Why Does Yuanji Food, Valued at RMB 3.5 Billion, Close One Store for Every Three Opened?

ZC Asia has learned that Yuanji Food Group Co., Ltd. (hereinafter referred to as “Yuanji Food”) recently submitted its listing application to the Hong Kong Stock Exchange, with Huatai International and GF Securities serving as joint sponsors. If successfully listed, it will become the “first dumpling and wonton stock” on the Hong Kong stock market.

It is reported that in 2017, founder Yuan Lianghong registered the company in Foshan with a registered capital of just 100,000 yuan, wholly owned by his spouse Yang Yu. Subsequently, Yuanji Yunjiao embarked on a franchise expansion strategy: surpassing 100 stores in 2018, exceeding 1,000 stores in 2021, and reaching a total of 4,266 stores by September 30, 2025.

The prospectus reveals that Yuanji Food operates two major brands: “Yuanji Wonton” and “Yuanji Weixiang.” The former focuses on dine-in, ready-to-eat, and fresh takeout/delivery, contributing approximately 97% of revenue. The latter expands into retail and B2B channels for pre-packaged products, with revenue growing 46.48% year-on-year in the first three quarters of 2025, emerging as a new growth driver.

In June 2023, the company completed a 30 million yuan Series A financing round led by Black Ant Capital. Its funding pace accelerated significantly in 2025: a 150 million yuan Series B round closed in September, followed by a swift 280 million yuan Series B+ round in December. Notably, the payment date for the Series B+ round was December 15, 2025. Less than a month later, Yuanji Foods submitted its IPO prospectus.

The Series B+ round featured a prestigious investor lineup, including publicly listed company Golden Dragon Fish (parent company of Yihai Kerry), C&D Emerging Investment under Xiamen C&D Group, and Qicheng Capital. Post-funding, the company achieved a valuation of RMB 3.5 billion.

Prior to the IPO, founder Yuan Lianghong directly and indirectly controlled 82.54% of the company's voting rights, holding absolute control. Black Ant Capital is the largest institutional investor, while Yihai Kerry holds a 0.43% stake.

Franchise Model Hits a Snag: One Store Closes for Every Three Opened

Yuanji Food's expansion miracle heavily relies on its franchise model. As of September 30, 2025, among its 4,266 stores, franchised outlets numbered 4,247, accounting for a staggering 99.55%, while company-owned stores totaled only 19.

However, the prospectus data reveals underlying concerns with this model. In 2023, 2024, and the first nine months of 2025, Yuanji Food's total store GMV was RMB 4.772 billion, RMB 6.248 billion, and RMB 4.789 billion, respectively. Adjusted for the number of stores at the end of each period, the average daily GMV per store was RMB 4,220, RMB 4,390, and RMB 4,158, respectively, with a year-on-year decline of 5.30% in the first three quarters of 2025.

Average order value also showed a persistent downward trend: RMB 26.13 per order in 2023, declining to RMB 24.69 in 2024, and further falling to RMB 22.79 in the first nine months of 2025.

More concerning is the closure rate among franchisees. In 2023, Yuanji Food opened 1,226 new franchise stores while closing 81, averaging one closure for every 15 new openings. In 2024, 254 stores closed—roughly one closure for every four new openings. During the first nine months of 2025, 481 new stores opened but 160 closed—equivalent to one closure for every three new stores—signaling a marked slowdown in expansion.

This indicates that Yuanji Food's overall revenue growth increasingly relies on the sheer accumulation of store numbers, while the operational pressure on individual franchise outlets intensifies. Should franchisees face profitability pressures or even losses, the entire expansion model will face severe challenges.

300 Million Yuan in Related-Party Transactions: Supplier Controlled by “Boss's Wife”

At this critical moment of its IPO push, Yuanji Food's related-party transactions have drawn significant scrutiny.

The prospectus reveals the company's ongoing procurement from six related enterprises, covering multiple segments including soup base sauces, dumpling wrappers, production equipment, and advertising design. These six companies are: Foshan Fanlaizhiwei Seasoning Food Co., Ltd., Guangdong Huifengyuan Food Co., Ltd., Guangdong Chuwei Engineering Services Co., Ltd., Foshan Heshun Food Machinery Co., Ltd., Shenzhen Zuoyou Color Advertising Planning Co., Ltd., and Shenzhen Teibiezhengjing Culture Communication Co., Ltd.

Shareholding penetration analysis reveals that all six companies hold partial stakes in Guangdong Miyuan Enterprise Management Co., Ltd. (with holdings ranging from 35% to 42%). The controlling shareholder of Miyuan is Yang Yu, spouse of Yuan Lianghong, holding a substantial 95% stake.

In the first nine months of 2023, 2024, and 2025, Yuanji Food's procurement amounts from the aforementioned six companies were RMB 41.31 million, RMB 54.94 million, and RMB 34.22 million, respectively, totaling RMB 130 million. The company further projects that the upper limits for procurement expenditures from 2026 to 2028 will reach RMB 97 million, RMB 122 million, and RMB 128 million respectively, totaling RMB 347 million over the three-year period, demonstrating a trend of year-on-year increase.

In its prospectus, Yuanji Food stated that all related-party transactions are conducted under fair principles and normal commercial terms, without harming the interests of the company or its shareholders. However, it did not elaborate on how the fairness of these transactions is effectively monitored.

Frequent Food Safety Incidents: Franchise Management Proves Challenging

For food and beverage companies relying on franchise models for rapid expansion, food safety remains a constant threat hanging over their heads—Yuanji Food is no exception.

In late 2024, a Yuanji Wonton Noodles outlet in Beijing drew widespread attention after reports surfaced of “earthworms found in fresh meat wonton noodles.” The Haidian District Market Supervision Administration subsequently confirmed the store had violated food safety regulations and initiated an investigation. Yuanji Wonton Noodles responded by pledging to strictly rectify the store, dismiss the manager, and enhance daily oversight.

On the Black Cat Complaint Platform, Yuanji Wonton Noodles faces 385 complaints, most targeting food safety concerns. Reports of “foreign objects in food” and “acute gastroenteritis after consumption” are common. Random searches on Meituan's food delivery platform reveal some Beijing outlets with over 5% negative reviews, citing issues like “insufficient portions” and “offensive odors.”

Yuanji Food acknowledged in its prospectus: “We cannot guarantee that quality control and food safety measures will remain effective at all times, nor can we ensure franchisees, employees, and other third-party operators adhere to our internal policies and guidelines.” This admission reflects, to some extent, the company's struggle to manage thousands of franchise outlets.

Targeting Tier-3 Cities and Overseas Expansion: Seeking a Second Growth Curve

Faced with the challenges exposed by its franchise model, Yuanji Food is actively seeking new avenues for growth.

As of September 30, 2025, the company operated 1,121 stores in tier-3 and below cities, accounting for 26.6% of its total outlets—a 6.8 percentage point increase from 2023, making it the fastest-growing market tier.

Overseas expansion is also accelerating. Tian Wei, co-founder of Yuanji Cloud Dumplings, is leading a team of seasoned veterans to vigorously develop international markets. By the end of 2024, the company opened its first overseas store in Singapore; as of January 5, 2026, it has expanded to 10 stores in Singapore and established a presence in Thailand. The prospectus states that the goal of overseas expansion is “not fragmented coverage, but building a cohesive business footprint.”

Proceeds from this IPO will primarily fund digital and intelligent infrastructure development, overseas market expansion, brand building and product R&D, as well as supply chain upgrades.

For investors, the growth potential of a single dumpling may be enticing, yet the harsh realities of capital markets demand attention. Whether Yuanji Foods can successfully list on the Hong Kong Stock Exchange and how it will navigate these challenges post-IPO remain questions the market is watching closely.

Disclaimer: The content herein is for reference only and does not constitute any form of investment advice. Should any information contained herein prove inaccurate, incomplete, or potentially misleading, please refer to the company's official announcements. Market risks exist; investment requires caution.