With a surge in franchise stores, how did Lao Xiang Ji gain an advantage in the food delivery battle?

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Laoxiangji has submitted its third prospectus in its sprint toward a Hong Kong IPO.

Revenue in the first eight months of 2025 was 4.58 billion yuan, up 10.9% year-on-year, with 179 new stores added, reaching a total of 1,658 stores.

Currently, Laoxiangji adopts a strategy of balancing dense expansion in its home base in Anhui province with expansion outside the province.

By the end of August 2025, its stores covered only nine provinces nationwide, with nearly half still located in Anhui province.

Including the neighboring Jiangsu province and Shanghai, the company has a total of 1,434 stores in East China, accounting for 86.5% of all its stores.

In 2024, measured by gross merchandise volume, Laoxiangji became the largest Chinese fast-food brand in East China, with a market share of 2.2%, about 2.5 times that of the second-largest competitor.

This dense regional layout is closely related to its full-industry-chain model.

As one of the few brands in the Chinese fast-food industry to be deeply involved in poultry farming, the company has established a supply chain system that includes 2 central kitchens, 3 chicken farms, and 8 distribution centers, and is building a third central kitchen in Anhui, which is expected to begin trial production in 2027.

This heavy-asset, full-chain layout has provided a solid foundation for store expansion and food safety management, but because of its "high investment, high costs, and low average spend per customer" operating characteristics, some believe it may bring funding pressure and profit volatility.

However, it is precisely this relatively complete supply chain that strongly supports the rapid expansion of Laoxiangji's franchise system.

In recent years, the company has continued to optimize its store structure, gradually converting mature self-operated stores into franchised stores, and opening up franchising to qualified former employees.

As of the end of August 2025, the number of its franchise stores has reached 733, accounting for nearly 44% of its total stores, significantly up from 18.8% in 2023.

Among chain restaurant brands that are listed or preparing for IPO, Laoxiangji’s franchise ratio is among the highest in the industry.

By comparison, Yujian Xiaomian's proportion of franchise stores is less than 25%, Yum China about 13%, Xiaocaiyuan has not yet opened franchising, and hot pot brands, which have higher standardization difficulty, find it even harder to roll out franchising on a large scale.

Under the franchise system, Laoxiangji mainly supplies goods to franchisees and charges a management fee of 6% of each store’s monthly revenue.

This asset-light expansion model not only optimizes the company's overall profitability structure but also allows it to flexibly capture traffic during the summer 2025 delivery platform subsidy cycle, effectively responding to pressure from declining average order value and dine-in numbers.

In the first eight months of 2025, the company’s gross profit margin increased by 0.7 percentage points to 24.6%, and net profit margin edged up by 0.1 percentage point to 8.1%.

The prospectus also unusually disclosed in detail the platform fee structure of chain fast-food brands’ delivery services.

For each delivery order, Laoxiangji must pay the platform a commission based on sales and a variable fulfillment fee. For orders totaling 25 to 40 yuan, the platform service fee is typically between 2 and 7 yuan.

In 2024 and the first eight months of 2025, the average delivery platform service fee rates for Laoxiangji’s self-operated stores were 17.9% and 17.5%, respectively.

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