Analysis of Xibei's 'More Staff' Strategy and Profit Sustainability

In September 2025, Xibei faced its biggest crisis since its founding when Luo Yonghao questioned its use of pre-made dishes. In response to this severe challenge, Jia Guolong launched the ‘More Staff’ strategy as a solution [1][2].

• Store Staff Increase
  : Build ‘Family Fun Restaurants’ and increase staffing in stores
• Salary Improvement
  : Train ‘Happiness Ambassadors’ (who can perform magic tricks, provide birthday services, etc.) with monthly salaries exceeding 10,000 yuan, far higher than the industry average
• Service Upgrade
  : Attract and retain excellent employees through high salaries to enhance customer experience

Cost Item	Change Status
Labor Cost Ratio	Climbed from 25% to over 30%, an increase of about 5 percentage points [1][2]
Average Customer Spending	Dropped by 20% from original level, now maintained at around 75 yuan [2]
Gross Margin	Further declined due to promotional activities

• Turnover Loss
  : Daily turnover decreased by 1-3 million yuan during the crisis [3]
• Promotion Cost
  : Launched aggressive promotions such as ‘100-yuan no-threshold voucher for any consumption’ [3]
• Cash Flow Pressure
  : An insider admitted, ‘We are definitely losing money now; cash flow pressure is huge’ [1]

Labor cost increase + Average customer spending decrease + Promotion cost = Significant pressure on profitability

The core contradiction Xibei faces now is:

. This dual pressure makes short-term profitability difficult.

“If the boss earns less, employees earn more, and customers are satisfied and come often, the business model will work” [2]

This idea draws on Ford Motor’s successful experience of raising employee wages in 1914, but there are essential differences between the catering industry and manufacturing industry:

1. Characteristics of the Catering Industry
   :
   • Marginal profit is inherently not high
   • High sensitivity to labor costs
   • It is difficult to fully absorb cost increases through scale effects

2. Xibei’s Special Dilemma
   :
   • Brand premium is based on the ‘high quality’ positioning
   • After a 20% drop in average customer spending, it is doubtful whether the 75-yuan price can support the high labor cost model
   • Jia Guolong clearly stated, ‘Dishes that have been reduced in price will not increase again; this is long-term’ [2]

Facing pressure, Xibei is undergoing profound strategic adjustments:

Original Strategy	Adjusted Strategy
“Xibei on every street in the world”	Accept scale contraction and close underperforming stores
Pursue scale expansion	Pursue ‘beautiful restaurants’ instead of a huge empire
Central kitchen standardization	Move some processes to stores, preferring to accept instability
Focus on developing the southern market	Shrink the southern market and focus on core regions

1. Deterioration of Cost Structure
   : Labor cost increase of 5 percentage points plus a 20% drop in average customer spending has greatly compressed profit margins

2. Cash Flow Risk
   : Promotion investment and rigid cost increases may lead to phased cash flow tension

3. Long-term Model to Be Verified
   : Jia Guolong tries to establish a virtuous cycle through ‘employees earn more, customers are satisfied’, but whether this model can work in the catering industry still needs time to verify

4. Lack of Industry Reference
   : High salary models like those of Pang Donglai and other enterprises lack successful precedents in the full-service restaurant chain field

• How Xibei absorbs the 5% increase in labor costs without raising prices
• Whether the ‘Fun Restaurant’ positioning can continue to attract customers and establish price support
• Whether it can achieve a ‘small but beautiful’ profit model after scale contraction

— References:

[1] 南方网 - 贾国龙的反思与百日风波后的西贝 (https://news.southcn.com/node_179d29f1ce/6363558cb8.shtml)

[2] 文学城 - 贾国龙放下骄傲，西贝获得宽容 (https://www.wenxuecity.com/news/2025/12/26/126463846.html)

[3] 澎湃新闻 - 从"西北烟火气"到"零成本用餐"，西贝2025年危机全景 (https://m.thepaper.cn/newsDetail_forward_32120365)