A Sagging Food Market
China's restaurant economy, once thriving with a variety of cuisines and full restaurants, is currently in a sad state. The weakening economy, shifting consumer habits, and increased operating costs have led to a growing number of restaurants fighting to stay afloat.
One of the most notable casualties is the Camel Hospitality Group, an Australian-owned enterprise that was once a dominant force in Shanghai’s dining and nightlife scene. In late 2024, the company abruptly shut down all its venues, leaving employees and suppliers unpaid.
Among the restaurants that were closed was The Bull & Claw, a popular Shanghai brunch spot with free-flowing drinks and mid-range prices. The closure shocked many in the industry, as part of an overall pattern of restaurant closures in China.
The Fall of Camel Hospitality Group
Camel Hospitality Group, which began in 2010, had several established restaurants and bars in its portfolio, including:
- The Bull & Claw – Renowned for its brunch and casual dining.
- El Santo – An energetic Mexican restaurant.
- KIN Urban Thai Kitchen – Well-known Thai eatery.
- D.O.C. – An Italian restaurant.
By November 2024, the company shut down fully, including its gym business, without paying many staff members. Staff were notified through a WeChat alert, which claimed that the company had disbanded and cancelled their contracts.
Graphics designer Joan Dai described the following situation:
"We received a PDF document from our boss Tony Finocchiaro. It informed us that the company had dissolved and all employees' contracts had been terminated. It informed us that our salaries would be paid once the bankruptcy sale of the company was completed. The boss then disappeared, and he has not replied to our calls ever since. He simply ghosted us.".
The abrupt closure left suppliers and vendors in arrears, with some firms demanding compensation in the form of protests. One of the suppliers, Maria, who provided liquor to Camel Group's clubs, was owed around 2,000 yuan ($280) but considered herself lucky compared to others.
The company attributed the worsening market conditions to the reason for shutdown and claimed that it was "unsustainable to continue" but was criticized by the employees and the suppliers for not budgeting ahead financially and being transparent.
A China Dining Crisis on a Large Scale
The downfall of Camel Hospitality Group is but one case of a larger crisis hitting China's restaurant business.
Key Statistics:
- Nearly 3 million restaurants went out of business in China in 2024.
- In Beijing, the restaurant sector's profits fell by 81%.
- In Shanghai, the profits fell by a third.
- Over 10% of restaurants in major cities have closed down.
One of the main reasons for the crisis is dining-out expenditure patterns. Under economic uncertainty, Chinese consumers opt for savings rather than dining out, and this leads to sales plummeting. Restaurants have been forced to cut prices, making profitability nearly impossible.
A recent Reuters report chronicled how restaurant entrepreneurs are struggling to stay afloat in an economy where deflation and poor demand cause earnings to shrink. (Source)
Challenges with Competition
There's another cause behind the slump that is increased competition. The majority of mid-level restaurants have cut the use of good-quality ingredients and lowered wages as a final bid to stay alive. But it has backfired, creating customer unrest and additional revenue loss.
Other businesses are attempting smaller and lower-cost buildings, but that too is fast becoming an uneconomical proposition.
Who is Surviving?
Despite the overall downturn, certain restaurant chains have been able to succeed by adapting to changing market trends.
1. The Success of Pizza Hut in China
Pizza Hut has seen strong growth through offering value meals. In 2024, it introduced pizzas under $7, which led to a 50% sales boost.
Furthermore, the company launched "Pizza Hut Wow" restaurants, with a smaller and cheaper dining format, which has proved highly popular among younger customers. (Source)
2. Yum China Continues to Expand Despite China's Worsening Market
Yum China, which owns KFC and Pizza Hut in China, reported in 2025 it will open 1,600 to 1,800 new restaurants this year.
The company will also repay $3 billion to shareholders between 2025 and 2026, an indication of confidence in long-term growth. (Source)
3. Coffee Chains Becoming Popular
China's coffee industry is booming, with operators like Chagee expanding aggressively.
Founded in 2017, Chagee now operates near 6,400 stores in China, Malaysia, Singapore, and Thailand. The company will open its first U.S. store in Los Angeles in Spring 2025, right up against Starbucks.
In 2024, Chagee made $1.7 billion in revenue and $344.5 million in net income. (Source)
The Future of China's Restaurant Industry
While some restaurants are expanding, many traditional mid-range restaurants continue to operate with tight profit margins.
Restaurant operators will have to do the following in order to survive in this new economic landscape:
- Offer cheap eats in a bid to woo price-conscious customers.
- Improve operational efficiency as a means to lower their cost base.
- Go online with ordering and delivery services to reach out to more consumers.
- Diversify into overseas markets to counter domestic losses.
Chinese hotpot chains like Haidilao International are already doing this by diversifying into Southeast Asia, North America, and Europe. (Source)
Conclusion
China's previously booming restaurant industry is undergoing a massive overhaul. While many companies, including Camel Hospitality Group, have become casualties of economic pressure, others—like Pizza Hut, Yum China, and Chagee—are thriving by adapting to market trends.
The years ahead will be crucial to determining which restaurant concepts can thrive and endure in this challenging environment. Businesses that are able to offer affordability, innovation, and efficiency are most likely to be successful in the long term.