(Yicai Global) Sept. 26 -- Xiabuxiabu Catering Management Holdings has gone ahead with the launch of a new barbecue restaurant business in spite of a six-fold widening in the Chinese hotpot chain’s first-half net loss.

Xiabuxiabu opened its first Chenshao eatery in Shanghai on Sept. 24, Yicai Global learned from the company. It plans to open an initial group of 20 in first-tier Chinese cities, and accelerate the pace of expansion to 30 a year from 2024 so as to have 100 in places like Hangzhou, Chongqing, and Tianjin in the next three years.

The first half of this year was especially tough for China’s CNY4.7 trillion (USD657 billion) catering sector, as a resurgence of Covid-19 forced restaurants to close and curbed dine-in services. Xiabuxiabu’s net loss ballooned 493 percent to CNY278.2 million (USD38.9 million) in the six months ended June 30, from CNY46.9 million a year earlier. Revenue sank 29 percent to CNY2.2 billion (USD301.3 million).

The Covid-19 pandemic will eventually come to an end, said Xiabuxiabu Chairman He Guangqi, who set up the Beijing-based company in 1998, predicting that demand among China’s more than 1 billion consumers will surge.

The hotpot and barbecue segments were worth about CNY950 billion (USD132.8 billion) and CNY270 billion last year, respectively, according to the China Chain Store & Franchise Association. There were 852,000 barbecue businesses, of which 493,000 are still open, data from corporate information platform Qichacha showed.

They are the two biggest segments in China’s catering sector, He pointed out. But there has never been a leading barbecue brand, so Chenshao aims to differentiate itself in the market, he added.

But during these unusual times Xiabuxiabu needs to be more cautious about expansion, He pointed out, so the firm aims to keep the cost of renting premises for Xiabuxiabu outlets below 10 percent of turnover, under 8 percent for hotpot sub-brand Coucou, and less than 15 percent for the first batch of Chenshao eateries.

Chenshao’s rents will be higher because its restaurants need to be in better locations. They must be on the first floor, with outside space, and in commercial areas where young people hang out, He said.

Coucou posted a small first-half loss, but will turn an annual profit if the Covid-19 situation improves by December, He said, adding that Xiabuxiabu, which has been on the recover path since July, is in the same situation.

Editor: Futura Costaglione