This is an English adaptation of a FoodBud historical article originally published on June 25, 2022.
Tianyuan Law Firm, in an article by Zhu Kaichao, analyzed the compliance issues mainland China restaurant companies needed to address when preparing for Hong Kong listings. The piece framed compliance not only as a listing requirement, but also as a practical operating discipline for labor-intensive, multi-site foodservice businesses.
As of the article date, at least 8 mainland restaurant companies had completed Hong Kong listings, and at least 7 more had submitted applications and were waiting for Hong Kong Stock Exchange hearings or listing.
The article identified several common features among these issuers:
Restaurant operators must align business licenses, food permits, and actual operations. After earlier licensing reforms, food hygiene licenses, food circulation licenses, and catering service licenses were consolidated into the food operation license around 2016.
Key points highlighted:
The article also warned that red-chip restructurings may become more complex if the business includes foreign-investment restricted or prohibited activities. Under the 2021 Negative List, foreign investment was prohibited in wholesale and retail of tobacco products, and foreign ownership in value-added telecommunications services was capped at 50%. Businesses involving these activities may need divestment or a VIE structure.
Under the 2020 revision of the Measures for the Supervision and Administration of Food Safety in Online Catering Services, online catering providers using third-party platforms or self-operated websites must have physical stores and valid food operation licenses.
Self-operated website providers must file with the local county-level market supervision authority within 30 working days after filing with the telecom authority. Filing information includes domain name, IP address, telecom license or filing number, enterprise name, address, and legal representative or responsible person.
Operators must also publish accurate dish names and main ingredients online, and self-operated website providers must keep online order records, including food name, order time, delivery staff, delivery time, and delivery address, for at least 6 months.
The 2019 Catalogue for Classified Management of Pollutant Discharge Permits for Fixed Pollution Sources did not list restaurant services, so ordinary restaurants did not temporarily need pollutant discharge permits.
Central kitchens may be different. Because they produce and process food and may involve pollutant discharge, they should complete relevant pollutant discharge procedures according to the applicable food manufacturing or agricultural and sideline food processing category. The article defined a central kitchen as an independent facility established by a restaurant chain to centrally process finished or semi-finished food and distribute it directly to catering service providers.
Under the 2021 revision of the Food Safety Law, food producers and operators must establish and implement employee health management systems. Employees who handle ready-to-eat food must undergo annual health checks and obtain health certificates before work.
Violations may lead to rectification orders, warnings, fines of RMB5,000 to RMB50,000 if not corrected, and in serious cases suspension of production or business or license revocation.
Restaurant chains offering stored-value cards must comply with the Trial Measures for the Administration of Single-Purpose Commercial Prepaid Cards.
Key requirements include:
The article also noted that Beijing, Shanghai, and other regions had issued model prepaid-consumption contracts, and operators should check whether local rules require use or filing of standard terms.
Hotels and restaurants are public gathering places, so fire-safety compliance is a central issue in Hong Kong listing reviews.
Under the 2021 revision of the Fire Protection Law, projects requiring fire acceptance must apply to the housing and urban-rural development authority after completion. Other construction projects must complete filing after acceptance. Projects requiring acceptance cannot be used without passing fire acceptance.
Public gathering places must also obtain fire-safety approval before use or operation. Applicants may use the notification-and-commitment route or request an on-site inspection. If a public gathering place operates without fire rescue authority approval, the authority may order suspension and impose fines from RMB30,000 to RMB300,000.
The article highlighted two recurring problems:
If the landlord cannot or will not cure building-level defects, the restaurant operator may need to close the store early or avoid renewal. For owned properties, the operator should complete the first-level fire procedures itself.
The article also noted lease-contract risk: under Article 153 of the Civil Code, leases for premises legally prohibited from use due to missing fire acceptance may face invalidity risk. Under Article 1198, restaurant operators that tolerate fire hazards and fail to fulfill safety obligations may bear tort liability for resulting harm.
For listing applicants with dozens or more than 100 stores, the article advised correcting even a small number of non-compliant stores. Based on the author’s experience, temporarily closing one or two stores before responding to exchange comments or before the hearing could help reduce defects and support Hong Kong Stock Exchange review.
Restaurant businesses are labor-intensive and often face high front-line employee turnover. Some employees may prefer not to contribute because they already participate in rural welfare programs, while employers may also view full contributions as a cost burden. The article noted that some restaurant companies had failed to open social insurance or housing provident fund accounts on time, or had failed to make full and timely contributions for all employees.
Under the 2018 revision of the Social Insurance Law:
Under the 2019 revision of the Housing Provident Fund Management Regulations:
The article also noted temporary pandemic relief policies, including phased reductions or exemptions for enterprise social insurance premiums and employee basic medical insurance contributions. However, these policies generally had time limits and often assumed normal payment before refund or offset. Similar temporary support also existed for housing provident fund matters.
Foreign employees and labor dispatch employees require separate attention. Foreign employee social insurance generally follows the Social Insurance Law, while housing provident fund treatment may be more flexible. Labor dispatch contributions are usually handled according to contracts between the employer and dispatch agency.
The article described franchising as attractive to capital markets because standardized chains are replicable, scalable, and easier to review.
Under the Commercial Franchise Administration Regulation, a franchisor must have mature operating resources such as registered trademarks, corporate logos, patents, or know-how, and must be able to provide continuing operating guidance, technical support, and training. A franchisor must also have at least 2 directly operated stores that have operated for more than 1 year.
Important points include:
Franchisors must file with the commerce authority within 15 days of signing the first franchise contract. Intra-provincial franchising is filed with the provincial authority; cross-provincial franchising is filed with the State Council commerce authority. Changes to registration information, operating resources, or franchisee-store distribution must be filed within 30 days, and annual franchise-contract status must be reported by March 31.
Contract names do not control. Agreements titled brand cooperation, brand-exclusive operation, special distribution, or similar may still be franchise contracts if they license operating resources, require a unified operating model, and involve payment by the franchisee.
Under the Cybersecurity Review Measures effective February 15, 2022, critical information infrastructure operators purchasing network products or services, and network platform operators conducting data processing activities that affect or may affect national security, must undergo cybersecurity review. Network platform operators holding personal information of more than 1 million users must apply for cybersecurity review before listing abroad.
The article stated that, based on the Exit and Entry Administration Law’s definition of “exit” and the ordinary meaning of “abroad,” Hong Kong listings were less likely to be treated as overseas listings for this purpose. Unless national security issues were involved, restaurant companies seeking Hong Kong listings generally did not need to proactively apply for cybersecurity review. One applicant’s prospectus was cited as saying the rules did not apply because the company sought a Hong Kong listing rather than a foreign listing.
Restaurant companies are still increasingly data-relevant because of delivery ordering, online ordering, and digital ordering. Under the Data Security Law and Personal Information Protection Law, operators should build full-process data-security management systems, use necessary technical and organizational measures, collect data lawfully and properly, process personal information for clear and reasonable purposes, and limit collection to the minimum necessary scope.
For restaurant companies operating apps, the article highlighted risks commonly identified by the Ministry of Industry and Information Technology, including improper personal information collection, difficult account cancellation, improper personal information use, forced targeted-push functions, excessive collection, and forced, excessive, or frequent permission requests. Operators should self-correct early to avoid regulatory rectification or app removal.
The article’s core message was that compliance is a continuous process tied to internal controls, legal updates, and social responsibility. Hong Kong Stock Exchange listing applications can be delayed or rejected where business compliance is insufficient. For restaurant chains, early work on business licensing, labor compliance, fire safety, franchising, prepaid-card controls, cybersecurity, and data protection can reduce remediation time and listing cost.
Note: listing counts, cybersecurity interpretations, IPO-related observations, and regulatory references are historical as of June 25, 2022.