a sale. The process was described as early-stage, with the company’s owners assessing potential buyer interest, and the transaction was said to potentially reach several hundred million dollars.

Element Fresh positioned itself as an American-style casual dining brand, offering salads, sandwiches, juices, smoothies, Asian dishes, and creative dinner items. Since opening its first restaurant in 2002, the brand had received multiple reader-voted dining and service awards.

According to people familiar with the matter cited at the time, Element Fresh had not made a final decision. SAIF Partners was identified as an investor in the company.

By December, however, Element Fresh had issued an internal notice dated December 14, 2021, stating that it was applying for bankruptcy liquidation.

Internal Notice to Employees

The notice said the company had faced unprecedented operating difficulties since the COVID-19 outbreak began in China in January 2020. Store operations had been severely affected, and over the previous two years, store performance had recovered slowly and weakly, resulting in serious companywide losses.

The company said it was experiencing heavy operating losses and a broken capital chain, and would enter bankruptcy liquidation under relevant national laws. A court-appointed third-party bankruptcy liquidation law firm would oversee the process.

Key measures listed in the notice included:

• Element Fresh would gradually close its company-owned stores, central kitchen, administrative offices, and operational support departments.
• Employees at closed stores and office support departments would sign work-suspension agreements. From the date of suspension, they would receive the local minimum wage and minimum social insurance contributions.
• If employees wanted to maintain their previous social insurance contribution level during suspension, the difference would be borne by the employee, given the company’s cash constraints.
• For stores not yet closed during the liquidation process, wages and payment timing would be determined based on performance assessment and company cash flow.
• The company encouraged employees to seek other opportunities. After office support departments suspended work, one HR colleague would remain at headquarters to handle resignation procedures.

The notice was signed by the following entities: Element Fresh Catering Management (Shanghai) Co., Ltd.; Element Fresh Food (Shanghai) Co., Ltd.; Xincanlv Catering Management (Shanghai) Co., Ltd.; Yaosu Catering (Shanghai) Co., Ltd.; and Xinshichao Catering Management (Beijing) Co., Ltd.

As of the article’s publication, Element Fresh had 28 stores in mainland China, across cities including Shanghai, Beijing, and Guangzhou. In early November, the brand had still been running a promotion offering RMB500 extra value for every RMB1,000 topped up, making the liquidation filing particularly awkward for customers and staff.

Wagas Was Also Reported to Be Exploring Options

Bloomberg had also reported that Yum China Holdings, Philippine restaurant group Jollibee, and Restaurant Brands International, the parent company of Burger King, were considering bids for Wagas. The brand had also reportedly attracted interest from private equity firms.

Sources said Wagas was seeking a valuation of USD800 million to USD1 billion or higher, and was expected to reach nearly RMB1.2 billion, or USD188 million, in sales that year. A buyer could emerge as soon as that year, according to the report.

Wagas was founded in Shanghai in 1999 by Danish founder John Fohlmann Christensen. It grew from a cafe into a light-meal chain selling salads, pasta, sandwiches, juices, coffee, and related products.

Public data cited in the article showed Wagas had 160 stores in core commercial districts across 11 cities, including Shanghai, Beijing, Shenzhen, and Hangzhou. Its main customer base was described as young white-collar consumers aged 25 to 35.

Bloomberg had first reported in October 2021 that Wagas was planning a sale, which Wagas later denied. In response to Bloomberg’s newer report, Wagas said it was “not convenient to disclose externally at present.” The three companies named as potential bidders did not provide direct responses.

The Light-Meal Category Was Under Pressure in China

The article argued that China’s light-meal segment was gradually being tested, and perhaps had not yet reached the right stage of market development.

By contrast, Sweetgreen’s North American public-market debut on November 19, 2021, saw its stock price jump 76.79%. After opening, the shares briefly surged to USD56.20, pushing its market value above USD6 billion. More recently, the stock had fallen back to USD28, with market value around USD3 billion.

Since its founding in 2007, Sweetgreen had been favored by investors and was sometimes described as “the Apple of foodservice” or “the Starbucks of salad.” As of September 26, 2021, Sweetgreen had 140 stores across 13 U.S. states and more than 5,000 employees.

In China, early light-meal player Sexy Salad had fallen to only 10 stores. Its revenue in the previous year was RMB20.7 million, and its core team had shifted focus to Wonderlab. Through Wonderlab, the team had moved into the probiotics category. The article concluded that strong founders still need to find markets with a sufficiently high ceiling.

Note: sale, valuation, sales forecast, IPO, stock price, and market-cap figures are historical and reflect reporting available as of December 17, 2021.