Chinese office workers who grab Malatang for a quick lunch may find it hard to imagine that Europeans have already started celebrating birthdays and gathering with friends at Malatang restaurants.

At Yangguofu’s restaurant in London’s Chinatown, it is now a common sight to see seven or eight young Europeans gathered around bowls of steaming Malatang, drinking beer and eating cake. A single meal can cost £200. They have turned fast food into something resembling a party—perhaps bringing back memories of celebrating birthdays at McDonald’s as a child.

Yangguofu has also joined the booming wave of Chinese restaurant brands expanding overseas. Since early 2022, Yangguofu has opened nearly 200 stores worldwide.

However, unlike the narrative surrounding many Chinese companies expanding overseas, Yangguofu is not going abroad simply because growth in China has become increasingly difficult. In 2023, the number of new franchisees joining Yangguofu more than doubled year on year. One reason was that, following the easing of pandemic restrictions, many young people wanted to open a Malatang restaurant as a side business.

“Yangguofu’s overseas expansion actually became a major strategic campaign after Captain [Yang Xingyu] became Chairman,” Ping Junjie, head of Yangguofu’s European market, told Huxiu.

In June 2022, Yang Xingyu, whose nickname is “Captain,” became CEO of Yangguofu and took responsibility for its overseas expansion. He is also Yang Guo Fu’s son. Yang Xingyu oversees the localization of the Yangguofu brand overseas, as well as the development of its supply chain and digital intelligence systems.

Benchmarking Against Japanese Ramen in Europe

The first destination for Chinese restaurant brands expanding overseas is often Southeast Asia, where cultural and geographical proximity make market entry relatively easier, or the United States, where consumer spending power is higher.

Yet within Europe’s overall foodservice market of approximately US$840 billion, Asian cuisine accounts for only 2%–3% (US$16.8–25.2 billion). According to estimates by the Yangguofu team, Malatang previously accounted for only 0.5%–1% of the Asian food market.

Yangguofu nevertheless chose Europe as a strategic beachhead for its global expansion.

“Going from the United States to the rest of the world means moving from higher-income markets to lower-income markets from an economic perspective. But going from Europe to the rest of the world means first conquering a cultural high ground. This can provide a higher-level validation of the brand’s value and allow us to capture a cultural premium,” Ping Junjie explained.

Yangguofu is also no longer positioned as a low-priced brand in Europe.

Among the four major categories of Asian cuisine in Europe—Japanese, Korean, Southeast Asian, and Chinese—Yangguofu chose to benchmark itself against Japanese ramen, the category with the strongest cultural appeal, highest pricing, and largest number of stores. Japanese ramen is the largest category within Japanese cuisine and, like Malatang, is centered around soup-based dishes.

According to Yangguofu’s estimates, Japanese ramen accounts for approximately 4%–6% of the European Asian food market, representing roughly US$500–800 million, with around 3,000 stores across Europe.

Based on this logic, Yangguofu’s competitor in Europe is not another Malatang brand, but a Japanese ramen brand called Takumi. With an average ticket of €21–25, Takumi currently operates more than 60 stores across eight European countries.

In Europe, Yangguofu’s average ticket size is also set at €20–25 (approximately RMB 180–200), while a meal at McDonald’s or KFC costs only around €10.

“Our store ratings have already surpassed Takumi’s. Our goals for this year and next year are to overtake them in terms of store count and sales per store, respectively, and become a leading Asian restaurant chain in Europe,” said Ping Junjie.

Competition in the European Malatang Market Is Heating Up

It is worth noting that competition in Europe’s Malatang market has also intensified since Yangguofu entered the market.

According to estimates by the Yangguofu team, there are currently around 600 Malatang restaurants in Europe, with industry revenue growing at approximately 20%–30%.

One reason for the increase in Malatang restaurants is related to the current stage of development of the Chinese restaurant market in Europe.

Malatang is a category that does not require highly skilled chefs. A single store can operate with just six to seven employees.

Many Chinese restaurants in Europe were founded by older generations of overseas Chinese. After establishing themselves through the restaurant business, many of them do not want their children to continue in such a demanding industry. As the number of chefs capable of preparing Chinese cuisine declines and labor costs continue to rise, Chinese restaurant owners are increasingly looking for standardized concepts with lower labor requirements.

“Between May and August 2024, four or five Malatang restaurants emerged in Berlin alone. Dozens more have appeared across Europe over the past one to two years,” said Ping Junjie. Some were also Chinese restaurant owners who had wanted to join Yang Guo Fu as franchisees but were rejected.

Yangguofu itself is also accelerating its store expansion. It currently has around 50 stores in Europe, including stores that have been signed and are undergoing renovation. Germany is its largest market, with approximately 23 stores, 11 of which are already open. Similar to the domestic market, these stores are predominantly franchised, with only one directly operated store in Europe.

According to Yangguofu, an ordinary 120–150-square-meter store in Europe generates approximately €80,000–100,000 in monthly revenue, with an initial investment of RMB 1.6–2.5 million, including the franchise fee, renovation, and initial supply of soup bases and other materials. A flagship store, such as the Düsseldorf location, generates approximately €180,000–200,000 in monthly revenue, with an initial investment of around RMB 4 million.

Yangguofu’s revenue primarily comes from franchise fees and service fees, as well as Yangguofu-branded renovation materials and supplies, and the purchase of soup bases and other products by franchisees.

“Each European franchise store contributes approximately RMB 400,000–500,000 in annual revenue. Total annual revenue in Europe is approximately RMB 20–30 million, including directly operated stores, while total overseas annual revenue has exceeded RMB 100 million,” Ping Junjie told Huxiu.

What specific strategies is Yangguofu pursuing in Europe, and what challenges has it encountered? Below is the full transcript of Huxiu’s conversation with Ping Junjie, Head of Yangguofu’s European operations:

Huxiu: Who is Yangguofu’s target customer in Europe?

Ping Junjie: Yangguofu’s customer base in Europe has evolved from primarily Chinese students to local consumers.

In the early stages, we relied on Chinese students to get started, but today, local customers account for more than 60% of traffic at our stores, and in some stores the figure reaches 80%–90%. Our core customers are primarily young people, including students and office workers from different countries, as well as a considerable number of middle-class professionals such as lawyers and doctors.

Huxiu: What is Yangguofu’s brand positioning and dining occasion in Europe? How do you attract these local customers?

Ping Junjie: Yangguofu wants to reshape consumers’ perception of Malatang in Europe. Europeans do not view it simply as fast food.

Its positioning is closer to “light dining”: more expensive than fast food, which costs around €10, but less expensive than traditional full-service dining, which can cost €40–50. It is similar to the role KFC and McDonald’s played when they first entered China 30 years ago. We want to create a sense of social appeal and novelty that feels “presentable.”

For example, Europeans come to Yangguofu to celebrate birthdays or gather with friends. They may stay for several hours and spend more than £200 on a meal. People in Spain and Germany enjoy drinking beer while eating Malatang, which is quite uncommon in China.

Huxiu: How exactly do you create this sense of social appeal and novelty?

Ping Junjie: Yangguofu wants to become a “lifestyle” brand.

Europeans like to combine dining with socializing and entertainment. So our flagship store in London has transformed the basement into a live-house-style space for music performances and stand-up comedy. Another store, converted from a former bank, has turned the old underground vault into private KTV rooms.

Overall, we want to integrate music and culture to make Yangguofu feel cooler and more youthful, while also opening up additional revenue streams.

Huxiu: How do you manage the supply chain in Europe?

Ping Junjie: Yangguofu has its own factories and can produce at scale, supplying nearly 7,000 stores worldwide. This year, a regional distribution warehouse will be completed in Europe. Some products will be sourced centrally within the region, which will also reduce logistics costs.

Overseas supply chain management is a major challenge. Some brands lack overseas teams and stable supply capabilities, and their franchisees have even used soup bases from other hot pot brands to make Malatang. That means their supply chain controls have effectively failed.

Huxiu: Have you made significant adjustments to the flavors for the European market?

Ping Junjie: In fact, product localization is our most immediate challenge.

There are many different allergens in Europe. Store employees specifically explain these issues to customers, and information about the main ingredients is displayed in stores.

In addition, Europe has diverse religious practices, vegetarianism is widespread, and European food safety standards are extremely stringent—for example, certain animal-derived ingredients are restricted. As a result, we have gone through many iterations of our soup base formulations.

Huxiu: Apart from product localization, what other challenges have you encountered in Europe?

Ping Junjie: The first is the complexity of operations and management.

When people talk about Europe, they often think of it as a complicated place. There are more than 40 countries, each with different languages, policies, and tax systems. For example, a certification obtained in Germany may not necessarily be valid in France. Such regulatory complexity presents significant challenges for team management.

In addition, the process of securing locations and completing renovations in Europe can take a long time. It is normal for a Yangguofu store to take more than six months from site selection to opening, which places extremely high demands on capital management and operational planning.

Among all these challenges, however, the most profound and fundamental is the difficulty of cultural integration.

Europe’s diverse religious beliefs, deeply rooted dietary habits, and language barriers between different countries—such as the reluctance of French and German people to speak English—are all invisible barriers that must be overcome in cultural integration. At times, it feels like we are doing more than selling a bowl of Malatang; it feels like a dialogue between two civilizations.

Huxiu: How do you view the increasingly intense competition in the Malatang category?

Ping Junjie: When selecting franchisees, we generally try to work with one franchisee per city to avoid unhealthy competition, internal cannibalization, and damage to brand value. This also means that we have rejected many Chinese business owners who wanted to become franchisees. Some of them went on to establish their own Malatang restaurants, which has indirectly created additional competition for us.

Building a strong competitive moat is certainly important in a competitive market. I believe Yangguofu’s core competitive advantages lie in three areas.

First is the brand and its culture.

When Yangguofu first expanded overseas, its existing brand recognition in China gave it a natural word-of-mouth advantage among Chinese students. As we have gone deeper into Europe, we do not want to simply sell products. We also focus on cultural storytelling—for example, organizing Malatang festivals and producing “spice stories” videos that incorporate the histories of different countries. All of these efforts are intended to help Europeans understand the story of China.

The supply chain management I mentioned earlier is also a core competitive advantage.

Then there is our localized team. Our European team has only seven people, but is responsible for operations across 11 European countries. We primarily recruit Chinese students with work permits or Chinese people whose families are based here, which makes the team highly efficient.

Huxiu: What are your future goals in Europe?

Ping Junjie: First, we want to become a leading Asian restaurant chain in Europe and surpass Takumi.

In addition, our strategy in Europe is based on a long-term approach. Commercial leases in Europe typically run for five to 10 years, or even longer. Yangguofu’s London Chinatown store, for example, signed a 15-year lease. This means we must have the capabilities and planning required for long-term operations rather than approaching the market with the mindset of making quick profits.