Spicy Hot Pot Brand Yang Guo Fu Applies for Hong Kong IPO

Chinese spicy hot pot chain Yang Guo Fu on Tuesday submitted an application for a listing on the Hong Kong Stock Exchange (HKEx), with China Securities International serving as its exclusive sponsor.

The history of the brand can be traced back to 2003, when founder Yang Guofu and his spouse opened their first self-operated spicy hot pot restaurant named “Yangji Spicy Hot Pot” in Harbin, a northeastern Chinese city. In 2007, the trademark “Yang Guo Fu” was registered as the brand name of all affiliated restaurants.

After several years of development in northern and central China, Yang Guofu’s family members jointly established the company in Shanghai in November 2015. In December 2021, the company was reorganized into a limited company.

According to the document Yang Guo Fu submitted to the HKEx, as of September 30, 2021, the company operated 5,783 restaurants globally, including three self-operated restaurants in Shanghai, 5,759 franchised restaurants in 31 provinces and cities in China, and 21 overseas franchised restaurants in Australia, Canada, South Korea, the United States, Japan and Singapore.

According to Frost & Sullivan’s report, Yang Guo Fu ranked first in China’s spicy hot pot market in terms of revenue, GMV and number of restaurants, as of December 31, 2020.

Yang Guo Fu disclosed in the prospectus that the franchise restaurants is the main source of income, including franchise fees, system maintenance fees and the sales of goods to franchisees.

The company also disclosed that in 2019, 2020 and the first nine months of 2021, it earned profits of 181 million yuan ($29 million), 169 million yuan and 202 million yuan, respectively.

Although Yang Guo Fu is the first spicy hot pot brand in China to attempt a public listing, its profit model has been seen as controversial by the public. Since its establishment, it has been relying on the franchise mode to expand, but it cannot control food safety standards well. In recent years, such problems have been exposed many times.

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In July last year, a video blogger made a private visit to Yang Guo Fu, only to find that there was mouse excrement everywhere in the warehouse and employees continued to use the ingredients that were bitten by mice. Yang Guo Fu issued an apology statement, and many stores were ordered to undergo rectification and received penalties.