IPOs: how restaurant chains raise cash

Xiao Nan Guo, with 62 outlets here and on the mainland, listed on Hong Kong's exchange last year. So did Tsui Wah, the cha chaan teng chain. Its share price has since risen by more than half - market reports attribute this to the mainland's growth potential. Chinese operations South Beauty and Golden Hans, and Cantonese chain Tai Hing Roast, are all expected to launch initial public offerings this year.

Edmond Chan, from PricewaterhouseCoopers' Capital Market Services Group, says the primary reason restaurants list is to get more funds for expansion. An IPO is a more "viable" option than traditional methods of raising money. You can usually raise more money from an IPO than from business partners. The appeal of what is seen as a low margin business with high failure rates lies in potential growth in China, Chan adds.

The arduous listing process is a hurdle confronting Dining Concepts. With 22 venues, including celebrity-backed ventures such as Mario Batali's Lupa in Hong Kong, the company generated revenue of HK$65 million in 2012.

It has grown rapidly in recent years and founder Sandeep Sekhri wants to maintain the momentum. He plans to list the company in a few years.

"I would list for expansions into other markets - I would love to expand my business to China," he says.

"The downside is the amount of paperwork and reporting. The question is: do we want to go through that process?