How Haidilao Restructured Its Restaurant Network in 2021
By Jotham Lim
5 min read
Executive Summary#
In 2021 Haidilao (海底捞) restructured its restaurant network, closing restaurants it had opened during the early pandemic period and absorbing one-time charges for asset disposal and impairment so that the business would rest on its strongest sites.[1] Measured against 2019, demand for its style of dining held up through three years of pandemic disruption, which we believe shows how loyal its customers have remained. This analysis looks at why the company closed restaurants, what its business segments show, and how a smaller network and a growing online retail strategy prepared the hotpot chain for 2022.
Download Full Report#
Get the complete analysis with additional data, competitive landscape insights, and product strategy details.
January-November 2022 Report: China's Haidilao Online Market Analysis →
Why Haidilao Restructured Its Restaurant Network#
Haidilao International Holding Ltd. (6862.HK) spent 2021 reshaping its restaurant network while demand for its dining experience recovered across its main segments. The restructuring brought one-time charges for the disposal and impairment of long-lived assets, which reflected the cost of reversing the expansion the company had carried out during the early pandemic recovery.
Two pressures shaped the year's results:
- Store closure charges: closing restaurants brought non-recurring costs for asset disposal and lease termination
- Pandemic restrictions: ongoing restrictions reduced how fully restaurants could be used, while fixed costs such as leases and staffing commitments limited how far operations could adjust
The Store Closure Programme#
In 2021 Haidilao closed restaurants that it had opened during the early pandemic period, a move that investors and industry observers saw as a necessary correction. The company had expanded quickly on the expectation of a swift recovery in dining, and that recovery came unevenly across China's cities.
The programme had a clear strategic purpose, since closing these locations reduced the company's fixed costs and let it concentrate resources on its busiest restaurants.[2] The smaller network left the business better placed to improve its margins as China's dining sector returned to normal in the January-November 2022 reporting period.
By accepting a large one-time cost, management showed that it now put long-term unit economics ahead of short-term revenue growth, which marked a change from the expansion-first approach of earlier years. Most of the closures were in Tier 2 and Tier 3+ cities, where foot traffic had not returned to pre-pandemic levels. Analysts noted that the remaining restaurants were concentrated in Tier 1 and strong Tier 2 cities, where steadier consumer spending supported higher average spending per visit and more consistent use of restaurant capacity.
What the Business Segments Show#
Restaurant operations remain the core of the company's business, while takeaway, condiment sales and the company's other restaurant brands are smaller lines alongside them. The condiment and multi-brand lines are where the company has started to build new sources of revenue.
Demand Held Up Through the Pandemic#
Comparing 2021 with the pre-pandemic baseline of 2019 removes the distortions of the pandemic years, and on that comparison demand for Haidilao's dining experience held up through a period of severe disruption. We believe several parts of the company's approach helped it keep its customers through rolling lockdowns, social distancing rules and changes in consumer behaviour:
- Its signature service model, which kept customer satisfaction and repeat visits high
- Menu innovation, which kept the dining experience fresh for regular customers
- Improvements to its loyalty programme, which deepened customer engagement across channels
- Brand recognition, which turned familiarity from dining in into online retail purchases
Looking Ahead: A Smaller Haidilao Enters 2022#
The restaurant network that entered 2022 carried much lower fixed costs than it had at its peak, and the remaining restaurants were concentrated in busier sites with better margins. We believe this positioning proved sound, as China's dining sector continued to face intermittent disruption through 2022, including Shanghai's two-month lockdown from April to June.
The company also stepped up its online retail strategy at the same time, with its "Future Food Laboratory" initiative launching new product categories while it built its e-commerce channels on Tmall (天猫) and JD.com (京东).
The main question for 2022 was whether Haidilao could turn its smaller network into a lasting improvement in margins while it built new sources of revenue through online retail. The early signs from condiment sales and the multi-brand segment suggested that the diversification strategy had momentum, even as the core dine-in business continued to feel the wider effects of China's changing pandemic policy.
Key Takeaways#
- In 2021 Haidilao closed restaurants it had opened during the early pandemic period, accepting one-time restructuring charges so that it could concentrate on its strongest sites
- Most of the closures were in Tier 2 and Tier 3+ cities, where foot traffic had not returned to pre-pandemic levels
- Compared with 2019, demand for the company's dining experience held up through the pandemic, which we believe reflects its service model, its menu innovation and its loyalty programme
- Restaurants remain the core of the business, while condiments, other restaurant brands and the "Future Food Laboratory" are where the company is building new revenue online
- The smaller restaurant network left the company better placed to improve its margins in 2022
## About the Data
This analysis draws on Moojing Market Intelligence data covering January-November 2022, combined with Haidilao International Holding Ltd. (6862.HK) financial disclosures. Moojing analyses brand and category performance across major Chinese e-commerce platforms. For full methodology and additional insights, see the complete Haidilao Online Market report.
This content adheres to Moojing's editorial standards .
Frequently Asked Questions
Haidilao restructured its restaurant network in 2021, closing restaurants it had opened during the early pandemic period and absorbing one-time charges for asset disposal and impairment, while demand for its dining experience recovered across its main segments. The charges came from a structural decision that was taken and paid for within a single reporting year, so the company's accounts for 2021 reflect the restructuring more than its day-to-day trading. The source is the company's own disclosures as a listed entity (6862.HK).
To reverse an earlier expansion. The group opened restaurants quickly during the early pandemic period, expecting a swift recovery in dining that arrived unevenly across China's cities, which left a network whose fixed costs did not match its customer traffic. The closures removed that exposure and concentrated resources on the busiest sites, and most of them were in Tier 2 and Tier 3+ cities, where foot traffic had not returned to pre-pandemic levels. By accepting a large one-time charge to do it, management showed that it now put long-term unit economics ahead of expansion.
Comparing 2021 with the pre-pandemic year of 2019 removes the volatility of the pandemic years, and on that comparison demand for Haidilao's dining experience held up through rolling lockdowns, social distancing rules and changing consumer behaviour. We believe the drivers were its signature service model and its effect on repeat visits, menu innovation, a deeper loyalty programme, and the way familiarity from dining in carried over into online retail purchases.
A lower fixed cost base going into a year that still brought disruption, including Shanghai's two-month lockdown from April to June. Restaurants remained the core of the business, so the open question was whether a smaller network of busier restaurants could turn into a lasting improvement in margins while new revenue lines were built alongside it. The early signs from condiment sales, the multi-brand segment and the "Future Food Laboratory" initiative, which took new product categories into online retail, pointed that way.
