Chinese Celebrities Dabbling in the Dining Industry

Recently we shared how many of China’s top live streamers such as Viya and Austin Li have begun diversifying their revenue streams by creating their own brands. Well, it’s not only live streamers stepping out of their comfort zones, Chinese celebrities are figuring out more ways to commercialize their public images.

And this time it’s not beauty brands or clothing lines…it’s restaurants! 

In 2020, hot pot restaurant Xianhe Zhuang (闲和庄), which was founded by Chinese actor Chen He (陈赫 became very popular. Celebrity Sun Yizhou (孙艺洲) opened a barbecue restaurant in June, actress Guan Xiaotong (关晓彤) opened her milk tea store in September and actor Huang Xiaoming (黄晓明) opened a barbecue restaurant in November.

Whenever they opened restaurants, there were many related videos or posts on social media, especially on Douyin. For example, a Douyin foodie KOL @大LOGO吃垮北京, who has 23.6 million followers, often visits those celebrities’ restaurants when they are opened. Combining the influence of celebrities and KOLs, these restaurants indeed grew very well and stood out when physical stores were suffering after the effects of COVID lockdowns.

The Popularity Starts from an MCN

The big boss behind the prosperous situation is a restaurant MCN (multi channel network) called Zhishan (至膳). For usual MCNs, they incubate personal influencers/KOLs, and Zhishan is applying the same concept to incubate wanghong restaurants.

Zhishan was founded in 2011. Its most signature “influencer” is a hot pot restaurant called Tan Yaxue (谭鸭血). At Tan, customers are able to have super spicy hot pots and its hero product is duck blood. In 2018, Tan covered the market by opening 100 stores within 9 months. At the end of 2019, it already had 175 stores nationwide. Over 80% of its consumers are post-90s and post-00s.

A key reason for its quick expansion is, Tan uses a franchise model. It also leverages steep discounts during the initial launch period to get people in the door. For example, customers only need to pay 38 RMB for food that is actually worth 100 RMB. Tan often has celebrities show up in the store and help to promote the restaurant.

Other than Tan Yaxue, another hot pot restaurant that we mentioned at the beginning Xianhe Zhuang from Chen He, is also a successful case study from Zhishan. Xianhe was founded in 2015 but it didn’t start to become very popular until 2019 when Zhishan became involved in the business. Since 2019, many KOLs and celebrities actively show up at the store and post their experiences on social media. To date, it has over 600 stores nationwide.

The majority of Zhishan’s clients are hot pot restaurants. This is because Zhou Yang (周杨), founder of Zhishan, believes that hot pot is a very social and shareable food. Once you’ve provided customers with a busy and dynamic eating environment and those dishes are good-looking enough to motivate them to take pictures and share, the restaurant will organically be promoted on the Internet.

Franchise Fees are a Major Revenue Source for Those Celebrity Restaurants

Other than daily income from stores, the major income source for those celebrity restaurants is franchise fees. In terms of Xianhe Zhuang, if you want to open a 300-square-meter store, you have to pay 480k RMB as the franchise fee and 50k RMB as security fund. On top of that, you have to pay for decoration, interior design, material/food cost and marketing. In total, to open a Xianhe Zhuang hot pot restaurant, you have to spend at least 1.6 million RMB. 

Compared with Xianhe, another celebrity restaurant called Huofeng Xiang (火凤祥) costs less but it still requires a 280k RMB franchise fee and another 50k RMB as the security fee.

Xianhe currently has 685 stores, which means, solely from franchise fees, Chen He and Zhishan have 350 million RMB in total in their pockets. Huofeng was founded in 2019, and it has over 50 franchisees. It is expected to have 450 stores by the end of 2022.

Celebrity Restaurants Are Not a Lucrative Business to Join

According to an ROI sheet from Xianhe, franchisees are able to achieve over 24k RMB revenue per day. They claim owners can run their businesses at a 60% gross profit rate, and at this rate, franchisees will recover their investment in 9 months. And according to the ROI sheet from Huofeng, the period is only 7 months. 

But this is unlikely. 60% gross profit is a number that the majority of players in the dining industry are not able to achieve. It is impossible to be honest. One of the most popular hot pot restaurants Haidilao (海底捞), its gross profit is only between 18-25%, and another popular fast food restaurant Jiumaojiu (九毛九), its gross profit is between 15-20%.

Although these celebrities are able to drive a lot of traffic to these restaurants, a business can’t rely solely on that if it wants to achieve sustained growth. What’s more, being that closely tied to a celebrity is very risky. The celebrity could be an outstanding citizen today, but who knows what scandals will be revealed in the next minute.

The franchise model is also a risk. With such quick expansion it is easy for problems to arise. 

Once even one of them has a food safety issue, it will affect not only other stores but the celebrity as well.  

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