In catering, a large and fragmented rigid demand market worth RMB 3.5 trillion, chain expansion has shown "J-shaped" growth, the underlying supply chain has accelerated development, catering e-commerce has become more retail-oriented, and category branding... China The size, growth rate, market segmentation and innovation vitality of catering companies are bursting with unprecedented energy, triggering a massive influx of capital.

It should be said that the freshly made tea industry is an absolute hot spot in the catering industry that has gradually gained momentum in the past two years. Mr. K believes that a large part of the reason for this is that milk tea is more popular than most catering categories. It can be standardized and productized, which is conducive to chain expansion.

The “leaders” among them are undoubtedly the “HiTea” companies. They have large financing amounts, high valuations, and the support of well-known investment institutions. In addition, they all have the same characteristics: they insist on focusing on first- and second-tier cities and pricing. High-end and direct sales models.

Big bosses in the investment and consumption field basically live in the first-tier cities of Beijing, Shanghai, Guangzhou, Shenzhen and Hangzhou, with decent jobs and exquisite lives. Naturally, they also favor directly-operated brands that are good at attracting attention and doubling the number of Internet celebrity products. There are plus.

When Mr. K was selling projects, he met an investment boss who said arrogantly: We don’t look at the franchise model, but only look at the direct sales and “xiaogui” heads that represent the direction of consumption upgrading. brand.

Frankly speaking, Mr. K also thinks that "Hitea" people are very cool. When Heytea first became popular, he queued for three hours to try it. In the past two years, he has been following Weibo and friends on Weibo and In the circle, young people can be seen everywhere "showing off" Heytea. On weekend afternoons, taking photos with a cup of Heytea seems to have become a status symbol (of course, fewer and fewer people are showing off now...).

However, regardless of feelings and appearance, is "Hitea" really a good business worth investing in?

Today, Mr. K came to argue with the "Hitea" people.

1

Business in first-tier cities

Just “looks beautiful”

Mr. K believes that chain operations in first-tier cities are just “ "Looks beautiful", but profitability may not be the same. The reason is that the guaranteed rent paid by the catering industry has a more significant grading effect in first, second and third tier cities, while the difference in square footage is not so obvious.

Although catering can attract people, the rent level is generally low, and the guaranteed rent increase is low, usually only 40%-50% of the retail format.

Through research and analysis of large-scale restaurants, casual restaurants, and fast food (covering more than 300 catering brands) in shopping malls in major cities across the country, we found that the guaranteed rent for restaurants in first-tier cities is approximately RMB 8-12. / square meter per day, which is twice the rental level in second-tier cities and three times that in third-tier cities.

Secondly, the lease period of the catering business is longer than that of the retail business, generally 5-8 years, and the rent increases slowly during the contract period, generally by 2%-3% per year (depending on the area size).

However, in terms of the square meter efficiency of catering businesses in regional shopping malls in first-, second- and third-tier cities, the difference is not as obvious as the guaranteed rent. Therefore, the square meter efficiency/rent ratio in first-tier cities is often not as good as that in second- and third-tier cities.

2

Positioning mid- to high-end

Greatly affected by consumption dimensionality reduction

In fact, low-tier cities have low rental costs; The natural advantage of high consumption potential. We can see that brands such as Yidiandian, Mixue Bingcheng, and CoCo are tapping the consumption potential of lower-tier cities as channels sink. There is also the rise of Shanghai Auntie, which started from second- and third-tier cities and advocates the strategy of "rural areas surrounding cities" .

Mr. K believes that in the vast third and fourth tiers or counties, the “15 yuan invisible milk tea consumption line” will not be shaken in the short term. Tea drinks like Heytea, priced around 25-30 yuan, may cater to the consumer psychology of first-tier cities, but life in third- and fourth-tier cities is not easy.

In addition, "cost-effectiveness" is still the core factor affecting mass consumption. As Mr. K once said: "Due to the uneven consumption level across the country, first- and second-tier cities and third-, fourth- and fifth-tier cities are experiencing different stages of consumption upgrading. Third-, fourth- and fifth-tier cities are still in the initial stage of upgrading, while the consumption in first- and second-tier cities is Downgrading is essentially "consumption dimensionality reduction." After upgrading, cost-effectiveness is still king, and consumers' attitudes towards some products are still Buddhist."

China has been developing rapidly for so many years, but its wealth structure is still the same. Pyramid shape: There are huge numbers at the bottom, the middle class is squeezed, and consumption habits are still "cheap-oriented".

In the past few years, cases such as the boutique ODM NetEase's Strict Selection, the 10 Yuan Store's Miniso, and the sudden emergence of Pinduoduo have all proven this.

3

The internal damage of the direct chain model

Recently, the news that Hillhouse Capital sold JD.com and bought Taobao has hit the Moments, Gelonghui A passage from the author impressed me deeply: "From a model perspective, self-operated management can see the boundaries. The expansion of GMV requires corresponding costs from operation to management. In essence, it is still a second-hand dealer who resells to make a profit. And Alibaba is still a rental company, which is different from the past. One is to introduce high-quality tenants, and the other is more like Lianjia Zuru. You only need to pay to move in. In terms of business model, Alibaba and JD.com win. Already divided.”

Mr. K believes that the direct chain model has the following problems:

1. The slow pace under the heavy asset model

The restaurant chain is It improves its negotiating power with suppliers through centralized procurement and distribution, and increases brand awareness through the exposure of chain stores, thereby increasing square footage efficiency, reducing rental costs, and thereby increasing net profit margins. However, "the only martial arts in the world is fast". Enterprises that adopt the direct chain model are naturally at a disadvantage in terms of expansion capabilities; while the franchise model expands at an alarming rate and can quickly occupy the market.

According to the ranking of the number of stores of each catering brand released by the "China Catering Report" (2018), in the TOP20 list, except Starbucks, the other 19 brands have one thing in common, that is, they are in China's chain methods include franchise expansion.

It is worth mentioning that Haidilao, which is about to be listed in Hong Kong, has developed for nearly 20 years, and the number of restaurants worldwide has only increased from 112 in 2015 to 273 in 2017. As of March 31 this year, Haidilao's net current liabilities were approximately 1.442 billion yuan. This time, Haidilao finally put aside its "reservation" and rushed to be listed on the Hong Kong stock market to replenish its blood.

In order to intuitively illustrate the difference in expansion speed between direct operation and franchising, Mr. K made an analysis using the two Yabo brothers who were listed at the same time but had completely different development models.

From the perspective of expansion, Mr. K believes that Juewei’s model is better than Zhou Hei Ya’s. Through franchising, it can achieve rapid promotion and increase its popularity. At present, Juewei’s layout has basically been completed across the country.

As of June 30, 2018, Juewei had opened 9,459 stores nationwide, forming a direct and franchise chain sales network covering 30 provinces, autonomous regions and municipalities across the country. Zhou Hei Ya's 2017 annual report disclosed that its self-operated stores totaled 1,027, covering 60 cities in 15 provinces and municipalities in China.

It can be seen that Juewei has priority in occupying the market, consumers' minds, and favorable store locations. There are not many good positions left for Zhou Heiya.

It is precisely because Juewei Yabo has more offline stores and has its own advertising effect. When the revenue scale is similar, Zhou Heiya needs to invest more than twice the sales expenses of Juewei. .

At the same time, relying on the advantage of large scale, the supply chain advantages formed by Juewei are expected to generate greater foreign industrial investment capabilities. With strong transportation capabilities and store network support, Juewei can also create an open platform that empowers more food companies.

Mr. K also noticed that Juewei’s annual report disclosed that in the future, it will accelerate the construction of a food ecosystem, integrate mergers and acquisitions of high-quality projects, participate in investments in food chains and catering companies, and share the dividends brought by the upgrading of food and catering consumption. Of course, there is another important reason: Juewei's cash flow is very good.

2. You bear the risk at your own risk, the cost of trial and error is high, and you may miss the window period

It should be said that no chain store's location selection is not based on trials. Site selection is a science, which is both science and metaphysics. Where can a store be profitable? Prediction requires knowledge and luck.

In terms of knowledge, direct-operated brands often encounter "acclimatization" when they expand in other places. Franchise chains are naturally operated by local teams; and in terms of luck, direct-operated chains directly They bear the risk of bad luck, lose money when opening a store, close it and try again, and lose money on investment. The franchise chain directly transfers this part of the risk to the franchisees.

Here, we still compare the cases of Zhou Hei Ya and Juewei, and let the data speak:

(1) Direct sales expansion in other places encountered "acclimatization", and the revenue of various places The difference is large

Zhou Hei Ya stores are quite concentrated, mainly in Hubei and other places (central China), with 43.6% of the stores contributing 62% of the revenue; while in southwest and other places due to factors such as taste differences, 6.1% Stores contributed only 1.8% of revenue. It can be seen that in the process of off-site expansion, Zhou Hei Ya's regional performance varies greatly. People in Hubei have feelings for it, but not elsewhere.

Juewei is distributed across the country, and with its localization advantage, revenue in each region is relatively balanced.

Let’s take a look at Haidilao. While it continues to expand its scale, its revenue growth rate cannot keep up. Data from Yihai International in 2016 showed that in 2014 and 2015, Haidilao opened 18 and 31 new stores in China respectively, with revenue growth of 640 million yuan and 95 million yuan respectively. increase income” phenomenon.

(2) The cost of trial and error brings hidden worries to profits

In 2017, Zhou Hei Ya closed 64 stores, compared with 778 stores at the end of 2016, the store closure rate reached 8.2% . Affected by competition and other factors, the company's average single store revenue has declined, which has affected Zhou Hei Ya's net profit margin, while Juewei Food's net profit continues to rise.

3) The expansion speed is slow, and it is easy to miss the expansion window period

If you adopt the direct operation model, the expansion is slow, and you have to spend your own money to try and make mistakes. The risk lies in choosing a good and suitable one. All the sites are occupied by competitors, thus missing the expansion window. Of course, if you have strong product capabilities and are not afraid of competitors, you will eventually see the phenomenon of "McDonald's must be surrounded by KFC". But how many companies have such brand power, investors can weigh it for themselves.

3. Visible return ceiling

Public information shows that the composition of Haidilao’s costs is roughly as follows: in 2017, its raw material costs accounted for about 40%, and employee costs The proportion is 29.3%. All restaurants are leased, so the rental investment is not high. In 2017, Haidilao only spent 415 million yuan on rent, accounting for 3.9%, which is far lower than the industry level of 15% (the rent ratio of many catering companies reaches 20% or more).

Haidilao’s brand and operational capabilities should represent the top level in the catering industry, right? However, when the rent ratio is only 3.9%, its net interest rate can only be maintained below 10 points.

Haidilao’s rental advantage comes from its brand influence, and many shopping malls offer rent-free treatment. But once the brand influence weakens in the future, rents will definitely rise, eating up the net profit margin.

Haidilao’s prospectus also disclosed, “We cannot ensure that when renewing the relevant lease agreement, we will not incur a large amount of additional costs or increase the rent we pay. If the rent greatly exceeds the current year’s price when the lease agreement is renewed, or the lessor no longer grants currently existing favorable terms, our business and operating results may be materially and adversely affected.”

Industry analysts said that in extreme cases, if the rent ratio rises to 15%, there will be no profit. This is the most important risk point of concern from an investor's perspective.

Therefore, many direct-operated brands face rigidly rising rents and labor (social security) costs. If they choose to go to the capital market, under the condition that all finance, taxation and social security are in compliance, the net profit margin they can achieve One can imagine.

Note: Under the franchise model, the company makes money from the supply chain, and the terminal sales entities are individual industrial and commercial households, which are not included in the accounting of listed entities.

4. Competition for talents and lack of effective incentives

On the one hand, the product itself must be good, but the operational capabilities and enthusiasm of the staff in the specific store and the location of the store are important. Sex is also evident.

The direct operation model is an administrative management system. It may not be difficult to find 10 qualified store managers, but it needs to find 100 or 1,000 qualified store managers and at the same time maintain their enthusiasm for work. , which is a very challenging thing for any company.

Mr. K always insists that "home contracting" is the best incentive. 711 and FamilyMart convenience stores are the best proof.

Couples who start a business can have food and accommodation in the store, because all they earn is their own, and there is no need to supervise or punish them at all. There is no need to bear social security. They can get off work on time when they are self-employed. Franchise owners can even operate until 12 o'clock in the evening.

One of the global expansion concepts of 711, a model of global chain operation, is to allow franchisees to join with a prime position, because your prime position is that the company’s professional managers may not be able to expand even if they expand. You get it, or you don’t have the ability to get it, or even if you have the ability, that position is yours, and I can’t get it even if you don’t give it up.

It doesn’t matter if the genes and abilities of mom-and-pop shops are insufficient. The headquarters can come to empower them and teach them how to do better and be more efficient, so as to form a joint force and realize the maximum sharing of resources. ——The headquarters enjoys the prime location of the mom-and-pop shop, and the mom-and-pop shop enjoys the headquarters’ management technology.

After maximizing all the capabilities and skills of a single store, your profit efficiency will be much higher than other mom-and-pop stores and street stores. At this time, the headquarters and franchisees can share the profits for the higher portion of the profits.

In fact, in recent years, we have seen that many franchise brands that did not do franchises in the past, such as Pizza Hut, etc., are now starting to franchise. In fact, the main reason is not the lack of money, but the lack of resources. . So, what is the more important function of the franchise business model? Integrate all social resources that can be integrated.

4

What exactly is invested in the catering industry?

A friend once asked me whether good food and drink are considered barriers. I said that of course it is a barrier when it comes to business, but it is not a barrier when it comes to capital.

Because from a practical point of view, on the one hand, catering recipes are easy to leak, and the taste is too easy to plagiarize. On the other hand, at the same time, users have no loyalty to their tastes, and they are always pursuing fresh flavors. And if you drink carefully, you will find that the taste of brands such as Heytea under the direct operation model will be slightly different in each store.

Catering is inseparable from delicious food, but large-scale catering must not be successful because of delicious food. So what exactly is the investment in catering? Mr. K believes that it is brand and marketing capabilities, continuous new product research and development capabilities, and management capabilities during chain expansion.

What is worth investing in in the catering industry is the franchise-based chain model, which is an ecosystem company. Of course, it must be said that only 1% of the franchise model is worth investing in. Because there are absolutely few companies that can truly lock in quality control and expand healthily and rapidly.