Wallace has come up with a whole new act!

At the start of 2024, Wallace's Chinese-style store made a heavy impact.

The white chicken logo on a bright red base, paired with the classic patterns of the Forbidden City, Wallace perfectly blends delicious temptation with the national trend, firmly grasping the secret to traffic.

Of course, this is not the first time Wallace has caught people's attention.

You should know that the three years of masks have knocked down nearly a third of fast-food restaurants, and even the old kings like McDonald's and KFC are struggling.

But against all odds, the down-to-earth Wallace made a comeback, not only surpassing McDonald's and KFC in the number of stores, but also easily earning 3.5 billion a year, firmly sitting on the throne of the king of Chinese fast food.

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What McDonald's and KFC didn't expect was that the ones who cut in on their business were two local bosses from Wenzhou, who are the founders of Wallace, Hua Huaiyu and Hua Huaiqing.

So, how did Wallace start from scratch, and can its glory continue?

Compared to the high light in the future, the origin of the Hua brothers is not eye-catching.They grew up in a small village in Wenzhou, and in order to make a name for themselves, Hua Huaiyu embarked on a business venture with 8,000 yuan in his pocket after graduating from high school.

Just like all rags-to-riches stories must have a bleak beginning, Hua Huaiyu was no exception in encountering setbacks on his business journey. Whether it was setting up street stalls or running a shoe factory, his ventures were always lukewarm.

His younger brother, Hua Huaiqing, had been toiling away as an accountant in a small county town for eight long years. Watching his peers rise to success, he couldn't bear the thought of being left behind. So, he resigned without a new job lined up and followed his brother's footsteps to start their own business venture.

But starting a business is never easy, and the brothers had no clue where to go next. As they were in a dilemma, in 1987, KFC made a strong entry into Beijing, seemingly providing them with a desired answer.

As a quintessential fast-food chain from abroad, KFC's opening was instantly covered extensively by the People's Daily, and soon after, a fast-food craze swept across the nation.

Three years later, McDonald's, not to be outdone, followed suit and began to compete with KFC for a share of the vast Chinese market. Eating a piece of fragrant American-style fried chicken became a source of pride and conversation among the citizens at that time.

Consequently, KFC was always packed with customers, with many people willing to wait in line for hours in the cold just to taste the flavor of foreign fast food.In 2001, observing the market's fondness for hamburgers and fried chicken, the entrepreneurial Hua brothers, sensing a business opportunity, quickly pooled together 80,000 yuan and immediately opened their first fast-food restaurant next to Fuzhou University.

To ensure their survival, the Hua brothers deliberately gave their store a very Western-sounding name, "Hua Lai Si." After all, at that time, foreign products were synonymous with high quality and had become the most basic consumer perception.

Thus, Hua Lai Si became the most loyal disciple of KFC, with every aspect from products to decoration reflecting the shadow of KFC, even copying KFC's children's playground without omission.

However, despite Hua Lai Si's all-out efforts to imitate, its obscure status resulted in a daily turnover of only about 2,000 yuan, which was far from enough to sustain the operation of a 300-plus square meter store.

Moreover, Delisi crossed the sea to capture the mainland market, and a host of local hamburger shops sprouted like bamboo shoots after a rain, turning the originally vast blue ocean into a fiercely competitive red ocean.

Hua Lai Si understood that to establish a firm foothold in the fast-food industry, they had to unhesitatingly bring out their trump card.

Initially, Hua Huaiqing targeted the lower-tier market, focusing on customers who loved fried chicken and hamburgers but were financially constrained.

After all, not everyone can afford Häagen-Dazs, but a one-yuan ice cream cone is affordable for anyone. The key to determining the size of the market lies in how many people can afford to buy.

Therefore, Hua Lai Si adjusted its strategy, distancing itself from the first-tier cities dominated by McDonald's and KFC, and decisively heading towards third-tier and below cities with 70% of the population, and then actively implementing a low-price strategy.

While KFC was selling its signature spicy chicken legs burger at a price of over ten yuan, Hua Lai Si's special offer of 123 activity astonished customers, with cola selling for only 1 yuan, chicken legs for 2 yuan, and hamburgers for 3 yuan.What's even more exaggerated is that Wallace also has a special offer of three burgers for ten yuan. You should know that ten yuan at McDonald's can only get you a serving of fries to satisfy your craving.

Of course, faced with such a huge price difference, consumers voted directly with their wallets.

Soon, Wallace won overwhelmingly, with the first day's turnover doubling to 4,000 yuan, and the second day continued to grow to 6,000, and on the third day it broke through the 8,000 mark.

Hua Huaiqing's excitement was palpable; it's hard to imagine that products priced at only 1 to 3 yuan could sell more than 2,000 orders in a day. The flurry of orders, like snowflakes, also announced that Wallace's opportunity to make a name for itself had finally arrived.

But before he could be happy, Hua Huaiqing was stunned after calculating the costs.

It turned out that the burgers with low profit margins, once labor and store costs were deducted, were just a loss leader. But the reputation of affordable burgers had already been established, and raising prices would undoubtedly be self-destructive.

So, Hua Huaiqing, who racked his brains, decided to "take a two-pronged approach" to maintain profits.

To control costs, Wallace first worked hard on store location selection.

Hua Huaiqing actively avoided high-end business districts and main roads, only choosing places with dense populations but cheap rents, such as street corners and alleys.

Subsequently, Wallace also gritted his teeth and closed the children's playground, using every square meter of the store to increase profits.Secondly, Wallace does not hesitate to compromise the quality of raw materials:

While KFC burgers still use chicken leg meat, Wallace opts for the cheaper chicken breast meat; when KFC chooses Heinz tomato ketchup, Wallace only uses the inexpensive Del Monte as a substitute.

With such extreme cost control, the super unbeatable cost-performance ratio has become Wallace's confidence to compete with McDonald's and KFC.

How cheap can Wallace really be?

6.99 yuan is not enough to buy a taro pie from McDonald's, but Wallace can offer a chicken burger with both hands;

23 yuan finally allows you to afford a double burger from McDonald's, but looking back, you can already take away a chicken burger with a chicken roll and cola set from Wallace.

In addition to the cost-performance ratio that consumers love to talk about, Wallace has also taken a different path and invented the "partner" system.

Unlike ordinary franchising, Wallace will send out experienced employees to form independent small teams, and then support them to return to their respective provinces and cities to open stores independently.

The store is jointly funded by the store manager, staff, and headquarters, and the final dividends are distributed according to everyone's contribution.

In other words, the unique partner system ties everyone together into a community of interests, so not only is it difficult for Wallace stores to collapse, but the larger the scale, the higher the employee benefits, and the stronger the fighting spirit.Of course, the headquarters will be responsible for addressing the uniform decoration of stores, brand operations, and logistics distribution issues, with employees only needing to pay a consultation fee of 10,000 and undergo short-term training.

In contrast, KFC's initial franchise fee alone is around 300,000 to 400,000 yuan.

Thus, Wallace has experienced a rocket-like ascent. Data shows that Wallace, which only started franchising in 2003, expanded out of its home province in just two years and completely penetrated the third to eighteenth-tier cities.

In addition to its wide reach, the scale of Wallace's chain stores is also continuously expanding.

The number of stores increased rapidly from 200 in 2006 to over 12,000 in 2019, far exceeding the total number of McDonald's and KFC stores, with employees reaching 50,000.

Turning back the clock to the millennium, Wallace was just an inconspicuous backdrop in China's catering market.

Seeing Wallace's continuous expansion, KFC finally could not sit still and attempted to go down-market to compete with Wallace, only to be met with a wall.

It is worth mentioning that even when KFC imitated Wallace's best-selling product, the honey-glazed roasted whole chicken, they found that consumers simply did not buy it.

After all, KFC, accustomed to the high-end market, priced the whole chicken at 149 yuan, while Wallace next door only charged 19 yuan.

Soon after, KFC quietly removed this item from its menu. Indeed, Wallace's cost-performance ratio is something KFC cannot imitate or truly learn.Relying on scale for efficiency, Wallace has made a fortune.

According to financial reports, the main revenue of Wallace's parent company comes from providing ingredients and equipment to stores across the country.

After all, from small items like dipping sauces and chicken nuggets to larger items like seating and kitchen utensils, the stores all require centralized allocation from Wallace's headquarters. The huge purchasing volume also allows Wallace to get more favorable prices, thereby significantly reducing the cost of raw materials for Wallace.

Therefore, in just one year of 2022, Wallace earned over 7 billion yuan in revenue from selling raw materials and ancillary equipment, becoming the new top stream in the Chinese fast-food industry.

Obviously, through strict cost control, Wallace quickly conquered the market with its extremely high cost-performance ratio, then expanded rapidly through a partnership system, and relied on the scale of 20,000 stores to integrate the industry chain, ultimately forming Wallace's core competitiveness.

However, just when everything was heading in a good direction, Wallace's crisis arrived quietly.

Firstly, food safety became the first stumbling block on Wallace's path forward.

In 2021, some netizens on Zhihu exposed that they had diarrhea after eating Wallace's fried chicken. Soon, some netizens followed up and complained about their bitter experience of becoming "spraying warriors".

There are even enthusiastic netizens who have summarized a list of spraying products, even specifying the combination of meals and eating time, and excluding various interference items to determine whether it is the meat or bread that has gone wrong.

But in the end, no one could reach a consensus, after all, having diarrhea after eating Wallace is purely a matter of probability.The only certainty is that Wallace's quality control indeed has issues. The same product can taste different in various stores, and one might even experience different outcomes of gastrointestinal distress.

Consumers are now facing a "prisoner's dilemma" created by Wallace. When one cannot have both a full wallet and a satisfied appetite, one must inevitably sacrifice one for the other.

However, considering Wallace's affordable prices, consumers have not launched a verbal assault against the brand.

It wasn't until a video titled "How Dirty is Wallace" went viral that everyone's defenses were completely shattered.

The video is filled with various nauseating scenes:

There are employees who pick up chicken nuggets that have fallen on the floor and continue to use them, and when dish soap drips into the frying oil, the employees nearby turn a blind eye. Even employees without health certificates not only do not wear masks but also cough while frying chicken.

Subsequently, Wallace issued an apology and suspended the operation of the involved stores for rectification. However, similar incidents are not new to Wallace.

Previously, during a large-scale inspection of the catering industry by the Beijing Market Supervision Bureau, Wallace was reported up to 17 times for using expired food and continuing to use blackened frying oil, successfully topping the blacklist.

When a restaurant becomes popular not for its dishes but for its persistent hygiene issues, even the most tolerant customers will develop aversion.

Clearly, Wallace's food safety crisis is inextricably linked to the rapid expansion of its stores. Behind the quality control fiasco, it undoubtedly highlights Wallace's weakness of being "big but not strong."Secondly, many up-and-coming contenders are gearing up to challenge Wallace's leading position.

Especially Tastin, which has seen explosive growth in its stores, has easily won the hearts of consumers with its freshly baked buns and unique Chinese-style combinations.

There is also the equally affordable Lepai Burger, which is aggressively expanding its territory through franchising, encroaching on the market share that originally belonged to Wallace.

Lastly, there is the relentless pressure from the veteran burger chains McDonald's and KFC.

First, KFC launched the "Crazy Thursday" promotion, offering a variety of popular mixed sets at half price, attracting countless loyal fans to worship.

Then McDonald's new special offer, the Double Beef Patty with Double Grilled Sausage, known as the "Unvegetarian King," is also priced at only ten yuan.

When the once unattainable McDonald's and KFC are willing to "lower their stance," how should Wallace, which has taken the affordable route, respond?

Wallace, which has leveraged low prices to move the large market, has always had hidden dangers in product control and profitability, which are urgent issues that need to be addressed.

After all, once Wallace, the king of ten thousand stores, has the advantage of scale, whether it can establish a strong brand is the key point.

Relying solely on scale to exchange for benefits is ultimately risky, and Zhengxin Chicken Rice, which has already fallen, is a lesson to learn from.

Now, in the fiercely competitive catering race, it is not hard to understand Wallace's motive to play the emotional card with the trend of national style.It's just that Wallace wants to make a comeback; neither the hard strength nor the cost-performance ratio can be neglected.