SINGAPORE (THE BUSINESS TIMES) – Hot pot chain giant Haidilao International Holding said it will be shutting down or suspending the operations of around 300 poorly performing restaurants, after having expanded aggressively in the past two years.
Some restaurants will be temporarily closed for no more than two years, and resume operations “in appropriate times”, the Hong Kong-listed company said in an exchange filing on Friday (Nov 5).
No employees will be laid off, and affected employees will be redeployed within the group.
The closures will reportedly affect outlets mainly in China, though some cuts will come in countries the restaurant has expanded into.
Haidilao did not specify in its bourse filing which markets would be affected, but the decision follows a rapid expansion over the past two years.
As at end-June, the hot pot giant has 1,597 restaurants in operation globally, 1,491 of them in mainland China. This is more than a 70 per cent jump over the 935 restaurants it had globally, including 868 in mainland China, a year ago.
In Singapore, Haidilao has 18 restaurants, with its 19th slated to open at Northshore Plaza, Punggol’s new neighbourhood centre.
Haidilao had said in a 2021 interim report published in September that factors affecting its performance in the first half of this year include the time taken for newly opened restaurants to hit their first break-even. Restaurants were also still suffering from the continuing impact of the Covid-19 pandemic.
Even though the group had higher revenue and profit during the first half of this year compared with the prior-year period, Haidilao noted that table turnover rate was 3.0 times per day, down from 3.3 times per day for the corresponding period last year.
“The operating performance was not up to the management’s expectations, reflecting that the internal management and operations need to be corrected and improved on a best-effort basis,” Haidilao said in the report.
The company’s share price has also taken a beating in recent weeks, including nine straight days of losses in end-October to early-November, in which the counter shed around a third of its value amid a flare-up of Covid-19 cases in China. The counter is down nearly 65 per cent for the year to Friday, when shares closed at HK$21.05.
Haidilao said on Friday that it has decided to launch a plan, which it has dubbed Woodpecker, to improve operating performance.
The plan’s initiatives include paying attention to the restaurants with unsatisfactory operating results, including overseas restaurants, and taking improvement measures accordingly.
The group will also be slowing down its business expansion plans. It said: “If the average table turnover rate of Haidilao restaurants of the group is less than 4 times per day, no new Haidilao restaurants will be opened on a large scale in principle.”
• With additional information from The Straits Times