Prepaid consumption is meant to be a win-win model for businesses and consumers, but in the catering industry, this model has repeatedly led to crises. Since the beginning of 2026, several regional or national catering brands, including Shanghai Xiaonanguo, Fengmao BBQ, Hainan Jiayifang, and Nanchang Shixianlou, have been caught in a wave of store closures. Many customers have faced issues such as being unable to recover their prepayments. Notably, most of these brands had been operating for years with good reputations but suddenly shut down due to poor management or broken capital chains, leaving consumers unprepared.
Although the Supreme People’s Court issued and implemented the Judicial Interpretation on Civil Disputes Involving Prepaid Consumption last year, clarifying the responsibilities of operators, consumers still face practical challenges such as difficulty in providing evidence, holding parties accountable, and high costs of safeguarding their rights. An industry association representative stated that the interpretation provides clearer regulations on operators’ responsibilities after terminating business, which is a positive signal for standardizing the industry. However, from a governance perspective, there is still a process required between establishing systems and operators genuinely developing compliance awareness.
From a legal standpoint, if a catering brand suddenly closes and refuses to refund stored-value card balances or prepayments, it may constitute a breach of contract. In certain circumstances, it could even be considered fraud or involve criminal offenses. Who, then, safeguards the final step in prepaid consumption?
Consumers like Ms. Jin from Changchun reported that after using a Fengmao BBQ stored-value card for several years, she found in early January that only three branches remained open in the city, and her card was no accepted at other locations. Although she applied for a refund and her card balance was cleared by the headquarters, Yandi Deshang Catering Co., the refund was still not processed a month later. Fengmao BBQ is just one example of the brands facing collapse in 2026.
These brands share common traits: they are well-known, have long operating histories, and their closures were sudden, with little advance notice to consumers. The core reason for closure often relates to operational failures. In response to closures, wage arrears, and prepayment issues, Fengmao BBQ founder Yin Longzhe issued several letters between December 2025 and February 2026, explaining that the company faced liquidity pressure due to loan repayments and delayed financing. As of March 8, no clear plan for refunding consumers had been announced.
A staff member at a still-operating Fengmao BBQ franchise store revealed that due to settlement disputes with the headquarters, the store no longer accepts stored-value cards from other branches and is uncertain about its future. Some brands, like Hainan Jiayifang, have begun registering prepaid card balances but have not provided specific timelines or solutions.
Why do such prepayment issues persist despite regulations? An industry association secretary-general noted that while prepaid consumption is a legitimate business model, its success depends on operators using funds compliantly and transparently. Compared to sectors like beauty salons or fitness, catering involves smaller prepaid amounts and shorter consumption cycles, making it less risky overall. However, high-profile cases attract significant attention.
Legal experts point out that enforcement remains challenging. Some businesses evade responsibility by using different company entities, deregistering, or transferring assets. Consumers also struggle to provide evidence, as many prepaid transactions lack written contracts. Although regulations require shopping malls to vet tenants, accountability gaps often leave consumers to pursue claims independently.
To improve prepayment management, the industry could focus on three areas: strengthening legal awareness and self-regulation, enhancing transparency in refund rules and store policies, and exploring safeguards like fund escrow or insurance mechanisms. For consumers, prepaid card non-refundability typically constitutes a breach of contract. If operators close without notice or refuse refunds, it may amount to consumer fraud, entitling customers to triple compensation under consumer protection laws. In severe cases, such practices could lead to criminal fraud charges.
Consumers are advised to gather evidence, such as payment records, card details, and communications, and report issues to market regulators or consumer associations. If fraud is suspected, legal action or police reports may be necessary. However, if a business declares bankruptcy, consumer prepayments are generally treated as ordinary claims without priority in repayment proceedings.
Industry recommendations for consumers include choosing established brands with stable operations, verifying store types and contracting entities, opting for small, short-term top-ups, and retaining contracts, receipts, and transaction records. Key questions—such as whether a store is franchised or directly operated, who receives payments, and refund procedures—should be clarified in writing rather than relying on verbal promises, as regulations require written agreements for prepaid services.
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