The hot-pot chain giant Haidilao International Holding said it will shut down or cease operating around 300 malfunctioning restaurants after aggressively expanding over the past two years.
Some restaurants will be temporarily closed for no more than two years and will resume operations “at appropriate times,” the Hong Kong-listed company said in a listing on Friday, November 5.
No employees will be made redundant, and affected employees would be redeployed within the group.
The closings will reportedly mainly affect stores in China, with some cuts being made in countries the restaurant has expanded into.
Haidilao did not specify which markets would be affected in its listing, but the decision follows a rapid expansion over the past year.
At the end of June 2021, the group operated 1,597 restaurants worldwide, 1,491 of them in mainland China. That was an increase of more than 70 percent from the 935 restaurants worldwide, including 868 in mainland China, that were open at the end of June 2020.
Haidilao had said in an interim report published in September 2021 that among the factors that influenced his performance in the first half of 2021, the time it took newly opened restaurants to break even and returns from cash investments were longer than in earlier periods. Restaurant operations also continued to suffer from the ongoing effects of the Covid 19 pandemic.
Although the group had higher sales and profits in the first half of 2021 compared to the same period last year, Haidilao found that the table turnover rate was 3.0 times per day, up from 3.3 times per day for the corresponding period in 2020.
“Operational performance has not met management’s expectations, reflecting that internal management and operations must be corrected and improved to the best of our ability,” Haidilao said in the report.
[[nid:514836]]
The company’s share price has also taken a hit in recent weeks, including nine straight days of losses from late October to early November, with the counter losing around a third of its value amid a flare-up of Covid-19 cases in China. For the year through Friday, when the stock closed at HK $ 21.05, the counter is down nearly 65 percent.
Haidilao said Friday that it had decided to launch a plan called “Woodpecker” to improve operational performance.
The plan’s initiatives include looking out for and taking appropriate improvement measures for restaurants with unsatisfactory operating results, including overseas restaurants. It also intends to rebuild and strengthen parts of the Group’s functional departments and to restore the regional management system.
The group will also slow down its business expansion plans. It stated: “If the average table turnover rate of the Haidilao restaurants in the group is less than 4 times a day, no new Haidilao restaurants will be opened on a large scale.”
With additional information from The Straits Times.
This article was first published in the Business Times. Permission is required for reproduction.
