Between High Profit Margins and Heavy Assets: The Illusionist’s Business Philosophy of “Japanese Cuisine by Day, Nighttime Bars”

Within the besieged world of the restaurant and bar business, old idols are being demystified, and new believers are still entering the scene.

As Helen’s, once touted as the “first stock in small taverns,” struggles to pivot to a franchise model, on the other side of the track, COMMUNE, known for its “daytime meals and nighttime drinks” all-hours model, has formally submitted its prospectus to the Hong Kong Stock Exchange, attempting to tell a completely different story of quality.

Capital moved early: In early 2021, Hillhouse Capital made the first A-round investment; in 2022, Sunrise Capital led the investment, with Hillhouse and Tomato Capital following, completing an A+ round of financing worth several hundred million yuan.

By the time of the prospectus submission, Hillhouse and Sunrise still held 9.63% and 1.71% of shares respectively.

From Seasaw and Nayuki to Diandude and Weijia Liangpi, crossover examples abound in the restaurant and bar business, but few succeed, perhaps indicating the challenges inherent to this business model.

In 2024, COMMUNE’s revenue grew 27% year-on-year to 1.074 billion yuan, and its 7.8% market share is about twice the combined share of the second and third players in the industry.

However, under the common cost pressures in the food and beverage industry, COMMUNE's profit curve displays distinct fluctuations: adjusted net profit margin was 8.7% in 2023, dropped to 6.2% in 2024, and bounced back to 9% in the first three quarters of 2025.

Is the “daytime meals, nighttime drinks” business fundamentally a social traffic operation relying on high premiums and heavy assets, or is it a highly replicable business model that can withstand market cycles?

Against the grand narrative of a hundred-billion-yuan market, can COMMUNE's single-store efficiency support the capital market's expectations for "long-term growth"?

Premium on Space and Social Experience

The essence of the restaurant-bar hybrid business style represented by COMMUNE lies in maximizing operational efficiency within limited space.

By offering social space throughout all hours, COMMUNE stretches operating hours to 16–18 per day, covering breakfast/brunch, afternoon tea, dinner, and late-night drink scenarios to offset high rents in core business districts.

Based on this, the beverage business acts as the “ballast” for profits. For example, its own brand beer sells at around 20 yuan per unit with a purchasing cost of only about 2.5 yuan, resulting in a gross margin as high as 87.5%.

The company also set up its own import-export trading company and central warehouse to source core drinks directly, optimizing supply chain efficiency and stabilizing overall gross margins at a high level of 67.8%–70.5%, significantly above the industry average.

On the surface, food attracts customers for drinks, while drinks raise the overall customer transaction size. However, in actual operations, both restaurant bars and pure bars struggle to do justice to both food and drinks.

The reason is, the more complex the SKU, the greater the management difficulty and risk of loss; additionally, the required talent team, equipment configuration, and operational systems for each are completely different.

Junjie Liu, founder of craft beer supply chain service provider Happy Brewer, told Xinfeng that what’s special about COMMUNE is that it started from brand and target customer and then built its team accordingly.

“COMMUNE knows exactly what kind of atmosphere its target customers want, and then designs what food to serve and what drinks to offer,” says Liu. "With a rich SKU and relatively complex operations, high pricing and gross margin must be maintained."

In the first three quarters of 2025, COMMUNE’s average member bill was close to 170 yuan.

High ticket price restaurant businesses rarely remain unaffected in today’s consumption environment.

In 2024, COMMUNE started to optimize its product structure, streamlining the selection zone beverage SKU from over 1,000 to about half. According to the prospectus, after adjustment, selection zone beverage SKUs are about 200, and the Western cuisine menu is about 70 items.

More effort and resources are invested in developing proprietary products and differentiation.

By September 30, 2025, COMMUNE had launched 14 proprietary packaged alcoholic drinks, including “COMMUNE German Wheat” and “White Peach Oolong Cider”, which account for over 20% of total alcoholic beverage revenue.

By adjusting product structure and strategic price reductions, the company achieved certain growth in core operating metrics. In 2024, daily output per square meter was 58.3 yuan; in the first three quarters of 2025, it rose to 60.5 yuan.

By contrast, Chinese fast-food chain Lao Xiang Ji, bolstered by its takeout business, achieved 89.1 yuan/square meter at directly operated stores from January to August of 2025.

Some older stores are showing signs of decline: Same-store sales growth rate in tier-one cities in 2024 and the first three quarters of 2025 were -1.1% and -1.4%, year-on-year declines.

In tier-two cities, same-store growth was 3.6% in 2024, but fell to -0.3% in the first three quarters of 2025.

Regarding cost structure, due to all-hour operations requiring chefs, bartenders, and other staff in multiple shifts, COMMUNE's labor costs are high.

In 2024, employee spending grew 38% year-on-year to 290 million yuan; in the first three quarters of 2025, labor cost growth was 21%, exceeding the revenue growth rate of 14% in the same period.

Additionally, unlike competitors such as Helen’s with franchise models, COMMUNE insists on wholly-owned direct operations. Its per-store initial investment is as high as 5–6.5 million yuan, and most stores are located in core commercial areas—typical heavy asset operations.

In 2024 and the first three quarters of 2025, depreciation of lease property, plants, and equipment accounted for 17.4% and 13.6% of total revenue, creating a significant fixed cost burden.

The “Dream-Building Space” Is Hard to Replicate

As franchise fast-food brands crowd into the Hong Kong Stock Exchange, restaurant models like COMMUNE that emphasize “atmosphere management” face the challenge of standardization.

COMMUNE's co-founder and chief brand officer Fan Xiamei once stated their product system is divided into two categories: one is physical products like food and drinks; the other is “virtual products” comprised of service and environment—sound, light, taste, and touch.

“Atmosphere management may not seem to have a standard answer, but it’s hidden in countless details.” According to COMMUNE, this includes time-scheduled playlists, dynamic lighting, meticulously controlled music decibel levels, staff shift service standards, table and chair spacing, etc.

Despite this, the social experience itself is still difficult to mass-produce.

“Atmosphere” is highly reliant on single-store operations and regular customer relations, with many uncertainties, so COMMUNE is particularly cautious about store location.

Co-founder Sun Xianguo, when discussing the site selection strategy under “food-led alcohol”, pointed out that while data is crucial, the team also values intuition based on scenario judgment.

He regards COMMUNE as a “dream-building space”—whenever considering a potential site, the team pre-designs the outdoor seating area, the arrangement of greenery, and the creation of drinking atmosphere for each scene.

“Data is fundamental, but when facing an uncertain macro environment, we also believe in the power of intuition and imagination,” Sun explains. Considering the all-hours operation and a wide age range of clientele, the location selection standards are only becoming stricter.

In 2024, COMMUNE opened 11 new stores in tier-one markets, about two thirds of that year’s total new stores, and almost all positioned as higher-end “premium stores.”

Expansion in tier-two cities remained steady, with about 6 new stores opened in both 2024 and the first three quarters of 2025.

An investor with long-term interest in the consumer business analyzes that by sinking “standard stores” and replicating “social premium”, essentially, COMMUNE leverages brand power to attract lower-tier customers, achieve traffic conversion and boost output per unit area, and gradually expand supply chain gains.

In the eyes of the market, for restaurant models focused on scene and experience, the real challenge is not operational complexity, but whether they can keep attracting customers and avoid being forgotten or abandoned.

“If you evaluate Helen’s from 2018 to 2022, it was still a successful case, precisely matching the consumption power and social needs of college students at the time," Liu says. “It’s just that young people’s preferences have changed now.”

In Liu’s view, Chinese consumers still have limited overall acceptance of the “restaurant-bar hybrid” format, and the truly mainstream restaurant & bar scenarios are still centered on food stalls and various types of dining.

In the third-tier and below markets where it has not focused, COMMUNE currently maintains only nine stores. These stores generally range from 400–700 square meters, but with different local consumption scenarios and needs, their daily output per square meter is only a third of that in tier-one cities.

Lin Yue, chief consultant at Lingyan Management Consulting, suggested that COMMUNE's future could revolve around “localization” and “light-weighting”: the former incorporates local snacks and dishes to lower the consumption barrier through “familiar flavors”; the latter refers to smaller, less capital-intensive store types, creating new experiences through cost-effective soft furnishing and activities.

COMMUNE plans to add 105–135 stores over three years, doubling its current scale of 112 stores.

Of these, 30–40 new stores are planned for 2026, focusing on tier-one and tier-two cities; 35–45 new stores in 2027, deepening roots in tier-two and emerging markets; and another 40–50 in 2028, further covering major economic regions.

Yet, the heavy asset operation model demands high and continuous funding, and listing in Hong Kong has become a key “blood transfusion” channel.

As of November 2025, the company's cash and equivalents on the books are less than 100 million yuan, with net current liabilities of 175 million yuan, revealing a clear liquidity gap.

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