A two-pronged self-rescue strategy is being implemented simultaneously at Xibei following the retreat of its founder, Jia Guolong, from the forefront.
On one side, the company is undergoing contraction and experiencing associated pain. In January, Xibei announced the closure of 102 outlets and reduced its headquarters staff from over 500 to approximately 200, a cut exceeding 60%. Remaining employees face challenges, with some receiving pay reduction notices, while those refusing voluntary resignation were issued standby notices. For the next six months, these employees will receive only the local minimum wage of 2,540 yuan per month.
Conversely, a covert expansion is underway. On March 2, in Shanghai—the city hardest hit by the closures—Xibei established three new companies in one go: Shanghai Lihe Catering Management Co., Ltd., Shanghai Huijuyuan Catering Management Co., Ltd., and Shanghai Lumantang Catering Management Co., Ltd. These entities share an identical ownership structure: Inner Mongolia Xibei Catering Group Co., Ltd. holds a 70% stake, while Shanghai Haochi Catering Management Partnership holds the remaining 30%.
This presents a stark contrast for a single company at the same point in time.
The legal representatives of the three new companies are Li Huilai and Wang Jinjin, both long-time core managers within the Xibei system responsible for East China operations. Corporate records indicate deep equity ties between these individuals and Xibei. Wang Jinjin holds a 3.259% stake in Shanghai Haochi and a 6.3938% stake in Hohhot Telling the Truth Enterprise Management Center. Li Huilai also holds a 1.2227% stake in Shanghai Haochi.
Established in 2015, Shanghai Haochi functions as an employee持股 platform for Xibei, aimed at retaining core management. A decade ago, the parties jointly founded Shanghai Xibei Zhouxin Catering Management Co., Ltd., with Xibei Group holding 60% and Shanghai Haochi 40%. This makes Li and Wang not just legal representatives but actual beneficiaries of the new ventures.
In contrast, many grassroots Xibei employees received standby notices citing a significant drop in business volume, placing them on a five-month standby arrangement starting March 3, during which they will receive the local minimum wage of 2,540 yuan per month. An employee from Beijing expressed frustration online, alleging coercion after refusing pay cuts and subsequent forced standby status to depress average wages before potential dismissal.
Reports confirm that on March 6, Xibei implemented a delayed salary payment scheme: 50% for monthly salaries of 20,001 yuan and above, 80% for salaries between 10,001 and 20,000 yuan, and full payment for salaries of 10,000 yuan and below. Employees resigning by 11 PM that day were exempt. A store manager acknowledged delayed wages for management, citing operational difficulties, with a 30% salary cut for managers and head chefs, potentially reimbursable as bonuses if store losses decrease.
Shanghai has become a testing ground for these adjustments. Following the pre-made meal controversy, Shanghai became Xibei's biggest loss-making region, accounting for 19 of the 102 nationwide closures early this year. However, it remains the area with the most remaining stores, representing Xibei's strongest asset base. The establishment of three new companies here suggests an intent to isolate risk.
By setting up independent legal entities, Xibei can separate new operations from the liabilities of older, underperforming stores. Contracts, leases, and cost structures of old outlets remain with the original entity, while new companies can open new stores or acquire better assets in the same region with fresh credit and tax identities.
Analysts note that Shanghai serves as a high-pressure test market for the restaurant industry due to high rents, fierce competition, and discerning consumers. Success there could facilitate expansion elsewhere. Furthermore, the new companies, bearing names like "Lihe," "Huijuyuan," and "Lumantang" without the Xibei brand, also serve to isolate the new ventures from the negative associations now linked to the main brand—such as being "expensive" and associated with pre-made meals—allowing for new branding, store formats, and pricing strategies unburdened by past issues.
This setup offers strategic flexibility. Successful new brands could become a second growth curve; failure would not further drag down the main brand. Under this logic, the 4,000 employees affected by closures seem left behind in the "old Xibei" awaiting resolution, while Li Huilai and Wang Jinjin take with them the seeds of the "new Xibei."
The 30% stake held by Shanghai Haochi is crucial, incentivizing the core team while ensuring the group retains 70% control. Founder Jia Guolong's role appears nuanced. While absent from communications about sensitive staff reductions, a separate management reshuffle on February 1 saw him appoint a new group president and XIBEI business unit CEO, indicating he retains ultimate control—a strategy of focusing on major decisions while delegating smaller, contentious matters. This contrasts sharply with Xibei's formerly proud culture of "treating employees well," where Jia once emphasized that "Xibei's greatest product is its people" and shared profits generously.
The current restructuring has created a divergence in this standard: grassroots employees face forced departures or minimal standby pay, while core executives hold stakes in new ventures. From a business perspective, the move is logical. Li Huilai and Wang Jinjin, with their extensive experience and stable teams in East China, are well-positioned to lead a potential turnaround through these new companies.
Key questions remain. What will these new companies ultimately offer consumers? If launching new brands, how will they quickly gain recognition in a competitive market? If they are merely variants of Xibei, how will consumers be convinced that "this time is different"? Furthermore, if the main Xibei brand continues to decline and the new ventures struggle, how long will the 30% equity retain the core team?
The fundamental issue lies with the market: will consumers respond positively? Earlier this year, an incident where "Xibei evacuated overnight, angering a mall" sparked widespread discussion, further eroding consumer trust. Trust cannot be rebuilt through corporate registrations alone. Consumers ultimately care about whether the food and service justify the price when they dine out.
Jia Guolong once advised employees to "build roads when encountering mountains, and bridges when meeting rivers." This time, the mountains are vast and the waters deep. Whether those with the new tickets can navigate Xibei through these treacherous waters remains to be seen. For now, for the grassroots employees receiving 2,540 yuan per month on standby, that answer seems very distant.
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