A plate of spicy shredded potatoes for RMB 3 (USD 0.40), winter melon and pork meatballs for RMB 6 (USD 0.80), and stir-fried chicken with Sichuan peppercorns for RMB 9 (USD 1.30). These prices have caught the attention of diners in Beijing, where cost-conscious residents are marveling at what proud Shandong locals are calling “China’s Saizeriya” or the “Pinduoduo of the restaurant world.”
The meals come from Chaoyixing, a fast food chain rooted in Jinan, Shandong, known for its signature braised pork shoulder. According to restaurant analytics firm Canyan Data, the brand now operates 729 stores (mostly through joint ventures) with an average customer spend of RMB 14.9 (USD 2.10). It has since expanded beyond Shandong to Beijing, Tianjin, Hebei, and Henan.
A consumer-focused investor told 36Kr that Chaoyixing generates RMB 2–3 billion (USD 280–420 million) in annual revenue and sustains positive net margins. “Among community dining concepts, it’s a solid bet,” the investor said.
In a market defined by cautious spending and uneven recovery, Chaoyixing has emerged as a textbook example of value-driven growth. Founded in the 1990s, the brand expanded gradually within its home province before spotting the right moment to scale. Its trajectory mirrors that of other budget champions like Henan-born Mixue Bingcheng. Whether Chaoyixing can replicate that level of breakout success remains uncertain.
Japan’s own consumer sector offers a relevant historical parallel. Since the 1990s, prolonged stagnation there saw 11 of the 20 best-performing “ten-bagger” stocks come from the foodservice sector, including names like Saizeriya and Yoshinoya. The common thread? A relentless focus on delivering value.
Today, Chaoyixing and other dark horse contenders in China’s restaurant industry face a similar challenge: how to serve high-value meals while scaling reliably across regions.
Building slow, scaling smart
Chaoyixing traces its roots back to 1912, when a Jinan eatery named Zhengtaiheng began serving what would become its signature dish: braised pork shoulder. After several generations of family stewardship, Zhang Chao took the reins in 1993, ushering in the modern era of Chaoyixing.
From a single outlet to more than 700 locations, the brand’s ascent has been shaped by a blend of timely opportunities and deliberate decision-making.
For its first decade, Chaoyixing remained small and scattered. “If one store opened, another might have to close,” recalled Zhang Jingzhi, the fifth-generation inheritor and now executive general manager. The menu was expansive, ranging from braised pork and stirfries to claypots and barbecue. It was far more varied than it is today.
Stability came in 2003, when Zhang Chao narrowed the menu around the core pork dish, introduced home-style sides, and launched standardized production as the foundation for expansion.
The real breakthrough came in 2009, when Chaoyixing was selected to cater the National Games in Shandong. The event tested the brand’s operational chops and served as a public endorsement. In 2011, it joined Jinan’s inaugural “reassuring breakfast” program, and a government study tour from Zibo catalyzed its first store beyond city limits.
Between the early 2000s and 2012, the brand quietly rebuilt its central kitchen four times. With each iteration, staff training, equipment, and process standardization improved, but public visibility remained low. As capital flowed toward upscale dining during China’s consumption upgrade wave, no-frills community restaurants like Chaoyixing were largely overlooked.
That changed during the pandemic. “Previously, restaurants were product-driven. Location was everything,” said Sun Pan, partner at Xiaoshuju Venture Capital. “Now, it’s all about supply chain capacity. Repeat purchases, not prime locations, determine success.”
Consumers, Sun noted, are spending based on essential needs. Home Original Chicken (HOC) founder Wang Guoyu echoed the sentiment at his company’s 2024 annual meeting, pledging to abandon “ineffective marketing, gimmicks, or free giveaways” in favor of fundamentals: good food, solid service, inviting atmosphere, loyal customers, and strong reviews.
In today’s value-driven market, affordability, safety, and taste are non-negotiable. The latter two are often communicated through open-kitchen designs, a hallmark of Chinese dining. Founder Zhang frequently introduces dishes on live streams, framed by woks and burners, while social media posts from staff showcase behind-the-scenes preparation, reinforcing transparency and trust.
So how does Chaoyixing maintain its striking affordability?
At its core is a commitment to low margins. Gross margins vary widely across peers: around 20% for HOC, 50% for Country Style Cooking (COC), and over 60% for Xiaocaiyuan, an Anhui cuisine specialist.
“Fast food chains can only offer low prices if their supply chains and scale are robust,” a longtime consumer investor told 36Kr.
Chaoyixing has spent years building that foundation. Its newest central kitchen can support more than 2,000 stores across Shandong and neighboring provinces. The pork shoulder is fully prepared in-house before being delivered, ready to serve. Stirfry ingredients are dispatched using a digital planning system that optimizes freshness and efficiency in real time.
Low rents have also helped. “The past few years have left many commercial properties vacant,” Sun said. “It used to cost RMB 300,000 (USD 42,000) just to take over a space in a prime spot. Now, there’s often no transfer fee at all.” For brands in expansion mode, that’s an opening—whether selling bubble tea or braised pork.
Years of supply chain groundwork, combined with favorable timing and a time-tested menu, have brought Chaoyixing to a critical juncture. The brand that grew up in Jinan and dominated Shandong is now stepping into broader, less familiar territory.
Outside the stronghold
Even HOC, long considered the leading candidate to become China’s first publicly listed domestic fast food brand, has struggled to grow beyond its core territory. In the first three quarters of 2024, the majority of its revenue still came from East China, with only 13.2% of its stores located elsewhere.
So what happened when Chaoyixing ventured beyond Shandong?
In 2023, it took its first steps outside the province, opening two stores in Hengshui, Hebei, followed by two in Beijing that November. Online, skepticism surfaced almost immediately. “If Chaoyixing charges Shandong prices in Beijing, how will it stay profitable?” one user asked. “Rent is much higher there.”
The menu did adjust slightly. Most items in Beijing cost RMB 1–2 (USD 0.14–0.28) more than in Jinan, with meat dishes sometimes priced RMB 3–4 (USD 0.42–0.56) higher. A plate of spicy shredded potatoes goes for RMB 2 in Jinan, but RMB 3 in Beijing. Celery and pork stirfry is RMB 4 and RMB 5, respectively. The differences are modest, and customer reviews on Dianping consistently praise the meals as “incredibly cheap.”
“Running at low margins is part of our DNA,” said assistant general manager Song Yefei at the launch of the first Beijing store. “We know labor, rent, and logistics cost more here. That just means slimmer profits, but we’ve never pursued high margins.”
Chaoyixing kept its formula intact. According to Beijing general manager Li Hongpeng, the rollout prioritized four areas: selecting locations near subway stations and residential neighborhoods; upgrading store design to feel cleaner and brighter; spotlighting its braised pork in the layout; and transferring roughly 70% of staff from Shandong to uphold service quality.
The approach appears to be working. In just over a year, Chaoyixing has opened more than 30 stores in the capital. “Despite higher wages and rents, the brand has held pricing steady,” Sun said. “That shows its cross-regional potential.”
Most investors and restaurant founders agree: in foodservice, the only lasting moat is scale.
Sun believes high-spending customers may drive bursts of early traction, but they tend to be fickle. Value-focused diners, though less reactive to marketing, are more loyal once won over. They also represent the mainstream in today’s market, and Chaoyixing caters to them exceptionally well. Such brands may not go viral, but they scale consistently. And once they do, their edge is hard to match.
Chaoyixing is already pushing farther afield. Beyond its strongholds in northern and central China, it opened a store in Xuzhou, Jiangsu in 2024 and is piloting operations in Xiamen, Fujian. But expanding comes with new complexities: regional taste preferences vary, and longer supply chains increase operational friction. Early reviews from Xuzhou have been mixed.
As Chaoyixing moves into unfamiliar territory, it faces the same test confronting every aspiring national chain in China: how to maintain consistency, efficiency, and value while learning to speak the local culinary dialect.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Ren Cairu for 36Kr.