On 4 March, the topic “Haidilao announces franchising mode” (#海底捞宣布将推加盟特许经营模式#) shot to number 1 on the Hot Search list of Weibo, China’s Twitter-like platform, with over 230 million views. The announcement was made at the Hong Kong Stock Exchange, where the hot pot chain is listed. The company clarified that allowing franchising is part of its strategy for diversification and expansion. It has also set up a franchising division and is fine tuning the details and the processes for this new partnership mode.
The reason that the news attracted so much attention is that Haidilao, with its over 1,400 branches, is one of the restaurant chains that is best known for directly operating all their branches. Moreover, the hot pot giant is also known for its mentor-apprentice mode of training that guarantees the standard of its staff and the operation of each location. The policy shift in a way is a divergence from Haidilao’s brand image, if not value.
However, Haidilao reiterated that its focus is still on direct operation and it is cautious with franchising. This is arguably the catch of this announcement. Some leaked images show that as part of the screening process for prospective franchisees, the hot pot chain will be asking questions such as how many branches they are expecting to open, with options between 2 to 5, and how much funds are they able to invest, not counting loans, and starting from 10 million RMB (1.39 million USD). The brand is, in this way, signalling it is inviting large-scale franchising partners with access to sufficient funds and with the intention of operating multiple locations. This requirement can be seen as a way to safeguard the standard of service that Haidilao is known for.
In late February, the restaurant chain announced that it expects its revenue to grow no less than 33.3% to over 41.4 billion RMB (5.75 billion USD). It also expects a record-breaking profit for 2023 as net profit will be no lower than 4.4 billion RMB (611.33 million USD), 2.68 times of 2022. With the internet-breaking viral “Subject 3” dance as well as in-store arts and crafts activities, Haidilao increased its brand visibility significantly in 2023. Expansion seems like a natural step for the hot pot chain and franchising is a cost-effective way of doing just that.
