This is an English adaptation of a FoodBud historical article originally published on September 4, 2022.
FoodBud noted that this analysis was originally published by Tony Ge Shuo near the start of 2022. The article argues that China’s restaurant SaaS market was moving from a software-installation cycle into a service-led cycle, with platform giants reshaping the competitive structure.
According to iResearch’s September 2021 China enterprise SaaS report, China’s enterprise SaaS market had been growing rapidly since 2016. Growth reached 47.9% in 2018, softened briefly in 2019, then accelerated again in 2020 as COVID-19 drove demand for online work and digital operations. Market size reached RMB53.8 billion in 2020, up 48.7% year on year.
The report projected a 34% CAGR over the following three years, with the market expected to reach RMB130 billion in 2023 and annual growth still at 31.5%. The article’s interpretation was that 2020 marked an inflection point: the market would keep growing, but growth rates were beginning to slow.
Business-function SaaS reached about RMB29.19 billion in 2020, up 43.1%. iResearch split it into:
CRM was described as a star category because it links directly to revenue growth. ERP, SCM, HRM/HCM, tax, finance, and BI sat in the larger operations-management group. Collaboration was already dominated by Alibaba’s DingTalk and Tencent’s WeCom/Tencent Meeting, while ByteDance was commercializing Feishu with the positioning of serving “advanced enterprises.”
Industry-vertical SaaS reached about RMB24.65 billion in 2020, up 56%. iResearch’s category mix was:
Restaurant SaaS had a large theoretical base because China had nearly 10 million restaurants. But restaurant operators historically spent little on IT, the industry was low-margin, and price wars triggered by Meituan and Alibaba compressed monetization. The article put restaurant SaaS market size at only about RMB1.2 billion, or 5% of industry-vertical SaaS.
Major restaurant SaaS players were grouped into two types.
Platform-backed systems included Meituan Restaurant SaaS, which covered POS, CRM, supply chain, payment acquiring, and other products. Pingxin Technology, once independent, was acquired by Meituan in 2018 and folded into Meituan POS.
Alibaba Local Services relied mainly on Keruyun for restaurant SaaS, covering POS, CRM, supply chain, and acquiring. Keruyun received Alibaba investment and acquisition activity in 2019 and was formally folded into Alibaba Local Services in 2020. Meiwei Buyongdeng, focused on queue-management SaaS, was acquired by Alibaba Local Services in 2020. Chensen Century received investment from Alibaba Koubei in 2017 and later became part of the local-services structure, mainly retaining its chain supply-chain system.
Independent restaurant SaaS companies included:
The article traced China restaurant SaaS back to 2006, starting from CRM and membership marketing. Three early names were Yazuo, Tongka, and Maimaiti. Because mature public-cloud infrastructure did not yet exist in China before 2010, early SaaS providers had to rent bandwidth and build their own server-room arrangements.
The author chose 2010 as the industry starting point because it was the first year of China’s O2O boom and the founding year of Meituan.
Key annual milestones:
Restaurant SaaS financing and M&A mentioned for 2015-2016 included Yazuo’s Series C from Alibaba Ant Financial in 2015, Keruyun’s Series B from Baidu in 2015, 2Dfire’s investment from Alibaba Koubei in 2016, Pingxin’s strategic investment from Meituan in 2016, Chensen Century’s controlling investment from Alibaba Koubei in 2016, and Tianzixing’s Series B from Meituan in 2016.
Delivery changed the restaurant operating radius from roughly 1-2 kilometers to 3-5 kilometers. Meituan later overtook Ele.me by expanding into lower-tier cities and using its group-buying field-sales capability. Ele.me eventually accepted Alibaba investment and was acquired by Alibaba; Baidu Waimai and Nuomi were also sold and folded into the Alibaba/Ele.me ecosystem.
By the time of writing, the article said China’s delivery market had reached RMB1 trillion, about 20% of restaurant industry operating scale. But platform commission and delivery fees left many restaurants with revenue but little profit, a tension that worsened during COVID-19.
Because restaurants depended heavily on delivery, SaaS systems needed platform order-data interfaces for kitchen production and rider dispatch. In the second half of 2021, Meituan proposed charging all restaurant SaaS companies by API order-data read volume. The author estimated this could add tens to hundreds of yuan per restaurant per year, creating a heavy burden if SaaS vendors absorbed the cost.
In 2018, Alibaba bought Ele.me for US$9.5 billion and merged Koubei with Ele.me in October to form Alibaba Local Services. Wang Lei, also known as Kunyang, became president and reported to Alibaba Group CEO Zhang Yong.
On the 2B front, Alibaba Local Services assembled an ISV alliance that included Yazuo, 2Dfire, Meiwei Buyongdeng, Yunzong Technology, Yinhezi, Chensen Century, and later Keruyun. It used POS installation subsidies, QR ordering subsidies, and payment subsidies to win restaurant SaaS share.
Meituan, by contrast, acquired Pingxin and Tianzixing, invested in Aoqiwei and Tiancai Shanglong, and still kept investing in internally developed integrated hardware and software for Meituan POS. The article argued that Meituan’s focused self-development beat Alibaba’s ISV-led, KPI-driven approach.
Alibaba Local Services acquired Keruyun after failed follow-on financing talks with Yazuo and 2Dfire. In January 2020, Alibaba Local Services formally announced an RMB800 million acquisition of Keruyun. In August 2021, Keruyun founder Peng Lei left the acquired company.
COVID-19 created a split market for SaaS. Online collaboration, training, live commerce, online acquisition, and private-domain operations benefited. But restaurants under revenue pressure cut software and IT spending.
After acquiring Yazuo and reorganizing it into Weimob Smart Restaurant, Weimob launched a “three-store integration” private-domain solution covering dine-in, mini-program delivery, and mini-program retail. Hualala and Aoqiwei were affected by the pandemic and adopted more conservative strategies. Meituan and Alibaba Local Services continued to gain restaurant SaaS share in 2020.
In 2021, capital rushed into restaurant brands. In the first half of 2021, restaurants received 62 investments, more than the combined total for beauty care and alcoholic/non-alcoholic beverages. The top categories were tea drinks with 15 deals, coffee with 13, noodles with 9, and bakery/desserts with 6.
Examples included Nayuki completing more than US$100 million in Series C financing in January 2021 and listing in Hong Kong in June; Heytea disclosing a US$500 million Series C at a RMB60 billion valuation in early July; Mixue Bingcheng completing its first RMB2 billion financing round at a RMB20 billion valuation; Luckin Coffee receiving US$250 million; Manner Coffee completing three funding rounds in the first half; Tim Hortons accelerating China expansion; Lanzhou beef noodle brands Ma Jiyong, Zhang Lala, and Chen Xianggui receiving funding; Wuye Noodles raising RMB300 million in June; and Hefu Noodles completing an RMB800 million Series E in early July with Tencent as a strategic investor.
Restaurant SaaS companies also drew capital attention again. Hualala received strategic investment from Shenzhen Capital Group in 2021, and Aoqiwei, with Meituan as a major shareholder, received financing from Beijing Innovation Industry Investment and other funds.
Regulation was another 2021 keyword. China investigated platform companies for antitrust issues, fined Alibaba and Meituan, introduced privacy and data-security rules, and reviewed past investments and acquisitions. Meituan’s 2015 investment in Aoqiwei was cited as one case judged to violate antitrust rules, with a RMB500,000 penalty. WeChat also tightened rules around forced public-account follows in QR-code ordering.
The author summarized restaurant SaaS in four stages:
Although China SaaS still had an estimated 6-8 years of growth from the report’s perspective, the author expected restaurant SaaS to hit its limit earlier because platform giants had accelerated consolidation.
The demand side was segmented by store count:
The article excluded very small owner-operated shops with only acquiring needs and also treated large single-unit Chinese banquet or restaurant venues differently. Those single venues could be 1,000-10,000 square meters, generate RMB600,000-RMB3 million per month, and operate more like small enterprises.
The supply side was split into software and service. Software included POS, CRM, ERP, SCM, KDS, finance, scheduling, HR, and related systems. Service included private-domain operations, such as membership and WeCom operations, and public-domain operations, such as Dianping, Douyin, Xiaohongshu, and delivery-platform operations.
The article estimated, unofficially, that by the end of 2021 Meituan POS had reached 1.5 million active installations, or nearly 30% of a 5 million-restaurant addressable market after excluding very small shops without POS needs. Keruyun was estimated at about 500,000 active installations.
Meituan’s ability to move from single stores into chains of around 50 stores was viewed as strategically important. The author compared this with disruptive innovation: entering from low-end or underserved customers, improving product capability, then moving upmarket.
The article projected that over the next 2-3 years, platform restaurant SaaS systems represented by Meituan and Keruyun could take most small and midsize chain markets and a small portion of standardized large-chain customers. Large, complex chains and large-format Chinese restaurants would still prefer specialized integrated SaaS providers.
The article’s central operating insight was that many restaurants had bought CRM, POS, and other SaaS tools but still failed to use data effectively or improve results. SaaS vendors kept adding functions while prices fell and industry losses widened.
The author argued that software improves operating efficiency, but service is needed to improve business outcomes. If SaaS does not take responsibility for customer outcomes, it lacks long-term retention value.
Restaurant profitability was framed as:
Profit improvement = revenue growth - cost reduction - expense reduction
SaaS had already improved service efficiency through QR ordering, QR payment, online queueing, reservations, e-invoices, delivery order integration, and coupon verification. But two major needs were still not met well:
The article focused on revenue growth and argued that restaurants lacked the professional digital-operations talent required to convert tools into measurable growth.
The article used a supply-demand model and PEST framework to validate a new opportunity: providing digital operations growth services to restaurant chains that had already completed SaaS upgrades.
On the demand side, restaurant operators needed to grow dine-in revenue, delivery revenue, and retail revenue. Specific tasks included opening new stores, launching new brands, acquiring customers, increasing member repeat purchase, raising ticket size, improving Meituan and Ele.me delivery, developing mini-program delivery, and selling packaged goods, semi-finished products, or ingredients.
The hidden needs were more important: professional operators were expensive or unavailable, marketing teams had turnover, digital tools were hard to use effectively, new platforms changed quickly, public-platform traffic costs were rising, and many membership systems produced member quantity without member quality.
On the supply side, the author saw a white space for SaaS-based digital operations and full-domain operations. Traditional public-domain agencies knew delivery and platform traffic but lacked SaaS know-how. Private-domain operators knew WeCom and mini-programs but usually served large brands and lacked restaurant-specific methods.
PEST factors supporting the opportunity included:
The author made a bold forecast that China’s 5 million chain/usable restaurant SaaS market could eventually be split with Meituan covering 3 million restaurants, Alibaba 1 million, Hualala 600,000, and other vendors 400,000.
The article proposed “misaligned competition” rather than direct competition.
Platform SaaS companies such as Meituan and Alibaba served single stores and small to midsize chains with highly standardized, low-cost, traffic-linked SaaS. The author argued they were unlikely to build large labor-heavy operations-service teams because platform economics favor standardized scale.
Independent restaurant SaaS firms such as Hualala and Tiancai Shanglong served large and midsize chains with full digital systems. The author argued they tended to value software over operations services.
Public-domain delivery and Dianping operators such as Shiheng and Zaihui knew traffic operations but lacked deep restaurant SaaS capabilities.
General private-domain operators such as Jingli knew private-domain growth, but had less restaurant-specific experience and less depth in SaaS tool and data operations.
Local POS agents were close to customers but lacked professional operations talent and scale.
The article identified six capabilities needed for the new model:
Using the VRIO model, the author saw the intelligent operations expert system as the likely core competence. It would combine AI assistance, data-driven operations, and professional operators, similar in spirit to an L2 autonomous-driving model for restaurant operations.
The article’s answer to its own question was that restaurant SaaS was both endgame and halftime.
The first half, focused on digital infrastructure and software deployment, was nearing its end. The second half, focused on digital services and business outcomes, was beginning.
The author closed by arguing that the next phase of SaaS would shift from software-first to service-first, consistent with the full meaning of “Software as a Service.”
Note: IPO, financing, valuation, market-size, market-share, and forward-looking figures above are historical references from the original 2022 article.