In-Depth Analysis of Profitability for Yuanji Food Franchisees

Based on collected public information, I will conduct a systematic analysis of the profitability of Yuanji Food franchisees.

Yuanji Food, as China’s largest Chinese fast-casual restaurant enterprise, has a highly concentrated franchise system. As of September 30, 2025, the company has 4,266 stores worldwide, of which 4,247 are franchise locations, accounting for a staggering 99.6%[1][2]. This ratio is extremely high in the restaurant industry, meaning the company’s business model relies almost entirely on its franchise network.

In terms of franchisee structure, the company has 2,065 franchise partners, with an average of 2.06 stores per franchisee. This figure is not only far higher than the restaurant industry average, but also on par with leading tea beverage brands such as Mixue Ice Cream & Tea and Guming[1][3]. The high average number of stores per franchisee reflects franchisees’ recognition and loyalty to the brand, and also suggests that the profitability of existing stores can support franchisees to expand with multiple locations.

According to prospectus data, the GMV (Gross Merchandise Value) of franchise stores in mainland China reached RMB 6.074 billion in 2024, corresponding to an average annual GMV of approximately RMB 1.88 million per store[2][3]. This figure is above the middle level in the restaurant industry. In the first nine months of 2025, the average monthly order quantity per store was approximately 490 orders, with the order quantity of dine-in stores being 1.8 times that of takeout stores, indicating that the dine-in scenario remains the main consumption channel[3].

Yuanji Food adopts a “high quality-price ratio” market positioning. According to the prospectus, the standard retail price of its signature product, cooked pork and chive dumplings, ranges from RMB 15 to RMB 25 per serving; the signature black pork wonton noodle ranges from RMB 15 to RMB 16 per serving; and the minced meat noodle ranges from RMB 8 to RMB 10 per serving[1]. Compared with the 2024 data of RMB 21.6 per capita consumption for snack and fast food, Yuanji’s product pricing has strong market competitiveness[4].

Calculated from the ratio of GMV to order quantity, the average transaction value was RMB 26.5 in 2023, RMB 24.9 in 2024, and RMB 22.8 in the first three quarters of 2025, showing a continuous downward trend[5]. This trend may reflect the company’s profit-concession strategy under competitive pressure, or changes in product structure.

Yuanji Food’s franchise network prominently features the model of “existing franchisees opening new stores”. As of September 30, 2025, “existing franchisees opening new stores” has become one of the main driving forces for store growth[1][3]. This “endogenous growth” model indicates that after obtaining good returns from operating existing stores, franchisees are willing to continue investing in new stores, forming a positive cycle of “opening stores - making profits - reinvesting”.

Industry research shows that based on a survey of nearly 300 Yuanji Wonton & Dumpling stores in third-tier and lower-tier cities (with an average store area of 70 square meters), the payback period performs better than in new first-tier and second-tier cities[6]. The dine-in share of stores in third-tier and lower-tier cities is nearly 40%, which is higher than that in new first-tier and second-tier cities, indicating stronger in-store consumption habits among consumers. Correspondingly, the share of fresh ingredients is 28%, and the share of takeout and group buying is 32%, which are lower than those in new first-tier and second-tier cities[6].

From the company’s financial data, Yuanji Food’s adjusted net profit was RMB 179 million in 2023 and RMB 180 million in 2024, increasing to RMB 192 million in the first three quarters of 2025, with the adjusted net profit margin rising to 9.7%[2][3]. The company’s overall gross profit margin remains around 24.7%, which is significantly lower than the gross profit margin of over 50% commonly seen in most chain restaurant brands[1][5].

An industry insider close to Yuanji Food once said: “The boss of Yuanji is very kind to franchisees and does not exploit them.” Zhang Jun, the current COO of Yuanji Wonton & Dumpling, also stated in a media interview: “Here, the bosses have an overflowing kindness towards employees and franchisees.”[1] Although this strategy sacrifices some short-term profits, it helps maintain the stability of the franchise ecosystem.

As of September 2025, Yuanji Food has over 35 million members, with an average quarterly repurchase rate of approximately 32.3%[3]. A high repurchase rate is an important guarantee for store profitability, as the cost of acquiring new customers is much higher than that of retaining existing ones. High member loyalty reflects that the products and services can meet consumer demands, providing a fundamental guarantee for the sustainable operation of franchisees.

Yuanji Food faces competitive pressure from multiple dimensions. First, the competitive barrier of the “freshly made on-site” model is not high and can be easily imitated. The threshold for “freshly made on-site” dumplings is too low, and competitors can quickly follow up, even competing at lower prices[7]. A large number of local restaurants have launched promotions such as “RMB 15.8 all-you-can-eat freshly made dumplings” and “RMB 24 full buffet”, with free cold dishes, fruits, and beverages included[7].

Second, low-price competition on food delivery platforms has impacted Yuanji. After the 2025 food delivery price war, catering prices have become extremely sensitive, with a large number of orders flowing to low-price channels such as “Pin Haofan”. To seek profits amid extreme cost pressures, many merchants have abandoned the “freshly made on-site” concept and switched to ultra-low-cost frozen dumplings[7]. Some frozen food suppliers have sold frozen dumplings at a cost as low as RMB 0.15 each. Even if 12 dumplings are sold for RMB 9.9 on “Pin Haofan”, merchants can still make a profit after deducting platform fees[7].

Yuanji Food faces challenges in expanding into sinking markets and northern China. As of September 2025, only 26.6% of its stores are located in third-tier and lower-tier cities, which is significantly lower than the 51% in first-tier cities[1]. At the same time, although the northern market has impressive growth, its base is still small, and the company needs to continuously address multiple barriers such as north-south taste differences, a deep-rooted tradition of home cooking, and competition from local brands[1].

The “freshly made on-site” model bets the brand’s value on “food safety” and “on-site transparency”. Once a food safety issue occurs, consumer trust will collapse instantly, and the brand may be backlashed faster than it was established[7]. The “earthworm incident” that occurred in 2024 pushed Yuanji into the spotlight, revealing the double-edged sword effect of this model[7].

Based on existing data, a preliminary estimation of investment returns for franchisees can be made:

It should be noted that the above estimates are for reference only, and actual profitability is affected by multiple factors such as location, operational capabilities, and market environment. Industry research shows that the payback period of Yuanji Wonton & Dumpling stores in third-tier and lower-tier cities performs better than in new first-tier and second-tier cities[6].

Based on a comprehensive analysis, the overall profitability of Yuanji Food franchisees presents the following characteristics:

1. The high proportion of “existing franchisees opening new stores” indicates that the profitability model of existing stores has been verified by the market
2. High repurchase rate and membership system support store operations
3. The payback period performs better in sinking markets than in higher-tier cities
4. The company adopts relatively moderate franchise policies to maintain the stability of the franchise ecosystem

1. Intensified market competition and price wars compress profit margins
2. The “freshly made on-site” model is easy to imitate, weakening differentiated advantages
3. Low-price competition on food delivery platforms impacts the traditional business model
4. Regional expansion faces challenges from taste differences and consumption habits

1. Conduct full research on local market competition
2. Prioritize regions with shorter payback periods such as third-tier and lower-tier cities
3. Emphasize dine-in services to increase average transaction value and consumption experience
4. Strictly control costs and focus on food safety and product quality

[1] China Fund Journal - Yuanji Food Submits Listing Application to HKEX, with Over 4,000 Stores (https://www.chnfund.com/article/AR398f3500-492d-3643-0d17-3a1ec9449565)

[2] Xinhua Finance - Yuanji Food Races for Hong Kong IPO, 2024 GMV Exceeds RMB 6 Billion (https://www.xincai.com/article/nhhamhi6612243)

[3] 36Kr - Yuanji Wonton & Dumpling Pursues Hong Kong IPO: Over 95% of Stores are Franchise Locations (https://m.36kr.com/p/3636531115901954)

[4] Data quoted from 2025 China Catering Category Development Report by China Fund Journal

[5] CBNData - “Mixue Ice Cream & Tea” of the Dumpling Industry is Going Public (https://m.cbndata.com/information/294892)

[6] 36Kr - Sink Down, Expand Out, Opportunities Everywhere | 50,000-Word Interpretation of 2024 Catering Industry (https://m.36kr.com/p/2798548572565127)

[7] 21st Century Business Herald - “Freshly Made On-Site” Hard to Verify, Expansion Blocked, How Long Will Yuanji Wonton & Dumpling Remain Popular? (https://www.21jingji.com/article/20251125/herald/caa801d31d07a91e7db75bb51f5041a0.html)