China’s high-end chain restaurants have moved beyond rapid expansion into a new phase defined by cost control and value re‑definition, China restaurant strategist Wang Dongming told a live Sohu broadcast that drew over 330,000 viewers. The industry’s contest is less about single recipes or flashy marketing than about supply‑chain efficiency, customer perception management and sustainable brand operations across the full business chain.
Wang argues that the row over pre‑prepared food (pre‑made ingredients or “pre‑cut/prepared” items) is symptomatic rather than foundational. The real friction lies in a mismatch between the high fixed costs many restaurant groups have absorbed to produce standardised inputs and consumers’ price expectations, which are informed by mature overseas pre‑made systems that benefit from decades of scale and lower unit costs.
Cost is the primary challenge. Stricter food‑safety enforcement and rising public expectations force restaurants to invest more to reduce safety incidents, but diminishing returns set in rapidly: driving error rates toward zero requires exponentially higher spending. Pre‑prepared ingredients are widely adopted because, for many chains, they are the most cost‑effective route to safer, more consistent output.
Where many domestic chains go wrong, Wang says, is in trying to internalise the whole industrial chain. Unlike international giants such as McDonald’s and KFC, which rely on third‑party co‑packers and ingredient suppliers, some Chinese groups have built their own factories—a heavy‑asset model that burdens brands with fixed costs that must be recouped through higher prices. A healthier ecosystem, he suggests, would see specialised suppliers scale to serve many brands and dilute costs through volume, leaving restaurants to focus on frontline operations and customer experience.
That structural issue feeds into a deeper cognitive gap between buyers and sellers. Wang notes consumers decide primarily on price, then taste, and finally safety and service; restaurateurs often reverse that order, prioritising safety and consistency with an eye to cost recovery. The result is predictable friction: diners balk at paying premium prices for dishes they expect to be freshly made even when the pre‑made route guarantees higher safety and consistency.
The market, Wang forecasts, will polarise. Chains should either commit to high‑end niche formats—targeting customers at Rmb120 per head or above with fewer, better‑run outlets—or pursue mass‑market scale below Rmb60 per head. The midmarket around Rmb80–120 is shrinking; brands that try to “down‑brand” risk diluting equity and failing on costs. He recommends launching new, distinct formats for any move downmarket rather than dragging established premium brands into a price war.
Some brands have avoided the pre‑made stigma through category fit and perception management. Hotpot operators such as Haidilao, Wang observes, benefit from serving raw ingredients that diners cook at the table, sidestepping the pre‑made label, while their standardised soup bases are perceived as condiments rather than central ingredients. Looking ahead, Wang expects the next phase to be “precision customer acquisition”: fewer scattershot marketing campaigns and more targeted efforts that clearly communicate who a brand is for and why that audience should pay a premium.
Wang’s three words for the industry—survive, life‑or‑death, business—underscore his prescription: operators must first survive and then stop acting like restaurant purists and start acting like businesspeople, aligning products and prices with customer expectations. Short‑term controversies can burnish or scar reputations, but long‑term viability will hinge on clear positioning, scalable supply chains and an operational focus on the buyer.