Proprietary and Confidential
Casual Dining Restaurant MarketChina
Prepared Q4 2011
Casual Dining
Chinese Restaurant Market
Quick Service Restaurant
Hotpot Specialty/Fine Dining
Casual Dining Restaurants Offer Moderately Priced Food With Table Service
2
Casual Dining Restaurant Market – Definition
The Chinese consumer food industry is segmented into following restaurant formats:
• Quick Service Restaurants—self-service restaurants and customers pay prior to consumption to enjoy quick service and convenience
• Full Service Restaurants—traditional sit-down restaurants with ordering and full table service provided by waiters
• Hotpot—hot pot is placed in the middle of the table with ingredients in the pot, which are cooked on the table with full waiter services
• Casual Dining—offer low price food with table service and casual ambience; many casual dining restaurants offer full bar and a separate bar staff
• Specialty/Fine Dining—full service restaurant with formal ambience and special meal courses menu
KFC
Mc Donald
JiSheng
ZhenGongFu
BaiFuKaoBa
Little Sheep
ChongQing
Little Swan
XiaBu XiaBu
Xiangeqing
South Beauty
BaBeila
LaoNiangJiu
Full Service Restaurant
Ajisen
Chamate
JiaHeYipin
Pizza Hut
Starbucks
Source: FSG Research and Analysis; ‘My Decker Capital’ (December 2010); ‘Restaurants and Foodservice Review’, Alix Partners (May 2010)
Market Definition
The casual dining market comprises
restaurants offering table service and
coffee shops, which serve moderately-
priced food in a casual atmosphere; they
usually provide table service, and are placed between QSRs and fine
dining restaurants
Source: FSG Research and Analysis; ‘Restaurants and Foodservice Review’, Alix Partners (May 2010); ‘Western Fast Food Players in China Outlook 2010–2015’, Report Buyer (June 2010); China Latin Diaries; The Economic Observer Online; China Chain Store and Franchise Association
Chinese Casual Dining Restaurants Market is Fragmented with Large Players Accounting for about 6% Market Share
3
Hotpot29%
Casual Dining21%
Specialty/Fine Dining50%
100% = 80 companies
Breakup for full-service restaurants in China(%, 2009) As per the market research report, by the end of 2010, the
Chinese casual dining market was expected to reach $310 billion
• According to China Cuisine Association, sales in the casual dining category grew 43.3% year on year in 2008, due to growing demand for low priced food by Chinese youth
By 2013, casual dining market is expected to grow and witness heavy investments by western chained restaurants, such as Pizza Hut, and Starbucks
• In 2011, Subway (a US–based casual dining chain) planned to open 300 outlets in China by 2015
• The country’s rapid urbanization coupled with the Chinese government’s plan to encourage foreign investment (in 2010) made this industry attractive for Western fast food players
Majority of the western and Chinese chained restaurants had plans to open casual dining restaurant (CDR) in tier 2 and tier 3 cities, such as Ningbo, Kunming, Fuzhou, and Tianjin
• This is primarily on account of dominance of well-established CDRs (Pizza Hut and Papa John’s) in tier 1 cities, such as Beijing and Shanghai
Average Net Profit Margin in the Chinese Food Service industry(%, 2008)
Hotpot Western Cuisine
Full Service Restau-
rant
Casual Dining
General Dining
Hotel Din-ing
Quick Service Restau-
rant
17.1%15.8%
12.3%
9.6%8.0%
6.1% 5.8%
As per Alix Partners, in 2009, China’s restaurant industry was highly fragmented with only 6.0% being contributed by the
China’s top 100 restaurants; however, large casual dining chains are likely to gain Chinese market share with special Chinese
menu
“We believe looking to cities outside Shanghai and Beijing will be the key to success for CDRs in the coming years.” – Howard Hsiao, Senior
Vice President, getchee Enterprise Solutions (July 2011)
“We believe looking to cities outside Shanghai and Beijing will be the key to success for CDRs in the coming years.” – Howard Hsiao, Senior
Vice President, getchee Enterprise Solutions (July 2011)
“We’ve been looking at cities outside the traditional markets of Beijing and Shanghai where a well-run restaurant can yield high profits before
market saturation occurs.” – Philip Tomlin, getchee Business Analyst (July 2011)
“We’ve been looking at cities outside the traditional markets of Beijing and Shanghai where a well-run restaurant can yield high profits before
market saturation occurs.” – Philip Tomlin, getchee Business Analyst (July 2011)
Casual Dining Restaurant Market – Overview
4
Notes: 1) Based on latest statistics available on secondary/primary domain2) This represents the number of its dine-in outlets; it has another 130 home delivery outlets
Source: FSG Research and Analysis; Company Website; Primary Research
Pizza Hut and Paulaner Brahaus Were the Earliest Entrants in the Chinese Market
NameCountry of
Origin
Year of Establishment
in China
Number of Outlets in China1 (2011)
Additional Information
Self-owned Franchised Total
Pizza Hut
US 1990 560 0 5602
Pizza Hut, an American restaurant chain, primarily offers pizzas, pastas, and rice dishes
• It also offers side dishes such as buffalo wings, breadsticks, and garlic bread
Pizza Hut China is a subsidiary of Yum! Brands, a global fast food restaurant company operating/licensing brands such as Taco Bell, KFC, and Wingstreet
Paulaner Brahaus
Germany 1992 12 0 12
Paulaner Brahaus is a German chain that serves Bavarian and Munich dishes along with Paulaner beers
In China, it started its outlets in cooperation with Kempinski Hotel, a German hotel chain that serves as the sole agent for Paulaner beer in the country
It has two restaurants in Shanghai and one each in cities of Beijing, Chengdu (Suchian), Dalian (Liaoning), Nanjing (Jiangsu), Sanya (Hainan), Shenyang (Liaoning), Suzhou (Jiangsu), Wuxi (Jiangsu), Xi’an (Shaanxi), and Yinchuan (Ningxia)
Key International Casual Dining Restaurant Chains
5
Notes: 1) Based on latest statistics available on secondary/primary domain2) Starbucks receives royalties and license fees from licensed outlets that can resell Starbucks’ coffee, tea, and related products
Source: FSG Research and Analysis; Company Website; Primary Research
International Chains Typically Operate Through Self-owned Business Model in China
NameCountry of
Origin
Year of Establishment
in China
Number of Outlets in China1 (2011)
Additional Information
Self-owned Franchised Total
Hard Rock Cafe
US 1994 1 0 1
Hard Rock Cafe is an international casual dining restaurant that serves a range of burgers, sandwiches, salads, and drinks
The restaurant is located in Beijing
Starbucks
US 1999 220 0 600
Starbucks Coffee is the largest coffee chain in the world
The company operates in China through a joint venture with Mei Da Coffee (in Beijing), President’s Group (in Shanghai), and Maxim’s Catering (in southern China)
It does not franchise its outlets but about 380 of its outlets are licensed2
Outback Steakhouse
US 2001 2 0 2
Outback Steakhouse is a casual dining chain that primarily serves beef and steak items in an atmosphere resembling that of an Australian outback
In China, both its restaurants are located in Beijing
TASTYTaiwan 2001 160 0 160
TASTY, owned by Wang Pin (a Taiwan-based restaurant Group), specializes in steaks and other beef-based dishes
Key International Casual Dining Restaurant Chains
6Notes: 1) Based on latest statistics available on secondary/primary domainSource: FSG Research and Analysis; Company Website; Primary Research
Western Fast Food Chains Continued to Make Inroads in China During the Mid-2000s
NameCountry of
Origin
Year of Establishment
in China
Number of Outlets in China1 (2011)
Additional Information
Self-owned Franchised Total
Papa John’s
US 2003 18 139 157
Papa John’s, primarily a take-away and delivery pizza chain, also offers table service in some of its restaurants
In China, Papa John’s operates through a hybrid business model (a combination of self-owned and franchised outlets)
Turbo RestaurantHong Kong 2003 13 0 13
Turbo Restaurant is a Hong Kong-based chain that serves a range of salads, pizzas, pastas, etc.
Hooters
US 2004 4 0 4
Hooters is a beach-themed restaurant that serves seafood, sandwiches, and spicy chicken wings
The company has one restaurant in Beijing, two in Shanghai, and one in Chengdu
First two restaurants were opened in Shanghai (2004 and 2006), followed by a restaurant in Beijing (2007) and another one in Chengdu (2008)
It operates in the country through Pacific Wings, a company controlled by Hooters USA, that manages the outlets in China
Key International Casual Dining Restaurant Chains
7
Notes: 1) Based on latest statistics available on secondary/primary domain2) NA denotes information Not Available
Source: FSG Research and Analysis; Company Website; Primary Research
Some International Chains Serving Japanese-style Food Also Operate in the Market
NameCountry of
Origin
Year of Establishment
in China
Number of Outlets in China1 (2011)
Additional Information
Self-owned Franchised Total
Sizzler
US 2004 6 0 6
Sizzler is an American chain that offers salads, steaks, seafood, chicken, ribs, and beverages
It entered China through a 50:50 joint venture with Minor International, a Thailand-based hospitality Group
According to the terms of the joint venture, Minor International received exclusive rights to license Sizzler brand in China
All of its six restaurants are located in Beijing
Sakae Sushi
Singapore 2004 NA2 NA NA
Sakae Sushi is a casual dining chain that serves Japanese-style food
Its outlets are concentrated in the cities of Beijing, Shanghai, and Chengdu
It operates through a hybrid business model
Key International Casual Dining Restaurant Chains
8Source: FSG Research and Analysis; Company Website; Primary Research
Pizza Hut’s Success in China Led to the Entry of Other Pizza Chains in the Market
NameCountry of
Origin
Year of Establishment
in China
Number of Outlets in China1 (2011)
Additional Information
Self-owned Franchised Total
The Pizza Company
Thailand 2005 NA2 NA 14
The Pizza Company, owned and managed by Minor International Group, is one of the leading pizza chains in China
It operates through a hybrid business model and has 14 restaurants in Beijing
California Pizza Kitchen
US 2005 2 0 2
California Pizza Kitchen is a casual dining chain that serves pizzas, pastas, salads, appetizers, soups, sandwiches, and desserts
The company’s outlet is located in Shanghai
Costa Coffee
UK 2006 42 0 42
Costa Coffee is a coffee house company based in the UK that entered China through a joint venture with the Yueda Group, a Chinese state-owned enterprise
In 2008, it entered into a second joint venture in China with the Beijing Hualin Group, a leading Chinese retailer
Its outlets are concentrated in Beijing, Jiangsu (cities of Nanjing and Suzhou), Shanghai, and Zhejiang (Hangzhou city)
Notes: 1) Based on latest statistics available on secondary/primary domain2) NA denotes information Not Available
Key International Casual Dining Restaurant Chains
9Source: FSG Research and Analysis; Company Website; Primary Research
The Market Has Continued to Witness the Entry of International Chains till 2010
NameCountry of
Origin
Year of Establishment
in China
Number of Outlets in China1 (2011)
Additional Information
Self-owned Franchised Total
85o C Cafe
Taiwan 2007 NA2 NA 185
85o C Cafe is a cafe and bakery specializing in coffee, cakes, and breads
In China, it operates through a hybrid model
Tony Roma’s
US 2010 0 2 2
Tony Roma’s is a casual dining restaurant chain that specializes in serving ribs
It operates in China through Mas Millennium, its sole franchisee in the country
• Mas Millennium (Singapore) was incorporated in 1991 to act as a holding company to develop Tony Roma's restaurants in China, Hong Kong, Indonesia, the Philippines, Singapore, Taiwan, and Thailand
The company has one restaurant each in Shanghai and Chengdu
Notes: 1) Based on latest statistics available on secondary/primary domain2) NA denotes information Not Available
Key International Casual Dining Restaurant Chains
10Source: FSG Research and Analysis; Company Website; Primary Research
Domestic Players, such as Chamate and JiaHeYiPin, Serve Chinese-style Food
NameCountry of
Origin
Year of Establishment
in China
Number of Outlets in China1 (2011)
Additional Information
Self-owned Franchised Total
Chamate
Taiwan2 2002 NA3 NA 99
Chamate is a casual dining restaurant chain that serves Chinese-style food
The company’s stores are primarily located in Beijing, Guangdong (Shenzhen city), Hubei (Wuhan city), Jiangsu (cities of Changzhou, Jiangyin, Nanjing, Suzhou, Wuxi, and Xuzhou), Liaoning (Shenyang city), Shandong (cities of Jinan and Qingdao), Shanghai, Tianjin, and Zhejiang (cities of Hangzhou, Ningbo, and Yiwu)
The company operates through a hybrid business model
Grandma’s Kitchen
China 2003 5 0 5
Grandma’s Kitchen is a restaurant chain that offers Western food, such as steaks, along with beer
The company primarily targets tourists and Americans staying in the country
All its restaurants are located in Beijing
JiaHeYiPinChina 2004 75 0 75
JiaHeYiPin serves a range of Chinese-style food such as dim sums and noodles
Most of its outlets are located in Beijing
Notes: 1) Based on latest statistics available on secondary/primary domain2) Though Chamate originated in Taiwan, it is included as a domestic chain as it is owned and controlled by Shanghai Chamate Food (a Chinese company)3) NA denotes information Not Available
Key Domestic Casual Dining Restaurant Chains
11Source: FSG Research and Analysis; Company Website; Primary Research
Liang’an Coffee Has 350 Stores Located Across Several Cities in China
NameCountry of
Origin
Year of Establishment
in China
Number of Outlets in China1 (2011)
Additional Information
Self-owned Franchised Total
Liang’an Coffee
China 2003 NA2 NA 350
Liang’an Coffee is a coffee chain that was launched in China by UBC Cafe (a Taiwan-based Group) in 2003
Presently, UBC Cafe does not hold any stake in Liang’an Coffee
The company’s stores are located across China in Beijing, Guangdong (Shenzhen city), Guanxi, Hebei (Shijiazhuang city), Hubei (Wuhan city), Jiangsu (cities of Changshu, Jiangyin, Suzhou, and Xuzhou), Liaoning (cities of Dalian and Shenyang), Shandong (cities of Jinan and Qingdao), Shanghai, Tianjin, and Zhejiang (cities of Hangzhou and Shangyu)
It operates through a hybrid business model
Shanghai Babela Yizhou Food and Beverage
China 2005 30 NA NA
Shanghai Babela Yizhou Food and Beverage is a casual dining chain that serves pizzas, salads, soups, pastas, and sandwiches
It operates through a hybrid business model
Notes: 1) Based on latest statistics available on secondary/primary domain2) NA denotes information Not Available
Key Domestic Casual Dining Restaurant Chains