The Chinese restaurant industry is facing significant challenges. For example, Taiwanese dumpling chain restaurant Din Tai Fung will close 14 branches across several cities in China by October 31st. This decision has sparked widespread concern about the industry’s struggles since the pandemic.
China’s restaurant sector is experiencing a collective downturn, despite that fact that COVID-19 restrictions have now been lifted in China. In the first half of 2024, over a million Chinese restaurants closed, nearly doubling the figure seen in 2022. Many business owners have lost their investments and have been forced to exit the market.
Even large restaurant chains are struggling. Nayuki expects losses of 420-490 million yuan (US$59 – 69 million), Haidilao projects losses of at least 260 million yuan (US$36 million), and Luckin Coffee’s profits have dropped by 50% compared to last year.
The industry faces rising costs for taxes, social security, and wages, while prices and profits are declining. Most large restaurant companies are experiencing profit declines, with Xiabu Xiabu seeing the most significant drop – a 133-fold increase in net loss.
Luckin Coffee, despite opening thousands of new stores and increasing revenue by 38%, saw its net profit fall by 50%, illustrating the phenomenon of “increasing revenue but not increasing profit.”
As price wars continue, the Chinese restaurant industry has entered a low-profit era. The once “golden” market is no longer, and experts predict that the situation may become even more challenging in the future.
Source: Central News Agency (Taiwan), August 26, 2024
https://www.cna.com.tw/news/acn/202408260296.aspx