Haidilao's fastest-expanding sub-brand, Yanqing Barbecue Shop, is paying the price for "expanding too quickly".
From November 2025 to the end of June 2026, Yanqi closed at least 19 stores, and no new stores were opened in the first half of 2026.
But the real problem is not just the spin-off of a sub-brand, but rather Haidilao itself.
The mentorship program, store manager replication, and instilling in servers the belief that "hard work changes one's fate" are the organizational capabilities that Haidilao takes pride in, but this set of capabilities is losing its effectiveness.
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Yanqing Barbecue Continues to Close Stores
Yanqing BBQ shops are closing down everywhere, which doesn't come as a surprise to Song Nan.
She used to work part-time at a Flame restaurant in Changsha. In just over a year, the store had five different managers. By the time she left, the store had stopped offering hair washing and styling services, and the area originally allocated for these services had been converted into an iron plate fried rice counter.
This change is somewhat ironic - "washing hair, styling, and DJing" were originally Yan Qing's most distinctive trio of skills.
Yanqing is a barbecue brand under Haidilao. The wait staff assist with grilling and offer hair washing and braiding services. After 8 pm, the restaurant adds fancy cocktails, dancing, and DJ performances, attempting to retain nighttime social consumption that would otherwise take place in bars and nightclubs.
The range hood's exhaust pipe has a strong suction power, capable of holding a phone in place, but the smell of grease may still linger. The shampooing and hairdressing area is designed to address this issue, with high-end shampoo, conditioner, and a Dyson hair dryer on the grooming table.
At least initially, the model received positive feedback. The first Xi'an store, which opened at the end of 2023, quickly turned a profit; the Xi'an, Yiwu, and Nanjing stores that opened in 2024 were reported to be "profitable from the first month," with the night-time module also bringing in around a 15% increase in sales for some stores.
External institutions at the time also calculated a similarly optimistic single-store model: Yanqing's distance from Hai Di Lao's original capabilities was not far, and while hot pot and barbecue use different beef cuts, the combined demand can achieve synergy in the supply chain, allowing for direct negotiations with suppliers on the price of "whole cattle".
Following such feedback, Yanqing quickly entered an expansion phase. At one point, Haidilao's management had envisioned having 400 to 500 stores within the next three years. In the first half of 2025, Yanqing opened 46 new stores, reaching a total of 70 by the end of June.
But by the end of 2025, the contraction had begun. Haidilao no longer publicly discloses the specific number of Yanqi stores. From November 2025 to the end of June 2026, at least 19 Yanqi stores were closed, and no new stores were opened in the first half of 2026. According to Zhen Gu Research, Yanqi's contraction is still not complete.
The reason for Yanqing's contraction cannot be simply attributed to "poor business."
Song Nan's store business is doing well, with daily sales reaching 50,000 to 60,000 yuan during winter and on weekends and holidays. On the busiest New Year's Day, the store, which has only 35 tables, received more than 240 tables of customers.
In East China, Yanqing can also achieve similar sales to popular barbecue brands, but it needs to deploy more personnel to maintain this experience.
Barbecues require staff, hair washing requires staff, hair styling requires staff, and in the evenings, live music performances and DJs still require staff.
And after it expanded to dozens of stores, the first risk to be exposed was precisely "people".
Stuck on Human Resources
Yanqing is not entirely building a new team from scratch. Many of its management and core members have come from Haidilao, while a large number of ordinary positions are being recruited from the market.
Li Meng is preparing to leave her job. She told us that many of the store's management team came from Haidilao, and compared to employees who were hired later through social recruitment, they "trust their own people more". Employees hired through social recruitment need to spend more time to truly integrate into the team or get promotion opportunities.
Song Nan has also experienced this difference. She said that some employees who came from Haidilao can be a bit "self-righteous" and are used to lecturing employees who were hired later through social recruitment based on their past experience at Haidilao.
The store where she worked never had a "stable team". Each store manager had their own people; whenever a new manager took over, they would bring in familiar employees, and some of the original employees would leave to follow the previous manager.
Ordinary employees have a high turnover rate. Before the opening, the first batch of more than 20 employees were sent to Xi'an for training for about a month. Later, only one of the more than 20 people remained in the store, with most leaving one or two months after the opening.
The store is hiring on one hand, while constantly losing employees on the other. Some new hires only work for one or two days before quitting, citing exhaustion. Song Nan returns to the store every other week, only to frequently find that the colleagues she worked with have been replaced by a new batch.
One of the reasons for leaving is the disparity between labor intensity and returns.
Haidilao service staff generally operate under a piece-rate wage system, where "more work means more pay." In contrast, Yanxing Gate stores openly recruit using fixed salary tiers. Some stores briefly experimented with a piece-rate system for about three months before reverting back to fixed wages.
For employees, the problem with fixed salaries is not the "fixed" aspect itself, but rather that in order to control labor costs, they are required to take on an increasing number of roles without their income automatically increasing as a result of taking on an additional position.
Song Nan's position was barbecue server. She started the day after her interview. No one systematically taught her how to grill or serve. She stood beside other staff members, watched, and memorized the steps.
Soon, Song Nan was assigned to handle three or four tables at once. Sometimes two tables were pushed together to seat more than a dozen people, yet in the work allocation it still counted as one table. Besides assisting with grilling, she also had to watch the tables, deliver dishes, and clear tables; when the host station was short-staffed, she'd cover hosting, and when other positions were short-staffed, she'd fill in there too.
Li Meng has also experienced this state: "Wherever there's a shortage of staff, I go there, one person taking on several posts. I have to work quickly, and I have to keep smiling, but when I get busy, I don't even have time to drink water."
Chen Mingming recently left her job. During the pre-employment interview, she was promised a monthly salary of over 4,300 yuan and four days off per month. However, after joining the company, she was assigned multiple roles and required to work extra shifts, with 7-8 days of overtime per month.
She feels she has been constantly nitpicked, suppressed, and belittled, and even targeted by a small clique, with the threat of being "arranged to be on leave indefinitely if they don't want her." In reality, she only takes home more than 2,500 yuan.
"One person is doing the work of three or four, and in the end, the salary is less than half of what other restaurants pay," Chen Mingming said.
When talent can't be retained, it in turn hits the services that depend most on people.
It takes at least 20 minutes for one person to wash their hair, so to shorten the queue, more staff are needed; however, increasing staff means higher wages, more equipment, and additional space.
At the store where Song Nan works, hair styling was initially handled by a dedicated staff member, but later became a task that ordinary waiters would attend to when they had time. If no one was available, customers would be told that the service was temporarily unavailable. When the store first opened, it had two DJs, but both eventually left. The store also hired a resident singer, who worked there for a few months before leaving as well.
However, these services are still in demand, and canceling them would clearly dilute the original differentiated positioning. Song Nan often sees consumers on Dazhong Dianping directly comparing Yanqing and Haidilao, thinking that the service "can't compare to Haidilao".
A catering company with over 100,000 employees, known for building barriers with its services, has encountered organizational capability issues while replicating Huoyan.
What is referred to as organizational capability is the mechanism of "people", which is the ability of store managers to motivate and manage individual stores. Through mentorship and training, service staff can become store managers, and a store manager can then mentor apprentices who can go on to open new stores, relying on "changing one's fate with one's own hands" to infinitely replicate the same service model.
Haidilao's once-vaunted organizational capabilities seem to have encountered issues.
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Haidilao Faces Organizational Challenges
Red Pomegranate was never just a plan to find new brands.
Haidilao hopes to address two issues at the same time: new growth outside of hot pot and organizational structure.
In the past, the most clear path to advancement for Haidilao employees was built on the main brand's continuous expansion of new stores. Waiters could become store managers, and a store manager could then train apprentices who would go on to open the next store. As new stores continued to emerge, they constantly generated new store manager and regional manager positions.
However, after Haidilao's main brand entered a mature phase, this path began to narrow. The number of hot pot stores is no longer increasing at the same rapid pace as before, meaning management positions that rely on expansion will not increase indefinitely.
In terms of store-level innovations, such as selling breakfast, the rewards brought about are limited, making it difficult for employees to continue believing in the idea that "hard work can change one's fate."
The Red Pomegranate Plan aims to create new opportunities for employees. The name "pomegranate" symbolizes "many seeds, many blessings," and the company does not set a predetermined number of brands to incubate, instead encouraging employees to continuously propose new projects. At one point, Haidilao received an average of approximately 200 innovative project proposals per day from within the company.
Yanqing is one of the earliest "seeds" to grow up.
Yang Hua, the founder of Yanple, worked at Haidilao for over 20 years. Her first internal startup, "Wugu Sancan", was not successful, with several stores continuously losing money, leading her to believe she was not cut out for entrepreneurship. On her second attempt, she chose to focus on grilled meat. After Yanple took off, she took on an additional role: "head coach" of the company's entrepreneurship committee.
Haidilao subsequently set up a more complete team, known as the "Five Tigers of Operations": Deputy General Manager Shao Zhidong is in charge of business growth, Executive Deputy General Manager Song Qing is responsible for supply chain and product management, Yang Hua is in charge of incubating entrepreneurial projects, Rotating COO Miao Xiqing is responsible for store operations, and Marketing Director Zhang Guanping is in charge of scenario marketing.
Five individuals have almost all the capabilities needed for a new brand, from products and supply chains to stores and marketing. The company has also established a "seed library" of over 100 entrepreneurs. In contrast to the previous approach of letting entrepreneurs explore on their own, this round of Red Stone Pomegranate emphasizes group empowerment and batch incubation.
Behind this is still Haidilao's familiar approach: old people doing new things. What new brands lack is not just a product idea. Finding locations, procurement, hiring, training, opening stores, and judging what problems a store has all require organizational experience.
Haidilao is also attempting to directly replicate its most important management resource - store managers - for its new brand.
In 2024, the company began implementing the "double-store" and "multi-store" models. As initially designed, a mature store manager would no longer be limited to managing just one Haidilao, but could simultaneously be responsible for a second, third, or even nearby Hongshiju stores.
This mechanism appears to kill two birds with one stone. For the company, the new brand does not need to train a new store manager every time a store is opened; for employees, managing more stores can bring in more income and also free up positions for deputy store managers and reserve cadres to be promoted.
However, the multi-store strategy later failed to address the talent issue as initially envisioned.
After the multi-store promotion, a formal store manager may be responsible for two, three, or even four stores, with more stores outside of their "home store" actually being operated by deputy store managers. The number of formal store managers decreased from nearly 1,000 to around 600 or 700, but deputy store managers receive lower profit-sharing than formal store managers.
The system originally designed to open up promotion channels has instead created a new intermediate layer: formal store managers oversee more stores, with proxy store managers and reserve cadres waiting to be converted to formal positions below them. Some managers have found that their workload has increased, but their income has not risen in proportion.
Song Nan's experience at the Changsha store epitomized this issue, with five store managers coming and going in over a year, each bringing their own team, and ultimately failing to build a stable one.
By the end of 2024, Hongshi You had incubated 11 brands and 74 restaurants. By the end of 2025, the number of dining brands outside of Haidilao's main brand had increased to 20, with a total of 207 restaurants.
As of the end of June 2026, Haidilao's other operated catering brands increased to 21, while the number of stores decreased from 207 to 183. Revenue from other restaurant operations reached 1.271 billion yuan, up 113.1% year-over-year.
Revenue has doubled, while the number of stores has decreased. This set of seemingly contradictory figures actually marks a new phase for Hongshengyuan.
Haidilao's latest statement is that it is shifting its focus from "expansion in scale" to "improvement in efficiency": re-evaluating all existing projects, concentrating talent, site selection, and other resources on verified brands, and slowing down store openings or adjusting store layouts for projects with unproven business models.
The final candidates that made the cut in the latest round of screening are Haidilao Dapaidang hot pot and Rusou sushi. Yanqing, which was once the fastest-expanding, did not appear on this list.
In January 2026, Zhang Yong, who had stepped down as CEO nearly four years prior, reassumed the role of CEO at Haidilao. Among the three initiatives he promoted were Hongshiliu and the intelligent mid-platform. Three months later, Yang Lijuan also returned: she resigned as CEO of Te Hai International and re-entered Haidilao, taking charge of overseeing and driving the Hongshiliu plan.
The organizational issues that Hongshi Pomegranate initially sought to address have not disappeared with the increasing number of brands, and to some extent, it has become part of the problem itself.
Organizational capabilities rely heavily on specific individuals and mentor-apprentice relationships, which cannot be replicated like menus and supply chains. Red Stone Pomegranate's attempt to replace these relationships with mechanisms has instead created new intermediate layers.
The problems encountered by Haidilao are not unique to the company, as all catering enterprises that have bid farewell to rapid growth are facing the same issues.
Haidilao is crossing the river, but can't find a stone to feel its way. The same is true for other catering enterprises.