The era of rapid growth for China's restaurant industry has given way to a period of stagnant competition, where brands are vying for a limited pool of customers. This shift is accelerating the divergence among regional cuisine chains, forcing them to adapt or face decline.
On June 30th, the final customers left the Nanjing Impressions outlet at Shenzhen's Luohu KK Mall. This marked the complete withdrawal of the chain from the Shenzhen market after 11 years. Just three years prior, it operated five bustling locations in the city. While the official reason cited was "lease expiration," the undeniable reality is a combination of an aging brand and dwindling customer traffic.
Nanjing Impressions' exit is not an isolated case. Grandma's Home (Waipojia), another chain specializing in Jiangsu-Zhejiang cuisine, withdrew from the Guangzhou market in December 2024, also citing non-renewal of its lease. The famous Changsha-based Super WENHEYOU, once a cultural and culinary landmark, struggled to replicate its success when it expanded ambitiously to cities like Guangzhou and Shenzhen starting in 2020.
Challenges in National Expansion
Wen Zhihong, a restaurant chain expert and founder of Hehong Consulting, identifies two primary challenges for regional brands expanding nationally. The first is economic: whether the restaurant's store model is suitable for large-scale replication. The second is managerial: whether the operational capabilities of the team can keep pace with the expansion rhythm.
He notes that restaurant operators today commonly face the "three highs": high rents, high labor costs, and high ingredient costs. "Companies founded over a decade ago, even if they were once very popular, may struggle to survive in today's fiercer competition if they haven't continuously adjusted and optimized with the market," Wen stated.
From January to May 2026, national catering revenue reached 2.35 trillion yuan, a year-on-year increase of 3.1%, which outpaced the overall growth of total retail sales of consumer goods (1.4%). However, looking longitudinally, the industry has entered a stage of stagnant competition with slowing growth. In this environment, regional cuisine enterprises are experiencing accelerated divergence.
Nanjing Impressions represents the collective dilemma faced by a batch of "middle-aged brands." Alongside others from its era like Grandma's Home, these brands enjoyed moments of national prominence. Yet, in the current climate, they are the first to be impacted by issues like outdated models, redundant SKUs (Stock Keeping Units), and heavy capital investments.
Paths to Adaptation and New Solutions
While going national is difficult for a regional brand, establishing a firm foothold and gaining genuine market acceptance presents a second layer of challenge. However, some brands are finding new solutions. Listed companies like Xiaocaiyuan (00999.HK) and Green Tea Restaurant (06831.HK) are placing greater emphasis on refined operations to sustain performance growth and store expansion.
Furthermore, some niche regional cuisines from areas like Yunnan and Guizhou have rapidly broken through by adopting a "pretty food" logic. This concept prioritizes social media appeal and the dining experience over the food itself, attracting a younger demographic.
A consensus is slowly forming within the industry: the restaurant business increasingly requires meticulous cultivation and keeping up with the times.
The Case of Nanjing Impressions
Founded in Nanjing in 1994, Nanjing Impressions is known for its "Jinling cuisine" like Meiling porridge, roasted duck buns, and vegetarian mixed dishes, with an average check of 60-70 yuan. Unlike the nationwide popularity of Sichuan, Hunan, or Cantonese cuisines, it represents a relatively niche category. The brand is distinguished by its decor that recreates old Nanjing alleyways, featuring square tables, couplet lanterns, and tile-walled private dining rooms.
Around 2010, under the second generation of leadership, the brand accelerated its outward expansion, entering cities like Beijing, Shanghai, Guangzhou, and Shenzhen. It opened in Singapore in 2016. Wen Zhihong recalls that a decade ago was the brand's most aggressive expansion period, with a strong presence in major cities.
The brand has not publicly disclosed financing information. According to data from Zhamen Canyan, it currently operates 101 stores, with 38 located in its home province of Jiangsu. Following its Shenzhen exit, only 5 stores remain in Guangdong province.
Wen Zhihong points out that the direct reasons for a restaurant's failure are simple: costs are too high and revenue is too low. Nanjing Impressions, operating primarily in high-rent shopping malls with its distinctive, costly decor, faced significant expenditure. Additionally, its operational weaknesses included SKU redundancy. Its menu in Beijing features nearly 90 dishes, whereas Xiaocaiyuan offers only 45-50 SKUs per quarter.
Other regional brands have also faced expansion hurdles. Grandma's Home closed its last Guangzhou store in late 2024 after eight years without opening a new one there. Super WENHEYOU's forays into Guangzhou and Shenzhen ultimately proved unsuccessful, with its Guangzhou location closing in early 2025. Feng Bin, CEO of WENHEYOU, admitted in an interview that the brand struggled to balance its successful elements with local culture, particularly in Guangzhou where it was reluctant to fully let go of its Hunan cuisine roots.
Successful Strategies and Emerging Trends
Despite the challenges, some companies are carving out successful paths. Xiaocaiyuan (807 stores) and Green Tea Restaurant (609 stores) both reported strong 2025 results. Xiaocaiyuan, founded in Anhui in 2013, offers "affordable new Hui cuisine," while Green Tea Restaurant, founded in 2004, serves "new Zhejiang cuisine" that blends elements from various popular cuisines.
In 2025, Xiaocaiyuan achieved revenue of 5.345 billion yuan, with net profit surging 23.2% to 715 million yuan. Green Tea Group's revenue grew 24.1% to 4.763 billion yuan, with net profit jumping nearly 40% to 509 million yuan. Both chains accelerated their net store additions despite the industry's slow growth.
Their growth is underpinned by refined operational strategies. In 2025, Xiaocaiyuan focused on not being drawn into platform-driven food delivery wars, concentrating on dine-in service, and proactively lowering prices. It announced in August 2025 that it would no longer participate in any delivery platform discounts, shifting focus back to dine-in. It also reduced prices on signature dishes and introduced a paid membership system to boost loyalty.
Alongside these listed players, a wave of niche regional cuisines is making initial national inroads by transforming into "pretty food" – aesthetically pleasing meals and venues designed for social media sharing. Brands specializing in Yunnan-Guizhou, Jiangxi, Guangxi, and Ningbo cuisines are leading this trend.
A representative brand, Ameigo Meiguo (Yunnan-Guizhou-Sichuan bistro), opened its first store in June 2023 and has since expanded to nearly 200 locations. Some franchisees reported impressive early sales. Duan Jicheng, a veteran restaurateur in Beijing, franchises brands like Shanjiao Basjoo, a Yunnan Dai cuisine restaurant that emphasizes a photogenic environment.
Risks in a Hot Market
However, this trendy sector is not without risk. In May 2026, news of a Ameigo Meiguo franchisee vandalizing their own store cast a shadow. The franchisee, who invested approximately 4 million yuan, was forced to close after just four months due to issues cited by the mall, with revenue plummeting from 738,000 yuan to 220,000 yuan.
Duan Jicheng, who franchises the newer brand Shanjiao Basjoo (under 10 stores), was cautious during selection, noting that while established brands have high recognition, their higher franchise thresholds mean longer payback periods. "If the payback time exceeds one year, it becomes very difficult later," he said, emphasizing that "pretty food" restaurants rely on hype and novelty. He has recouped his seven-figure investment in one year, while a neighboring similar restaurant closed within a year.
He believes intense competition tests a brand's ability to continuously create novelty through product innovation. Shanjiao Basjoo launches large-scale new menus every two months, which significantly boosts repeat and new customer traffic. When asked how long such trends last, Duan remains calm: "The restaurant business has cycles. The transition from prosperity to decline generally takes three to five years."
Comments