High-end restaurant chain Beijing Xiangeqing Co Ltd announced further investments in an overseas expansion drive, as worries over domestic business are mounting.
"We are planning to inject $20 million in our Hong Kong branch, mainly to invest in stores in Australia, and we're readying funds to set up Chinese food restaurants in the United States," it said in a statement.
The company also released its first-half financial results. It reported a drop of 38 percent year-on-year in revenue to 427 million yuan ($69.77 million).
Xiangeqing was hit by the government's recent campaign to curb lavish spending with public funds, as business banquets play an important role in its revenue, it said. Increasing costs for raw materials and salaries, as well as higher rents, were also a reason behind the losses, it added.
In the first half of 2013, Xiangeqing closed eight stores in cities including Beijing, Zhengzhou and Shanghai.
"The Australian store is a trial for our further expansion outside China. We are taking our best chefs to the overseas stores to maintain our advantage in innovation and talent, and also meet the increasing demand for high-end Chinese restaurants overseas," it said.
In addition to its plans to tap overseas markets, and faced with a lackluster future in China, the company is also speeding up its upgrading and transformation process. That includes the cancellation of expensive dishes and service fees, the promotion of group-buying campaigns targeting the mass market, and an expansion into the fast food sector.
The company is also actively diversifying its business structure. It's planning to acquire a 51 percent stake in Zhongyu Environmental Technology Co in Jiangsu province.
Before Xiangeqing, several Chinese restaurant chains have explored ways to expand overseas, a strategy which has some risks.
Haidilao, one of the best known hotpot chains in China, signed deals to open a restaurant in the United States and another in Singapore in June last year. Other players trying to expand overseas include the Little Sheep Catering Chain Co and the South Beauty Group.
"An increasing number of Chinese restaurant chains are opening stores in overseas markets, but I think they're just holding trial operations so far, as they tend to have smaller restaurants, luncheonettes, or they're working with foreign companies. It's difficult for them to have large-scale operations," said Bian Jiang, assistant director of the China Cuisine Association.
Bian said that although Chinese cuisine has become increasingly popular globally in recent years, its growth in overseas markets is just slowly increasing, not surging.
"Overseas demand is limited because foreigners don't eat Chinese food everyday," said Bian.
Bian suggested Chinese restaurants not invest massively in overseas markets at first, and the appropriate way to explore a new market is to start with small and medium-sized restaurants or luncheonettes.
The revenue of China's total catering industry was up 8.7 percent to 1.18 trillion yuan in the first half. The growth rate was 4.5 percentage points lower than a year earlier, according to data from the China Cuisine Association.
"Making a name for themselves overseas and dispersing risks through global expansion is essential for well-developed Chinese chains," said Ma Wenfeng, a food industry analyst with Cnagri.com.