The first stock in the dumplings-and-wontons business, “Yuanji Foods,” is heading for an initial public offering in Hong Kong.
Recently, Yuanji Foods submitted its listing application to the Hong Kong Stock Exchange. Its operating figures show a mix of scale expansion and mounting profitability pressure. In 2023 and 2024, the company recorded revenue of RMB 2.026 billion and RMB 2.561 billion, respectively, up 26.4% year over year. Revenue for the first three quarters of 2025 reached RMB 1.982 billion, up 11% year over year. While revenue continued to grow, the growth rate clearly slowed. Profitability fluctuated significantly: net profit fell 15% year over year in 2024 to RMB 142 million, then rebounded to RMB 142 million in the first three quarters of 2025 (matching the full-year 2024 level in just nine months). Adjusted net profit was RMB 192 million, up 31% year over year, with the increase largely driven by a reduction in share-based payment expenses.
The company’s gross margin has consistently been below the industry average, dropping to 23% in 2024 and then recovering to 24.7% in the first three quarters of 2025—still far below the 28%–32% level of leading players. Raw material costs accounted for as much as 87.5%, and rapid expense growth further squeezed profit margins. Overall, the company’s scale advantage stands out, but its earnings are not sufficiently stable. Growth remains primarily driven by store count, and operating efficiency urgently needs improvement.
Yuanji Foods’ core strengths are mainly reflected in three areas: category positioning, scale deployment, and its business model.
First, it enjoys a clear category advantage. The company focuses on the dumplings-and-wontons segment and has become China’s largest dumplings-and-wontons company. By store count, it is also the world’s largest Chinese-style quick-service restaurant chain. As of September 2025, it had 4,266 stores worldwide, covering 32 provinces across China and markets in Southeast Asia. The category has broad appeal and aligns closely with neighborhood consumption scenarios, giving it the potential to become a mass-market fast-food staple.
Second, its asset-light franchising model enabled rapid expansion. Franchised stores accounted for more than 95% of the total, and 97.2% of revenue came from selling ingredients to franchisees and collecting service fees. This model lowers expansion costs, helping the company complete a nationwide rollout in a short period. Store growth in lower-tier cities was particularly strong, with the share of the lower-tier market rising from 19.8% in 2023 to 26.6% as of September 2025.
Third, it leverages dual brands and format synergies. “Yuanji Yunjiao + Yuanji Weixiang” integrates dining and retail, with store formats including “raw-and-cooked integrated” outlets to meet diverse needs such as dine-in, delivery, and take-away of uncooked products. In the first three quarters of 2025, delivery GMV reached RMB 2.136 billion, with its share rising to 44.6%, indicating continued optimization of the business mix. In addition, capital backing fueled expansion: from 2023 to 2025, the company completed multiple financing rounds, reaching a post-money valuation of RMB 3.5 billion, and brought in strategic investors such as Yihai Kerry to create synergies across the supply chain and channel resources.
At the same time, the company’s weaknesses and growth pain points are equally prominent—and have become the central tests on its path to an IPO. First, control gaps in the franchising model are glaring. With franchised stores accounting for more than 95% of the network, quality control is extremely difficult. In 2024, the “worm incident” at a Beijing franchise store triggered a crisis of trust in the brand; related complaints on the Black Cat platform exceeded 380. Revenue at some outlets plunged by 30%. Meanwhile, in 2025 the ratio of newly opened to closed franchise stores deteriorated from 15:1 to 3:1. Franchisees’ payback periods averaged 13–20 months—and could be longer in top-tier cities due to intense competition. Waning franchisee enthusiasm directly undermines the stability of the company’s core source of revenue.
Second, there are fundamental flaws in the profit structure. Raw-material costs have long remained above 85% of revenue, reaching 87.5% in the first three quarters of 2025—well above the industry average. This was compounded by a 63.7% surge in selling and marketing expenses in 2024 and a 20.1% increase in administrative expenses; cost growth far outpaced revenue growth, keeping gross margin under sustained pressure. Third, there is a perception gap between the flagship “freshly hand-wrapped” selling point and actual operations. The company uses centrally produced, frozen ingredients delivered from a central kitchen, with stores only wrapping on-site—something that does not match consumers’ understanding of “handmade throughout the entire process.” Controversy over pre-prepared food has further eroded trust in the brand. In addition, the company also faces compliance risks: in 2023, 21.6% of revenue was processed via third-party payment channels, and issues such as unpaid social insurance contributions and deficiencies in property filings remain to be addressed.
Yuanji Yunjiao has also run into a growth bottleneck and has kept trying to break through. On the one hand, growth has been heavily dependent on store count. In the first three quarters of 2025, per-store revenue efficiency fell 4.3% year on year, while average spend per order dropped from RMB 26.1 in 2023 to RMB 22.8. In lower-tier markets, the company also faced challenges such as pricing that is perceived as too high (an average of RMB 23, close to the upper limit of the price band in lower-tier cities) and difficulties in flavor localization—its southern-style, fresher and slightly sweeter taste profile has not been well accepted in lower-tier northern cities.
On the other hand, the company actively sought breakthroughs. It planned to use IPO proceeds to advance digitalization, upgrade its supply chain, and expand overseas. It also rolled out corrective measures in 2025, such as tiered complaint-response protocols and shortening the shelf life of fillings, while accelerating its overseas rollout. As of September 30, 2025, it had 53 stores overseas; peak daily turnover at its Singapore stores reached SGD 12,000, making Southeast Asia the company’s core overseas expansion battleground.
In fact, demand in the Chinese-style neighborhood snack segment is enormous. Shaxian Snacks and Hangzhou Xiaolongbao each have more than 10,000 and 30,000 stores nationwide, respectively. Although Yuanji Foods, with over 4,000 stores (nearly 1,500 in the Yangtze River Delta), ranks among the leaders, most brands in the sector are still mainly mom-and-pop operations, with weak quality control and fragmented supply chains. A comparable listed company in the same category, Babi Food, also focuses on neighborhood breakfast and snack scenarios and has achieved scaled expansion through franchising. However, Babi Food is positioned as more affordable, with an average ticket size of RMB 12–15—well below Yuanji Foods’ roughly RMB 20—while offering a broader product range that includes buns, steamed buns, and other breakfast items. Its supply-chain buildout is also more mature, giving it an edge in gross margin.
In addition, while Chinese-style fast-food companies such as Laoxiangji and Country Style are primarily direct-operated, they have set examples in brand operations and quality-control management. As the first company in the dumpling and wonton segment to sprint toward a listing, Yuanji Foods’ post-listing performance will serve as a reference for the capitalization of Chinese-style fast-food subcategories. The Hong Kong stock market is relatively accommodating toward chain catering franchise models, valuing scale growth and model replicability—providing Yuanji Foods with fertile ground for capital. At the same time, Hong Kong regulators have been raising their requirements for the authenticity of filing materials and the accuracy of business descriptions, further increasing the bar for listing review.
It can be said that Yuanji Foods’ Hong Kong listing is a comprehensive stress test of the resilience of its business model. As the undisputed leader in the dumpling-and-wonton segment, the company’s scale advantage, category positioning, and asset-light expansion model offer strong development potential. If the funds raised through the listing can be effectively invested in digital quality control, supply-chain upgrades, and overseas expansion, the company is expected to ease franchise-management challenges and improve operating efficiency—while also leveraging the brand endorsement of the capital markets to mitigate the “pseudo-made-to-order” controversy and solidify its position in the industry.
At the same time, the company must directly confront the inherent shortcomings of the franchise model, the structural issues at the core of its profit model, and the potential risks in quality-control compliance. If it cannot convert capital advantages into tangible improvements in competitiveness, food-safety issues and earnings volatility will continue to weigh on its valuation and long-term growth.
Overall, Yuanji Foods’ investment appeal lies in the growth potential of a niche segment and the room for imagination around scaled expansion, while the risks are concentrated in the sustainability of its model and the stability of profitability. The crux of its future development is to find a balance between scaling up and quality control, achieving a shift from “leading in quantity” to “leading in quality.” This will not only determine the company’s own performance in the capital markets, but also shape market confidence in the capitalization of Chinese-style fast-food subcategories.
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