The overall downturn in the restaurant industry has not spared HAIDILAO from its impact. In the first half of 2025, HAIDILAO's restaurant system sales decreased by 6.5% year-over-year, with total revenue recording RMB 20.703 billion, down 3.7% compared to the same period last year. Restaurant operations, as the core revenue segment, recorded RMB 18.58 billion, a 9% decrease year-over-year, with its proportion falling below 90% for the first time. This marks HAIDILAO's first half-year revenue decline since 2022.

Founder Zhang Yong once regarded McDonald's standardization as the golden standard. The standardized, replicable, and efficient store model once formed the core narrative of HAIDILAO in the capital markets. However, with changing competitive landscape and plateauing growth in core business, HAIDILAO has been forced to break away from its standardized model and pivot toward more personalized growth paths.

In the first half of the year, HAIDILAO significantly accelerated its deployment in products, scenarios, and store formats, demonstrating a proactive stance toward diversified exploration. The company continues to broaden its average spending coverage range, from high-end "Premium Selection" stores with per capita spending above RMB 500, down to lunch buffets with per capita spending of only RMB 20.

In terms of scenarios, HAIDILAO actively expanded into late-night dining, parent-child interactive, and pet-friendly themed stores. Through the "Red Pomegranate Plan," it has extended into multiple categories including barbecue, fried chicken, grilled skewers, mini hot pot, and iron pot stew, covering almost all mainstream chain restaurant formats.

Whether these various attempts to inject freshness into standardization can gain widespread market recognition remains to be observed. Not long ago, rumors circulated about HAIDILAO "switching to semi-self-service mode with significant service reductions." Although officially denied, this still reflects consumers' complex emotions regarding HAIDILAO's transformation. Can HAIDILAO, as it gradually moves away from its traditional image, continue to gain consumer recognition?

**Growing Pressure**

The pressure facing HAIDILAO primarily stems from changes in the external market environment. Over the past six months, national restaurant revenue growth has continued to slow, matching or even falling below the growth rate of total retail sales of consumer goods. Particularly in June this year, revenue from restaurants above designated size reached RMB 137.2 billion, down 0.4% year-over-year, marking the first negative growth of the year.

Against the backdrop of many peers choosing "price-for-volume" strategies to cope with market downturn, HAIDILAO maintained its average spending recovery trend that has continued for over a year. In the first half of 2025, HAIDILAO's national store average spending per capita rose slightly from RMB 97.4 in the same period last year to RMB 97.9, with growth across all city tiers. First-tier cities showed the most significant performance, with a 1.1% year-over-year increase and average spending per capita reaching RMB 105.2. Nevertheless, current overall average spending still has a RMB 5 gap compared to the same period in 2023.

HAIDILAO CEO Gou Yiqun frankly stated at the earnings conference: "Consumers increasingly pursue ultimate value-for-money, differentiation, personalization, and emotional value. Competitors' introduction of more cost-effective new products has attracted some consumers, having a certain impact on HAIDILAO's dine-in business."

After actively abandoning the most direct customer acquisition strategy of "price-for-volume," a decline in HAIDILAO's customer traffic was predictable. In the first half of the year, HAIDILAO's average table turnover rate dropped from 4.2 times/day in the same period last year to 3.8 times/day, driving same-store sales to decrease by 10% year-over-year.

With fixed costs difficult to effectively amortize, labor costs as a percentage rose by 0.5 percentage points year-over-year to 33.8%. Although not directly reducing prices, HAIDILAO increased portion sizes and material inputs, causing raw materials and consumables costs as a percentage to rise by 0.8 percentage points to 39.8%.

Under the combined effect of these factors, HAIDILAO's core operating profit in the first half declined by 14% year-over-year to RMB 2.4 billion, nearly RMB 400 million less than the same period last year. The table turnover rate of 3.8 times/day also fell below HAIDILAO's self-defined operational "passing line."

HAIDILAO previously stated that if average table turnover rate fails to reach 4 times/day, it would pause large-scale new store openings and prioritize improving operational efficiency of existing stores. In the first half, HAIDILAO's total store count decreased by a net 5 stores compared to the beginning of the year, bringing the total to 1,363 stores.

To boost same-store performance, HAIDILAO continues to drive diversified innovation in products and scenarios. In terms of products, it launched fresh-cut series and seasonal series, encouraging the development of personalized dishes with local characteristics. For scenarios, it actively creates late-night themed, parent-child themed, and pet-friendly stores.

HAIDILAO revealed that regions currently launch 60-80 new dishes monthly. After late-night scenario store renovations, average table turnover rates improved by at least 10-20% compared to pre-renovation levels. As of the end of June 2025, nearly 30 late-night scenario themed stores nationwide have completed renovations, with over 50 standard themed stores focusing on fresh-cut and live products already in operation. The company will continue to expand the scale of scenario-themed stores.

Simultaneously, with subsidy and traffic support from the first-half delivery battle, the delivery business accelerated its rise, growing 60% year-over-year to RMB 930 million. "Hot Pot Dishes for Rice," targeting single-diner scenarios, showed particularly significant growth, contributing over 55% of delivery revenue. New categories such as mixed rice and homemade beverages have also entered testing phases, expected to further enrich delivery offerings.

These innovative transformations creating incremental growth bring some short-term pressure on profitability. In the first half, HAIDILAO's investment in delivery business promotion and diversified marketing activities increased significantly, with corresponding expenditures rising by RMB 150 million.

**Where Is the Space?**

Since store count peaked in 2021 and the "Woodpecker Plan" was launched, HAIDILAO's "unlimited expansion" story has become difficult to sustain. One consumer commented: "HAIDILAO hasn't actually changed; it's the market that has changed."

Under continuous emergence of similar restaurant competition, HAIDILAO's once-proud standardized operations, exceptional service, and interactive experiences are gradually losing their uniqueness. As HAIDILAO Vice Chairman Zhou Zhaocheng pointed out: "Consumer demographics have changed, and the restaurant market landscape has changed. Using an old map, you can't find the new continent."

Beyond performance growth, HAIDILAO's expansion faces a special layer of internal pressure. HAIDILAO employs a master-apprentice incentive system that "connects interests and locks in management." Store managers not only receive performance commissions from their own stores but also earn higher percentages from stores managed by their apprentices and grand-apprentices. An important prerequisite for this mechanism's effective operation is continuous store expansion. Once growth stops, internal talent promotion channels narrow, incentive effects weaken, and may even risk failure.

As traditional self-operated stores encounter bottlenecks, HAIDILAO accelerated the expansion of its franchise system and "Red Pomegranate Plan" stores in the first half. The "Red Pomegranate Plan" currently covers 14 restaurant brands including Yanqing Barbecue Shop, Congqian Yin Xiang, and Xiaohai Love Fried, with a total of 126 restaurants under the plan. When last year's annual report was disclosed, the plan only covered 11 brands and 74 stores.

Sources close to HAIDILAO revealed that the "Red Pomegranate Plan" added an external excellent entrepreneurial brand introduction mechanism in the first half. Currently, multiple models operate simultaneously: internal entrepreneurship, external entrepreneurial brand co-creation, and external city brand cooperation.

For franchise business, through dual advancement of existing store conversion and new store development, 28 new franchise stores were added in the first half, bringing the total to 41 stores, exceeding last year's full-year opening count.

New businesses currently contribute limitedly to total revenue. In the first half, 41 franchise stores achieved total revenue of RMB 91 million, with average single-store revenue contribution of about RMB 2.2 million, far below directly-operated stores' RMB 14 million level during the same period.

HAIDILAO's franchise adopts a strong trusteeship model, with headquarters providing unified management and charging fees based on fixed profit percentages. Even with continued future expansion, contribution to total revenue is expected to remain at relatively low proportions in the short term.

The "Other Restaurant Operations" segment, including multiple brands under the "Red Pomegranate Plan" and enterprise hot pot and camping dining scenarios, achieved revenue of RMB 597 million in the first half, a significant 227% year-over-year increase. The vast majority came from the largest brand "Yanqing," which added 46 stores in the first half, bringing its total to 70 stores and achieving revenue of nearly RMB 200 million.

Based on accumulated franchisee resources in lower-tier markets, HAIDILAO expects to build a larger restaurant ecosystem through multi-brand synergy and format integration. Zhou Zhaocheng previously revealed such ambitions: after the main brand's franchise business runs smoothly, many sub-brands under the "Red Pomegranate Plan" can also achieve scaled expansion through franchise models.

Another possible advancement direction is delivery system integration. HAIDILAO explicitly stated in its financial report that it will integrate multi-brand, multi-category resources to build HAIDILAO's delivery super kitchen, explore satellite store new models, and drive both revenue and profit growth.

From current franchise store and other brand store scale proportions, the business model still needs time for verification and accumulation to truly succeed.

Huaxing Securities analyst Jiang Xuefeng believes that HAIDILAO's investment logic has smoothly transitioned from "earning performance money" to "earning dividend money," with performance serving as only one standard for measuring company value. Under unchanged operational fundamentals, the company's stock price will still fluctuate widely between 10-20 times PE, but "sustained stable high dividends" may become the second catalyst for stock prices.

In recent years, HAIDILAO has significantly enhanced shareholder returns. HAIDILAO's payout ratio has gradually increased from 40% in 2022 to 90% in 2023, reaching 95% in 2024. The 2025 interim dividend of HK$0.338 per share maintained the high payout ratio of 95%.