Wallace’s parent company, Fujian Huashi Foods, has quietly moved to terminate its listing on China’s New Third Board (NEEQ), marking a tactical retreat for a business that once touted a “ten‑thousand‑store” ambition. Trading was suspended on January 23 and a shareholder meeting on January 26 approved delisting; the National Equities Exchange and Quotations accepted the termination on February 4. The manoeuvre has been framed internally as a governance and cost‑efficiency measure, but it follows years of stretched finances, faltering margins and recurring food‑safety complaints.
Huashi is the operating company behind the mass‑market Western fast‑food brand Wallace, which has grown rapidly in lower‑tier Chinese cities by combining direct management with crowded franchising, employee‑partnerships and store crowdfunding. Since listing on the NEEQ in 2016 the group leaned on a low‑price, high‑scale playbook to build roughly 19,500 outlets by early February 2026 — almost matching the combined footprint of KFC and McDonald’s in China — and securing leadership in China’s fried‑chicken and burger segment.
That scale, however, has exposed structural weaknesses. Ownership is tightly concentrated: the controlling shareholder Hu Huaiyu and his brother’s wife hold about 64% of equity. Such family dominance helped speed decisions during the growth phase but leaves the business vulnerable to the absence of countervailing institutional governance as it seeks to professionalise. Industry observers point out that, once a chain reaches tens of thousands of outlets, governance frictions and the need for transparent, independent oversight become central to any quality or profit turnaround.
The balance sheet tells a sobering story. Total liabilities climbed from roughly RMB 1.085 billion in 2022 to about RMB 2.108 billion by mid‑2025, lifting the asset‑liability ratio to roughly 73.7%. Revenue growth decelerated from double‑digit rates in 2022 to single digits by 2024 and fell 0.5% in the first half of 2025. Marketing outlays surged: 2024 saw a near‑RMB 146 million spend on brand and promotion, a sum that formed three quarters of sales expenses yet delivered diminishing returns. Gross margins have been compressed to near 6%, and net margins are substantially below the 5% industry average reported for 2025.
Cash flow and profit quality are strained. Contract liabilities (prepayments) ballooned by roughly 239% to about RMB 1.674 billion in H1 2025, suggesting reliance on advance receipts to manage working capital. Several regional subsidiaries — especially those handling warehousing and distribution — reported losses, forcing the parent to keep injecting cash. Other payables spiked, partly because of large declared dividends; high payouts to family shareholders amid mounting debt have raised questions about capital allocation priorities.
Compounding the financial stress are persistent food‑safety accusations. Incidents reported in March 2025 included outlets relabelling expired meat and reheating visibly degraded frying oil whose acidity exceeded standards by a wide margin. Inspections uncovered pest problems and poor hygiene in certain kitchens, and consumer complaint platforms logged over 13,700 grievances through February 11, 2026, with roughly 95% tagged as food‑quality issues. Wallace’s high complaint rate contrasts sharply with global quick‑service brands and has kept regulators and consumers wary despite company promises of remediation.
Management has argued that delisting will reduce compliance costs and permit faster, more flexible redeployment of capital across its vast outlet base without the reporting frictions of a public platform. Yet leaving the NEEQ will also cut off a modest, if illiquid, avenue for outside capital and reduce transparency for franchisees, suppliers and lenders. The decision looks less like a fresh start than a tactical fallback: shrink visible governance obligations while the company attempts to repair margins and stem reputational damage.
For China’s restaurant sector the Huashi episode is a cautionary tale. The era of growth‑at‑all‑costs is colliding with rising input costs, tighter consumer expectations and stricter local enforcement of food safety standards. Chains that built fast scale on low prices face a painful choice — slow expansion and invest heavily in standardised supply chains and compliance, or accept an erosion of brand equity that will invite regulator intervention and give rivals room to poach market share. Wallace’s next moves — whether a wholesale restructuring, private recapitalisation, or a refocus on quality over quantity — will be watched closely by investors, competitors and policymakers alike.