Chinese media outlet Tech Planet reported on Saturday that Quxiaomian, a restaurant founded by Charles Lu Zhengyao, former chairman of Luckin Coffee, is seeking a new round of financing. An informed source says Quxiaomian is valued at 1 billion yuan ($155 million) in this round, and it wants to raise 100 million yuan.
Lu started to prepare for Quxiaomian this past April. This is Lu’s second entrepreneurial venture after Luckin Coffee. Quxiaomian provides eight categories of food, such as hot and spicy noodles, pot-stewed meat and vegetables, dessert, drinks and cold dishes. So far, 25 Quxiaomian restaurants have opened and been in opereation since August 8th.
The Quxiaomian team lacks experience in the catering field and so, as a form of compensation, they try to attract customers with ultra-high discounts. Luckin Coffee was a master in launching price wars. But without discounts, Quxiaomian noodles are much more expensive than other noodle shops. Besides, consumers have had higher expectations for Quxiaomian and subsequently been disappointed by the cost-value disparity, thus resulting in a low repurchase rate.
Quxiaomian isn’t copying the crazy expansion efforts of Luckin Coffee. One Luckin Coffee staff member told Tech Planet that the coffee chain had initially expanded very quickly, but that may have been because a coffee shop is relatively small. A small cafe can take only two weeks to decorate and open while a larger cafe might take a month.
However, a postponed expansion makes employees feel less confident in the company. Quxiaomian plans to expand stores in two batches: the first batch will occur in 14 first-tier or new first-tier cities, such as Beijing, Shanghai, Guangzhou, Shenzhen and Hangzhou; the second batch was supposed to be in another 8 cities starting on August 18th, including Fuzhou, Nanchang, Changsha and Hefei.
However, Tech Planet learned from Quxiaomian staff that the expansion plan of the second batch has been suspended and will take place in early September. An employee working for the expansion says they are mainly working on market research now.
A total of 106 noodle shops can be searched on Meituan App, of which 25 are in business while the rest have not yet opened. A person close to the top of the company says restaurants that aren’t in business now won’t be opening anytime soon and may be redesigned for renovation.