Chairman Dennis Lo Hoi-yeung said the company's rebranding, which began in November 2003 and involved repainting premises orange, replacing furniture and adding new items to the menu, had raised comparable store sales 34 per cent in the second year and 45 per cent at the end of last month.

With the number of visitors up 11 per cent and the average customer spending reaching $25.50 from $24.70 a year ago, gross margins rose two percentage points to 10.7 per cent for the year to March.

'We will continue to rely on growth in sales to improve our gross margin,' said Mr Lo. Fairwood operates 72 fast-food outlets and cafes in Hong Kong and nine outlets on the mainland.

It plans to add eight stores in Hong Kong this year, including one at Kornhill Garden in Taikoo Shing. Fairwood aims to have 100 stores in Hong Kong and 30 stores in southern China, mainly in Shenzhen, Guangzhou and Dongguan, by 2010.

Mr Lo said a new Hong Kong store costs up to $4 million while a new store in the mainland costs up to $2 million.

Fairwood's mainland operation, which accounted for 7 per cent of the group's turnover and 8 per cent of net profit, recorded a 20 per cent increase in revenue for the year to March.

Mr Lo said the average spending of a mainland customer was about 20 yuan and the mainland operation's gross margin was about 14 per cent.

Although many Hong Kong retailers, including cosmetic retailer Sa Sa International Holdings, said high rents had hit their bottom lines, Mr Lo said it was not an area of concern for Fairwood.

For the year to March, rent took up 14.8 per cent of turnover, compared with 16.8 per cent a year ago.

About 80 per cent of Fairwood's rents are turnover rents which absorb about 12 per cent of the stores' sales, according to Mr Lo.

Like rivals Cafe de Coral Holdings and Maxim's, Fairwood is in a hurry to revamp stores with new designs. Mr Lo said that with the three-year plan ending in November this year, Fairwood would launch a new round of store revamps. Details of the new design would be announced in November.

Earlier this year, Mr Lo met with Japanese designer Yasumichi Morita and Hong Kong-born architect Steve Leung to discuss the new store design. Mr Lo said the new design, which would keep the firm's colour orange, had been fixed and that each new store's interior design would cost up to $4.48 million.

Fairwood had $144.7 million cash at the end of March while its gearing was 2.2 per cent, down 2.2 percentage points from a year ago.

Its share price yesterday rose 2.2 per cent to $6.95.