A Chinese Pizza Hut? Hefu-Noodle Completes Series C+ Round of Funding
COVID-19 and China
Noodle restaurant of Hefu. Image credit: Hefu-Noodle

Hefu-Noodle (和府捞面), a Chinese noodle restaurant brand, completed its Series C+ funding round of CNY 215 million, or USD 31 million on July 3, 2019.

Noodle restaurants in China date back 2,500 years and have long been associated with a plebian culinary tradition.

Hefu-Noodle, however, deviated from this norm by positioning itself as a high-end restaurant. It immerses diners in a bookstore-like setting, leveraging its unique operating model to create a slow and refined dining experience.

Founded in August 2013, the Jiangsu-based brand has not only upended people's views on traditional Chinese noodle, but also raised some investors' expectations for how far catering business can go.

After opening its first restaurant inside an RT-MART(大润发), a traditional supermarket and shopping complex, in Rugao, Jiangsu Province, the self-run chain brand has expanded rapidly and marked a milestone in 2017 with its 100th outlet opened in Shanghai.

Due to the difficulty in standardization and complex operation management, many venture capitalists have balked at investing in Chinese catering companies. Moreover, fundraising activities in the consumer-facing market have contracted drastically, down from more than 800 investments last year to less than 200 in the first half of 2019.

So Hefu-Noodle's continued appeal to investors makes it a relative bright spot amid the bleak market signals. What has it got right?

First and foremost, product. The company abandoned cheap raw materials and coarse cooking procedures, spending several years instead on trying to make the best noodle and soup.

The product development team traveled to different countries and restaurants to sample all kinds of noodles, in their search for the most “flavorful and chewiest” noodles before opening its first restaurant.

With quality noodle and soup, the average price of CNY 45 a bowl is relatively acceptable to customers. Besides, each store offers free noodle and soup if customers ask for more, a sales gimmick that appears to offer good value for money. Its core products include noodles, rice and drinks. Basically, a standard menu consists of 15 staple dishes, more than 20 snacks and offers a couple of drink choices.

Service is another strength of Hefu-Noodle and it is centered around the principle of “zero disturbance." With an in-store GPS device that guides servers to customers’ tables, the restaurant chain guarantees that all food that’s not arrived within 15 minutes of the placement of orders will be free. What’s more, customers will be able to quietly slurp on their noodles, free from the irksome peddling of unwanted services occasionally seen in other restaurants.

In addition, the delicate food requires delicate control. The company has spent CNY 10 million on building its own central kitchen. Centralized production saves the firm a great amount of money in labor costs as well as ensures better control of consistency in taste and quality.

The fast-serve but slow-dining mode, the middle- to high-end positioning strategy and the highly standardized products of Hefu-Noodle have combined to unlock the potential of what has been referred to by some in China as a local equivalent of “Pizza Hut.”

Nevertheless, opportunities and risks come hand in hand for startups in the midst of expansion. Standardized food should go with standardized store management ability.

Comments vary for this emerging noodle restaurant brand. Negative reviews proliferate online as consumers complain about tables reeking of unwashed cleaning cloth.

There also have been exposed by internal whistleblowers about squalid kitchens and questionable hygienic practices.

Finally, the reliability of the self-run model is also questionable.

Proprietors of the chain store need to take these risks into consideration when they stake their reputation on making a quick buck out of traditionally slow business.

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