A new wave of Chinese restaurant chains are elbowing out established fast-food giants, as once-aspiring brands are losing appeal to increasingly sophisticated consumers.
Having failed to notice shifting consumer taste, major fast-food chains, such as McDonald's and Kentucky Fried Chicken, have continued to rely on their cookie-cutter services that focus heavily on convenience. They face a long road ahead to regain the once-strong status they enjoyed in China not long ago, because today's Chinese consumers are presented with a wide range of dining options.
Quick, cheap and cool
"Good interior design, wide variety of food and cheap -- this is an ideal place to come with friends," said Liu Xing, a 27-year-old office worker in Dalian, Liaoning Province.
He was dining with four out-of-town friends at a brand new Green Tea Chinese restaurant in a shopping mall. The restaurant chain offers a menu based on traditional meals from Hangzhou Province. Liu and his friends ordered six dishes out of more than 100 choices on the menu. Still, the tab came to just around 50 yuan ($7.8) per person, including beer and ice cream.
Liu appeared quite satisfied to be treating friends to a banquet without splurging. "I couldn't take my friends to KFC, could I?," he said.
Chinese fast-food restaurant chains, such as Green Tea, Grandma's Home and Teppanyaki Xiang, have grown sharply here in recent years. These eateries typically feature a modern interior design and relaxed atmosphere, as well as large-portion meals and reasonable prices.
According to the China Hotel Association, the country's restaurant market grew year-on-year by 9.7% to be worth 2.7 trillion yuan in 2014. The growing popularity of fast and fashionable Chinese restaurant chains is attributed as one of the main drivers behind the solid growth.
By contrast, KFC and McDonald's, which have been operating in China since the 1980s, have been losing ground. KFC was once hailed as a model of success for foreign businesses, but Yum! Brands, the major U.S. fast-food company that operates KFC and other chains, announced in October that it will spin off its Chinese KFC operations. McDonald's has not been doing so well either, having closed about 80 locations in China so far this year.
Some blame the two U.S. fast-food chains' downfall on a scandal that occurred in July last year. A Chinese company, Shanghai Husi Food, a supplier of the two U.S. fast-food giants, was found to have been supplying out-of-date chicken meat to clients.
However, McDonald's and KFC are likely facing a more deep-rooted problem. They were once seen as symbols of economic prosperity in China, but that status has diminished in the eyes of contemporary consumers. Chinese now have access to more sophisticated products and services offered by cafe chains, such as Starbucks, and local fast-food eateries.
Explaining why she does not go to McDonald's nor KFC anymore, a housewife in Shanghai said, "I don't want to visit their stores because they are dirty, and their service is bad."