How the rapidly growing franchise of Laoxiangji is benefiting from the takeaway battle

Lao Xiang Ji has submitted its third prospectus for the sprint to the Hong Kong stock market.

In the first eight months of 2025, revenue reached 4.58 billion yuan, a year-on-year increase of 10.9%, with the number of stores increasing by 179 to 1,658.

Lao Xiang Ji is currently adopting a strategy of balancing the expansion of its home base in Anhui Province with expansion outside the province.

By the end of August 2025, its stores will only cover nine provinces nationwide, with nearly half of the stores located in Anhui Province.

If we include the neighboring Jiangsu Province and Shanghai, the total number of stores in the East China region reaches 1,434, accounting for 86.5% of the total number of stores.

In terms of total transaction volume in 2024, Lao Xiang Ji is the largest Chinese fast food brand in East China, with a market share of 2.2%, approximately 2.5 times that of the second-largest competitor.

This regionally concentrated layout is closely related to its full industry chain model.

As one of the few brands in the Chinese fast food industry that deeply engages in the breeding segment, the company has established a supply chain system that includes 2 central kitchens, 3 chicken farms, and 8 distribution centers, and is currently building a third central kitchen in Anhui, expected to enter trial production in 2027.

This heavy asset layout across the entire chain provides a solid foundation for store expansion and food safety control, but due to the operational characteristics of "high investment, high cost, and low customer unit price," some viewpoints believe it may bring pressure on capital turnover and profit fluctuations.

However, it is precisely relying on this relatively complete supply chain that Lao Xiang Ji can strongly support the rapid expansion of its franchise system.

In recent years, the company has continuously promoted the optimization of its store structure, gradually converting mature directly-operated stores into franchise stores and opening franchise opportunities to qualified former employees.

As of the end of August 2025, its franchise stores have reached 733, accounting for nearly 44% of the total number of stores, a significant increase from 18.8% in 2023.

Among the chain restaurant brands that have gone public or are preparing for an IPO, Lao Xiang Ji's franchise ratio ranks among the top in the industry.

In comparison, XIAO NOODLES has a franchise store ratio of less than 25%, Yum China about 13%, and Xiaocaiyuan has not yet opened for franchising, while hot pot brands with higher standardization difficulties find it even harder to implement a franchise model on a large scale.

Under the franchise system, Lao Xiang Ji mainly supplies goods to franchisees and charges a management fee of 6% of the monthly sales of the store.

This light asset expansion model not only optimizes the overall profit structure of the company but also allows it to flexibly capture traffic during the summer delivery platform subsidies in 2025, effectively responding to the pressure of declining customer unit prices and dine-in sales.

In the first eight months of 2025, the company's gross profit margin increased by 0.7 percentage points to 24.6%, and the net profit margin also slightly increased by 0.1 percentage points to 8.1%.

The prospectus also unusually disclosed in detail the platform fee structure for the delivery business of chain fast food brands.

Lao Xiang Ji must pay the platform for each delivery order, including commissions based on sales and variable fulfillment fees. For example, for an order amount of 25 to 40 yuan, the platform service fee typically ranges from 2 to 7 yuan.

In 2024 and the first eight months of 2025, the average platform service expenditure rate for Lao Xiang Ji's directly-operated store delivery business was 17.9% and 17.5%, respectively