The catering industry itself is characterized by high costs and low profits. Yum China, which operates standardized fast food, has a profit margin of around 20%, while Xiaonanguo and Quanjude, which operate Xiabu, have a profit margin of no more than 3% and have relatively low marginal costs. Xiabu’s profit margin is also around 11%. And these companies with such profit margins are relatively benchmark companies, and the profit margins of the lower echelons will also be lower. Lower profits mean a longer capital return cycle, which poses a great challenge to the sustainability of catering companies. Since the overall market capacity of catering is large but competition is fierce, differentiated operations down to individual products are the basic status quo. Whether catering companies can continue to survive depends on whether they can transform from monopoly brands to monopoly categories. However, even if you can monopolize a certain category, as consumers' choices become more and more diversified, the sustainability of the company will still be challenged by changes in consumer choices.

These are the difficulties that founders of catering companies must be mentally prepared for before starting a business. These difficulties extend to a series of problems.

Measured from the core of catering products, the catering industry market is a perfectly competitive market. The characteristics of perfect competition mean that no company in the market can obtain monopoly profits, which determines the profit ceiling of catering enterprises.

One superficial reason why the catering industry is a perfectly competitive market is that the entry barriers are low, but the reason cannot be simply summarized as low entry barriers. To give a counterexample, the entry barriers to the Internet industry in the early years were also very low, but the Internet is a typical imperfectly competitive market. Moreover, after ten years of golden development of commercial real estate, the proportion of catering formats in shopping malls has increased from 30% to 60%. The dividend period of commercial real estate is coming to an end, and rent and labor costs are also increasing day by day. If street shops are excluded, , the entry threshold for the catering industry is actually not low.

A more important reason why the catering industry has fallen into perfect competition is that industry participants are highly substitutable, and this substitutability spans various segments. In essence, the business logic of catering is to provide diners with products and services based on food ingredients by renting a certain space. The core of the product is to provide a feeling of satiety. The analogy of "putting some meat on the flatbread" is ridiculous, but it is the closest explanation to first principles. Pizza Express is not only a substitute for Pizza Hut and Le Caesar, which also specialize in pizza, but also a substitute for McDonald's and Burger King, and even a substitute for Haidilao and Xiabuxiabu. To take an extreme example, a restaurant with three Michelin stars would never consider itself to be in the same market as Shaxian snacks, but in fact the existence of Shaxian snacks will substantially change the frequency of consumption and lower the ceiling of this three-star Michelin restaurant.

Under certain domestic demand market conditions, perfect competition determines the upper limit of the catering industry - although this is a ceiling that most catering companies cannot touch. In the previous period, perfect competition was also one of the factors in low-cost competition in the previous period, but historical factors at a specific stage of development played a more critical role. In the early stage of reform and opening up, per capita income gradually increased, and the population agglomeration effect initially took shape. With the emergence of new cuisine categories (such as "foreign fast food", "Western food" and various local dishes appearing in coastal cities), catering companies in the incremental market are simply Copying also has the opportunity to seize the market, which leads to the phenomenon of homogeneity. Homogenization means further compressing the premium space under perfect competition. The income level of diners has also compressed the upper limit of premium space, and companies can only expand profits by cutting costs. This is a historical factor of a specific period in the past.

However, the new era is a period in which the stock market is the main feature, and the copycat model is no longer feasible in first- and second-tier cities. As the population further gathers, the income of diners further increases, and the consumption outlook upgrades, the catering industry has also undergone fragmentation and cross-integration, and has begun to operate differentiated operations, such as Japanese cuisine. The Japanese restaurants in our impression have also evolved from serving sushi in one pot. All categories of popular cuisine have gradually been subdivided into various business formats, and various izakayas, Japanese hot pots, Fangtai, and kaiseki cuisine have successively appeared on the market. The basis for diners to choose restaurants has also evolved from cuisine to single items and catering brands. Without changing the nature of perfect competition, the market has been segmented and the market that can be achieved through low-cost competitive strategies has been squeezed out.

If the total profit value (V) created by a catering company based in a first-tier city is expressed as the product of customer lifetime value (LTV) and the number of covered customers (Q), the customer lifetime value is further expressed as From the customer's single consumption profit (P) and consumption frequency (T), we can derive the total profit value that the enterprise can create V=P*T*Q. When the population of first-tier cities stabilizes or is even squeezed out, with the segmentation of the market, the number of covered customers Q will be diverted. Then increasing the profit P generated by a single consumption and the frequency of consumption T is a solution to the problem of low profits. Two key points. Therefore, catering companies are now looking for ways to increase customer unit prices and repurchase rates. They are also trying to reach the upstream supply of raw materials to reduce raw material costs, and use IT and Internet tools to save labor costs. Personally, I think the repurchase rate is the most important indicator that should be paid attention to, because it reflects the influence of the catering brand, and is also a leading indicator of such indicators as table turnover rate, square footage efficiency, etc.

There are many ways to increase the repurchase rate, but in the final analysis, it comes down to the brand. Brands are not just trademarks managed by the Trademark Office, nor are they just dazzling non-effective advertisements in various media and the financial backers behind them. As the inner part of the bright appearance, the brand is the outer shell supported by a series of technologies, products, and services. It is the company's monopoly on this series of technologies, products, and services. Monopoly branding is the easiest monopoly for a catering company to achieve - just spend money to hire a trademark agent, but ambitious catering companies will try to "monopolize" the category. Because "monopolizing" a category means "monopolizing" a market segment dominated by the category, using the brand to occupy the minds of diners about the category, and setting an alarm clock in the minds of diners. When diners want to eat pickled fish, they think of Tai Er, when they want to eat roasted pork ribs, they eat Fat Boy, and when they want to drink tea, they drink Hey Tea. This is the brand's alarm clock in the minds of diners, waking them up to make repeat purchases.

However, as mentioned earlier, any catering brand is inevitably exposed to perfect competition, even if the brand successfully "monopolizes" a certain category. There is no roasted pork ribs that must be eaten, and there is no irreplaceable added value. There are only three meals that must be solved. Moreover, catering companies must face the issue of profit sustainability. In perfect competition, no catering company can guarantee that it can continue to launch products that meet the tastes of diners, especially in this era of rapid brand explosion but also rapid annihilation. Therefore, more and more catering companies are embarking on the path of strategic investment.