Lanzhou beef noodle restaurants have sprung up everywhere, but there is no money in them, quite literally. Transparent accounting in these cashless restaurants has made them prime targets for venture capital.
Photo from CFP
By LIU Yujing
It seems almost everyone loves Lanzhou beef noodles. Named after Lanzhou, capital of Northwest Gansu Province – the bowls of steaming soup are traditionally eaten in small, cramped eateries. They are cheap and warming.
And right now, no one is enjoying the traditional quick lunch more than venture capitalists. MaJiYong, a noodle chain start-up that only opened its first restaurant in 2019, received a billion yuan (US$ 156 million) from Sequoia Capital in May. Another chain ChenXiangGui is also looking for a bidder willing to offer a billion yuan. ZhangLaLa founded by former wrestler ZHANG Xiaohui received 100 million yuan from Shunwei Capital and GoldenSand Venture and is now looking for another US$60 million.
Despite rustic names and traditional helpings, these restaurant chains have little to do with the wild west of China. They are pure Shanghai incubated.
More than 13,000 noodle restaurants opened last year, mostly mom-and-pop stores – your typical noodle restaurant. All the three noodle shops are trying to transcend that image, with spacious designs and expensive noodles, usually 40 yuan, twice the price of a random noodle canteen.
Much of the appeal of the noodle shop has always been how easy and fast operations are. And it is the super-efficient service in swanky noodle bars that attract customers and investors alike. Customers place orders and pay by phone and the noodles appear five minutes later.
CAI Zhi, the founder of a catering business podcast, explained why investors are so keen. “Mobile payment is easier for them to do the accounting,” he said. So much easier that the financial status of each shop is pretty much there, in real-time, and cash flows are live.
But despite the hot money flowing in, not all noodle restaurants are ready to embrace the market. “Too much money, too few managers,” Cai said. “Without a good team, the money will simply burn for nothing.”
ZHANG Gaotao who owns a vocational school cultivating noodle chefs in Gansu holds the same opinion. "The VCs have spotted the value of noodle business, but to thrive, systematic and experience management must be introduced."