Fairwood Holdings is joining fast-food rival Cafe de Coral in accelerating expansion in the mainland, tempted by lower labour costs and surging economic growth.
Fairwood, which is opening new stores in the Pearl River Delta, plans to boost the number of mainland outlets fourfold to 40 in three years and open restaurants in Beijing. The plan came as the company's stores in Guangzhou recorded 'better than expected' sales, according to chairman Dennis Lo Hoi-yeung.
Mr Lo said Fairwood's 10 outlets in Shenzhen and Guangzhou mainly attracted Hong Kong customers visiting the mainland and it wanted to tap more local customers.
He said profitability in the mainland was higher than Hong Kong as it had much lower labour costs. Gross profit margin at its mainland operations was 12 per cent compared with 7 per cent in Hong Kong.
Fairwood's mainland rush coincides with Cafe de Coral's plan to double the number of outlets to 200 in five years. Cafe de Coral, the world's biggest Chinese fast-food restaurant chain, will focus on expanding its network in Guangzhou, Shenzhen and Shanghai, according to chairman Michael Chan Yue-kwong.
'Fairwood and Cafe de Coral will compete in the Pearl River Delta, but their main competitors will be local restaurant chains that are also expanding aggressively,' said an analyst.