CHINA'S newly introduced value-added tax has eroded the profit margins of Fairwood Holdings' fast-food operations on the mainland, according to the company's managing director.
Dennis Lo Hoi-yeung said margins were being squeezed, citing increased food costs as a result of the tax and rising labour costs.
He said mainland operations had contributed ''slightly'' to the group's bottom line, but he did not provide figures.
In fact, Fairwood's plan to establish a ''central kitchen'' in Guangzhou had been shelved in view of the spiralling rents in the capital of Guangdong province, he said.
However, the company might now consider Dongguan, also in Guangdong, where its central office would be open by June, along with the installation of computers.
Fairwood remains committed to its China expansion, planning to spend about $80 million there to set up more fast-food outlets.
The company has 17 outlets in China and the network will increase to 20 by the end of the month. It plans to add 10 more in the next fiscal year.
