On the 14th floor of Hysan Place in Causeway Bay, branding barriers for half a floor have just been installed. The tenant behind them is the well-known mainland hotpot brand BANU, yet just three months ago, this space belonged to Jupuer Hotpot, operated by Xiabuxiabu (0520.HK). In this prime shopping hub of Hong Kong Island, BANU has made a bold investment to secure the location, signaling ambitious plans. In June, Jupuer exited the lease; BANU took over and is expected to open its first Hong Kong store in mid-November. As one hotpot brand departs and another arrives, some mainland restaurant companies are hitting setbacks in Hong Kong while others charge ahead undeterred.

The first wave of mainland restaurant entries into Hong Kong began in 2017, led by hotpot brands, with the pioneer being HAIDILAO (6862.HK), which opened its inaugural store in a shopping district that same year. Joining the initial wave was Happy Lamb, founded by the original Little Sheep team, which launched in 2018. At that time, only a handful of hotpot-focused brands paid attention to the Hong Kong market. After 2023, however, intensifying competition in the mainland dining sector pushed companies to seek growth overseas, and Hong Kong, with its 7 million residents and international status, became the preferred testing ground for overseas expansion.

According to Yin Guowei, Greater China Retail and Consumer Products Leader at EY, 2023 marked the start of a "scaled wave" of mainland restaurant brands entering Hong Kong, with numerous top players initiating strategic layouts across virtually every mainstream dining segment, from hotpot and casual dining to tea beverages, coffee, fast food, and noodles. To date, more than 60 mainland dining brands have entered the Hong Kong market. These include hotpot leaders like HAIDILAO, Jupuer, and Happy Lamb; sour fish dishes from Jiumaojiu (9922.HK) brands Taier and Yao Yao; fast-casual options such as Green Tea Restaurant (6831.HK) and Encounter Noodles (2408.HK); and a crowded tea sector featuring Mixue Bingcheng (2097.HK), Chagee (CHA), Guming (1364.HK), Luckin Coffee (LKNCY), and Heytea. BBQ chains like Mu Wu BBQ and Xita Laotaitai are also present. Most of these are listed on the Hong Kong Stock Exchange, and BANU, which plans its first Hong Kong outlet, updated its listing application with the HKEX in July.

Yin noted that Hong Kong has become a primary listing venue for mainland dining brands, and opening stores there offers a natural "showcase effect" for engaging with the capital markets. Indeed, the market initially responded enthusiastically: flagship brand HAIDILAO achieved a peak daily table turnover rate of 4.8 times, well above the industry average of 2.5, with wait times nearing three hours. The novelty appeal of mainland brands, combined with competitive pricing, initially generated strong foot traffic. However, this brief surge of enthusiasm quickly faded as Hong Kong consumers' interest cooled, exposing the limits of the "low-price plus traffic" strategy.

Taking HAIDILAO as a prime example, the company continued its service-focused hotpot model in Hong Kong with pricing lower than local competitors. In the four years following its debut, it maintained an expansion pace of one new store per year, but after 2021, the viral queue effect dissipated, and expansion suddenly stalled. Currently, weekend waits at its flagship shopping district store have dropped to around 30 minutes, weekdays require no queuing, and seating occupancy at certain times falls below 70%. Company financials show same-store sales in the Hong Kong, Macau, and Taiwan region dipped slightly from RMB 1.774 million in the first half of 2024 to RMB 1.701 million in 2026, while total customer visits decreased from 700,872 to 698,348 over the same period. Over three years, sales have remained flat to slightly down, traffic growth has stalled, and the benefits of new customer acquisition have been exhausted.

HAIDILAO is not alone in this trend. Competitor Jupuer Hotpot, which peaked with 12 branches, has shrunk to just 7. The viral BBQ chain Xita Laotaitai exited the market within three years of entry. Hunan cuisine brand Radish Goes Extreme shut down after only four months of operation. Yao Yao Sour Fish, under Jiumaojiu, closed all its locations by its fourth year in Hong Kong. Market data indicates that the survival rate for mainland dining brands in Hong Kong is less than 20% from 2023 to 2026.

Yin believes that Hong Kong is a mature, truly competitive market, and some companies have misjudged the difficulty of entry. He said that certain brands arrived with grand ambitions but failed to thoroughly research consumer preferences and local competition, assuming success in the mainland could be replicated elsewhere. Simply copying mainland SKUs and marketing tactics rarely earns long-term acceptance from local customers. Huang Simin, Head of Consumer Brands and Hospitality at Invest Hong Kong, echoed this sentiment, noting that success doesn't come from transplanting a mainland business model wholesale, but from clearly understanding the relationship between customer, pricing, and location.

A mainland-born founder of a chain restaurant in Hong Kong explained to us that the reasons behind the "failure" of mainland brands are numerous and similar. He described their approach as "marketing plus low pricing," which fundamentally doesn't work under Hong Kong's high cost structure. Once table turnover rates driven by traffic decline, losses accelerate faster than in the mainland. He also criticized mainland brands for not respecting "Hong Kong palates," noting that locals are highly discerning about ingredients, and while pre-made dishes or "industrialized food" lower costs, Hong Kong consumers won't keep eating something just because it's cheap.

Given Hong Kong's GDP per capita exceeds USD 49,000, the consumer base is capable of paying for quality. The founder observed that consumers here have near-demanding expectations for ingredient freshness and cooking craft. A high-cost market tends to filter for high-quality operators. Yin added that Hong Kong has its own unique characteristics, and successful brands often adapt their strategies to local conditions.

Amid the failures, some still push forward, and the competitive front for top restaurant groups is extending to Hong Kong. The founder shared that recently, few well-known mainland restaurant chains have been seen expanding to Hong Kong, with the industry closely watching BANU's performance. He cited three reasons for this attention: first, the stagnation or contraction of brands like HAIDILAO and Jupuer; second, BANU's positioning as a "premium quality hotpot" with higher price points, which offers a reference for potential industry price increases or transformations; and third, the widely discussed "HAIDILAO-BANU rivalry," as the two brands' Causeway Bay stores are less than 100 meters apart. BANU's slogan, "Service isn't our specialty; tripe and mushroom soup are," stands in direct contrast to HAIDILAO's service-focused identity, and this rivalry may extend further into Hong Kong.

However, the scale difference between the two is substantial. HAIDILAO operates over a thousand company-owned stores, while BANU has just surpassed 200. In terms of revenue, HAIDILAO generated RMB 43.225 billion last year compared to BANU's RMB 2.846 billion. Yet, BANU outpaces in growth: its revenue rose 23.4% and net profit jumped 67.5%, versus HAIDILAO's marginal 1.1% revenue increase and 14% profit decline, suggesting that BANU's model of fewer stores and higher average spending is viable in the mainland. On pricing, HAIDILAO's average mainland ticket is around RMB 100, while BANU's is about RMB 140, a 40% premium. In Hong Kong, HAIDILAO charges approximately HKD 200-400 per person, so BANU's pricing is likely to be even higher.

The founder argued that higher pricing itself isn't the issue; rather, it's whether BANU's mainland-style descriptions of dishes and food quality will resonate with Hong Kong diners. Yin noted that interest in mainland hotpot and similar categories is steadily increasing among locals, but they also demand greater freshness and customization. In the Hong Kong market, per-person spending of HKD 150-300 falls into the mass hotpot category, typically using frozen ingredients, where HAIDILAO and Happy Lamb compete. The HKD 300-500 range represents mid-to-high-end specialty hotpot, with Jupuer as a representative. Above HKD 500 is the premium segment, focused on high-grade fresh-cut beef and live seafood, which no mainland company has yet entered. If BANU prices 40% higher than HAIDILAO in Hong Kong, its range could be HKD 260-580, making it the first mainland hotpot brand to pursue a "quality" route there.

Due to its smaller store count, BANU enjoys better wait times and table turnover in the mainland compared to HAIDILAO. However, the founder cautioned that "queuing" may not be advantageous in Hong Kong. Referring to HAIDILAO's turnover trends, he noted that queue-driven benefits are unsustainable; most brands follow a similar curve of initial popularity followed by a sharp decline within six months. A local consumer behavior report from Wander Atlas highlights that Hong Kong's fast-paced lifestyle means residents evaluate dining value based on a combination of quality, speed, and convenience. Waiting an hour for a meal may be perceived as lower value-for-money. The founder added, "If wait times are as long as in the mainland and prices are double, why wouldn't locals just go to Shenzhen to eat?" This northern-bound consumption trend poses another challenge for mainland brands operating in Hong Kong.

Despite these challenges, recent government data shows that the number of tourism and hospitality companies, which includes restaurants, setting up in Hong Kong has increased year-on-year. In the first half, Invest Hong Kong assisted 413 overseas and mainland companies in establishing or expanding operations, with about 60% from the mainland. The tourism and hospitality sector is one of the top five industries, accounting for roughly 13%. Among new entrants, most are premium-priced brands. Besides BANU, which has filed with the HKEX, recent arrivals include the high-end ice cream brand Mr. Wild and the mid-to-high-priced dining bar Commune, which has also filed for listing. From 2023 to 2026, mainland restaurant brands are undergoing a significant "baptism" in Hong Kong.

The Hong Kong market does not buy into the "low price plus traffic" narrative. The triple pressures of high rents, high labor costs, and high consumer expectations leave no room for strategies relying on low prices and viral gimmicks. When novelty fades and table turnover drops, brands lacking quality assurance and product differentiation are quickly crushed by the market structure. The founder stressed that the industry is watching BANU's entry, but more importantly, it's observing the broader development path of mainland dining brands in Hong Kong. His own chain, positioned at mid-to-low price points slightly above cha chaan tengs, has seen notable revenue declines at multiple locations since last year and has already paused expansion in Hong Kong. He is now contemplating whether to experiment with a "mid-to-high-priced sub-brand."

Given that the "scale expansion" model exemplified by HAIDILAO and Mixue has been proven unviable in this market, the question arises: can a high-end, quality-focused approach succeed? Yin suggests that Hong Kong serves as a touchstone; brands that survive here are truly equipped for global expansion. He emphasized that Hong Kong's value to mainland restaurant companies lies not in the revenue generated by its 7 million residents, but in acting as a "small-scale, high-concentration, full-factor" validation platform where brands, products, and operating systems are tested against international standards and consumer expectations. In November, BANU's tripe will simmer in mushroom soup, and with it, the mainland restaurant industry's "quality transformation" will be put to the test in the Hong Kong market.