Haidilao's net profit drops 14%; franchise and multi-brand strategies fail to offset core business decline

Ask AI · Can growth in the franchise model offset shrinkage in the core business?

Reporter Zheng Yuxin

On March 24, Haidilao (06862.HK) released its financial results, showing that in 2025 its revenue was 43.23B yuan, up 1.1% year over year; net profit was 4.04B yuan, down 14% year over year. By the close on March 25, Haidilao’s share price had fallen 11.07%.

This is Haidilao’s first instance of net profit decline since the pandemic. The decline in net profit was mainly driven by lower restaurant turnover rate and a reduction in the number of company-operated restaurants, leading to a drop in operating income from core restaurants, as well as a significant increase in multiple cost items including raw material costs, marketing and promotional expenses, and administrative expenses.

Through franchising and multi-brand incubation, Haidilao is looking for a new growth engine.

Haidilao officially announced the opening of its franchising business in March 2024. Since rolling out the franchise model, Haidilao’s revenue structure has already changed.

Restaurant operations remain Haidilao’s main source of revenue. In 2025, this segment accounted for 86.9% of revenue for the same period, but its revenue fell 7.1% year over year to 37.54B yuan. Haidilao explained that this change was mainly related to the decline in the turnover rate, as well as the reduction in the number of company-operated Haidilao restaurants due to the steady advancement of the franchising business.

Franchisees need to pay Haidilao franchise fees, forming a new revenue model. In 2025, Haidilao’s franchising business income rose sharply from 16.71 million yuan in 2024 to 270 million yuan.

In addition, Haidilao also adjusted its stores. On one hand, it shut down stores and moved locations. In 2025, 85 company-operated Haidilao restaurants were proactively closed because their operating performance did not meet expectations, or were relocated due to changes in commercial landmarks or outdated facilities; meanwhile, 45 company-operated restaurants were converted to franchised ones. On the other hand, it was cautious about opening new stores. Company-operated restaurants totaled 1304; during the year, 79 were newly added. Franchised restaurants totaled 79; during the year, 21 were newly added.

In its financial report, Haidilao said that in 2025 it would advance the strategy of “a different Haidilao,” hoping to transform from standardized operations to differentiated competition through a “different strategy for each store” operating model. In 2025, Haidilao established store models including fresh-cut stores, late-night snack stores, parent-child stores, and pet-friendly stores. By the end of 2025, it had cumulatively completed renovations of more than 200 themed stores. Among them, fresh-cut stores and late-night snack stores have already achieved a nationwide layout in key cities.

A bigger change is reflected in the brands. In August 2024, Haidilao launched the “Pomegranate Seed Plan,” encouraging the incubation of more new brands. After more than a year of exploration, the plan has incubated 20 catering brands, including multiple categories such as seafood big platters, sushi, Western-style light meals, hot pot, and Chinese fast food, with a total of 207 restaurants. In 2025, Haidilao’s other restaurant operating income was 1.52B yuan, up 214.6% from the same period last year.

Under the parallel strategy of multiple brands, Haidilao adjusted its organizational structure in 2025 and established a coordination system across front office, middle office, and back office. The front office focuses on brand incubation and market offensives, with greater decision-making autonomy; the middle office takes on resource coordination and technology enablement responsibilities; and the back office is responsible for deepening the fundamentals of Haidilao’s main brand.

In January this year, Haidilao founder Zhang Yong resumed his role as CEO of Haidilao. In March 2022, Haidilao announced that Zhang Yong stepped down from his CEO position, and Haidilao’s veteran executive, Yang Lijuan, former vice chief executive officer, Chief Operating Officer, was reassigned as the company’s Chief Executive Officer. In June 2024, after serving as CEO of Haidilao for 2 years and 3 months, Yang Lijuan was reassigned to become CEO of Haidilao’s overseas business unit, Teha International. Subsequently, Gou Yiqun, Haidilao’s deputy general manager and in charge of investment business, took over as CEO. After 1.5 years, Gou Yiqun resigned, and Zhang Yong returned to serve as the company’s CEO, stepping back onto the front line.

Tian Guangli, founder of Longce Catering Think Tank, believes that last year Haidilao fell into a dilemma of “opening more stores but not more profit, opening more revenue but not more profit.” Its main hot pot business’s revenue and profits have both already reached a ceiling, and the exploration of multiple brands has not yet achieved significant results. The founder’s return to the front line is not only to restore confidence for the company and investors, but also to clarify the development direction and get out of the predicament.