REAL CASE 031

After Overexpanding Self-Operated Restaurants, Why Is Haidilao Changing Who Funds the Next Store?

Does a restaurant chain automatically become stronger when it has more stores? Haidilao shows why the answer can be no. For a self-operated restaurant, opening another location is not simply adding a new sales channel. The company must commit capital to fit-out, kitchen equipment, rent, employees, and management, then rely on customer traffic to turn those fixed costs into revenue. Store count creates value only when restaurant capacity is used effectively. Haidilao's rapid expansion in 2020–2021 made this issue more visible. The company added substantial self-operated restaurant capacity based on expectations that brand demand could support wider coverage. When external conditions changed, some markets could not absorb that capacity as efficiently as expected. The important question therefore stopped being simply "How many restaurants does Haidilao operate?" It became how effectively tables were being used, how much each restaurant generated, and how much corporate capital was required for the next unit of growth. That is why the strategy later changed. Haidilao did not simply return to large-scale self-operated expansion. It closed or optimized weaker locations, controlled new self-operated investment, and looked for growth channels that did not require the company to finance every new point of sale in the same way. One direction was delivery. Hot pot has traditionally depended heavily on the dine-in experience, but consumer demand for the brand does not have to be monetized only at a restaurant table. Delivery allows part of that demand to generate revenue outside the dining room. In 1H 2026, delivery revenue increased to approximately RMB2.05 billion. That is large enough to be treated as a meaningful channel rather than a minor side business. But delivery growth cannot be interpreted as proof that the dine-in problem has disappeared. If a self-operated restaurant still carries rent, labor, and equipment costs, empty tables remain underutilized fixed assets even when more consumers order through delivery. Delivery therefore adds a channel. It does not automatically eliminate restaurant-utilization risk. The second and strategically more important change is franchising. Self-operated expansion means: Haidilao largely funds the next restaurant. Franchised expansion means: A partner provides more of the capital for the next restaurant. That changes the balance-sheet and capital-allocation implications of growth. If the brand still has consumer demand, Haidilao does not necessarily need to own and operate every additional point of sale. It can expand coverage through its brand, supply chain, operating system, and franchise relationships while reducing the amount of corporate capital required for each new location. That is the central strategic change in Case 031. The company is not abandoning growth. It is changing who funds growth. The 2025 results show that the transition was not complete. Group revenue was approximately RMB43.23 billion, while revenue from Haidilao restaurant operations declined about 7.1%. The core dine-in business therefore remained under pressure. The same pattern continued in 1H 2026. Group revenue was approximately RMB22.34 billion, restaurant operations remained weaker, while delivery revenue increased significantly. The revenue mix was changing, but that did not mean every operating problem had been solved. The Outcome is therefore Mixed. Haidilao has recognized the problem created by excessive self-operated capacity and changed the way it allocates capital. But dine-in restaurants remain a major part of the business, and delivery and franchising still need to prove that they can become sufficiently durable growth engines. The most important question in this case is not how many restaurants Haidilao closed or opened. It is more fundamental: How much corporate capital is required for the next unit of growth? If the same brand can continue serving consumers while partners fund more of the next point of sale, Haidilao can potentially reduce the asset burden of expansion. That is the central lesson from its period of excessive self-operated growth.

ChinaFood / Restaurants / Hot Pot / Restaurant Chain / Delivery / FranchisingMixedWhy Haidilao did not simply resume aggressive self-operated store expansion after the 2020–2021 capacity buildout, but instead repaired store economics, expanded delivery, and increased the role of franchising; and why approximately RMB43.23 billion of Group revenue in 2025, a roughly 7.1% decline in restaurant-operation revenue, and approximately RMB2.05 billion of delivery revenue in 1H 2026 must be analyzed together. The central question is whether consumer demand can continue expanding while changing who funds the next point of sale.

BEFORE

Before 2020, Haidilao had already built a large hot-pot network dominated by self-operated restaurants. Direct ownership allowed the company to control service, food safety, employee training, and customer experience while capturing the economics of company-operated restaurants.That control required capital. Every additional self-operated restaurant required new fit-out, equipment, rent commitments, employees, and management resources. The rapid expansion of 2020–2021 magnified this characteristic. If demand remained strong, new stores could expand revenue; if demand fell below expectations, excess restaurants would become underutilized capacity carrying substantial fixed costs.The real Before problem was therefore not that Haidilao lacked enough stores. It was that too much capital had been committed to self-operated restaurant capacity faster than some markets could absorb it efficiently.Number

AFTER

By 2025–2026, Haidilao's operating logic had changed. The company no longer treated another self-operated restaurant as the only path to growth. It optimized weaker locations, controlled self-operated expansion, and increased the importance of delivery and franchising.In 2025, Group revenue was approximately RMB43.23 billion, while revenue from Haidilao restaurant operations declined about 7.1%. In 1H 2026, Group revenue was approximately RMB22.34 billion. Restaurant operations remained under pressure, while delivery revenue increased to approximately RMB2.05 billion. Consumer demand was increasingly being monetized through multiple channels, but the dine-in network still needed stronger utilization.The After is therefore neither "Haidilao has returned to aggressive growth" nor "Haidilao has failed." The more accurate state is that capital allocation has changed and the company is seeking lower-capital ways to grow, while the ability of new channels to offset pressure in restaurant operations remains under validation.Number

OUTCOME

MixedCase Result

MODEL

Haidilao has historically operated primarily through self-operated hot-pot restaurants. Consumers dine at tables, and the company monetizes those seats through customer spending and table turnover. Store utilization therefore has a direct effect on unit economics. Rent, fit-out, equipment, and much of restaurant labor are fixed or semi-fixed costs, so they do not fall proportionally when customer traffic weakens.This makes self-operated restaurants fundamentally different from an asset-light platform. Opening another company-operated restaurant requires Haidilao to commit capital and assume the operating risk. Franchising can shift more of the investment for the next location to a partner, while Haidilao participates through its brand, supply chain, operating system, and related economics.Delivery creates another revenue channel. It allows consumer demand to generate sales without relying entirely on dine-in table capacity, but it does not remove the fixed costs of existing restaurants. Haidilao must therefore be analyzed across restaurant operations, store utilization, delivery, franchising, and the amount of corporate capital required for each additional unit of growth.Business Model

Read the Case

# [SECTION

background] Before 2020: Self-Operation Created Control—and Fixed Costs

Before 2020, Haidilao had already built a large self-operated hot-pot network. Direct operation allowed the company to manage service, food safety, employees, and customer experience, all of which were important parts of the brand.

But self-operation meant that headquarters funded restaurant capacity. Each new location required fit-out, equipment, rent, and employees, and many of these costs did not disappear when customer traffic weakened.

The central restaurant economics therefore depended not simply on store count, but on table utilization and turnover. Only when customers consistently occupied those tables could the fixed costs of self-operated capacity be absorbed efficiently.

# [SECTION

timeline] 2020-2026: From Adding Capacity to Repairing Unit Economics

During 2020–2021, Haidilao expanded its self-operated network rapidly in an effort to increase coverage. When external conditions changed, excess capacity made fixed costs and restaurant utilization much more important.

From 2022 through 2024, the company entered a repair phase. It closed or optimized weaker restaurants and paid greater attention to existing store economics rather than simply increasing store count.

In 2025, Group revenue was approximately RMB43.23 billion, while revenue from restaurant operations declined about 7.1%. At the same time, delivery and franchising became increasingly important.

The same shift remained visible in 1H 2026. Group revenue was approximately RMB22.34 billion and restaurant operations were still under pressure, while delivery revenue increased to approximately RMB2.05 billion. Growth was increasingly coming from more than simply opening another self-operated dining room.

# [SECTION

problem_opportunity] Problem and Opportunity: Excess Self-Operated Capacity Was the Real Constraint

Haidilao's core problem was not a complete absence of brand demand. The company had built too much restaurant capacity for which it directly carried capital and fixed costs. When customer traffic was insufficient, unused tables still required rent, employees, and equipment.

The opportunity was therefore not simply to reopen the expansion engine. It was to improve utilization of existing restaurants while finding growth methods that did not require the same level of corporate capital.

Delivery allows some consumer demand to be monetized outside the dining room. Franchising changes who funds the next physical location. These approaches address different problems, but both reduce the degree to which growth depends entirely on new company-operated restaurants.

# [SECTION

business_model] Business Model: Restaurants Monetize Table Time and Turnover

Haidilao's core economics still come from restaurants. Customers occupy tables, complete their meals, and leave so another group can use the same capacity. Table utilization and turnover therefore determine how much revenue the same fixed asset can produce.

Under self-operation, Haidilao assumes more capital and operating risk while capturing more restaurant economics. Franchising reduces direct corporate capital requirements, but requires sharing economics with partners and creates additional demands around brand standards, food safety, and operating control.

Delivery and packaged products create revenue that is less dependent on restaurant seating. The strategic objective is therefore not to choose only one format, but to develop a more effective combination of self-operation, franchising, dine-in, and delivery.

# [SECTION

execution] Execution: From Adding Restaurants to Reallocating Capital

After overexpansion, Haidilao began closing or optimizing weaker restaurants and controlling the pace of new self-operated openings. That shows the strategy moved into actual resource allocation rather than remaining only a management statement.

At the same time, the company developed delivery so consumer demand could be monetized outside the dining room. Franchising allows partners to provide more capital for additional locations, reducing the amount of corporate funding required for each new point of sale.

The success of this execution cannot ultimately be judged only by delivery growth or franchise count. The full system must improve capital efficiency while maintaining food safety, brand experience, and attractive partner economics.

# [SECTION

turning_points] Turning Point: Growth No Longer Means Another Company-Funded Restaurant

Haidilao's real Turning Point was management accepting that growth does not necessarily require another restaurant funded and operated entirely by the company.

That decision carries opportunity costs. Closing weak stores means giving up visible scale. Controlling self-operated expansion means no longer maximizing store count. Franchising means sharing part of the economics with partners.

In exchange, the company can reduce incremental capital pressure and create more ways to reach consumers.

The strategic shift is therefore not that Haidilao stopped growing. It is that growth moved from "keep adding company-operated restaurant capacity" toward "serve demand through a better combination of channels and capital structures."

The central lesson from Haidilao's overexpansion is not that fewer restaurants are always better. Every additional point of sale must answer three questions: who provides the capital, who carries the fixed costs, and whether demand is sufficient. A restaurant brand can continue expanding consumer reach while changing who funds the next store. Delivery adds another channel, franchising changes the source of capital, and dine-in utilization still determines whether the existing self-operated network is healthy.

YouTube · English

Image / Ad

GoGoUpGoGoUp House Ad

DECISION

What would you do?

After overexpanding its self-operated restaurant network, which option best reflects Haidilao's actual strategy in 2025 through 1H 2026?

AImmediately return to aggressive self-operated expansion, using corporate capital to open large numbers of new restaurants as quickly as possible.BControl new self-operated expansion and optimize weaker stores while developing delivery and franchising, allowing consumer demand to be monetized through more channels and reducing the need for every new location to be funded entirely by Haidilao.CExit delivery, refocus all resources on dine-in, and require every new restaurant to remain company-operated.DSell the Haidilao brand, stop restaurant operations, and exit the hot-pot market.

Full Analysis

Haidilao's first Turning Point came during the rapid 2020–2021 expansion. Management expected brand demand to support a much larger self-operated network, so the company added substantial restaurant capacity funded by corporate capital. When external conditions changed, that assumption became much harder to sustain. The important question was no longer how many restaurants Haidilao had, but whether the existing tables and restaurant capacity were being used efficiently enough to support the fixed-cost base. The second Turning Point was the 2022–2024 repair phase. Haidilao closed or optimized weaker locations, controlled the pace of self-operated openings, and shifted attention from store count toward store economics. The third Turning Point was the growing importance of delivery and franchising. Delivery demonstrated that consumer demand did not have to be monetized only through dine-in tables. Franchising demonstrated that expanding physical coverage did not always require Haidilao to provide all of the capital for the next location. The real strategic break was therefore a new definition of growth: growth could come from different channels and different capital structures, rather than only from another company-operated dining room.

Turning Point

Before vs After

BEFORE

Before 2020, Haidilao already had a recognizable operating model. A mostly self-operated hot-pot network monetizing tables and turnover, supplemented by delivery, packaged products and a growing franchise channel. That starting point matters because the pandemic did not create the economics of the company; it exposed them. Businesses with high fixed cost, inventory exposure or long contractual obligations reacted differently from marketplace, franchise or fee models. A good baseline asks three questions. First, who pays the company and for what unit? Second, which costs arrive before revenue is certain? Third, how much capital is required to add the next unit of growth? Those questions make later strategic choices comparable across years rather than treating every management presentation as a new story. The six-year sequence is the spine of the case. The 2020–2021 expansion left too much self-operated capacity. The company spent 2022–2024 repairing store economics. In 2025 restaurant revenue declined while delivery and franchising became more important; the first half of 2026 showed the same mix. The period should not be read as a smooth trend. 2020 changed customer behavior and capital markets; 2021 rewarded growth; 2022 exposed inflation, rates or operating stress; 2023–2024 forced many companies to choose between retrenchment and renewed expansion; 2025–2026 show which changes became durable. For Haidilao, the decisive point is not the calendar year itself but the moment management could no longer rely on the old growth assumption.

AFTER

The evidence through the cutoff is: 2025 group revenue was about RMB43.23 billion, while Haidilao restaurant operations fell about 7.1%. In 1H 2026 group revenue rose to about RMB22.34 billion; restaurant operations were still lower, while delivery revenue rose sharply to about RMB2.05 billion. These figures must be interpreted in context. A high growth rate can come from acquisitions or a depressed comparison; a low growth rate can still be attractive if margins, cash flow or partner economics improve. The most useful comparison is therefore between the operating model before the strategic change and the economics after it. The result type for this case is **mixed**. That label is descriptive, not moral. It summarizes the state of the strategy at the cutoff and should not be read as a prediction of what will happen after September 2026. The major risks are: Cannibalization, food-safety execution, labor intensity, franchise quality control, and the danger that delivery growth masks weak dine-in utilization. There is also a measurement risk. Public disclosures differ by accounting standard, geography and business model. Some companies publish rich quarterly operating metrics; private or post-bankruptcy companies publish far less. Missing data should not be filled with invented precision. Finally, this case has a hard information cutoff of 12 September 2026. Events after that date may change the conclusion, but they are outside this case and should not be smuggled backward into the analysis.

GoGoUp Five Powers

Discover

5/5

★★★★★

Analyze

5/5

★★★★★

Execute

5/5

★★★★★

Decide

5/5

★★★★★

Create

4/5

★★★★☆

Discover5/5

Haidilao originally discovered that consumers were willing to pay not only for hot pot, but also for a differentiated service experience. The self-operated model helped integrate food, service, employees, and restaurant operations into one recognizable brand. After overexpansion, a second discovery became more important: brand demand and restaurant capacity are not the same thing. Consumers may continue valuing Haidilao without every market being able to support another company-operated restaurant. By 2025–2026, a third discovery had emerged: the same brand demand can be monetized through different channels. Consumers can dine in or order delivery, while physical expansion can occur through self-operated or franchised locations. Moving from "What do consumers want?" toward "Which assets and channels should serve that demand?" supports a Discover score of 5.

Analyze5/5

Haidilao cannot be analyzed only through Group revenue or total store count. The economics of a self-operated hot-pot network depend heavily on table utilization, turnover, restaurant revenue, labor, and rent. In 2025, Group revenue was approximately RMB43.23 billion, while revenue from Haidilao restaurant operations declined about 7.1%. In 1H 2026, Group revenue was approximately RMB22.34 billion. Restaurant operations remained weaker, while delivery revenue increased significantly to approximately RMB2.05 billion. These figures show that the revenue mix is changing. Delivery growth is a positive development, but it cannot be used to declare that the entire restaurant network has recovered if dine-in utilization remains under pressure. Franchise economics must also be analyzed separately. Franchising can reduce the corporate capital required for the next unit of growth, but it introduces revenue sharing, partner economics, and quality-control requirements. Therefore, Analyze receives 5.

Execute5/5

Haidilao's strategic change is visible in resource allocation rather than only in management statements. The company closed or optimized weaker restaurants, controlled the pace of new self-operated openings, and developed delivery and franchising. Each action addresses a different constraint. Optimizing weak restaurants reduces low-return fixed costs. Delivery expands the ways consumer demand can generate revenue. Franchising reduces the degree to which every new physical location must be financed directly by headquarters. The execution challenge is that becoming less capital-intensive cannot come at the expense of the brand. Hot pot depends heavily on food safety, service, and in-store execution. As franchising grows, training, supply-chain discipline, and quality control become even more important. Because Haidilao has materially changed where and how it allocates resources, Execute receives 5.

Decide5/5

Haidilao's most important decision was not to interpret the earlier expansion problem as evidence that it simply needed even more self-operated restaurants. Management accepted the opportunity cost of closing or optimizing weaker locations. It also accepted that franchising means sharing part of the economics with partners. In exchange, the company can reduce incremental capital pressure and expand through a more flexible network. The decision ultimately answers a capital-allocation question: if consumer demand for the brand still exists, does Haidilao itself need to finance every additional point of sale? The company's answer has increasingly become "not necessarily." Therefore, Decide receives 5.

Create4/5

Haidilao's original major creation was a restaurant system that combined hot pot, differentiated service, and highly controlled self-operated execution into a recognizable consumer brand. The company is now building a second system. Self-operated restaurants preserve core experience and operating capabilities, franchising improves capital efficiency, delivery expands consumption occasions, and packaged products can extend the brand beyond the dining room. This new combination has meaningful potential, but it is not yet fully validated. Restaurant-operation revenue remains under pressure, franchising must prove partner economics and quality control over time, and delivery must demonstrate that its growth is durable. The new channel and capital structure is taking shape, but it has not yet achieved the same level of validation as Haidilao's mature self-operated system. Therefore, Create receives 4.

Key Takeaway
Haidilao shows that restaurant chains must manage the relationship between consumer demand, fixed costs, and capital—not simply the number of stores. The rapid self-operated expansion of 2020–2021 created excess restaurant capacity, making table utilization and fixed-cost absorption more important than headline store count. The later strategy was not to stop growing, but to change how growth is achieved. In 2025, Group revenue was approximately RMB43.23 billion, while Haidilao restaurant-operation revenue declined about 7.1%. In 1H 2026, Group revenue was approximately RMB22.34 billion, restaurant operations remained under pressure, and delivery revenue increased to approximately RMB2.05 billion. Consumer demand can therefore be monetized through new channels even while the dine-in network still requires repair. Franchising changes the source of capital for the next point of sale. Haidilao does not necessarily need to fund every new restaurant itself; it can expand with partners while contributing brand, supply chain, and operating capabilities. The most transferable rule is: A restaurant brand can preserve and expand consumer demand while changing who funds the next point of sale. But lower capital intensity does not mean lower risk in every dimension. Franchising requires quality control, delivery growth cannot hide weak dine-in utilization, and the self-operated network still needs healthy unit economics. As of September 12, 2026, Haidilao had moved from excessive self-operated expansion toward a more flexible mix of channels and capital structures, but the new system remained under validation. The Outcome therefore remains Mixed.

Evidence / Sources

Public Evidence 1: Source / Author: Haidilao International Holding Ltd. Material: 2025 annual results and annual report Facts supported: 2025 Group revenue was approximately RMB43.23 billion, while revenue from Haidilao restaurant operations declined about 7.1%. These figures support the conclusion that the core restaurant business remained under pressure and that Group revenue alone cannot establish the health of dine-in operations. Public Evidence 2: Source / Author: Haidilao International Holding Ltd. Material: 2026 interim results, August 25, 2026 Facts supported: 1H 2026 Group revenue was approximately RMB22.34 billion. Restaurant operations remained weaker, while delivery revenue increased to approximately RMB2.05 billion. These figures support the conclusion that Haidilao's revenue mix was changing and delivery was becoming more important. Public Evidence 3: Source / Author: Haidilao International Holding Ltd. Material: 2025 annual report, 2026 interim report, and investor disclosures available through September 12, 2026 Facts supported: Haidilao continued developing delivery and franchising alongside its self-operated restaurant network while placing greater emphasis on store efficiency and lower-capital expansion methods. Internal Verification Notes: Research cutoff date: September 12, 2026. 2025 Group revenue: approximately RMB43.23 billion. 2025 Haidilao restaurant-operation revenue: approximately -7.1% year over year. 1H 2026 Group revenue: approximately RMB22.34 billion. 1H 2026 delivery revenue: approximately RMB2.05 billion. Do not treat Group revenue and Haidilao restaurant-operation revenue as the same reporting category. Do not claim that growth in delivery revenue proves that dine-in restaurant utilization has fully recovered. Do not describe Haidilao as having become a pure franchise or fully asset-light company. Self-operated restaurants remain an important operating foundation. Do not interpret controlled self-operated expansion as meaning the company stopped pursuing growth. The change is in the mix of channels and the source of capital used for growth. Do not describe franchising as risk-free. It reduces direct corporate store investment but increases the importance of partner economics, brand consistency, food safety, and quality control. Mixed means Haidilao has moved from excessive self-operated expansion toward store optimization, delivery, and franchising as more flexible growth methods, while core restaurant operations remain under pressure and the new channel and capital structure has not yet fully established a stable growth model. Statements such as "how much corporate capital is required for the next unit of growth" and "a restaurant brand can expand demand while changing who funds the next point of sale" are GoGoUp educational analysis. The Discover, Analyze, Execute, Decide, and Create scores and commentary are GoGoUp educational assessments, not official Haidilao ratings. This case is intended for business and entrepreneurship education and does not constitute investment advice.