“Wallace Channeling Package” and “Wallace Splatoon” have already become hot memes. Recently, Sina Technology "undercovered" a Wallace store in Beijing and found that the frying pan was as black as soy sauce. In addition, cockroaches and flies were found in the kitchen, ordering counter and dining area. Today, Wallace has opened more than 20,000 stores in China, far exceeding the number of KFC and McDonald's combined. Crazy expansion has led to continuous management and control problems for Wallace, and its financial situation has also declined. In 2022, its net profit will be 169 million yuan, a year-on-year decrease of 10.12%, and its gross profit margin is only 4.24%, which is far lower than the average gross profit margin of the catering industry of 50.08%.
Black oil mixed with flies, a carcinogen?
When talking about "thinned package", the first thing that comes to mind is the raw materials and processing procedures. Under normal circumstances, the raw materials have been distributed and tested and appear to be fine. The problem may be concentrated in the processing procedures.
Pan frying is one of the important processing procedures in the kitchen. Sina Technology discovered that Wallace’s frying oil was the color of soy sauce. The store clerk said that the oil had just been replaced last night, but on the second day, which was the third day of use, the color of the oil pan was darker.
(Color of frying oil on the first day)
(The color of the frying oil on the second day)
The clerk revealed that Wallace's oil is changed every three days, and the store is a 24-hour store. The oil pan is always kept at a constant temperature of 180 degrees. During the peak meal times (10:30 am to 1:30 pm, 5:30 to 7:30 pm), the clerk will constantly use the oil pan to fry whole chickens, chicken legs, chicken nuggets, chicken popcorn, hamburgers, French fries and other foods.
In addition, the store manager also said that his store has been deducted 200 yuan from the food safety award by the headquarters for not wearing masks and not adding ice to lettuce.
An insider from the State Administration for Market Regulation told Sina Technology that the state does not stipulate how many days oil can be used. Whether it is compliant depends on whether the indicators of the tested oil are qualified. If a large amount of food is fried in a pot of oil in a short period of time, the quality may not be up to standard even if it does not last three days.
Previously, Xie Zenghong, director of the Institute of Food Safety of Fuzhou University, said that after repeatedly frying starchy foods at high temperatures, more and more carcinogens, acrylamide, will remain in the oil. Regular consumption of this kind of fried food is bound to be harmful to the human body.
In addition, Sina Technology found cockroaches and flies in the store’s back kitchen, ordering counter and dining area.
(Flies everywhere in the kitchen)
To solve food safety, we basically rely on punishment
For years, Wallace's has been a leader in affordable fast food, but sanitation issues have persisted.
In 2019, the State Administration for Market Regulation issued a notice publicly naming Hualai. In 2021, an undercover video of Wallace became a hot topic. In the investigation video of the original video blogger, the staff was making fried chicken and burgers without wearing masks and gloves; the chicken pieces fell on the dry ground, were picked up and put back, and the chicken pieces fell on the wet ground, picked up and fried again. In 2022, two fried cockroaches were eaten in Wallace's burger.
In 2022, the updated administrative penalty decision on the Credit China website showed that a Wallace snack bar in Wuling District was fined RMB 5,000 for operating food that had exceeded the shelf life.
With the rapid expansion of Wallace, the management system is prone to blind spots in internal supervision.
However, nowadays, the above-mentioned problems basically do not occur in Wallace stores. Sina Technology saw that Wallace’s inspections are strict. There are seven cameras in its stores, five of which are aimed at the kitchen.
The store also has "Eight Restaurant Bans" posted on it, which include strictly prohibiting the use of expired and overnight ingredients and discarding expired or overnight ingredients; strictly prohibiting the use of ingredients that have fallen on the ground and discarding them as soon as they land; and strictly prohibiting the presence of live harmful organisms or pets in the store.
Sina Technology learned that Wallace's stores will receive at least three surprise inspections every month, including random camera inspections and on-site store inspections. If the above-mentioned "ban" is violated, the store will be closed for three days for rectification, and employees, store managers, supervisors, etc. will also be fined ranging from 200 yuan to 1,000 yuan.
Due to strict inspections, the possibility of food being dropped on the floor and put into the pot again has been greatly reduced in Wallace stores.
But even so, there are still hot memes about "Wallace's Thin Meal" and "Wallace's Splatoon" circulating on the Internet, and there has even been a wave of challenges on the Internet. Consumers rushed into Wallace stores to experience the "Wallace Thin Meal" and share their feelings.
On the black cat complaint, many people complained about Wallace's hygiene issues, such as hair found in crispy chicken, undercooked burger meat, plastic pieces in chicken rolls, etc.
Franchise model, put on the coat of "direct operation"
What is debatable is that the clerk at the Wallace store that Sina Technology went to claimed that Wallace was a direct-operated store, but the owner of the store claimed that he was a franchisee of Wallace.
Sina Technology searched many Wallace franchise advertisements on the website, but Wallace’s official Weibo and website stated that he had never opened up franchises.
The rhetoric here is not necessarily the "three-party partnership store model" created by Wallace himself, that is, three-party shareholders.
Specifically, Wallace encourages his old employees to form small teams to open stores independently in various provinces and cities, and the company provides technical support for decoration, logistics, training and other aspects required for the stores, which is an internal crowdfunding partnership model.
This model is divided into three parties. The first party is the headquarters investment, which accounts for about 50% of the shares. The second party is an internal partnership model, in which employees account for 5% of the shares, including store managers, internal executives and ordinary employees who can flexibly participate in the shares. The store manager is the core of the store's operation and has priority in acquiring shares.
The third party is an external partner, that is, the landlord, decoration company, supply chain service provider, investor and other related resource providers. At the end of the year, the three parties will distribute dividends and hold no more than 40% of the shares.
In other words, in terms of investment, internal employees and external partners jointly contribute money; in terms of management, direct management of people, finances, and materials of each store; in terms of relationships, the headquarters and individual stores have a franchise relationship.
Sun Wei, director of the Brand Marketing Center of Tsinghua University, previously said, "Wallace's frequent outbreaks of food safety issues are related to its high-speed partnership expansion. Generally speaking, high-speed fission out of control will bring about a series of problems, and rapid performance growth will often cover up many problems, such as food safety hazards. There has always been a paradox in brand chains. If you want to expand quickly, you need to delegate franchise rights; direct-operated chains are easy to control, but expansion is slow. Therefore, Wallace needs to upgrade the existing management and control model and increase profit margins to solve the fundamental contradiction."
However, this "three-party partnership store model" did allow Wallace to usher in the expansion of Gao. From 2007 to 2010, the number of Wallace Gao stores exceeded 1,000; in 2018, the number of stores exceeded 10,000. In the four years from 2019 to 2022, Wallace added 14,710 stores.
According to statistics, as of May 4, 2022. The number of Wallace stores has reached 20,139, exceeding the combined number of 8,167 KFC and 4,959 McDonald's stores in mainland China.
Profits are meager, less than 10% of the industry average
According to information on Wallace’s official website, the Wallace brand belongs to Fujian Wallace Food Co., Ltd. Both the napkins and packaging prominently displayed on the website have the words “20,000 stores nationwide”.
According to public reports, in 2016, Wallace was selected into the "Top 500 Most Valuable Chinese Brands" in 2016, and in 2019, it was ranked among the top ten fast food brands in China in 2018. TOP2.
Wallace was founded in 2001 by two brothers, Hua Huaiyu and Hua Huaiqing. At that time, KFC and McDonald's had just entered China's first-tier cities, and there was a "foreign fast food" craze in the country. The two brothers pooled together 80,000 yuan and started selling foreign fast food in front of Fuzhou Normal University, naming it "Wallace".
With the expansion of Wallace for more than ten years, in April 2016, Fujian Wallace Food Co., Ltd. was listed on the New Third Board under the name of "Washi Food". Its main business is Western-style fast food raw materials, ingredients, packaging and equipment.
Its operating income is mainly divided into two categories: product income, which is the sales of raw and auxiliary materials, packaging and equipment required for Western-style fast food terminals; consulting service income, which is providing customers with fast food restaurant decoration plans, operation solutions and guidance before opening fast food restaurants.
From 2016 to 2020, Huashi Food’s operating income was approximately 1.108 billion yuan, 1.645 billion yuan, 2.326 billion yuan, 2.55 billion yuan, and 3.494 billion yuan; The net profits belonging to shareholders of listed companies are approximately 21.5404 million yuan, 34.9798 million yuan, 50.7556 million yuan, 54.6042 million yuan, and 92.0947 million yuan.
However, Huashi Food's net profits have begun to decline in recent years. In 2022, it achieved operating income of 7.144 billion yuan, a year-on-year increase of 24.36%, and net profit of 169 million yuan, a year-on-year decrease of 10.12%.
However, the profit issue still plagues Wallace. In 2022, Wallace's gross profit margin was only 4.24%, which is far lower than the average gross profit margin of the catering industry of 50.08%.
Nowadays, Wallace has reduced the probability of food safety problems under strict control. However, how to get rid of the reputation of "sparse set meal" and "Splatoon", how to clarify the relationship between the "three-party partnership store model" and franchising, and how to get rid of the trouble of low gross profit margin are still issues that Wallace must face.