Across The Border | Restaurants advised to tread carefully with mainland ambitions
Fast-food chains Café de Coral and Fairwood see strong rises in their share prices after growing steadily across the border
Hong Kong restaurant groups are proving that a cautious, less-aggressive approach to expanding their operations into mainland China, can certainly pay dividends.
As growth into China is increasingly viewed as a must for many business sectors, given the rising spending power of its burgeoning middle classes, analysts say the restaurant business can traditionally be a lot more fickle than other areas.
And three examples of restaurant firms trying their luck at expanding there, prove the point.
Hong Kong fast-food chains Café de Coral and Fairwood have seen strong rises in their share prices after growing steadily across the border.
While another company, Cha Chaan Teng chain operator Tsui Wah, which has been expanding faster in the mainland, has seen its shares hammered.
“Many Hong Kong restaurants have failed to make money from their mainland operations in the past,” said Daniel So Pui-fung, a strategist at China Merchants Bank International Securities.
“It might be that the food they offer isn’t to mainlanders’ tastes, but I think it is more to do with this being a highly competitive industry, and with the economic slowdown, that’s become even fiercer.”