Cafe de Coral cooks up 1,000-shop world target

PUBLISHED : Monday, 06 August, 2007, 12:00am
UPDATED : Monday, 06 August, 2007, 12:00am

Cafe de Coral, the world's biggest Chinese fast-food restaurant, aims to nearly double the number of its outlets worldwide to 1,000 in five years and may for the first time franchise its self-branded stores on the mainland to meet the target.

The global target includes doubling the number of the company's mainland outlets to 200, according to chairman Michael Chan Yue-kwong.

To do this, the fast-food restaurant operator would increase its self-branded mainland stores to 100 by 2012 from 38 at present, Mr Chan said in an interview.

He said the company would open more stores in gateway cities in the Pearl River Delta including Guangzhou and Shenzhen, after expanding in second-tier cities including Dongguan and Zhongshan.

Mr Chan said the company might need to franchise its self-branded outlets for the first time to expand faster on the mainland.

The company also aims to have 100 New Asia Dabao shops in five years. The Shanghai fast-food chain, in which Cafe de Coral has a 50 per cent stake, now operates 67 outlets.

Most of Cafe de Coral's self-branded outlets are in the Pearl River Delta. Mr Chan said the company would open more stores in Shanghai, where it has seven Cafe de Coral stores that made about 2.3 million yuan of losses last year.

The expansion plan might help achieve its goal of spinning off its mainland unit for a separate listing in Hong Kong.

Cafe de Coral, which has 237 stores in Hong Kong, last month reported a 15.7 per cent rise in full-year net profit to HK$370 million for the year to March. Operating profit on the mainland surged 50 per cent to HK$36.8 million on a 21.5 per cent increase in sales to HK$259 million.

Mr Chan said the plan for a mainland spin-off was still preliminary.

'We will meet investment bankers and analysts and carry out feasibility studies on the spin-off,' he said.

'We need to figure out what the spin-off will involve, whether it will include New Asia Dabao or not.'

To push its network expansion in the mainland, Cafe de Coral plans to spend between 150 million yuan and 200 million yuan to build a food processing factory in Guangzhou, replacing its present processing unit in Panyu, Guangdong.

But as it expands, the retailer also faces increasing competition from rivals that specialise in fast-food retailing.

Hong Kong-based fast-food chain Fairwood Holdings plans to open as many as eight stores in the country's southern region where it now has 11 outlets.

International fast-food giants KFC and McDonald's are also stepping up their expansion in the mainland with their franchising strategy.

Mr Chan said that another challenge to Cafe de Coral's mainland expansion was the firm's inability to import meat due to government policy, even as pork prices had been rising since the beginning of the year.

Meanwhile, Cafe de Coralplans to double the number of outlets of its United States division, Manchu Wok, to 400 in five years, mainly through franchising.

Mr Chan said group sales had grown between 15 per cent and 16 per cent from April to July while same-store sales recorded a 'high single-digit' expansion during the period.