Business Splitting Accounting Worksheet

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1. Please draw the exact same table in attached picture into Excel. (Just draw them down, easy work)2. Please read the attached pdf, and draw a table about business splitting ( I will show you a reference later)The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the
contents of this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim
any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents
of this Application Proof.
Application Proof of
GUOQUAN FOOD (SHANGHAI) CO., LTD.
(A joint stock company incorporated in the People’s Republic of China with limited liability)
WARNING
The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the “Stock Exchange”)
and the Securities and Futures Commission (the “Commission”) solely for the purpose of providing information to the public
in Hong Kong.
This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can
be material. By viewing this document, you acknowledge, accept and agree with Guoquan Food (Shanghai) Co., Ltd. (the
“Company”, together with its subsidiaries, the “Group”), its joint sponsors, overall coordinators, advisers or members of
the underwriting syndicate that:
(a)
this document is only for the purpose of providing information about the Company to the public in Hong Kong and
not for any other purposes. No investment decision should be based on the information contained in this document;
(b)
the publication of this document or any supplemental, revised or replacement pages on the Stock Exchange’s website
does not give rise to any obligation of the Company, its joint sponsors, overall coordinators, advisers or members of
the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance
that the Company will proceed with the offering;
(c)
the contents of this document or any supplemental, revised or replacement pages may or may not be replicated in full
or in part in the actual final listing document;
(d)
this document is not the final listing document and may be updated or revised by the Company from time to time in
accordance with the Rules Governing the Listing of Securities on the Stock Exchange;
(e)
this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering
to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe
for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any
securities;
(f)
this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such
inducement is intended;
(g)
neither the Company nor any of its affiliates, its joint sponsors, overall coordinators, advisers or underwriters is
offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document;
(h)
no application for the securities mentioned in this document should be made by any person nor would such application
be accepted;
(i)
the Company has not and will not register the securities referred to in this document under the United States Securities
Act of 1933, as amended, or any state securities laws of the United States;
(j)
as there may be legal restrictions on the distribution of this document or dissemination of any information contained
in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and
(k)
the application to which this document relates has not been approved for listing and the Stock Exchange and the
Commission may accept, return or reject the application for the subject public offering and/or listing.
THIS APPLICATION PROOF IS NOT FOR PUBLICATION OR DISTRIBUTION TO PERSONS IN THE UNITED
STATES. ANY SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
WITHOUT REGISTRATION THEREUNDER OR PURSUANT TO AN AVAILABLE EXEMPTION THEREFROM.
NO PUBLIC OFFERING OF THE SECURITIES WILL BE MADE IN THE UNITED STATES.
NEITHER THIS APPLICATION PROOF NOR ANY INFORMATION CONTAINED HEREIN CONSTITUTES AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN THE UNITED STATES OR
IN ANY OTHER JURISDICTIONS WHERE SUCH OFFER OR SALE IS NOT PERMITTED. THIS APPLICATION
PROOF IS NOT BEING MADE AVAILABLE IN, AND MAY NOT BE DISTRIBUTED OR SENT TO ANY
JURISDICTION WHERE SUCH DISTRIBUTION OR DELIVERY IS NOT PERMITTED.
No offer or invitation will be made to the public in Hong Kong until after a prospectus of the Company has been registered
with the Registrar of Companies in Hong Kong in accordance with the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). If an offer or an invitation is made to the public in Hong
Kong in due course, prospective investors are reminded to make their investment decisions solely based on the Company’s
prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during
the offer period.
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
IMPORTANT
If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.
GUOQUAN FOOD (SHANGHAI) CO., LTD.
鍋 圈 食 品 (上 海 )股 份 有 限 公 司
(A joint stock company incorporated in the People’s Republic of China with limited liability)
[REDACTED]
Number of [REDACTED] : [REDACTED] H Shares (subject to the
under the [REDACTED]
[REDACTED])
Number of [REDACTED] : [REDACTED] H Shares (subject to
[REDACTED])
Number of [REDACTED] : [REDACTED] H Shares (subject to
[REDACTED] and the [REDACTED])
Maximum [REDACTED] : HK$[REDACTED] per H Share plus
brokerage of 1.0%, SFC transaction
levy of 0.0027%, AFRC transaction
levy of 0.00015% and Hong Kong
Stock Exchange trading fee of
0.00565% (payable in full on
application in Hong Kong Dollars and
subject to refund)
Nominal value : RMB[1.00] per H Share
Stock code : [REDACTED]
Joint Sponsors, [REDACTED]
[REDACTED]
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of
this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole
or any part of the contents of this document.
A copy of this document, having attached thereto the documents specified in the paragraph headed “Documents Delivered to the Registrar of Companies and Available on Display” in Appendix
[VII] to this document, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
(Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this document
or any other document referred to above.
The [REDACTED] is expected to be fixed by agreement between the [REDACTED] (for themselves and on behalf of the [REDACTED]) and us on the [REDACTED]. The [REDACTED]
is expected to be on or around [REDACTED] (Hong Kong time) and, in any event, not later than [REDACTED] (Hong Kong time). The [REDACTED] will be not more than
HK$[REDACTED] and is currently expected to be not less than HK$[REDACTED] per [REDACTED]. If, for any reason, the [REDACTED] is not agreed by [REDACTED] (Hong Kong
time) between the [REDACTED] (for themselves and on behalf of the [REDACTED]) and us, the [REDACTED] will not proceed and will lapse.
The [REDACTED], for themselves and on behalf of the [REDACTED], and with our consent, may reduce the number of [REDACTED] being [REDACTED] under the [REDACTED]
and/or the indicative [REDACTED] below that stated in this document at any time on or prior to the morning of the last day for lodging applications under the [REDACTED]. In
such a case, an announcement will be published on the website of the Company at www.zzgqsh.com and on the website of the Stock Exchange at www.hkexnews.hk not later than
the morning of the day which is the last day for lodging applications under the [REDACTED]. Further details are set forth in “Structure of the [REDACTED]” and “How to Apply
for [REDACTED]” in this document.
We are incorporated, and a majority part of our businesses are located, in the PRC. Potential investors should be aware of the differences in the legal, economic and financial systems between
the PRC and Hong Kong and that there are different risk factors relating to investment in PRC-incorporated businesses. Potential investors should also be aware that the regulatory framework
in the PRC is different from the regulatory framework in Hong Kong and should take into consideration the different market nature of the H Shares. Such differences and risk factors are
set out in the sections headed “Risk Factors”, “Regulatory Overview”, “Appendix [IV — Summary of Principal Legal and Regulatory Provisions]” and “Appendix [V — Summary of the
Articles of Association]” in this Document.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this document, including but not limited to the risk factors set out
in the section headed “Risk Factors” in this document. The obligations of the [REDACTED] under the [REDACTED] are subject to termination by the [REDACTED] (for themselves and
on behalf of the [REDACTED]) if certain grounds arise prior to 8:00 a.m. on the [REDACTED]. See “[ [REDACTED] — Grounds for Termination]” of this document.
The [REDACTED] have not been and will not be registered under the U.S. Securities Act or any state securities laws of the United States and may not be [REDACTED] or sold within or
to the United States, or for the account or benefit of U.S. persons (as defined in Regulation S) except in transactions exempt from, or not subject to, the registration requirements of the U.S.
Securities Act. The Offer Shares are being [REDACTED], sold or delivered (i) in the United States solely to QIBs in reliance on Rule 144A or another exemption from, or in a transaction
not subject to, the registration requirements of the U.S. Securities Act (ii) outside the United States in offshore transactions in reliance on Regulation S.
[REDACTED]
[REDACTED]
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
IMPORTANT
[REDACTED]
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
IMPORTANT
[REDACTED]
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
EXPECTED TIMETABLE(1)
[REDACTED]
–i–
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
EXPECTED TIMETABLE(1)
[REDACTED]
– ii –
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
EXPECTED TIMETABLE(1)
[REDACTED]
– iii –
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
EXPECTED TIMETABLE(1)
[REDACTED]
– iv –
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
CONTENTS
IMPORTANT NOTICE TO PROSPECTIVE INVESTORS
This document is issued by our Company solely in connection with the
[REDACTED] and the [REDACTED] and does not constitute an [REDACTED] to sell
or a solicitation of an offer to subscribe for or buy any security other than the
[REDACTED]. This document may not be used for the purpose of, and does not
constitute, an [REDACTED] to sell or a solicitation of an [REDACTED] to subscribe
for or buy any security in any other jurisdiction or in any other circumstances. No action
has been taken to permit a [REDACTED] of the [REDACTED] or the distribution of
this document in any jurisdiction other than Hong Kong. The distribution of this
document and the [REDACTED] and sale of the [REDACTED] in other jurisdictions
are subject to restrictions and may not be made except as permitted under the applicable
securities laws of such jurisdictions pursuant to registration with or authorization by the
relevant securities regulatory authorities or an exemption therefrom.
You should rely only on the information contained in this document to make your
investment decision. We have not authorized anyone to provide you with information that
is different from what is contained in this document. Any information or representation
not included in this document must not be relied on by you as having been authorized by
us, [the Joint Sponsors, [REDACTED],] any of our or their respective directors,
officers, employees, agents or representatives of any of them, or any other person or party
involved in the [REDACTED]. Information contained on our website, located at
www.zzgqsh.com, does not form part of this document.
Page
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
i
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
v
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
Glossary of Technical Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30
–v–
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
CONTENTS
Waivers from Strict Compliance with the Listing Rules . . . . . . . . . . . . . . . . . . . .
65
Information about This Document and the [REDACTED] . . . . . . . . . . . . . . . . . .
69
Directors, Supervisors and Parties Involved in the [REDACTED] . . . . . . . . . . . .
74
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
78
Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80
Regulatory Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92
History, Development and Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . .
115
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
135
Relationship with Our Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . .
204
Connected Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
209
Directors, Supervisors and Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . .
214
Substantial Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
233
Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
235
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
239
Future Plans and Use of [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
284
[REDACTED]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
287
Structure of the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
298
How to Apply for [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
309
Appendix I

Accountants’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I-1
Appendix II

Unaudited [REDACTED] Financial Information . . . . . . .
II-1
Appendix III

Taxation and Foreign Exchange . . . . . . . . . . . . . . . . . . . .
III-1
– vi –
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
CONTENTS
Appendix IV

Summary of Principal Legal and Regulatory
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV-1
Appendix V

Summary of the Articles of Association . . . . . . . . . . . . . .
V-1
Appendix VI

Statutory and General Information . . . . . . . . . . . . . . . . .
VI-1
Appendix VII

Documents Delivered to the Registrar of Companies and
Available on Display . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VII-1
– vii –
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
SUMMARY
This summary aims to give you an overview of the information contained in this
document. As it is a summary, it does not contain all the information that may be
important to you and is qualified in its entirety by, and should be read in conjunction
with, the full text of this document. You should read the whole document before you decide
to invest in the [REDACTED]. There are risks associated with any investment. Some of
the particular risks in investing in the [REDACTED] are set forth in the section headed
“Risk Factors” in this document. You should read that section carefully before you decide
to invest in the [REDACTED].
OUR VISION
Our vision is to be the go-to brand for dining at home in China.
OUR MISSION
Our mission is to source quality food ingredients globally and offer one-stop home meal
solutions featuring diverse, convenient, high-quality and value-for-money products to meet
consumers’ diverse needs under different dining scenarios, from urban centers to the most
remote areas of China.
OVERVIEW
We are the leading and a rapidly growing home meal solutions brand in China. Leveraging
our robust supply chain and production capabilities, we offer a wide variety of home meal
solution products under the Guoquan Shihui (鍋圈食匯) brand through a nationwide network
of 9,221 retail stores in China as of December 31, 2022, serving diverse dining scenarios. Our
business model is illustrated by the following diagram:
Diversified food ingredients
2C scenarios
Broad market
Combination of products, channels and brands
At home
Production capabilities to process
food ingredients
Offices
Solo dining
Eight categories, proprietary brand products
Other broad
2C scenarios
9,221 stores nationwide
Home meal solutions
Improve efficiency of at-home meal preparation
–1–
Campsites
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
SUMMARY
We are the leading one-stop home meal solutions brand in China, ranking first among all
retailers in China in 2022 in terms of retail sales value of home meal solution products,
according to Frost & Sullivan. We strategically entered into China’s home meal solutions
market specializing in at-home hotpot and barbecue products and were the largest at-home
hotpot and barbecue brand in China in 2022 in terms of retail sales value, according to Frost
& Sullivan. As a testament to our brand loyalty, over 95% of respondents were satisfied with
their purchases with us and are willing to purchase our products again in the future, according
to consumer surveys conducted by Frost & Sullivan in February 2023.
We established the largest retail store network offering one-stop home meal solutions in
China as of December 31, 2022 in terms of number of retail stores, according to Frost &
Sullivan. With a network of 9,221 retail stores across China as of December 31, 2022, we offer
both online and offline shopping experience and amassed over 100 million orders in 2022
alone.
We are also devoted to developing products under our proprietary brand name carrying
the Guoquan Shihui logo. Our products are known for being tasty, convenient, value-for-money
and of consistent quality. We were China’s largest home meal solutions retailer under
proprietary brands in terms of retail sales value of proprietary brand products in 2022,
according to Frost & Sullivan. We also rank first in terms of diversity of product portfolio
among all major players in the home meal solutions market, according to consumer surveys
conducted by Frost & Sullivan in February 2023.
The dining tables of Chinese people often showcase delicacies originated from different
regions. It is not only where a family have their meals every day but is also an important place
for people to have close exchanges with one another. At present, people principally dine in four
ways, namely (i) buying groceries to cook at home, (ii) dining at restaurants, (iii) having food
delivered from restaurants, and (iv) enjoying home meal solutions. China’s dining market grew
at a CAGR of 7.9% since 2017, reaching a market size of RMB8,911.9 billion in 2021. With
the development of China’s economy as well as changes in people’s lifestyles and consumption
patterns, the ways in which Chinese people dine have been evolving and home meal solutions
have emerged as a popular option, growing at a CAGR of 26.1% from 2017 to RMB290.3
billion in 2021.
Home meal solutions have distinct advantages over the other three dining options, each
of which has its own set of challenges and drawbacks. Buying groceries to cook at home is
often complicated, time-consuming and exhausting, thus increasingly incompatible with the
fast-paced urban life. Dining at restaurants has a high time cost and can be unsustainable to go
frequently. Food delivery and takeout can be unpredictable in terms of safety, taste,
temperature and retention of original food flavor, especially for hotpot and barbecue products.
Home meal solutions as the fourth dining option address these problems by striking the balance
between nutrition, taste, hygiene and efficiency. Home meal solutions include ready-to-eat,
ready-to-heat, ready-to-cook foods and prepared ingredients. Consumers can see and tailor
what ingredients and flavors go into what they eat and can easily prepare a meal with minimal
cooking skills. As different dining scenarios can be satisfied and a wide variety of foods and
–2–
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DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
SUMMARY
cuisines can be offered, meeting virtually all kinds of dining demand, this option has become
more prominent and is expected to be the fastest growing segment of China’s dining industry
from 2021 to 2026, according to Frost & Sullivan.
Consumer surveys conducted by Frost & Sullivan in February 2023 show that over 95%
of respondents are willing to increase the frequency of dining at home in the future. As the
leading one-stop home meal solutions brand in China, we are well positioned to capture the
significant growth potential in China’s home meal solutions market. We offer tasty, convenient
and value-for-money home meal solutions underpinned by high quality food ingredients that
have an immense potential for creating new and diverse products, to satisfy different dining
scenarios. Under our franchise business model, we derive substantially all of our revenue from
the sale of our products to franchisees, who open and operate franchised stores under our brand
and sell our products to consumers. As of December 31, 2022, we established a network of
9,221 stores under our Guoquan Shihui brand in China, covering 29 provinces, autonomous
regions and municipalities in China. We have also been developing online sales channels
including our Guoquan APP, WeChat mini-program as well as on popular social commerce
platforms such as Douyin. In addition, we partner with third-party food delivery platforms,
such as Meituan and Ele.me to deliver our products to consumers. Leveraging the highly
efficient management and operation of our supply chain and our digitalized management
system, we are able to ensure product quality and safety, as well as achieve high operational
efficiency from food production to retail sales.
We experienced significant growth during the Track Record Period. Our total revenue
increased by 33.5% from RMB2,964.7 million in 2020 to RMB3,957.8 million in 2021 and
further by 81.2% to RMB7,173.5 million in 2022. Our gross profit increased by 7.9% from
RMB329.3 million in 2020 to RMB355.3 million in 2021, and further by 251.5% to
RMB1,249.0 million in 2022. Our gross profit margin was 11.1%, 9.0% and 17.4% in 2020,
2021 and 2022, respectively. Our significant growth has enabled us to capitalize on the
advantages of economies of scale. This has been accomplished through our rapid expansion,
our focus on cost optimization, elevated brand recognition and our efforts to further advance
our digitalization initiatives. As a result of these efforts, we broke even in 2022 with a profit
of RMB241.0 million.
OUR BRAND AND PRODUCTS
We operate our business under the Guoquan Shihui brand (“鍋圈食匯”), offering
diversified, one-stop home meal solutions featuring tasty, convenient and value-for-money
(“好吃方便還不貴”) products for consumers across a wide range of dining scenarios. Our
product portfolio comprises eight categories including hotpot products, barbecue products,
beverages, solo-dining meals, ready-to-cook meal kits, fresh produce, western cuisines and
snacks, totaling 755 SKUs as of December 31, 2022, with more than 95% of our nationally
available SKUs under our proprietary brand carrying the Guoquan Shihui logo.
–3–
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DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
SUMMARY
The following table sets forth our revenue breakdown from the sale of our products by
category for the periods indicated:
Year ended December 31,
2020
Amount
2021
%
Amount
2022
%
Amount
%
(RMB in thousands, except percentage)
Hotpot products
Barbecue products
Others (1)
2,389,863
170,486
357,589
81.9
5.8
12.3
3,091,345
294,157
494,702
79.7
7.6
12.7
5,352,027
714,223
992,524
75.8
10.1
14.1
Total
2,917,938
100.0
3,880,204
100.0
7,058,774
100.0
Note:
(1)
Others mainly include food products such as beverages, solo-dining meals, ready-to-cook meal kits,
among others.
OUR SALES CHANNELS AND STORE NETWORKS
As of December 31, 2022, we established a network of 9,221 stores under our brand in
China, comprising 9,216 franchised stores and five self-operated stores.
During the Track Record Period, we derived substantially all of our revenue from the
sales of our proprietary brand products primarily comprising hotpot and barbecue products to
our franchisees, who operate franchised stores under our brand and sell our products to
consumers. We enter into franchise agreements with franchisees granting them the right to
operate franchised stores carrying our brand and trademarks. We do not charge or rely on
franchise fees. In selecting our franchisees, we take into account their industry experience,
financial circumstances, recognition of our value and management philosophy and their
passion and long-term commitment towards operating our franchised stores.
During the Track Record Period, our franchised store network grew rapidly. The total
number of our franchised stores increased from 1,441 as of January 1, 2020 to 9,216 as of
December 31, 2022. Despite the rapid expansion of our store network across China, our strong
continued support for our franchisees has resulted in a store closure rate as low as 3.0% for
2022.
–4–
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SUMMARY
The following table sets forth the movement of our franchised stores during the Track
Record Period:
Year ended December 31,
Number of franchised stores at the
beginning of the period
Number of new franchised stores
opened during the period
Number of franchised stores closed
during the period
Net increase in number of franchised
stores for the period
Number of franchised stores at the
end of the period
2020
2021
2022
1,441
4,296
6,864
2,883
2,762
2,631
28
194
279
2,855
2,568
2,352
4,296
6,864
9,216
In addition, as of December 31, 2022, we had five self-operated stores for the purpose of
providing a model for franchised stores as well as acting as trial sites for innovative store
operation and management strategies and tools, marketing activities, digital tools and new
decoration styles, among others, before introducing them to our franchised stores.
To empower franchisees and facilitate their sales growth as well as further our consumer
reach and offer more flexible shopping experience, we have established multiple online
channels, including (i) partnering with third-party food delivery platforms such as Meituan and
Ele.me, (ii) our Guoquan APP and WeChat mini-program, and (iii) Douyin.
PRODUCTION AND SUPPLIERS
Adopting our one-product-one-factory model, we have strategically acquired food
ingredient production capabilities to achieve stronger control over the production and supply
of our staple products. As of December 31, 2022, we had three food ingredient production
plants, Luyi Heyi (和一肉業) for the production of our beef products, Wanlai Wanqu (丸來丸
去) for the production of meatballs, Luyi Chengming (澄明食品) for production of our hotpot
soup base products, and had made investments in one of our suppliers, Daixiaji (逮蝦記) for
the production of our shrimp paste products, in order to have better control of the production
and supply of our major products. Meanwhile, to maximize production efficiency and broaden
our product portfolio, we also engage reliable suppliers to produce our other products.
Our suppliers mainly include suppliers for food products, raw materials and warehousing
and logistic services. We believe that our stable relationship with suppliers builds a strong
foundation for our robust supply chain and high-quality products. As of December 31, 2022,
we collaborated with more than 279 food ingredients suppliers, including renowned and
household brand names such as Anjoy and Sanquan. We expand and upgrade our product
portfolio frequently to meet evolving trends and consumer demands through our own R&D
center as well as two collaborative R&D centers with our suppliers.
–5–
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SUMMARY
Purchases from our largest supplier in each year during the Track Record Period
amounted to RMB206.7 million, RMB217.4 million, and RMB339.1 million, accounting for
6.4%, 5.9%, and 5.3%, respectively, of our total purchase amount during the respective period.
Purchases from our top five largest suppliers for the years ended December 31, 2020, 2021 and
2022 accounted for 24.6%, 22.0%, and 20.7%, respectively, of our total purchase amount
during those periods.
CUSTOMERS
During the Track Record Period, a significant majority of our customers are our
franchisees. Revenue from our top five largest customers for the fiscal years ended December
31, 2020, 2021, and 2022 accounted for 2.3%, 1.9%, and 4.0%, respectively, of our total
revenue during the same periods. We have a large customer base and we do not rely on any
single customer. We generally require our franchisees to pay in advance before we deliver the
products to them. We provide certain enterprise customers with a credit term up to 180 days
subject to the creditworthiness of the relevant customers.
OUR STRENGTHS
We believe the following competitive strengths have contributed to our success and
distinguished us from our competitors:

China’s leading and rapidly growing home meal solutions brand, catering to the
people’s evolving dining needs at home;

Home meal solutions products with exceptional value-for-money and variety,
improving the efficiency of at-home meal preparation;

Largest home meal solutions retail store network in China fostering a lively
community that brings warmth and convenience to people’s lives;

Streamlined supply chain management and operation enabling cost optimization and
ensuring product quality and safety;

Digitalized management systems to achieve high operational efficiency; and

Visionary management team with rich industry experience and knowledge leading
the successful development of our business and corporate culture.
OUR STRATEGIES
To achieve our vision and further solidify our market leadership, we intend to pursue the
following strategies:

Expand and deepen our omni-channel sales network to further our direct reach to
consumers;
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SUMMARY

Continually extend to more consumption scenarios such as campsite dining and
solo-dining to further cater to consumer needs;

Strengthen our R&D and upstream supply chain to expand product offerings to
reinforce our core competitive edges;

Enhance digitalization to continuously increase overall operational efficiency and
revenue, while ensuring food safety; and

Continue to enhance our brand image and marketing efforts to increase consumer
reach and stickiness.
OUR CONTROLLING SHAREHOLDERS
As of the Latest Practicable Date, Mr. Yang, Mr. Meng and Mr. Li, by virtue of the concert
party agreement among them, were collectively interested in approximately 33.01% of our total
issued share capital through Guoquan Industry (Shanghai) Co. Ltd. (鍋圈實業(上海)有限公司)
(“Guoquan Industry”), and Mr. Yang was also interested in approximately 12.42% and 3.21%
of our total issued share capital through Shanghai Guoxiaoquan Enterprise Management Center
(Limited Partnership) (上海鍋小圈企業管理中心(有限合夥)) (“Guoxiaoquan EM”) and
Shanghai Guoxiaoquan Agriculture Technology Service Center (Limited Partnership) (上海鍋
小圈農業科技服務中心(有限合夥)) (“Guoxiaoquan Tech”) respectively. As such, Mr. Yang,
Mr. Meng and Mr. Li were indirectly interested in a total of approximately 48.64% our total
issued share capital.
Immediately following the completion of the [REDACTED] (assuming the
[REDACTED] are not exercised), Mr. Yang, Mr. Meng and Mr. Li will be entitled to exercise
or control the exercise of an aggregate of approximately [REDACTED]% of the voting power
at general meetings of our Company. Therefore, Mr. Yang, Mr. Meng, Mr. Li, Guoquan
Industry, Guoxiaoquan EM and Guoxiaoquan Tech will constitute a group of Controlling
Shareholders of our Company under the Listing Rules. For further information, see
“Relationship with Our Controlling Shareholders.”
PRE-[REDACTED] INVESTORS
Since our incorporation, we have completed several rounds of equity financing in the past
few years. For further information, see “History, Development and Corporate Structure —
Pre-[REDACTED] Investments.”
–7–
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SUMMARY
CONTINUING CONNECTED TRANSACTIONS
We have entered into and are expected to continue with certain transactions after the
completion of the [REDACTED] which will constitute our non-exempt continuing connected
transactions under Chapter 14A of Listing Rules upon [REDACTED]. See “Connected
Transactions” and “Waivers from Strict Compliance with the Listing Rules — Waiver in
Respect of Non-exempt Continuing Connected Transactions” for further details.
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The following table sets forth selected information from our consolidated results of
operations for the periods presented. This information should be read together with our
consolidated financial statements and related notes included elsewhere in this document. The
results of operations in any period are not necessarily indicative of our future trends.
Year ended December 31,
2020
2021
2022
(RMB in thousands)
Revenue
Cost of sales
Gross profit
Selling and distribution expenses
Administrative expenses
Profit/(Loss) before tax
Income tax (expense)/credit
Profit/(Loss) for the year
2,964,743
(2,635,484)
329,259
(220,134)
(161,441)
(43,183)
(109)
3,957,804
(3,602,520)
355,284
(629,440)
(355,676)
(596,468)
135,607
7,173,457
(5,924,496)
1,248,961
(624,577)
(403,686)
332,042
(91,060)
(43,292)
(460,861)
240,982
We achieved continuous revenue growth during the Track Record Period, primarily
attributable to our expansion of store network and increasing sales of home meal products. We
recorded net loss in 2020 and 2021, mainly attributable to our workforce growth and
investment of resources in the promotional events with franchisees to support our store
network expansion and build our brand awareness. We recorded a net profit in 2022, as we had
substantially improved our operational efficiencies resulting from (i) cost control capabilities
benefiting from our growing procurement volumes and enhanced economies of scale, and (ii)
our increasingly recognized brand, which enabled us to optimize selling and distribution
expenses.
–8–
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SUMMARY
NON-IFRS MEASURES
To supplement our consolidated financial statements, which are presented in accordance
with IFRSs, we also use adjusted net profit/(loss) as additional financial measure, which is not
required by, or presented in accordance with IFRSs. We believe this non-IFRS measure
facilitates comparisons of operating performance from period to period and company to
company by eliminating potential impacts of certain items.
We believe this measure provides useful information to investors and others in
understanding and evaluating our combined results of operations in the same manner as they
help our management. However, our presentation of adjusted net profit/(loss) may not be
comparable to similarly titled measures presented by other companies. The use of this
non-IFRS measure has limitations as an analytical tool, and you should not consider it in
isolation from, or as a substitute for an analysis of, our results of operations or financial
condition as reported under IFRSs.
We define adjusted net profit/(loss) (non-IFRS measure) as net profit/(loss) for the year
adjusted by deducting fair value gains of unlisted convertible redeemable preferred shares held
by us, and adding back share-based payment expenses and [REDACTED] expenses. We
eliminate the potential impacts of these items that our management does not consider to be
indicative of our operating performance, as they are either non-operating or one-off gains and
expenses.
The following table reconciles our adjusted net profit/(loss) for the periods presented to
the most directly comparable financial measures calculated and presented in accordance with
IFRSs, which is net profit/(loss) for the year:
Year ended December 31,
2020
2021
2022
(RMB in thousands)
Reconciliation of net profit/(loss) to
adjusted net profit/(loss)
Profit/(loss) for the year
Adjusted:
Fair value changes of unlisted
convertible redeemable preferred
shares (1)
Share-based payment expenses (2)
[REDACTED] expenses (3)
Adjusted net profit/(loss) (4)
(43,292)
(460,861)
240,982

16,415

(26,877)

10,262

(450,599)
(58,167)
4,604
[REDACTED]
[REDACTED]
Notes:
(1)
Fair value changes of unlisted convertible redeemable preferred shares mainly represent changes in the
fair value of our investment in Dmall Inc.. Fair value changes of the preferred shares are not directly
related to our ability to generate revenue from our daily operations.
(2)
Share-based payment expenses represent the non-cash employee benefit expenses incurred in connection
with our award to key employees. Such expenses in any specific period are not expected to result in
future cash payments and are not indicative of our core operating results.
(3)
[REDACTED] expenses mainly relate to our [REDACTED].
(4)
A non-IFRS measure.
–9–
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SUMMARY
Selected Items from the Consolidated Statements of Financial Position
The following table sets forth selected information from our consolidated balance sheets
as of the dates indicated, which have been extracted from our audited consolidated financial
statements included in Appendix I to this document
As of December 31,
2020
2021
2022
(RMB in thousands)
Total current assets
Total current liabilities
1,068,594
488,016
1,957,192
583,358
2,409,028
1,303,017
Total non-current assets
Total non-current liabilities
106,673
16,872
762,556
21,664
1,671,642
88,102
Net current assets
580,578
1,373,834
1,106,011
Net assets
670,379
2,114,726
2,689,551
Our net current assets decreased from RMB1,373.8 million as of December 31, 2021 to
RMB1,106.0 million as of December 31, 2022, primarily due to (i) an increase of RMB396.5
million in trade payables; and (ii) an increase of RMB208.6 million in other payable and
accruals. This was partially offset by (i) an increase of RMB445.8 million in inventories; and
(ii) an increase of RMB119.4 million in trade receivables.
Our net current assets increased from RMB580.6 million as of December 31, 2020 to
RMB1,373.8 million as of December 31, 2021, primarily due to (i) an increase of RMB526.8
million in cash and bank balances; (ii) an increase of RMB200.3 million in financial assets at
fair value through profit or loss; and (iii) an increase of RMB185.2 million in prepayments,
other receivables and other assets. This was partially offset by (i) a decrease of RMB45.0
million in inventories; (ii) an increase of RMB105.9 million in other payables and accruals; and
(iii) an increase of RMB83.6 million in trade payables.
Selected Items from the Consolidated Statements of Cash Flows
The following table sets forth a summary of our cash flows for the periods indicated:
Year ended December 31,
2020
2021
2022
(RMB in thousands)
Net cash flows (used in)/generated from
operating activities
Net cash flows used in investing activities
Net cash flows from financing activities
Cash and cash equivalents at the end of
the year
– 10 –
(541,502)
(32,040)
576,839
(598,027)
(864,443)
1,777,147
285,283
(40,399)
32,529
100,821
417,573
694,954
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SUMMARY
KEY FINANCIAL RATIOS
The following table sets forth certain of our key financial ratios as of the dates indicated,
or for the periods indicated:
Year ended December 31,
Revenue growth
Gross profit margin (1)
(1)
2020
2021
2022
N/A
11.1%
33.5%
9.0%
81.2%
17.4%
Gross profit margin is calculated by dividing gross profit by our revenue.
[REDACTED]
[REDACTED] STATISTICS
The numbers in the following table are based on the assumptions that (i) the
[REDACTED] has been completed and [REDACTED] H Shares are issued and sold in the
[REDACTED], (ii) the [REDACTED] is not exercised, and (iii) [REDACTED] Shares are
issued and outstanding following the completion of [REDACTED].
Based on an
[REDACTED] of
HK$[REDACTED]
Based on an
[REDACTED] of
HK$[REDACTED]
[REDACTED]
HK$[REDACTED]
HK$[REDACTED]
[REDACTED] of our H Shares (1)
HK$[REDACTED]
HK$[REDACTED]
Unaudited [REDACTED] adjusted
net tangible liabilities per share (2)
HK$[REDACTED]
HK$[REDACTED]
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SUMMARY
(1)
The calculation of [REDACTED] of our H Shares is based on [REDACTED] H Shares expected to be
in issue immediately upon completion of the [REDACTED], without taking into account any allotment
and issuance of H Shares upon exercise of the [REDACTED].
(2)
The unaudited [REDACTED] adjusted net tangible per share is arrived at after the adjustment referred
to in “Appendix II — Unaudited [REDACTED] Information.”
[REDACTED] EXPENSES
The [REDACTED] expenses represent professional fees, [REDACTED], and other fees
incurred in connection with the [REDACTED]. We estimate that our [REDACTED] expenses,
including [REDACTED] for the [REDACTED], will be approximately HK$[REDACTED]
million (including (i) [REDACTED] of approximately HK$[REDACTED] million, and
(ii) [REDACTED] of approximately HK$[REDACTED] million, which consist of fees and
expenses of legal advisors and Reporting Accountants, and other fees and expenses),
representing approximately [REDACTED]% of the gross [REDACTED] from the
[REDACTED], (assuming an [REDACTED] of HK$[REDACTED] per [REDACTED]
(being the mid-point of the indicative [REDACTED] range) and no exercise of the
[REDACTED]), of which approximately HK$[REDACTED] million is directly attributable to
the [REDACTED] of our [REDACTED] to the public and will be deducted from equity, and
approximately HK$[REDACTED] million is expected to be expensed upon the
[REDACTED].
FUTURE PLANS AND USE OF [REDACTED]
Assuming an [REDACTED] of HK$[REDACTED] per H Share (being the mid-point of
the indicative [REDACTED] range of HK$[REDACTED] and HK$[REDACTED]), after
deducting the [REDACTED] and other estimated [REDACTED] expenses payable by us in
connection with the [REDACTED], and assuming that the [REDACTED] is not exercised, we
estimate that we will receive net [REDACTED] of approximately HK$[REDACTED] million
from the [REDACTED]. We intend to use the [REDACTED] from the [REDACTED] for the
purposes and in the amounts set forth below:

approximately [REDACTED]% of the net [REDACTED], or HK$[REDACTED]
million, to improve our supply chain capabilities by enhancing our production
capacity and efficiency;

approximately [REDACTED]% of the net [REDACTED], or HK$[REDACTED]
million, for investment in building home meal products processing centers and
product R&D

approximately [REDACTED]% of the net [REDACTED], or HK$[REDACTED]
million, for expanding our store network;

approximately [REDACTED]% of the net [REDACTED], or HK$[REDACTED]
million, for branding and marketing activities;

approximately [REDACTED]% of the net [REDACTED], or HK$[REDACTED]
million, for enhancing our digital capabilities; and
– 12 –
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SUMMARY

approximately [REDACTED]% of the net [REDACTED], or HK$[REDACTED]
million, as working capital and for general corporate uses.
See “Future Plans and Use of [REDACTED]” for further details.
DIVIDEND POLICY
We did not declare or distribute any dividend to our Shareholders during the Track Record
Period. However, we may distribute dividends in the future by way of cash or by other means
that we consider appropriate. Pursuant to our Articles of Association, our Board may declare
dividends in the future after taking into account our results of operations, financial condition,
cash requirements and availability and other factors as it may deem relevant at such time. Any
declaration and payment as well as the amount of dividends will be subject to our constitutional
documents, applicable PRC laws and approval by our Shareholders. Future dividend payments
will also depend upon the availability of dividends received from our subsidiaries in China.
PRC laws require that dividends should be paid only out of the profit for the year calculated
according to PRC accounting principles, which differ in many aspects from the generally
accepted accounting principles in other jurisdictions. PRC laws also require our subsidiaries to
set aside part of their net profit as statutory reserves, which are not available for distribution
as cash dividends. Distributions from our subsidiaries may also be restricted if they incur debt
or losses, or in accordance with any restrictive covenants in bank credit facilities or other
agreements that we or our subsidiaries may enter into in the future.
RISK FACTORS
Our business faces risks including those set out in the section headed “Risk Factors.” As
different investors may have different interpretations and criteria when determining the
significance of a risk, you should read the “Risk Factors” section in its entirety before you
decide to invest in our Shares. Some of the major risks that we face include: (i) Awareness,
recognition and popularity of our brand, whether in our existing markets or new markets, are
pivotal to the success of our business. Any negative impacts on our brand or reputation, or
failure to effectively promote our brand, could adversely affect our business and results of
operations; (ii) Our business is affected by changes in consumer tastes and dining preference,
which we may not be able to anticipate and identify in a timely manner or at all. Our efforts
in developing, launching and promoting new products, and diversifying our product and brand
portfolio may not be successful, which may expose us to the risks of extra costs and expenses;
(iii) Any failure by us or our suppliers to maintain effective quality control systems of our
products could have a material adverse effect on our brand reputation, business and operations;
(iv) Our extensive store network primarily comprises franchised stores that are operated by
franchisees. Our results of operations are largely subject to the performance of the franchised
stores. We cannot control and may not be able to effectively monitor the operations of these
stores or maintain our current relationship with the franchisees; (v) Our revenue growth in the
past was largely attributable to the rapid expansion of our store network. We cannot assure you
that we will maintain our store network or successfully implement our expansion plan in the
future; (vi) Our development strategies may not achieve the expected goals in the near term,
or at all; (vii) We operate in a highly competitive and fast-changing market and may lose our
market share if we fail to compete successfully; and (viii) If our suppliers do not deliver quality
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SUMMARY
food ingredients and raw materials at competitive prices or in a timely manner due to
deteriorated relationships with us or insufficient production capacity, we may experience
supply shortages and increased procurement costs.
IMPACT OF COVID-19
Since the end of December 2019, the outbreak of a novel strain of coronavirus, or
COVID-19, had materially and adversely affected the global and China’s economy. In response
to COVID-19, the PRC government imposed certain restrictive measures such as quarantine,
closure of workplaces and facilities, travel restriction and other related measures.
We took a series of measures in response to the outbreak of COVID-19 variants such as
Delta and Omicron and the relevant restrictions. While certain of our stores experienced
temporary closures due to the restrictive measures in certain cities, we obtained approval from
local authorities to keep some of our stores open during the lockdown to guarantee key supplies
for citizens. Meanwhile, we provided home delivery services through our online sales channels
and via third-party food delivery platforms. In addition, we took a series of measures to
minimize the impact of the COVID-19 pandemic on our production and supply chain. These
measures included obtaining permits for continuous production, enforcing prevention and
control measures, and maintaining a high inventory level of finished goods. As a result, our
production, supply chain and daily operations had not been materially and adversely affected
during the Track Record Period.
There remain uncertainties associated with the COVID-19, which may have potential
continuing impacts in the future if the pandemic and the resulting disruption were to extend
over a prolonged period. See “Risk Factors — Risks Relating to Our Business and Industry —
Outbreak, epidemic or pandemic of infectious or contagious diseases as well as negative
publicity relating to such incidents may cause interruptions to our supply chain, lead to the
reduction in our consumer traffic and consequently impose adverse impact on our results of
operations” and “Financial Information — Impact of COVID-19.”
RECENT DEVELOPMENT
Since December 31, 2022 and up to the Latest Practicable Date, we continued to expand
our store network. The total number of stores in our network increased from 9,221 as of
December 31, 2022 to 9,645 as of the Latest Practicable Date. After performing sufficient due
diligence work which our Directors consider appropriate and after due and careful
consideration, our Directors confirm that, up to the date of this document, there has been no
material adverse change in our financial or trading position, indebtedness, mortgage,
contingent liabilities, guarantees or prospects since December 31, 2022, being the end date of
the periods reported in the Accountants’ Report set out in Appendix I, and there is no event
since December 31, 2022 that would materially affect the information shown in the
Accountants’ Report set out in Appendix I.
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DEFINITIONS
In this document, unless the context otherwise requires, the following terms and
expressions have the meanings set forth below.
“AFRC”
Accounting and Financial Reporting Council (會計及財
務匯報局)
“Articles of Association” or
“Articles”
the articles of association of our Company, as amended,
which shall become effective on the [REDACTED], a
summary of which is set out in Appendix V to this
document
“Associate(s)”
has the meaning ascribed to it under the Listing Rules
“Board” or “Board of Directors”
the board of directors of our Company
“Board of Supervisors”
the board of supervisors of our Company
“Business day” or “business day”
a day on which banks in Hong Kong are generally open
to the public for normal banking business and which is
not a Saturday, Sunday or public holiday in Hong Kong
“CAC”
the Cyberspace Administration of China (中國國家互聯
網信息辦公室)
[REDACTED]
“CCASS”
the Central Clearing and Settlement System established
and operated by HKSCC
“CCASS Clearing Participant”
a person admitted to participate in CCASS as a direct
clearing participant or general clearing participant
“CCASS Custodian Participant”
a person admitted to participate in CCASS as a custodian
participant
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DEFINITIONS
[REDACTED]
“China” or “PRC”
the People’s Republic of China, excluding, for the
purpose of this document only, Hong Kong, Macau and
Taiwan
“Companies Ordinance”
the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong), as amended, supplemented or otherwise
modified from time to time
“Companies (Winding up and
Miscellaneous Provisions)
Ordinance”
the Companies (Winding up and Miscellaneous
Provisions) Ordinance (Chapter 32 of the Laws of Hong
Kong), as amended, supplemented or otherwise modified
from time to time
– 16 –
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DEFINITIONS
“Company”, or “our Company”
or “the Company”
Guoquan Food (Shanghai) Co., Ltd., a limited liability
company established under the laws of the PRC on July
11, 2019 and converted into a joint stock limited liability
company in the PRC on February 23, 2023
“Company Law” or “PRC
Company Law”
Company Law of the People’s Republic of China (中華人
民共和國公司法), as amended and adopted by the
Standing Committee of the Tenth National People’s
Congress on October 27, 2005 and effective on January 1,
2006, as amended, supplemented or otherwise modified
from time to time, which was last revised on October 26,
2018
“connected person(s)”
has the meaning ascribed to it under the Listing Rules
“Controlling Shareholder(s)”
has the meaning ascribed to it under the Hong Kong
Listing Rules and, strictly in accordance with such
meaning, includes Mr. Yang, Mr. Meng, Mr. Li, Guoquan
Industry, Guoxiaoquan EM and Guoxiaoquan Tech; and
“Controlling Shareholder” shall mean any one of them
“Conversion of Domestic
[REDACTED] Shares into
H Shares”
The
conversion
of
[REDACTED]
Domestic
[REDACTED] Shares in aggregate held by
[REDACTED] existing Shareholders into H Shares upon
the completion of [REDACTED]. Such conversion of
Domestic [REDACTED] Shares into H Shares [has been
filed] with the CSRC on [●], 2023 and an application for
H Shares to be [REDACTED] on the Hong Kong Stock
Exchange has been made to the Listing Committee
“CSDC”
China Securities Depository and Clearing Corporation
Limited (中國證券登記結算有限責任公司)
“CSDC (Hong Kong)”
China Securities Depository and Clearing (Hong Kong)
Company Limited
“CSRC”
the China Securities Regulatory Commission (中國證券
監督管理委員會)
“Director(s)”
director(s) of our Company
“Domestic [REDACTED]
Shares”
ordinary shares in the share capital of our Company, with
a nominal value of RMB1.00 each, which are not
[REDACTED] on any stock exchange
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DEFINITIONS
“EIT Law”
Enterprise Income Tax Law of the People’s Republic of
China (中華人民共和國企業所得稅法), as amended,
supplemented or otherwise modified from time to time
“Exchange Participant(s)”
a person: (a) who, in accordance with the Hong Kong
Listing Rules, may trade on or through the Hong Kong
Stock Exchange; and (b) whose name is entered in a list,
register or roll kept by the Hong Kong Stock Exchange as
a person who may trade on or through the Hong Kong
Stock Exchange
“Extreme Conditions”
any extreme conditions or events, the occurrence of
which will cause interruption to the ordinary course of
business operations in Hong Kong and/or that may affect
the [REDACTED]
[REDACTED]
“Group”, “our Group”, “we” or
“us”
our Company and its subsidiaries (or our Company and
any one or more of its subsidiaries, as the context may
require)
[REDACTED]
“HKSCC”
Hong Kong Securities Clearing Company Limited, a
wholly owned subsidiary of Hong Kong Exchanges and
Clearing Limited
“HKSCC Nominees”
HKSCC Nominees Limited, a wholly owned subsidiary
of HKSCC
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DEFINITIONS
“Hong Kong” or “HK”
the Hong Kong Special Administrative Region of the
PRC
“Hong Kong dollars,” “HK
dollars” or “HK$” and “cents”
Hong Kong dollars, the lawful currency of Hong Kong
[REDACTED]
“Hong Kong Stock Exchange” or
“Stock Exchange”
The Stock Exchange of Hong Kong Limited, a whollyowned subsidiary of Hong Kong Exchanges and Clearing
Limited
[REDACTED]
“IFRS”
International Financial Reporting Standards, which
include standards, amendments and interpretations
promulgated by the International Accounting Standards
Board and the International Accounting Standards and
Interpretation issued by the International Accounting
Standards Committee
“Independent Third Party(ies)”
any entity or person who is not a connected person of our
Company within the meaning ascribed thereto under the
Listing Rules
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DEFINITIONS
[REDACTED]
“Joint Sponsors” or
“[REDACTED]”
Huatai Financial Holdings (Hong Kong) Limited and
China International Capital Corporation Hong Kong
Securities Limited
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DEFINITIONS
“Latest Practicable Date”
March 27, 2023, being the latest practicable date for the
purpose of ascertaining certain information contained in
this document prior to its publication
[REDACTED]
“Listing Committee”
the Listing Committee of the Stock Exchange
[REDACTED]
“Listing Rules”
the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited (as amended
from time to time)
“Luyi Chengming”
Luyi Chengming Food Co., Ltd. (鹿邑縣澄明食品有限公
司), a subsidiary of our Company
“Luyi Heyi”
Luyi Heyi Meat Industry Co., Ltd. (鹿邑縣和一肉業有限
公司), a subsidiary of our Company
“Macau”
the Macau Special Administrative Region of the PRC
“Main Board”
the stock exchange (excluding the option market)
operated by the Stock Exchange, which is independent
from and operated in parallel with the GEM of the Stock
Exchange
“MIIT”
Ministry of Industry and Information Technology of the
PRC (中華人民共和國工業和信息化部), formerly known
as Ministry of Information Industry of the PRC (中華人
民共和國信息產業部)
“Mr. Li”
Mr. Li Xinhua (李欣华), one of our Controlling
Shareholders
“Mr. Meng”
Mr. Meng Xianjin (孟先進), an executive Director and
executive vice president of our Company, one of our
Controlling Shareholders
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DEFINITIONS
“Mr. Yang”
Mr. Yang Mingchao (楊明超), the chairperson of the
Board, an executive Director and chief executive officer
of our Company, one of our Controlling Shareholders
“Ministry of Finance” or “MOF”
Ministry of Finance of the PRC (中華人民共和國財政部)
“MOFCOM”
Ministry of Commerce of the PRC (中華人民共和國商務
部)
“NDRC”
National Development and Reform Commission of the
PRC (中華人民共和國發展和改革委員會)
[REDACTED]
“PBOC”
the People’s Bank of China (中國人民銀行), the central
bank of the PRC
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DEFINITIONS
“PRC GAAP”
generally accepted accounting principles of PRC
“PRC Legal Advisor”
CM Law Firm, the legal advisor to our Company as to the
laws of the PRC
[REDACTED]
“province”
a province or, where the context requires, a provincial
level autonomous region or municipality, under the direct
supervision of the central government of the PRC
“QIB” or “Qualified Institutional
Buyer”
a qualified institutional buyer within the meaning of Rule
144A
“Regulation S”
Regulation S under the U.S. Securities Act
“RMB” or “Renminbi”
Renminbi, the lawful currency of the PRC
“Rule 144A”
Rule 144A under the U.S. Securities Act
“SAFE”
State Administration of Foreign Exchange of the PRC (中
華人民共和國國家外匯管理局)
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DEFINITIONS
“SAT”
State Administration of Taxation of the PRC (國家稅務總
局)
“SCNPC”
the Standing Committee of the National People’s
Congress (全國人民代表大會常務委員會)
“SFC”
Securities and Futures Commission of Hong Kong
“SFO”
Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Share(s)”
ordinary shares in the capital of our Company with a
nominal value of RMB1.00 each
“Shareholder(s)”
holder(s) of the Share(s)
“SOE(s)”
state-owned enterprise(s)
[REDACTED]
“State Council”
State Council of the People’s Republic of China (中華人
民共和國國務院)
“Subsidiary(ies)”
has the meaning ascribed to it in section 15 of the
Companies Ordinance
“Supervisor(s)”
member(s) of our Board of Supervisors
“Track Record Period”
the years ended December 31, 2020, 2021 and 2022
[REDACTED]
“US” or “United States”
the United States of America, its territories, its
possessions and all areas subject to its jurisdiction
“US$” or “U.S. dollars”
United States dollars, the lawful currency of the United
States
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DEFINITIONS
“U.S. Securities Act”
the United States Securities Act of 1933, as amended,
supplemented or otherwise modified from time to time,
and the rules and regulations promulgated under it
“VAT”
value-added tax
“Wanlai Wanqu”
Luyi County Wanlai Wanqu Food Co., Ltd. (鹿邑縣丸來
丸去食品有限公司), a subsidiary of our Company
[REDACTED]
In this document, the terms “associate,” “close associate,” “connected person,” “core
connected person,” “connected transaction,” “controlling shareholder” and “substantial
shareholder” shall have the meanings given to such terms in the Listing Rules, unless the
context otherwise requires.
Certain amounts and percentage figures included in this document have been subject to
rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic
aggregation of the figures preceding them. Any discrepancies in any table or chart between the
total shown and the sum of the amounts listed are due to rounding.
For ease of reference, the names of the PRC established companies or entities, laws or
regulations have been included in this document in both the Chinese and English languages
and in the event of any inconsistency, the Chinese versions shall prevail.
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GLOSSARY OF TECHNICAL TERMS
The following is a glossary of certain terms used in this document in connection
with us and/or our business. As such, these terms and their meanings may not correspond
to standard industry meanings or usage of these terms.
“APP”
applications on smart mobile devices
“CAGR”
compound annual growth rate
“C2F”
consumer-to-factory
“county-level cities”
cities ranking immediately below a prefectural-level city
in terms of administrative level
“ERP system”
an integrated management system of business processes
that track business commitments on aspects such as
logistics, transportation and contract managements etc.
and facilitates flow between business functions to
enhance operation efficiency
“g”
gram
“GFA”
gross floor area
“home meal solution(s)”
ready-to-eat, ready-to-heat, ready-to-cook foods or
prepared ingredients supplied to consumers to improve
cooking efficiency in daily home cooking scenarios
“IT”
information technology
“kg”
kilogram
“L”
liter
“municipalities”
Beijing, Tianjin, Shanghai and Chongqing
“POS”
a retail management system for points of sale
“prefectural-level cities”
cities ranking immediately below a province in terms of
administrative level
“prepared ingredients”
raw materials for cooking that have been preliminarily
processed including cleaning, cutting and other
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GLOSSARY OF TECHNICAL TERMS
“provincial capitals”
capitals of provinces and autonomous regions
“R&D”
research and development
“ready-to-cook foods”
semi-finished ingredients that are pre-cut, seasoned and
mixed, or even deep-processed (i.e. fried, grilled), ready
for cooking
“ready-to-eat foods”
pre-prepared and packaged foods ready for consumption
without further preparation or cooking
“ready-to-heat foods”
pre-prepared foods that are already cooked and need only
heating by microwave, oven, boiling, steaming, etc.
before consuming
“SKU”
stock keeping unit
“sq.m.”
square meter
“tier one cities”
in this document, Beijing, Shanghai, Guangzhou and
Shenzhen
“townships”
administrative divisions ranking immediately below a
county-level city in terms of administrative level
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FORWARD-LOOKING STATEMENTS
This document includes forward-looking statements. All statements other than statements
of historical facts contained in this document, including, without limitation, those regarding
our future financial position, our strategy, plans, objectives, goals, targets and future
developments in the markets where we participate or are seeking to participate, and any
statements preceded by, followed by or that include the words “believe,” “expect,” “estimate,”
“predict,” “aim,” “intend,” “will,” “may,” “plan,” “consider,” “anticipate,” “seek,” “should,”
“could,” “would,” “continue,” or similar expressions or the negative thereof, are forwardlooking statements. These forward-looking statements involve known and unknown risks,
uncertainties and other factors, some of which are beyond our control, which may cause our
actual results, performance or achievements, or industry results, to be materially different from
any future results, performance or achievements expressed or implied by the forward-looking
statements. These forward-looking statements are based on numerous assumptions regarding
our present and future business strategies and the environment in which we will operate in the
future. Important factors that could cause our actual performance or achievements to differ
materially from those in the forward-looking statements include, among other things, the
following:

general political and economic conditions, including those related to the PRC;

our ability to successfully implement our business plans and strategies;

future developments, trends and conditions in the industry and markets in which we
operate or into which we intend to expand;

our business operations and prospects;

our capital expenditure plans;

the actions and developments of our competitors;

our financial condition and performance;

capital market developments;

our dividend policy;

any changes in the laws, rules and regulations of the central and local governments
in the PRC and other relevant jurisdictions and the rules, regulations and policies of
the relevant governmental authorities relating to all aspects of our business and our
business plans; and

various business opportunities that we may pursue.
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FORWARD-LOOKING STATEMENTS
Additional factors that could cause actual performance or achievements to differ
materially include, but are not limited to, those discussed in “Risk Factors” and elsewhere in
this document. We caution you not to place undue reliance on these forward-looking
statements, which reflect our management’s view only as of the date of this document. We
undertake no obligation to update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this document might not occur. All
forward-looking statements contained in this document are qualified by reference to the
cautionary statements set out in this section.
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RISK FACTORS
You should carefully consider all of the information in this document, including the
risks and uncertainties described below before making an investment in our H Shares.
The following is a description of what we consider to be our material risks. Any of the
following risks could have a material adverse effect on our business, financial condition
and results of operations. In any such case, the market price of our [REDACTED] could
decline, and you may lose all or part of your investment.
These factors are contingencies that may or may not occur, and we are not in a
position to express a view on the likelihood of any such contingency occurring. The
information given is as of the Latest Practicable Date, unless otherwise stated, will not
be updated after the date hereof, and is subject to the cautionary statements in
“Forward-looking Statements” in this document.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
Awareness, recognition and popularity of our brand, whether in our existing markets or
new markets, are pivotal to the success of our business. Any negative impacts on our
brand or reputation, or failure to effectively promote our brand, could adversely affect
our business and results of operations.
We have successfully established our key brand “Guoquan Shihui (鍋圈食匯),” which we
believe has significantly contributed to our success. To retain and expand the consumer base
for our products, it is pivotal to maintain and enhance the awareness, recognition and
popularity of our brand, which incentivizes consumers to continue purchasing our products,
and in turn facilitates us to maintain business and market position. The factors that are crucial
for us to maintain and enhance the awareness, recognition and popularity of our brand include,
but not limited to, the following:

maintaining the desirable tastes of our products, our great value-for-money, and our
diversified product portfolio and solutions;

increasing brand awareness through marketing and brand promotion activities;

maintaining stable relationships with our franchisees and suppliers;

ensuring compliance of our employees and franchisees with relevant laws and
regulations; and

competing effectively against existing and future competitors.
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RISK FACTORS
As we continue to expand business scale, extend our geographic reach and expand our
product offerings, it may become difficult for us to achieve the above factors. Furthermore, any
negative publicity on our products, such as liability claims, litigation, consumer complaints,
negative reviews on our products regardless of the validity, could impose negative impacts on
our reputation and brand image. If we fail to sustain the awareness, recognition and popularity
of our brand in our existing markets, or if we fail to effectively promote our brand and establish
such awareness, recognition and popularity in new markets, our business, financial condition
and results of operations may be materially and adversely affected.
Our business is affected by changes in consumer tastes and dining preference, which we
may not be able to anticipate and identify in a timely manner or at all. Our efforts in
developing, launching and promoting new products, and diversifying our product and
brand portfolio may not be successful, which may expose us to the risks of extra costs and
expenses.
Our success is dependent on our ability to anticipate, identify, interpret and react to
consumer tastes and dining preference. To better cater to consumers’ evolving preference, we
are committed to providing products with appealing tastes and launching new products from
time to time to adapt to shifts in consumer tastes.
To launch new products and improve existing products from time to time, we are
continuously conducting market research, involving parties across the value chain of our
business to observe the changing trends in the markets, so that we are able to promptly respond
to the constant changes in market trends, consumer tastes and preferences to design and
develop relevant pipeline products. In addition, we expect to further invest in the businesses
of the upstream of our value chain and launch new brands, thus diversifying our brand
portfolio. While we have in the past successfully developed and launched new products and
brand with wide market acceptance, we cannot assure you that we will be successful in
introducing new products and brands and diversifying our product and brand portfolio with
tastes appealing to consumers in the future. We may expend substantial resources developing
new products and brands that may not achieve expected success, which may incur extra costs
and expenses and in turn adversely impact our business and results of operations.
In addition, as consumer tastes and dining preference is constantly changing, which is
difficult to anticipate, we cannot assure you that we are able to anticipate, identify, interpret
and react to such changes in a timely manner or at all. Therefore, we cannot assure you that
our products will remain preferred by our consumers. If we fail to launch new products that are
widely accepted by our consumers, or if our competitors are able to react to the changes in
consumer tastes and dining preference more effectively, we may experience reduced consumer
demand, and our business, financial condition and results of operations may be materially and
adversely affected.
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RISK FACTORS
Any failure by us, our franchisees or our suppliers to maintain effective quality control
systems of our products could have a material adverse effect on our brand reputation,
business and operations.
Our success essentially depends on the quality of our products. Maintaining consistent
food quality depends significantly on the effectiveness of our quality control systems, which
in turn depends on a number of factors, including the design of our quality control systems and
our ability to ensure that our employees and our franchisees adhere to those quality control
policies and guidelines. Our quality control systems primarily cover (i) procurement and
supplier, (ii) logistics and storage, and (iii) stores. See “Business — Food Safety and Quality
Control.” In addition, as we procure a substantial amount of products from our suppliers, the
quality of our products also is affected by our suppliers’ ability to maintain effective quality
control systems. We cannot assure you that our quality control systems or those of our suppliers
will remain effective. Any significant failure or deterioration of our quality control systems
could have a material adverse effect on our brand reputation, business, financial condition and
results of operations.
Our extensive store network primarily comprises franchised stores that are operated by
franchisees. Our results of operations are largely subject to the performance of the
franchised stores. We cannot control and may not be able to effectively monitor the
operations of these stores or maintain our current relationship with the franchisees.
As of December 31, 2022, our franchised stores accounted for 99.9% of our total stores.
We primarily derive revenue from selling products to our franchisees, which is directly driven
by their in-store sales. During the Track Record Period, sales of home meal products to our
franchised stores increased by 28.1% from RMB2,910.1 million in 2020 to RMB3,727.9
million in 2021, and further increased by 73.7% to RMB6,476.7 million in 2022, accounting
for 98.2%, 94.2% and 90.3% of our total revenue, respectively. Therefore, our results of
operations are significantly subject to the performance of these franchised stores, which in
turn, reflects the marketing ability and management skills of our franchisees. Poor performing
stores, if the total number of which is significant, will materially and adversely affect our
revenue and profitability. Our franchisees independently manage their businesses, and are
responsible for the daily operation of their own retail stores. We also rely on franchisees to
implement our strategic initiatives and marketing programs. Therefore, the success and quality
of the franchised stores are ultimately dependent on the franchisees themselves.
Although we have developed a robust franchise management system to train our
franchisees and their employees, and supervise and manage our franchised stores, we may not
be able to monitor and manage their operations as directly and effectively as our own
self-operated stores. To maintain the standard and consistent quality of our products as well as
consumers’ purchasing experience, we provide operational guidelines on key aspects of store
operations, which range from frontline store-level staff training, store layout, product display,
inventory management to pricing requirement, so as to maintain our uniform brand image
across our stores. However, our franchisees may deviate from our guidelines without our
consent, which may jeopardize our brand positioning and image. Our franchisees may also
breach other provisions of the franchise agreements with us or otherwise engage in illegal
actions or misconducts. In addition, although we provide operational support services to
support their store operation, we cannot assure you that with these supports our franchisees will
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RISK FACTORS
be able to successfully operate franchised stores. Neither can we assure you that we will
maintain the growth of revenue from our franchised stores. If our franchisees fail to
successfully and effectively operate franchised stores, or if our franchisees do not satisfactorily
fulfill their responsibilities and commitments, our franchised stores may experience sales
declines and our brand image may be negatively impacted, which may consequently result in
our failure to maintain and increase our revenue and profitability. Under such occasions, our
business and results of operations would be adversely affected.
Our revenue growth in the past was largely attributable to the rapid expansion of our
store network. We cannot assure you that we will maintain our store network or
successfully implement our expansion plan in the future.
Our rapid growth is largely attributable to our extensive store network which has been a
critical factor in driving our business growth and strong results. Accordingly, our success is
dependent on maintaining relationships with franchisees and attracting new franchisees to join
our store network. During the Track Record Period, the number of our stores increased from
4,300 as of December 31, 2020 to 6,868 as of December 31, 2021 and further to 9,221 as of
December 31, 2022, representing a CAGR of 46.4%. In 2020, 2021 and 2022, the number of
closed franchised stores was 28, 194, and 279, accounting for 0.7%, 2.8% and 3.0% of the total
franchised stores as of December 31, 2020, 2021 and 2022, respectively. Although we only
experienced an insignificant number of franchised store closures during the Track Record
Period, we may not be able to maintain our relationships with franchisees due to various
factors, some of which are beyond our control. For example, if our existing products or new
products are unable to achieve popularity among consumers as expected, our franchised stores
may experience sales declines, which may render franchisees unable to generate investment
returns as they expected. As a result, our franchisees may terminate their agreement with us or
choose not to renew such agreement with us, resulting in the closes of franchised stores. In
addition, we may not be able to further attract new franchisees and open new franchised stores,
which will adversely affect our future business growth. The occurrence of any of the above
could have adverse impacts on our expansion plans, business prospects, financial condition and
results of operations.
To further increase our market share, we expect to continue to expand our geographic
coverage and deepen our market penetration. To this end, we intend to engage more quality
franchisees and encourage existing franchisees to open more stores, to increase the number of
our franchised stores. However, we cannot assure you that we will be able to successfully
contract new franchisees or open new franchised stores as scheduled. We may not be able to
contract franchisees with industry experience and managerial skills, to educate and train the
franchisees and their staff, or to identify attractive locations for new stores. Franchisees may
also decide to cease the business relationship with us if they find our services and support
unattractive. Furthermore, if we are unable to properly plan our store network expansion, an
increasing number of retail stores in one certain region may cause cannibalization and
unhealthy competition. Geographical location is of significant importance to the operation of
our stores. We cannot assure you that the current location of our stores will remain attractive
when there are changes in surrounding environment or local economic conditions. Surrounding
geographic and economic conditions may cause the location of our stores to be unsatisfactory,
which may further lead to a decrease in their sales volume.
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RISK FACTORS
Our development strategies may not achieve the expected goals in the near term, or at all.
To adapt into the competitive industry and maintain our leading market position, we plan
to further expand our store network, build long-term relationships with our franchisees,
diversify our product offering, enhance our supply chain capabilities, and further strengthen
our digital capacity. However, we cannot assure you that we will be able to execute our
strategies successfully and achieve the expected goals as planned in the near term or at all. For
example, while we continue to expand our geographic coverage and deepen our market
penetration, we may not be able to engage quality franchisees or encourage existing franchisees
to open more stores. In addition, new products that we are going to introduce, may fail to
achieve popularity and market acceptance. Furthermore, our initiative to establish home meal
products processing centers to offer customized Chinese food products may not achieve the
expected outcome. To further enhance our supply chain capabilities, we have invested and plan
to continue investing in strategic acquisitions of the businesses in the upstream of our value
chain, which we believe are supplementary to our existing operations. We cannot assure you
that these acquisitions would be successful. See “— We may make acquisitions, establish joint
ventures and conduct other strategic investments, which may not be successful.”
In addition, our robust operation and rapid expansion has been fueled by our information
technology. To support our business expansion, we plan to further strengthen our digital
capacity and improve our inventory management system, store operational management
system, membership system and business, finance and supply chain management systems. See
“Business — Our Strategies.” However, such initiatives to iterate information technology and
relevant digital technology infrastructure may not be able to facilitate the improvement of our
operational efficiency or business growth as expected. All these efforts require significant
managerial, financial, and human resources, which may not be proportional to the achievement
or at all. We cannot assure you that we will be able to effectively manage our growth or to
implement all these measures successfully or that our new business initiatives will be
successful. If we are not able to manage our growth or execute our strategies effectively, our
expansion may not be successful, and our business and prospects may be materially and
adversely affected.
We operate in a highly competitive and fast-changing market and may lose our market
share if we fail to compete successfully.
The industry we operate in is intensely competitive with respect to, among other things,
brand recognition, consistent food quality, services, prices and store locations. Our competitors
come from a variety of geographic markets, including domestic and international home meal
solution products providers. Furthermore, new competitors may emerge from time to time,
which may further intensify the competition. In particular, market players initially in other food
sectors may start to offer products or brands that resemble our concepts and target consumers,
imposing direct competition against us. There are also many well-established competitors with
substantially greater financial, marketing, personnel and other resources than ours, and several
of our competitors are well established in certain regional markets where we currently have
stores or intend to open stores.
– 34 –
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
RISK FACTORS
Our ability to effectively compete will depend on various factors, including the successful
implementation of our store network expansion strategy, and our ability to continuously source
high-quality food ingredients and raw materials, to expand product portfolio, and to enhance
our operational efficiency. Failure to successfully compete may prevent us from increasing or
sustaining our revenue and profitability and potentially lead to a loss of market share, which
could have a material and adverse effect on our business, financial condition, results of
operations and cash flows.
If our suppliers do not deliver quality food ingredients and raw materials at competitive
prices or in a timely manner due to deteriorated relationships with us or insufficient
production capacity, we may experience supply shortages and increased procurement
costs.
It is crucial for our business to source quality food ingredients at competitive prices in a
timely manner. Our ability to maintain consistent quality of food and maintain our product
offerings across our stores depends in part upon our ability to acquire quality food ingredients
from reliable sources that meet our quality specifications in sufficient quantities. Purchases
from our top five largest suppliers in each of 2020, 2021 and 2022 amounted to RMB788.8
million, RMB812.8 million and RMB1,311.7 million, respectively, and accounted for 24.6%,
22.0% and 20.7% of our total purchases in the respective periods. There can be no assurance
that we will be able to maintain business relationships with our key suppliers.
The availability (in terms of type, variety and quality) and price of food ingredients may
fluctuate and be volatile, which are subject to factors beyond our control, including seasonal
fluctuations, climate conditions, natural disasters, general economic conditions, global
demand, government policies and regulations including tariffs, and exchange rate fluctuations.
For example, the average wholesale price of beef increased from RMB53.8 per kg in 2017 to
RMB77.6 per kg in 2022; the average wholesale price of lamb increased from RMB47.5 per
kg in 2017 to RMB73.6 per kg in 2021, and slightly decreased to RMB68.6 per kg in 2022; and
the average wholesale price of pork increased from RMB21.2 per kg in 2017 to RMB44.9 per
kg in 2020, and decreased to RMB25.8 per kg in 2022. See “Industry Overview — China’s
Home Meal Solution Market — Raw Material Price of Home Meal Solutions.” Our suppliers
may also be affected by higher costs to produce the goods supplied to us, rising labor costs and
other expenses that they pass through to their customers, which could result in higher costs for
goods supplied to us. Although we typically stipulate a lock-up price for six months following
the execution of the supply agreement, we may have to negotiate with the supplier over the
procurement price after six months. Where our suppliers initiate the negotiation of procurement
prices due to the aforementioned reasons, we cannot assure you that we will be able to maintain
the procurement prices for food ingredients. Neither can we assure you that our current
suppliers will always be able to meet our stringent quality control requirements in the future.
In addition, the productivity of our suppliers may also be negatively affected by staffing
shortages, unexpected mechanical failures, utility shortages or outage, fire, acts of God or other
calamities at the production facilities of our suppliers, which would render our suppliers unable
to maintain their supply at the same or similar level of product quality and quantity in the
future. Moreover, we cannot assure you that we will maintain good and stable relationships
with our suppliers. If any of our suppliers do not perform adequately or otherwise fail to
distribute quality food ingredients to us in a timely manner due to deteriorated relationships
with us or insufficient production capacity, we cannot assure you that we will be able to secure
alternative suppliers on commercially acceptable terms in a timely manner, or at all. Any
failure to do so could increase our food costs and could cause shortages of food ingredients,
which will further lead to the shortages of our products and may cause us to replace certain
food ingredients with others that may affect the tastes of our products. Any significant changes
to the tastes of our products for a prolonged period could result in a significant reduction in
revenue during the time affected by the shortage and could adversely affect our business and
results of operations.
– 35 –
THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS
DOCUMENT MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.
RISK FACTORS
We may experience reduction in our production capacity due to force majeure events,
mechanical failures, or utility shortages, which may have a material adverse impact on
our business, financial condition and results of operations.
We own three production facilities in Henan Province, including (i) a beef proc…
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