Zhou Zhaocheng: Haidilao faces real challenges, but the strategic direction is correct.

Ask AI · Can the Red Pomegranate Plan become Haidilao’s second growth curve?

Zhang Yong’s return involves three plans: improving Haidilao store operations, especially interactions with young consumers; implementing the Red Pomegranate Plan in hopes of finding a second growth curve; building an intelligent middle platform.

Text | “Finance” Reporter Yang Liyun Intern Lin Xinyi

Editor | Xie Lirong

China’s large chain hotpot company Haidilao (06862.HK) recently released its latest annual financial report, with revenue of 43.23 billion yuan in 2025, up 1.1% year-on-year; net profit was 4.04 billion yuan, down 14% year-on-year. Two months ago, founder Zhang Yong returned to serve as CEO of Haidilao.

During Zhang Yong’s four-year absence, Haidilao experienced two leadership changes. In 2022, “the most outstanding service staff” Yang Lijuan took over, leading the “Woodpecker Plan” which closed about 300 poorly operated stores, helping Haidilao successfully turn profitable. In June 2024, another veteran, Gou Yiqun, succeeded Yang Lijuan as CEO; Yang Lijuan was appointed CEO of Haidilao’s overseas business, Tehai International, and also became an executive director.

In January 2026, Haidilao announced that Gou Yiqun resigned as CEO, and Chairman Zhang Yong personally took over. Meanwhile, Gou Yiqun and two other veteran directors resigned from the board, and four managers around 40 years old were appointed as executive directors—Haidilao is reshaping its management team, clearly moving toward a younger leadership.

Regarding profit decline, Haidilao’s official explanation mainly cites the impact of decreased table turnover rate and adjustments in product and scene innovation models. The most closely watched metric, the table turnover rate, failed to inspire market confidence. In 2025, the annual table turnover rate was 3.9 times/day, lower than 4.1 times/day in 2024. The total customer visits reached 384 million, a 7.5% decrease from the previous year.

These two data points show a decline in store foot traffic; with per capita spending roughly stable compared to last year, restaurant operating income decreased by 7.1% year-on-year.

Source: Wind

The company maintained overall revenue growth of 1%, mainly relying on delivery services and new restaurants incubated through the “Red Pomegranate Plan.” Due to a small revenue base, the growth rates of these two segments are particularly high, increasing by 111.9% and 214.6%, respectively.

Behind Zhang Yong’s return, Vice Chairman and Executive Director Zhou Zhaocheng is one of the “chief designers” of this core management youth transformation. He assists Zhang Yong in formulating the company’s long-term strategy and direction, making him the second most influential figure in the company’s strategic layer after Zhang Yong.

In a recent interview with “Finance,” Zhou Zhaocheng said that with Zhang Yong serving as Chairman and CEO, it is easier to unify the efforts of all employees and push projects and strategic decisions into action. This will make Haidilao’s overall direction clearer, and the company’s major strategic decisions will be sustained.

This aligns with Haidilao’s current development stage and situation. Wen Zhihong, a restaurant chain expert and General Manager of Hong Consulting, told “Finance” that the data feedback from financial reports is delayed; top management perceives their operational situation in real time. Zhang Yong’s return, when traced back in time, suggests that he already knew the performance trend months ago and had begun planning.

“It’s impossible for earth-shaking changes to happen in one or two months; it takes time,” Zhou Zhaocheng told “Finance.” He added that the overall table turnover rate had already increased in the first quarter of 2026.

CICC Lyon Securities pointed out in a report on Haidilao’s financials that investors remain cautious about the company’s reduced dividend payout ratio and the recovery of table turnover rate. The report believes that, given Haidilao’s current challenges, the 2025 table turnover rate of 3.9 times is quite robust; easing competition should help store expansion, with an estimated compound annual growth rate of 2% to 3% in store numbers from 2026 to 2028; re-focusing on developing sub-brands is a correct strategic move.

Zhang Yong’s next tasks include three main directions—improving store operations, especially interactions with young consumers; implementing the Red Pomegranate Plan to find a second growth curve; and building an intelligent middle platform.

Internal and external factors weighing on performance

Wen Zhihong believes that nearly stagnant revenue and declining profits are signals that Haidilao should be alert. In this interview, Zhou Zhaocheng did not directly discuss this topic.

According to the financial report, Haidilao divides its business into six segments: Haidilao restaurant operations, delivery services, other restaurant operations, condiment and ingredient sales, franchise operations, and others.

Haidilao restaurant operations remain the company’s main segment, accounting for 86.9%, but this share declined 7.6% compared to last year. The softness in main brand dine-in sales is the primary reason: in 2025, the overall average check was 97.7 yuan, a slight increase of 0.2%; but the table turnover rate decreased by 0.2 times/day, and same-store revenue fell 6.7% year-on-year. Coupled with the closure or transfer of 45 self-operated restaurants to franchise stores, this segment’s revenue dropped 7.1%.

Franchise operations are still in the early stages. By the end of 2025, Haidilao operated 1,383 restaurants under its brand, including 1,304 self-operated (79 new openings and 85 closures during the year), and 79 franchised stores (21 new, plus 45 transferred from self-operated). Since only franchise fees are recognized as revenue, franchise operations contribute just 0.6% to total revenue. During the reporting period, 85 self-operated restaurants were closed or relocated proactively due to underperformance.

Zhou Zhaocheng defined the key word for franchise strategy as “steady”: “We haven’t set a target for the number of franchises; quality comes first. We strictly evaluate and review franchisees. We seek high-quality partners through franchise channels—that’s different from simply pushing franchise expansion.”

Wen Zhihong believes that Haidilao’s performance pressure is directly related to the overall consumer market environment. In 2025, the full-year GDP growth was 5.0%, and total retail sales of consumer goods grew 3.7%, slightly above last year’s 3.5%. But catering revenue grew only 3.2% in 2025, a significant slowdown from 5.3% in 2024. Among large-scale catering (annual revenue over 2 million yuan), revenue reached 1.6337 trillion yuan, up just 2.0%. In other words, the larger the scale, the harder the growth.

He believes that the fundamental reason for Haidilao’s performance pressure is that consumer spending has shifted from double-digit annual growth to low single digits, with industry competition and internal issues also playing roles. From its own perspective, its main stores are large-format, high-cost operations, and in lower-tier markets, its brand effect is less advantageous than in high-tier markets.

Distribution of Haidilao’s business Source: Haidilao financial report

The ones taking business away are not hotpot restaurants

The latest “2026 China Catering Industry Ecosystem White Paper” published by the Red Restaurant Industry Research Institute states that catering revenue growth in 2025 was only 3.2%, with three main reasons for sluggish growth: overcapacity leading to homogeneous low-level competition, negative impacts from industry emergencies and policies, and an overall less optimistic economic environment causing cautious consumer spending, especially in high-ticket dining. As a lagging cyclical industry, the catering sector is expected to see substantial improvement in 2026.

So, who are Haidilao’s competitors? Other hotpot brands, or other dining categories?

Zhou Zhaocheng’s answer was unexpected: “Haidilao is competing in the dining consumption scene.” He explained that people’s lifestyles have changed—three meals a day are no longer a strict rule. A cup of milk tea, a dessert with coffee, or a 20-minute delivery beverage can replace a full meal. These behaviors are diverting demand from traditional dine-in.

Data confirms this trend. In 2024, the total number of all-category restaurant outlets increased by 11.2% year-on-year, but per capita consumption decreased by 11.5%. In 2025, expansion momentum slowed, with overall store numbers across six major categories down 2.6%. Heavy experience-based categories like barbecue and hotpot shrank significantly, while ready-to-drink beverages still grew rapidly at 10.9%. The hotpot market growth rate dropped from 5.6% in 2024 to 3.5% in 2025.

Source: Red Restaurant Industry Research Institute

Zhou Zhaocheng believes that fierce competition, amplified by social media and digital operations, has intensified price wars. Technological advances make outreach easier but also make competition more brutal.

“Nobody’s business is easy.” He thinks that Haidilao’s competition is not just between hotpot brands, but extends beyond the restaurant industry—more about consumers’ shifting time, choices, and demands. “Haidilao’s delivery last year grew well, which is also a form of time diversion. Delivery can go late into the night and create many eating periods outside traditional three-meal times.”

“The key is whether they can transform quickly and effectively,” Zhou said. If others (competitors) do well, it means they are transforming fast, correctly, and thoroughly. “We haven’t achieved our goals, so obviously some areas are lacking. We’ve made many efforts, but it’s still not enough. The main brand needs to be steady, new businesses need to be developed, and multi-scene layouts are necessary; otherwise, challenges will only grow.”

Compared with publicly disclosed 2025 results of Xiaocaiyuan, Yum China, Jiumaojiu, Dashi Holdings (Domino’s China), and Green Tea Group, Haidilao’s net profit growth is the lowest, and revenue growth ranks second from the bottom. But currently, its market value is around 70 billion yuan, second only to Yum China, far surpassing the others.

Chart: Lin Xinyi; Data source: Wind

Comparison of Market Values of Leading Chinese Mainland Restaurant Listed Companies Chart: Lin Xinyi; Data source: Wind

How to win it back? Race for market share

Since the business is being taken away not by other hotpot restaurants but by more dispersed consumption scenes, how can Haidilao “reel in” lost customers?

Zhou Zhaocheng’s approach is: wherever consumers go, Haidilao will follow. On one hand, strengthen the social scene function of hotpot stores, reform the main brand, launch the “Different Haidilao” strategy, decentralize store authority, and adopt an “one store, one policy” operation model, shifting from standardization to differentiation.

For example, based on different commercial districts and customer segments, they launched fresh-cut stores, night snack stores, family-friendly stores, and pet-friendly stores. By the end of 2025, over 200 of the 1,300+ stores had been transformed into themed restaurants.

On the other hand, fill the channels where consumers are shifting. For example, single-person dining, delivery scenarios, and multi-brand, multi-store setups. “If consumers shift to other channels, can we also have our products and services there? If yes, then we also share part of that (consumer demand)!”

According to the financial report, Haidilao has already seen growth in some new businesses outside its main store operations. The fastest-growing is delivery, which increased its share from 2.9% in 2024 to 6.1% in 2025.

Delivery is a key driver of Haidilao’s 2025 revenue, reaching 2.66B yuan, up 111.9% year-on-year.

“Actually, Haidilao’s delivery isn’t traditional hotpot delivery; the real growth is in high-frequency, lightweight delivery products for single-person scenarios, like side dishes and mixed rice.” Zhou said they will increase SKUs and categories for delivery this year. This leverages Haidilao’s supply chain advantage, turning raw materials into delivery products. Haidilao calls this a “store + home” dual-drive model.

Meanwhile, Haidilao is accelerating the incubation of new brands outside its main brand, known as the “Red Pomegranate Plan.” Launched internally in 2024, it encourages staff entrepreneurship and incubates new brands to find the company’s second growth curve.

This segment is categorized under “Other Restaurant Operations” in the financial report, which earned 1.521 billion yuan in 2025, up 214.6%, accounting for 3.5% of total revenue.

By the end of 2025, the Red Pomegranate Plan had 20 brands with 207 stores, covering categories like seafood stalls, sushi, Western light meals, small hotpots, and Chinese fast food.

Haidilao states that the Red Pomegranate Plan has shifted from internal incubation to market expansion, and has redefined its rules. It now has two systems: “Master Chefs” focusing on employee entrepreneurship, and “Common People’s Restaurants” led by headquarters for project incubation. Additionally, Haidilao plans to strategically seek acquisitions of quality assets to further enrich its restaurant formats and customer base.

“Launching ‘Common People’s Restaurants’ aims to establish more cost-effective projects,” Zhou explained. “Cost-effectiveness means high quality at very competitive prices. For example, in large stalls, this gives an advantage, driven by headquarters, and results can be very quick.”

He said that the principles for choosing entrepreneurial categories are threefold: first, market demand; second, growth potential; third, Haidilao’s capability. Early-stage project approval is based on these criteria. During the race, the market will decide who is good, who can sustain, and who should survive.

Currently, Haidilao hopes to downplay the role of new brands as part of the Haidilao group. “They (new brands) should go through their own market tests to evaluate whether their business models are viable, rather than initially relying on Haidilao’s brand. Otherwise, if they succeed, is it because of their own strength or because of the Haidilao brand? They need to find their own way early on and test the market to develop real skills.”

Therefore, there are no coordinated or linked actions among the 20 new brands at this stage—“their scale isn’t big enough,” Zhou said.

In theory, once these new brands grow to a certain size and begin to collaborate, Zhang Yong’s current focus on building an intelligent middle platform will play a bigger role. According to Haidilao’s financial report, the company is restructuring its organization to create three levels: front, middle, and back. The intelligent middle platform is seen as the “strategic command center,” responsible for strategic coordination, resource integration, and technological empowerment, enabling cross-brand resource sharing to achieve scale effects and replicable experience. By 2025, Haidilao plans to establish a shared “catering ecosystem intelligent middle platform” across all brands, confirming its strategy of technology-driven expansion.

Developing other brands and businesses will temporarily impact profitability. In 2025, Haidilao’s net profit margin was 9.4%, down 1.6 percentage points year-on-year; gross margin was 59.5%, down 2.6 percentage points, mainly because revenue from other business segments outside restaurants increased.

Implicit challenge: generational friction in service culture

Beyond financial reports, another intangible challenge Haidilao faces—difficult to quantify—is employee management and customer service. The core issue is how to handle relationships between people.

“Changing destiny with both hands” is Haidilao’s core value, offering a direct belief: regardless of background, as long as one is diligent, dedicated, and honest, ordinary people can earn a decent income with their own hands and see upward mobility.

Haidilao founder Zhang Yong summarized this as a fair environment where “more work equals more reward,” implemented on two levels:

The first step to change destiny is to earn money. Haidilao offers wages above industry average, using a “piecework” system where service quantity and quality directly affect income, enabling “more work, more pay”; and a “mentor-apprentice” incentive policy that binds interests across employees, store managers, stores, and the company.

The second is to give employees a decent life. Haidilao cares deeply for employees and their families, creating a “family” warmth, and as early as the 1990s, providing subsidies to outstanding employees’ parents, making them “prestigious” in their villages, linking personal achievement with family honor.

Fifteen years ago, a book titled “You Can’t Learn Haidilao” made Haidilao’s “management wisdom” a case study across industries. Its core idea is that Haidilao creates a corporate culture where employees feel respected and trusted, spontaneously providing excellent service. This seemingly simple but heartfelt philosophy is its most difficult-to-imitate secret.

However, as Haidilao grows, the “changing destiny with both hands” philosophy faces challenges. Recently, the company slowed store openings, reducing promotion opportunities for young employees, some feeling limited upward mobility and doubting the fulfillment of this philosophy.

Meanwhile, extreme service has evolved into highly standardized procedures. Younger and overseas employees are less compliant than previous Chinese staff. A recent post by a former Haidilao employee on Phoenix News criticized the work system.

She described a strict execution standard called “Smile Run Answer”: “Must smile, run, respond quickly.” She said customers are greeted with three steps, and farewells with three steps. Employees are required to maintain a constant, bright smile. “Urgency” is one of the metrics for executing “Smile Run Answer.”

She felt that “everyone is too busy, every time they speak, they habitually use a tone of correction or blame,” lacking empathy and understanding. She joined in January 2025 and left after six months.

Wen Zhihong said that during the growth phase, Haidilao employees felt a strong sense of belonging, happiness, and recognition; but when the company faces operational pressure, that pressure can pass from management to frontline staff.

Public sentiment on social media about Haidilao’s “extreme service” is also diverging. Under the Phoenix News comment, a reader said: “I personally find Haidilao’s service very awkward, too mechanical, uncomfortable. It’s not about experienced waiters reading cues, but about forced responses—constantly interrupting your meal.” This comment received over 1,000 likes.

“Good service” was once a core competitive advantage that distinguished Haidilao from other brands, with consumers assuming high prices include service costs. When service quality triggers negative feedback, it directly impacts table turnover (frequency of visits) and pricing power (profit margins).

Regarding this controversy, Zhou Zhaocheng admitted that service depends on human warmth transmission; while there are rules and procedures, they are hard to quantify. During implementation, misunderstandings and deviations occur. “The core is how management truly cares for employees and motivates them to prioritize customer experience.”

He emphasized, “The idea of ‘one hand on employees, one hand on customers’ is correct, but there are many shortcomings in execution. It requires continuous change and correction. Sometimes, it even takes a strong resolve to change inappropriate systems. Every level, department, and region needs to reflect, but their focus varies.”

On intergenerational friction, Zhou Zhaocheng said that Haidilao stores include both long-term employees around 30 years and young newcomers. “The key for this generation of young people is whether the company provides a fair and just environment, giving them room to grow, consistent with Haidilao’s value of changing destiny with both hands.”

He believes the generational gap is real: “People from the 70s might not understand the language or humor of today’s young people. The key is for managers to listen, respect, and communicate.”

“Since differences exist, they must be valued,” Zhou said. “No system is unchangeable. For example, in the mentor-apprentice system, the way mentors care for and involve apprentices has always been slightly adjusted. I promise: management systems are not based solely on top-down planning but on market reactions, actual results, and employee feedback.”