This is an English adaptation of a FoodBud historical article originally published on December 19, 2021.
Hop Hing Group, the franchise operator behind Yoshinoya and Dairy Queen in parts of China, recently received shareholder approval for privatization. The transaction was expected to be completed in January 2022, ending a 33-year listing history after Hop Hing listed on the Hong Kong Stock Exchange in November 1988.
Hop Hing’s market capitalization at the time was still about HKD 800 million. According to earlier company announcements, the Hung family held about 71.64% of Hop Hing. The company cited persistently low share liquidity as a reason for privatization: in the 24 months up to September 1 before the trading halt, average daily volume was about 4.304 million shares, or roughly 0.04% of issued shares. The privatization price was HKD 0.08 per share, about a 73.9% premium to the pre-suspension closing price of HKD 0.046. The privatization was expected to cost about HKD 229 million.
The plan gave shareholders a way to exit their investment. After privatization, Hop Hing would also be able to operate more flexibly as a private business, formulate and implement longer-term strategy, and pursue opportunities that may be harder for a listed company because of regulatory and compliance obligations.
Ten years earlier, in December 2011, Hop Hing’s market value was only about HKD 200 million. It then made a much larger move, acquiring the franchise operations for more than 200 Yoshinoya stores and 100 DQ stores in mainland China for HKD 3.775 billion. The Hung family injected the mainland Yoshinoya business into the listed company, while the Hong Kong Yoshinoya business was not included.
Yoshinoya is a century-old Japanese brand. Its first restaurant appeared in 1899 at a fish market in Nihonbashi, Chuo-ku, Tokyo. Yoshinoya Co., Ltd. was established in 1958, formalizing it as a foodservice company. The name “Yoshinoya” does not come from the founder’s surname, but from Mount Yoshino in Japan. According to the brand story, in the 12th century, the Japanese general Minamoto no Yoshitsune passed through Mount Yoshino while fleeing, and his concubine taught local residents how to make beef rice; beef rice later became a local specialty.
Globally, Yoshinoya had more than 3,000 stores, including more than 2,000 in Japan and more than 1,000 overseas. Nearly 60% of the overseas stores were concentrated in China, operated separately by Hop Hing Group and Yoshinoya’s Japanese headquarters.
In China, Hop Hing operated Yoshinoya in the northern region: Beijing, Tianjin, Hebei, Henan, Inner Mongolia, and the three northeastern provinces of Liaoning, Jilin, and Heilongjiang. Southern stores were managed by subsidiaries of Yoshinoya’s Japanese headquarters. In Hop Hing’s financial reporting, Inner Mongolia and the three northeastern provinces were categorized as “other northern China regions.”
As of June 30, 2021, Hop Hing had opened 396 Yoshinoya stores, 193 DQ stores, and one other store in its franchise territories, including Beijing, Tianjin, Hebei, Liaoning, Heilongjiang, Jilin, Henan, and Inner Mongolia.
According to Hop Hing’s interim report, first-half 2021 revenue was RMB 884 million, up 35.09% year on year. Net profit attributable to the parent company was RMB 8.698 million. Yoshinoya contributed RMB 740 million of revenue, while Dairy Queen contributed RMB 120 million. By region, the Beijing-Tianjin-Hebei metropolitan area was the main market, contributing RMB 660 million.
Hop Hing’s net profit had been declining since reaching RMB 167 million in 2017. By 2019, net profit had fallen to RMB 104 million. In 2020, under the impact of Covid-19, Hop Hing recorded a loss of RMB 81.9 million.
According to related reports, as of July 2020, Yoshinoya Japan had 250 stores in the southern China market.
Yoshinoya’s pressure had become increasingly visible. In April 2021, Yoshinoya Holdings released its 2020 financial report. It showed a net loss of JPY 7.5 billion, or about RMB 450 million. A significant share of the loss was attributed to weak performance in China, where Chinese outlets accounted for 60% of Yoshinoya’s overseas stores. Yoshinoya Japan had said it would close 150 overseas stores, including in the China market.
Over the previous decade, Yoshinoya was not the only international brand showing signs of decline. Brands such as Element Fresh, which applied for bankruptcy liquidation, reflected a broader pattern: international concepts rose quickly during a specific historical period when domestic supply in China was still limited. They filled market gaps and benefited from timing.
As Chinese demand changed, and as local brands rose and fought aggressively for market share, many international brands’ long-stable product playbooks began to drift away from the market. They struggled to keep pace with changing consumer needs, while emerging domestic brands started taking over market positions once held by international operators.
In late November 2021, Yoshinoya was hit by a food safety issue. Hop Hing responded by clarifying that the southern region was unrelated to its operations. Although the northern and southern operators run the same brand, this split structure has repeatedly created food-safety confusion. Yoshinoya is split between different northern and southern operators, and Hop Hing’s DQ business also has different franchise operators in the north and south.
DQ’s southern franchise operator is CFB Group. Its companies include Conaco (Shanghai) Food Management Co., Ltd., Shanghai Shida Food Management Co., Ltd., Shanghai Papa John’s Food Management Co., Ltd., Shenzhen Papa John’s Food Management Co., Ltd., Shanghai Pushi Food Management Co., Ltd., Qiyu Logistics (Shanghai) Co., Ltd., Shanghai Yixuan Food Management Co., Ltd., and Shanghai Conaco Meets Xiaomian Enterprise Management Co., Ltd. The group operates DQ and Papa John’s south of the Yellow River in China; all national operations of Brut Eatery and Sandao Ruchuan; and the Meets Xiaomian brand in Shanghai, Jiangsu, Zhejiang, and Anhui. At the beginning of 2021, the group had about 1,050 stores.
Recently, China’s State Anti-Monopoly Bureau published a list of unconditional approvals for business concentration cases. FountainVest Capital GP3’s acquisition of equity in China F&B Group, or CFB Group, was included. Bloomberg reported that FountainVest’s acquisition of a controlling stake in CFB was priced at about USD 160 million. FountainVest was founded in 2007, with focus areas including consumer, media and technology, healthcare, industrial, and financial services. Since 2011, it had invested in Peacebird, Kehua Bio-Engineering, Finland’s Amer Sports, and Zuoyebang, among others.
Among CFB Group’s agency brands, Papa John’s also used a north-south split. The northern franchise operation was run by Beijing Papa John’s Food Development Co., Ltd., invested by the U.S. headquarters, while the southern business was operated by CFB Group companies. This split-franchise model contributed to disorder in Papa John’s franchise market and affected store expansion.
Across these cases, split management structures appear prone to operational confusion, while the companies themselves were not highly valued. Hop Hing’s market value was HKD 800 million, equivalent to about RMB 650 million. CFB Group managed more than 1,000 stores, but its valuation was only about RMB 1 billion.
By contrast, international chains such as Yum China, Starbucks, and McDonald’s have treated mainland China as one integrated market under unified operating responsibility. That approach appears steadier and offers more room for growth. Splitting a market between two operators can look more like a transaction than a strong long-term operating platform.
Yum China was separated from Yum Brands and built a market capitalization higher than Yum Brands itself. Starbucks’ history in China also moved from fragmentation toward consolidation.
In 1999, mainland China’s first Starbucks opened at Beijing’s China World Trade Center. It was a franchised store authorized by Starbucks and opened by Beijing Mei Da Starbucks Coffee Co., Ltd. Starbucks then entered eastern and southern China in similar ways: in eastern China, Starbucks formed Shanghai President Starbucks Coffee Corp. with Uni-President to expand through a joint venture; in southern China, operations were handled by Maxim’s Caterers Starbucks Coffee in South China.
Starting in 2005, Starbucks began buying back shares in joint ventures and converting franchised stores into company-operated stores. In 2005, Starbucks increased its stake in Shanghai President Starbucks to 50%. It later raised its stake in Maxim’s Starbucks to 51%. In 2006, Starbucks acquired 90% of Beijing Mei Da Starbucks, bringing more than 60 stores in Beijing and Tianjin back under direct operation.
In 2017, Starbucks acquired the remaining 50% stake in Shanghai President Starbucks Coffee Co., Ltd. The USD 1.3 billion deal was the largest acquisition in Starbucks’ history. It gave Starbucks 100% ownership of about 1,300 stores across 25 cities in Shanghai, Jiangsu, and Zhejiang.
By 2017, Starbucks had fully consolidated control of its mainland China stores. The Starbucks franchise rights in Hong Kong and Macau remained with Maxim’s Group, but mainland China was under unified management.
Another example is % Arabica. The overall China and Southeast Asia agency rights were acquired for several hundred million RMB. The company’s valuation later became much higher than that amount, and at least higher than Hop Hing and CFB Group, even though % Arabica had only about 50 stores in China.
For international brands, a split-by-region franchise management strategy deserves reconsideration against the way China’s local market has developed. Competition has become much more intense, and without unified operating capability, it is increasingly hard to compete.
Note: IPO, market value, acquisition, valuation, and forward-looking privatization figures are historical references from the 2021 source article.