Restaurant chain Xiao Nan Guo looks to personal diners for growth
Shanghai operator Xiao Nan Guo is changing its focus to target personal dining which is outgrowing the once lucrative business segment
Mainland restaurant chain operator Xiao Nan Guo Restaurants Holdings plans to open its first mainland Dining Room outlet, a brand originally designed for the Hong Kong market, in Shanghai next year.
Chairman Wang Huimin who founded the company in Shanghai 25 years ago said the economic slowdown had affected business diners as companies tightened their belts but she remained upbeat about the outlook for the country's catering sector because more and more people are eating out.
"Overall, the market size is growing, but we need to sniff out new trends to ensure the growth of our businesses," she told reporters. "We want to focus on the segment where opportunities are bigger."
Xiao Nan Guo, which completed an initial public offering on the Hong Kong stock exchange in July, owns 63 large-size outlets under its name in more than 10 mainland cities.
Business diners have been one of its major revenue sources for the past 25 years.
"Today, personal dining is outgrowing business diners," Wang said.
"Therefore, it's reasonable to bring our Hong Kong model back to the mainland."
Xiao Nan Guo also operates three high-end Maison De L'Hui restaurants on the mainland and two Dining Room outlets in Hong Kong.
The Dining Room brand made its debut in Hong Kong in the middle of this year, and mainly targets customers with per capita spending of about HK$100.
Chief executive Kang Jie said the Dining Room outlets could reach the break-even point immediately after the official openings thanks largely to the support of local residents.
Due to delays in the completion of several commercial projects in which it had signed deals earlier, Xiao Nan Guo will open a total of 15 new outlets this year, less than its targeted 22, Kang said.
The restaurant chain plans to maintain the expansion pace next year as it remains cautious about the economic outlook.
Kang would not disclose a firm number of new openings for next year.
According to a survey by Dianping.com, a social rating site, 66 per cent of Shanghai residents dined out at least twice a week last year, 20 percentage points higher than a year earlier.
"We might slow down the new openings due to the weak economic conditions," said Wang. "But opportunities arise when everybody feels it is difficult to do businesses."
Xiao Nan Guo posted net profits of 56.2 million yuan for first half, up 52 per cent from a year earlier.
It also plans to open new Dining Room outlets in Hong Hong this year.
"Hong Kong is a wonderful market for restaurants," Wang said. "But our future is on the mainland because of the huge demand."