With 1,500 more employees, the total labor cost for the small vegetable garden actually decreased.

Ask AI · Is Xiaocaiyuan’s cost reduction and efficiency improvement coming at the expense of employee income?

On March 25, Xiaocaiyuan, a leading Chinese-style casual dining company under the mass convenience retail umbrella (00999.HK), released its 2025 annual report.

In 2025, Xiaocaiyuan generated revenue of RMB 5.345 billion, up 2.6% year over year. Attributable net profit was RMB 715 million, up 23.2% year over year, with profit growth outpacing revenue growth.

In terms of store expansion, in 2025 Xiaocaiyuan added 146 net new stores throughout the year. By year-end, the total number of stores reached 819, all operating under a direct-operated model, including 807 stores under the “Xiaocaiyuan” brand. The company also plans to expand its store footprint to 1,000 stores by the end of 2026.

However, Xiaocaiyuan’s store expansion pace showed a clear split during the year: in the first half, it added only 5 net new stores, nearly pausing expansion; in the second half, it accelerated, adding 141 net new stores. An investment research report from Soochow Securities noted that the slowdown in new store openings in Xiaocaiyuan’s first half of 2025 was related to negotiations over mall rent.

According to the prospectus plan as well, Xiaocaiyuan intends to open approximately 160 new stores in 2025, but its current expansion progress has fallen behind.

By Zhou Yu / Photo

The contrast between expansion intensity and revenue growth is especially striking. Last year alone, Xiaocaiyuan added 146 net new stores, expanding by more than 20%; yet revenue from dine-in business increased by only 2.2% year over year to RMB 3.261 billion.

This means that sales pressure at Xiaocaiyuan’s store front remains relatively high, and that pressure is also reflected in the long-term trajectory of revenue growth.

Looking at a longer timeline, Xiaocaiyuan’s revenue growth rate has shown a “stepwise slowdown” pattern: in 2022, revenue grew 21.45% year over year to RMB 3.213 billion; in 2023, it grew 41.58% to RMB 4.549 billion; in 2024, the growth rate slowed to 14.52% with revenue reaching RMB 5.21 billion; and in 2025, the growth rate fell further to 2.6%, the lowest in nearly four years. The company’s model of relying long-term on store expansion to drive growth may no longer be sustainable.

Operational pressure at individual stores becomes even more intuitive through specific data: after same-store sales fell 12.1% year over year in 2024, they declined another 9.4% in 2025. Although the decline narrowed, it was unable to reverse the overall lackluster trend. Among them, same-store sales in first-tier cities saw the most significant drop, with a decline of 12%.

A continuous decline in average ticket size has also become another major challenge.

The financial report shows that Xiaocaiyuan’s average spend per customer decreased from RMB 65.2 in 2023 to RMB 56.1 in 2025. Over the two years, the cumulative drop is approximately 14%. The continued downward pricing puts the brand’s ability to command a premium under pressure.

Delivery is another important component of Xiaocaiyuan’s revenue.

In 2025, the company’s delivery business revenue was RMB 2.065 billion, up 3% year over year, with a growth rate higher than the dine-in business. Its share of total revenue inched up to 38.6%.

But this share is not the company’s ideal situation. Xiaocaiyuan’s chairman, Wang Shuhai, has repeatedly said publicly that in the future, the revenue ratio of dine-in to delivery should be controlled at 6.5:3.5 (dine-in at 65%, delivery at 35%), with an ideal state of “70/30.” At present, the imbalance in delivery’s share continues to be evident. It is understood that in the fourth quarter of 2025, the company took the initiative to launch a two-way adjustment of “reducing delivery’s share and improving delivery quality + offering dine-in incentives,” seeking to bring delivery revenue share back into a reasonable range.

It should be noted that while Xiaocaiyuan’s profit growth outpaced revenue growth, cost reduction and efficiency improvement is the core support; however, this effect may come with a compression of employee income.

In 2025, as the company expanded its stores, Xiaocaiyuan’s number of full-time employees increased from 12,034 at the end of 2024 to 13,540 in 2025—an addition of 1,506 employees, a growth rate of 12.5%. But the company’s total staff cost for the full year (including salaries, wages, allowances, and benefits) did not rise but fell instead—from RMB 1.421 billion in 2024 to RMB 1.373 billion in 2025—corresponding to the average annual employee cost decreasing from RMB 118,100 to RMB 101,400, a decline of 14%.

Reporter: Zhou Yu

Text editor: Sun Wanqiu