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Recently, a scholar has observed a thought-provoking trend in Hong Kong’s F&B industry: many prominent Chinese F&B brands entering the local market have shuttered. Meanwhile, a few Chinese and Japanese chains continue to expand against the closing wave, still drawing public attention despite shifting consumer habits and fierce market competition. Yet, facing the same high operating costs, why do some incoming brands thrive and profit while others sink deeper into losses? FOODIVAL will break down the key reasons behind this phenomenon in this blog!
I. Two Main Reasons Why Chinese F&B Brands Struggle to Survive in Hong Kong
1. The "low-price model" cannot be applied in a high-cost environment
Many Chinese brands attract Hong Konger crossing the border thanks to their high value and low prices. However, after expanding to Hong Kong, these brands realised that they have misjudged the local market. With rental and labor costs far exceeding expectations, their “low-margin, high-volume” business model can no longer fit the high-cost environment, leaving these brands unable to adapt and ultimately forcing their closure.
According to Professor Terence T.L. CHONG, the Executive Director of Lau Chor Tak Institute of Global Economics and Finance and Associate Professor of Economics at The Chinese University of Hong Kong, brands like Mixue Ice Cream & Tea expanded rapidly in Mainland China primarily by gaining franchise and supplier fees. However, given Hong Kong’s high property costs, franchisees can hardly turn a profit through “price wars” alone anymore. On the other hand, if they raise prices to local market levels, they lose their core advantage, making consumers feel the products are no longer worth the price, weakening the appeal of Mainland brands in Hong Kong while prompting Hong Kong consumers to make consumption across the border instead.
2. Prioritizing a "Global Showroom" Over Cost Control
Professor Chong further noted that Mainland brands often view Hong Kong as a showcase for international expansion. Consequently, they are willing to absorb steep rental and staffing overheads in exchange for global exposure to demonstrate strength to overseas investors and boost brand prestige. Under this mindset, many incoming brands do not prioritize immediate profitability, even tolerating sustained operating losses. However, strict cost control is vital for long-term sustainability in F&B sector, especially in a high-cost environment, restaurants must embrace data-driven management to build a solid foundation for scalable growth.
II. Turning the Tide Through Data-Driven Operations
To survive fierce competition and elevated operational costs, precise cost control is essential for long-term growth and business stability. F&B brands must evaluate their operational strategies and replace “gut-feel” experience decision-making with data-driven management to avoid continued deficit.
The local expansion of Japanese conveyor-belt sushi chain “Sushiro” can serve as an excellent benchmark. Since entering Hong Kong in 2019, Sushiro has opened over 40 branches in just a few short years. Their ability to scale rapidly stems not only from a commitment to quality, but also from leveraging technology to balance “quality” with “operational efficiency”.
- To deliver its signature high-value offerings, Sushiro strictly controls ingredient costs and creatively utilizes offcuts such as using tuna parts unsuitable for sashimi to brew flavorful broth to further minimize food waste and costs.
- Furthermore, RFID chips embedded in their sushi plates help track ingredient freshness in real time while capturing customer purchasing data to refine sales strategies and curb food waste further.
This relentless focus on data management is precisely how Sushiro has stood out in a cutthroat market.
If you want your restaurant to gain a firm foothold in a high-churn market, building a solid operational foundation is essential. By utilizing dedicated systems to streamline front-of-house and back-of-house workflows, you can boost productivity and make precise, data-driven decisions to unlock the most cost-effective path to secure profits and scale sustainably even in tough times!