This is an English adaptation of a FoodBud historical article originally published on April 14, 2022.
On April 13, 2022, Japanese dining chain Shangjing submitted a prospectus to the Hong Kong Stock Exchange. In 2020, the company generated RMB 247 million in revenue, ranking first among Japanese all-you-can-order chain brands in China, with a 0.8% market share.
In this context, “hodai” refers to an all-you-can-order Japanese dining format. Unlike a conventional buffet, dishes are usually ordered from the table and prepared to order, while still offering the unlimited-dining proposition.
Shangjing opened its first store in 2004. In 2010, it began cross-regional expansion with first stores in Shenyang and Chongqing, extending its network into Northeast and Southwest China. By 2021, it had 34 self-operated stores, and in 2022 it launched a new brand, Liangliang Wagyu.
According to Shangjing’s prospectus, China’s Japanese restaurant market was expected to reach RMB 486.1 billion in 2025. The market was highly fragmented: in 2020, the top five Japanese restaurant chain groups together accounted for about 3% of the market.
The top five Japanese chain brands in China by store count were Ajisen Ramen, Yoshinoya excluding Yoshinoya stores under Hop Hing Group, Sukiya, Nduo Sushi, and conveyor-belt sushi brand Zhengxian. At the end of 2020, their store counts were 697, 544, 425, 2,000, and 123 respectively. Their revenues were RMB 1.57 billion, RMB 1.55 billion, RMB 1.09 billion, RMB 1.0 billion, and RMB 620 million respectively.
The prospectus segmented Japanese restaurants into three categories: Japanese à la carte restaurants, Japanese hodai restaurants, and other Japanese restaurants. À la carte examples include sushi, ramen, and izakaya concepts; hodai examples include sukiyaki and Japanese barbecue.
Shangjing sits in the Japanese hodai category, which emphasizes high-quality, fresh ingredients and varied menus for occasions such as family gatherings, business meals, and friend groups. Revenue in China’s Japanese hodai restaurant market rose from RMB 28.6 billion in 2016 to RMB 41.5 billion in 2020, a compound annual growth rate of 9.7%.
The prospectus expected the category to reach RMB 111.8 billion by 2025, implying a 2020-2025 CAGR of 21.9%.
Within Japanese hodai, the prospectus further divided the market into Japanese-cuisine hodai, hotpot hodai, and other Japanese hodai restaurants. Shangjing positioned itself as the leading Japanese-cuisine hodai chain by 2020 revenue; it had 41 stores at the end of 2020.
According to a CIC report cited in the prospectus, Japanese-cuisine hodai was the most popular dining-out choice within the Japanese hodai market, accounting for 71.8% of 2020 revenue. China’s Japanese-cuisine hodai restaurant revenue grew from RMB 23.2 billion in 2016 to RMB 29.8 billion in 2020, and was expected to reach RMB 71.6 billion by 2025.
Shangjing’s main brand was Shangjing Fine Cuisine. In 2022, it launched the sub-brand Liangliang Wagyu. At the time of the article, Shangjing had 47 stores across 18 Chinese cities: 35 self-operated stores, 11 franchised stores, and one Liangliang Wagyu store.
Revenue in 2019, 2020, and 2021 was RMB 320 million, RMB 247 million, and RMB 360 million respectively. Net profit was RMB 62.373 million, RMB 18.632 million, and RMB 33.811 million respectively.
Franchisees contributed RMB 5.6 million, RMB 2.4 million, and RMB 0.9 million of revenue across those three years.
The business was concentrated in Southwest and Northeast China. These two regions contributed RMB 197 million, RMB 159 million, and RMB 253 million in 2019, 2020, and 2021, representing 62%, 65%, and 70% of total revenue. Chongqing was Shangjing’s largest city market, with nine stores: eight self-operated and one franchised.
Cost ratios in 2019, 2020, and 2021 were:
The prospectus showed that the Japanese dining business was heavily affected by COVID-19. During the peak of the pandemic in 2020, 30 self-operated Shangjing stores suspended operations for more than 30 days. In the first quarter of 2020, customer traffic at self-operated Shangjing stores fell 62% year on year due to shortened operating hours, and two stores were permanently closed because of the pandemic.
Sporadic outbreaks in different parts of China continued to affect the business in 2021. Revenue at two self-operated stores in Chengdu fell 41% and 37% year on year respectively.
To offset pandemic pressure in 2020, Shangjing worked with third-party delivery platforms and tested lunch set delivery from its Wuzhong Road store in Shanghai. In 2022, the company planned to launch retail products including self-heating sukiyaki pots, beef-sauce mixed noodles, and grilled river eel.
Government subsidies and rent concessions totaled RMB 1.175 million, RMB 5.738 million, and RMB 4.212 million in 2019, 2020, and 2021. At the end of 2021, Shangjing had net current assets of RMB 19.286 million.
Inventory turnover days were 20, 31, and 20 days in 2019, 2020, and 2021.
Shangjing also sold prepaid stored-value cards through its official WeChat account. For example, customers topping up RMB 1,000 could receive two RMB 50 vouchers. Liabilities related to prepaid cards and vouchers were RMB 54.151 million, RMB 56.29 million, and RMB 42.062 million in 2019, 2020, and 2021.
Shangjing planned to open 19, 31, and 32 new stores in 2022, 2023, and 2024 respectively. Most of the planned new openings were expected to be under the Liangliang Wagyu brand. The company also planned to develop new brands, including a Japanese teahouse concept.
For the core Shangjing brand, the company planned to open six, eight, and nine new self-operated stores in 2022, 2023, and 2024 respectively.
Shangjing stores offered more than 100 dishes, compared with 50-80 dishes at other Japanese hodai restaurants cited in the prospectus. Average dining time was typically 1.5-2 hours.
In 2021, self-operated Shangjing stores had average spend per customer of RMB 282.7, average occupancy of 64.8%, average daily customer traffic of 108, and average daily sales of RMB 1.039 million.
A typical Shangjing store was 500-700 square meters and could seat about 150 customers. The average pre-tax cost of opening a new self-operated Shangjing store was RMB 2,718-4,960 per square meter. Most new stores reached breakeven in their second full month of operation, with an average cash payback period of 24 months.
Liangliang Wagyu was planned in two formats: Liangliang Wagyu Japanese Barbecue Hodai and Liangliang Wagyu Sukiyaki Hodai. The company expected to open five Japanese barbecue hodai stores each year in 2022, 2023, and 2024, and eight, 18, and 18 sukiyaki hodai stores respectively across those years.
The first Liangliang Wagyu store opened in February 2022. It covered 299 square meters, seated 116 customers, and had about 36 tables.
Note: IPO details, market forecasts, and store-opening plans are historical figures from the April 14, 2022 source article.