The COVID-19 outbreak has inflicted severe losses across China’s restaurant industry, yet one regional brand has gained remarkable visibility through two video campaigns. In February, Shu Congxuan, President of Laoxiangji, tore up a joint letter from employees requesting pay cuts. The day after the video spread, several banks contacted Shu Congxuan and successively extended loan facilities totaling nearly RMB 1 billion. A month later, Laoxiangji struck while the iron was hot and staged an online press conference in a village—reportedly costing only RMB 200.
How is the restaurant industry helping itself amid the epidemic? Is public attention a scarce resource? And how will capital be reallocated?
Chilies, garlic, and cured meat hung on an earthen wall. A red banner read in calligraphy: “2020 Laoxiangji Strategy Conference” with the word “big” crossed out. In Sangang Village, Feixi County, Anhui Province, Laoxiangji staff found a courtyard, hastily installed a blackboard, and gathered local villagers—“called up from the fields”—to sit below. Chairman Shu Congxuan, wearing a mask, stepped onto a brick stage.
“Over 30 years ago, the village head also spoke here about how each household could earn money. Later, the harvest tasted truly sweet,” said Shu Congxuan in Anhui-accented Mandarin, sitting at a table covered with a red cloth, a ceramic cup and thermos beside him. After a moment, he pulled out an old hen from under the table.
The video gained 3.7 million views on Laoxiangji’s official WeChat account alone. On Weibo, commenters remarked that the RMB 200 press conference “delivered a RMB 200 million effect,” praising the strong “internet-savviness” of this catering chain and its chairman from a second-tier city. In fact, Shu Congxuan is nearly 60. In 1982, shortly after leaving the military, he used his marriage savings to buy 1,000 old hens and became a poultry farmer. After SARS in 2003, he opened his first restaurant in Hefei specializing in chicken soup, named “Feixi Old Hen.” Over 17 years, “Feixi Old Hen” rebranded as Laoxiangji, opening 600 stores not only in Hefei but also expanding into Nanjing, Wuhan, and Shanghai. Just as expansion was accelerating, the COVID-19 outbreak hit.
According to a recent report by Evergrande Research Institute, the restaurant and retail sector lost an estimated RMB 500 billion during the seven-day Spring Festival holiday alone due to the epidemic. As the outbreak continues, losses keep mounting.
At an online salon gathering leading restaurant executives, Xibei Chairman Jia Guolong stated his company’s cash on hand wouldn’t last three months. Jia had previously turned down investment from Alibaba’s Koubei and resisted going public. Shortly after his remarks, Jia Guolong began engaging with investors. Many other companies also started considering capital offers.
Shu Congxuan also participated in that salon. His Laoxiangji had received an investment of nearly RMB 200 million from Harvest Capital in 2018. He didn’t echo Jia Guolong’s “plea of hardship,” but noted that during the outbreak, financial approval authority previously delegated had been recentralized: “Every penny spent now has to pass through my review.”
Soon after the salon, a video of the Laoxiangji chairman tearing up a joint letter from employees went viral. In the clip, Shu Congxuan, seated at his desk, tore in half a letter filled with employee signatures. He explained that some staff had proposed pay cuts to help the company through tough times. “I think you’re confused,” Shu said, declaring that Laoxiangji would not lay off employees or cut wages. “Even if we have to sell cars and houses, we’ll make sure everyone gets paid.”
The day after the video was released, several banks reached out to Shu Congxuan, negotiating loan facilities totaling nearly RMB 1 billion. Having tasted the power of new‑media marketing, a month later Laoxiangji struck again with an online strategy conference. The marketing team, with a budget of RMB 200, arranged a stage for Shu Congxuan in Sangang Village.
At the conference’s conclusion, Shu Congxuan announced that Laoxiangji would accelerate nationwide expansion: aiming to exceed 1,000 stores across China in 2020 and hiring 5,000 additional employees. How is the epidemic reshaping China’s restaurant industry? How should companies collaborate with capital? And why is Laoxiangji choosing to expand against the tide? We discussed these questions with Laoxiangji Chairman Shu Congxuan, his management team, and Alan Song, Founding Partner of Harvest Capital.
No Special Privilege—Whoever Has a Way Should Share It
GQ Report: How was the online strategy conference prepared?
Shu Congxuan: We found a courtyard in Sangang Village, Feixi County—a place where village meetings used to be held. We quickly had a blackboard installed. The audience in the video were all local farmers, “called up from the fields.” The entire conference budget was RMB 200.
GQ Report: Many people say you’re very internet‑savvy.
Shu Congxuan: Our company has many young people, and our consumers are also young, so we need to connect with their lives and engage with them. Our PR department was established in 2010—we’ve always emphasized this area. Even in rural Feixi, every household uses Douyin. New media has deeply penetrated daily life, and as a business, we can’t afford to ignore it. Our quick response this time came from ongoing accumulation. We have our own website, official accounts, Weibo, and Douyin presence.
GQ Report: From tearing the joint letter to the online press conference—is this a form of self‑help?
Shu Congxuan: There is certainly a self‑help element. But we also wanted to use this moment to boost morale across the industry. On the Lantern Festival, which is like a mini‑New Year here, I was thinking about our employees—some working, some at home, scattered nationwide, many staying in Wuhan. They needed to hear my voice. So I made a video and first sent it to our employee WeChat group. The response was enthusiastic, and some suggested we share it publicly.
GQ Report: Was tearing the letter by hand a marketing tactic?
Shu Congxuan: The signatures and handprints on that letter didn’t represent all employees—just a portion. It’s true that many employees in the WeChat group had offered to take pay cuts to help the company through the epidemic. That’s no fabrication. I tore it to make my stance clear.
GQ Report: What feedback did you receive after releasing the video?
Shu Congxuan: The response was significant. Internally, our staff were very encouraged—they said the boss had committed to paying them even if it meant selling property, which boosted confidence. Banks came the next day, offering loan facilities. Netizens responded positively, and later the provincial governor and mayor visited.
GQ Report: How much credit did banks extend? What’s your current cash‑flow situation?
Shu Congxuan: Several banks together offered nearly RMB 1 billion—enough for a year. But we haven’t used a single yuan of those loans yet.
GQ Report: Some argue that only the “privileged class” can speak out now. What’s your view?
Shu Congxuan: I don’t think that’s accurate. What “privileged class”? Who gave us privilege? What privilege do we have? It’s simply that whoever has a workable approach should share it. When you have a way forward, people are willing to listen, right?
GQ Report: Your supply chain includes poultry farming. Was that hit hard during the epidemic?
Shu Congxuan: The farming sector was indeed hit hard, mainly due to transport disruptions—feed couldn’t get into villages, chickens couldn’t be shipped out. Chickens kept for one or two months had to be buried in pits dug by excavators. But the farmers we work with fared much better. We adopted a purchase‑and‑store policy, buying and storing chickens in our warehouses. We coordinated with local authorities to secure green‑channel access.
Under the Outbreak, Resources Flow to Leading Players
GQ Report: Why did Laoxiangji decide to expand during the epidemic?
Alan Song: This is counter‑cyclical thinking. Many companies face survival crises during the outbreak. Laoxiangji is a funded company with solid operations and relatively strong cash reserves. Since survival isn’t an issue, they can focus on development in this contrarian environment.
The epidemic has made it difficult for many small‑ and medium‑sized enterprises, or those below the industry’s top tier, to operate. Many prime locations that were previously hard to secure have become available at lower cost—part of the epidemic’s clearing effect.
GQ Report: As an investor in Laoxiangji, what support have you provided beyond funding?
Alan Song: We frequently discuss operational matters. For example, this press conference was the company’s own initiative—you can see Laoxiangji is highly creative. We collaborate deeply on planning and execution, though specifics are not for public discussion.
Laoxiangji has long focused on new‑media strategy. Their understanding and application of the new‑media matrix and modern communication systems are industry‑leading. After investing, we’ve helped deepen brand marketing and user‑community building. Given our long‑term focus on consumer services, we bring deep expertise in this area.
GQ Report: How large was your investment?
Alan Song: In 2018, we made an exclusive investment of nearly RMB 200 million in Laoxiangji—a sizable transaction in the industry. Harvest Capital typically invests in segment leaders within China’s consumer‑service sector. Laoxiangji is a classic leader in the restaurant segment.
GQ Report: Why did you choose Laoxiangji?
Alan Song: Their leading position was certainly key. Laoxiangji’s operations have been excellent, and their learning ability is strong—evident in five generations of store upgrades, reflecting deep research into consumer psychology, quality control, and supply chain. Actually, I wasn’t the first investor to approach Mr. Shu—he had turned others down. We ultimately partnered because both sides shared the same goal: to become industry number one.
Companies with capital‑market awareness, financial discipline, strategic vision, and planning capabilities will undoubtedly lead in future competition. Enterprise competition will increasingly depend on leaders’ ability to master, mobilize, and allocate resources. Many companies fear capital, often due to fear of the unknown.
GQ Report: Will a Matthew effect emerge?
Alan Song: That’s an inevitable industry trend. It’s also why Harvest Capital invests almost exclusively in industry leaders.
GQ Report: The epidemic may reshuffle the deck. What gets washed away, and what remains?
Alan Song: Clearing is inevitable under the outbreak. China’s macro‑economy has been deleveraging since 2015; this epidemic has simply accelerated the clearing process.
The restaurant market follows a “20‑20‑60” rule: 20% profit, 20% break even, 60% lose money—meaning the industry’s attrition rate is high and survival rate low. This forces continuous evolution and upgrading. Historically, the better‑run companies that do more things right are more likely to survive a crisis. Similarly, how you act during this epidemic will determine your future standing.
GQ Report: “The bigger get stronger”—does that sound detrimental to industry diversity?
Alan Song: It’s an inevitable law of industrial development. Greater concentration doesn’t mean diversity disappears. China’s market is vast—a super‑pool of over 1.4 billion people. The restaurant sector can support 10 million stores. Even chains like Haidilao, which can scale to thousands of stores, generate RMB 20‑30 billion in revenue and about RMB 2 billion in net profit, still represent a small share of the overall track.
GQ Report: The relationship between Harvest Capital and Laoxiangji seems akin to coach and athlete?
Alan Song: We especially avoid the word “coach.” We prefer “strategic partner” or “super sparring partner.” In today’s capital environment, providing money isn’t the most important thing—truly becoming a business partner matters more. Entrepreneurs have their own capabilities and strong operational skills. I often say, in China’s era of “good people doing business,” earning money through hard work is respectable.
GQ Report: How do you interpret “China has entered the era of good people doing business”?
Alan Song: In the past, China’s market was often about factor‑driven, extensive growth—assembling resources and a team could get things done, without necessarily requiring deep cultivation. Now, with overcapacity and the end of the traffic‑dividend era, enterprises must truly deliver good products and services to earn consumer respect. The respect you give consumers will determine their future support.
The Turning Point Is Here—The Epidemic Is a Major Test
GQ Report: Everyone talks about resuming work. What does that mean practically?
Alan Song: There’s no dine‑in service, but we still need to operate. Since we’re paying rent and salaries, we can’t just shut down, right? So we quickly agreed on three areas: delivery, group meals, and retail products. Especially group meals—given our strong coverage in Anhui and central‑kitchen capacity, we’re pushing hard there. We’ve now recovered about 50‑60% of normal business volume.
GQ Report: Why didn’t many restaurants focus on delivery before? Can delivery be a lifeline during the epidemic?
Shu Congxuan: Partnering with platforms involves certain costs, making delivery margins thinner than dine‑in. Delivery did pick up during the outbreak, but even with more orders than usual, it couldn’t offset overall losses.
GQ Report: What will the epidemic crisis reveal?
Alan Song: The restaurant industry is ancient and traditionally emphasized dine‑in. During the outbreak, with dine‑in gone, many turned to delivery, retail, and group meals—this is a new trend. Additionally, the industry will undergo digital transformation, likely accelerated by the epidemic.
We’ve also observed that competition used to be online versus offline, with offline centered on stores. The epidemic prompts us to think about extending from “to‑store” to “at‑home” scenarios, which are crucial. Hence delivery and new retail. Simultaneously, the online market space will expand, and community‑marketing concepts are truly sinking in for restaurant leaders. In the future, it won’t be about “online vs. offline” but about being “always‑on.”
GQ Report: What’s the worst‑case scenario you can accept?
Shu Congxuan: That’s quite a negative question. First, during the epidemic, some market share may be lost due to severe impact, but I can fight to regain it. Second, survival is key—any cat that catches mice is a good cat. Third, I must pay my employees, even if it means selling my house or car. That’s a boss’s responsibility.
GQ Report: What’s most discussed in investment circles during the epidemic?
Alan Song: Adjusting investment strategy—it’s a process of investors looking inward amid external changes. Everyone is reviewing their portfolios. How past investments perform under epidemic pressure is a key concern. It clearly shows where a company’s core competitiveness and anti‑fragility lie. This is a valuable stress test.
Every investment institution should reflect deeply during this outbreak. In the past, we moved fast and spread wide, rarely pausing to examine whether we were right or if our strategies could withstand time. Facing this systemic risk is a major test—a real trial. I’ve noticed every firm is conducting in‑depth research, comparing notes and sharing insights.
In the past, there were many internet‑famous, even phenomenal projects. Why not now? Because they lacked time for compound growth—they weren’t long‑term investments, and their core competitiveness was weak. Investing in valuable companies means the rose of time will bloom in your hands.
GQ Report: What does this outbreak mean for China’s restaurant industry?
Alan Song: By 2025, the restaurant industry will become China’s largest sector. It already employs 45 million people; estimates suggest 80–90 million by then. By that time, China’s consumer‑service and modern restaurant industries will see the rise of branded, chain‑based, industrialized, digitized, and scaled large companies—I believe the epidemic will stimulate this process. Over the next 30 years, consolidation in China’s consumer‑service industry is an irreversible trend, beneficial for industrial upgrading.
In short, the epidemic is a huge test for the nation and every industry, not just consumer services. If you pass, you survive. If you fail, you’ll likely be eliminated. The turning point has arrived.
If the epidemic helps China’s economic restructuring, industrial upgrading, and enterprise quality improvement, that’s a silver lining worth recognizing.
