HAIDILAO (HKEX: 06862) is facing mounting pressure as its fast-expanding BBQ sub-brand, Yanqing Grill Store, begins to retract its footprint after a period of aggressive growth. Between November 2025 and the end of June 2026, Yanqing closed at least 19 locations, with no new openings recorded in the first half of 2026.
However, the issue extends beyond just this single sub-brand. The core problem lies within HAIDILAO itself, as its once-celebrated organizational strengths, including mentorship, store manager replication, and the ethos of "changing one's destiny through hard work," appear to be losing their effectiveness.
Song Nan, a former part-time employee at a Yanqing outlet in Changsha, was not surprised by the closures. Within just over a year, her store cycled through five different managers. By the time she left, the haircut and braiding services had been discontinued, and those areas had been converted into a teppanyaki fried rice station, a stark departure from the brand's original identity.
The signature features of Yanqing, which operates under the HAIDILAO umbrella, included assistants grilling meat for customers, plus unique amenities like haircuts and braiding. After 8 PM, the venue transformed with cocktail flair, dancing, and DJ performances, aiming to capture nighttime social spending typically reserved for bars and clubs. The powerful overhead suction hoses, which could even hold a phone, were meant to control smoke, but the haircut and braiding services were introduced to mitigate lingering odors, using premium shampoos and Dyson dryers.
Initially, this model received positive feedback. The first store in Xi'an, which opened in late 2023, quickly became profitable. Outlets opened in 2024 across Xi'an, Yiwu, and Nanjing were reported to be profitable within their first month, with nighttime modules contributing up to 15% of sales in some locations. Analysts at the time were optimistic about the unit economics, noting that while hot pot and BBQ use different cuts of beef, combined demand could allow for supply chain synergies and more competitive pricing from suppliers.
This favorable outlook drove rapid expansion. Management envisioned reaching 400 to 500 stores within three years. In the first half of 2025, Yanqing opened 46 new stores, reaching a total of 70 by the end of June. However, contraction began in late 2025, and HAIDILAO has since stopped disclosing specific figures. From November 2025 to June 2026, at least 19 stores closed, and there were no new openings. The retraction appears to be ongoing.
The reasons for this shrinkage are not simply about poor sales. Song Nan's store, for instance, performed well, generating 50,000 to 60,000 yuan in daily revenue during winter, weekends, and holidays. On the busiest New Year's Day, it served over 240 tables with only 35 available. Similarly, stores in East China matched the revenue of popular BBQ rivals, but this required a heavy reliance on manpower to sustain the experience.
The operational model is labor-intensive: grilling, haircuts, braiding, and nighttime performances all require dedicated staff. As the brand expanded to dozens of locations, the initial cracks appeared in its human resources. While management and core staff were largely transferred from the parent hot pot chain, front-line positions relied on market hires, creating a divided workforce where those from HAIDILAO were perceived as favoring their own internal network. Social hires found it difficult to integrate or advance without a longer tenure, and some experienced managers displayed a condescending attitude toward new recruits.
Staff turnover has been severe. In one store, the original group of 20 employees who were trained in Xi'an for a month dwindled to just one; most left within a couple of months of opening. New hires often quit after a day or two due to the intense workload. This churn was fueled by a disconnect between labor intensity and compensation. While the parent company uses a piece-rate wage system, Yanqing adopted fixed salary bands. Some stores experimented with a piece-rate model for about three months before reverting to fixed pay, which failed to reward employees for taking on multiple roles.
Song Nan, hired as a BBQ server, was thrown onto the floor the day after her interview without formal training. She was quickly expected to handle three to four tables simultaneously, sometimes serving groups of over ten people seated at two merged tables, which counted as only a single table in work assignments. Beyond grilling, she had to assist with front-of-house, delivery, cleaning, and fill in for any other vacant position. This "fill wherever needed" culture left staff without breaks, and some felt undervalued and even targeted, with one employee reporting that her actual take-home pay was only 2,500 yuan despite being promised over 4,300 yuan, as she was often assigned to assist other roles.
The high turnover directly impacted the services that defined the brand. With a single haircut taking at least 20 minutes, long queues required more staff, which increased costs. In Song Nan's store, the dedicated braid specialist was eventually reassigned to regular server duties, and the service was offered only on a best-effort basis. Similarly, two DJs and a resident singer all left within a short period. This erosion of its differentiated offerings, coupled with service quality that customers often compared unfavorably to the flagship HAIDILAO brand in online reviews, has left a restaurant group of over 100,000 employees struggling to replicate its own famed service culture.
The core issue at hand is the parent company's organizational capability, specifically the mechanisms of mentorship and single-store management. Previously, employee progression was tied to the expansion of the main hot pot brand, which created a steady pipeline of new store manager and regional manager roles. As the core brand matures and store openings slow, these advancement opportunities have diminished, making the promise of "changing destiny with your own hands" seem hollow.
The "Red Pomegranate Plan" was designed to solve this by fostering new sub-brands and creating new positions. The company encouraged employees to pitch projects, receiving around 200 proposals daily. Yanqing was one of the first successful outcomes, created by Yang Hua, a two-decade veteran who initially struggled as the head of a failed rice noodle venture before pivoting to BBQ. A dedicated support structure, including vice presidents for growth, supply chain, and marketing, was assembled to accelerate incubation across multiple new concepts.
The initiative aimed to leverage HAIDILAO's managerial resources by introducing "dual-store" and "multi-store" management models in 2024, where experienced store managers would oversee multiple hot pot and new-brand locations. This was intended to optimize talent use and provide income growth for top managers while freeing up positions for trainee managers. However, in practice, the number of formal store managers was reduced from nearly 1,000 to 600-700, and these managers were stretched thin across multiple locations. Deputy managers, who handled daily operations in these satellite stores, were paid less, creating a new middle layer rather than opening up promotion paths. Many managers found their workload increased without a corresponding pay increase, reflecting the instability seen in Song Nan's Changsha store.
The impact has been tangible. By late 2024, Red Pomegranate had incubated 11 brands across 74 outlets. A year later, the count had grown to 20 brands and 207 stores. By mid-2026, the number of brands had risen to 21, but the total store count dropped to 183. Despite the fewer stores, revenue from these other dining concepts reached 1.271 billion yuan, a year-over-year increase of 113.1%—a puzzling combination that signals a strategic pivot.
HAIDILAO has stated it is shifting from "scale expansion" to "efficiency gains," re-evaluating all projects to concentrate resources, including talent and prime locations, on validated brands. Concepts with unproven business models are being slowed down or closed. The two concepts chosen for further backing are Haidilao Dapaidang Hot Pot and Ruyi Sushi, notably excluding Yanqing, its fastest-growing sub-brand.
The organizational dilemma persists even as the group introduces new leadership. In January 2026, founder Zhang Yong returned as CEO after a four-year hiatus, with a focus on Red Pomegranate and intelligent systems. Shortly after, Yang Lijuan resigned from her role as CEO of SuperHi to return and coordinate the plan. Yet, the plan has not resolved the organizational challenges; it has arguably become part of the problem. Organizational strength is built on personal mentorship ties, which are not as easily transferable as recipes or supply chains. Attempting to replace these relationships with mechanisms has created new bureaucratic layers. Ultimately, the issues faced by HAIDILAO are not unique to it; all restaurant companies transitioning from rapid growth face similar hurdles. As the saying goes, the company is trying to cross a river without a stone to touch, and finding the way is a challenge shared across the industry.