Analysis of Service Quality Assurance Mechanisms and Challenges in Ruipai Pet's VDP Model

Based on the collected data, I will systematically analyze the service quality assurance mechanisms and challenges of Ruipai Pet under the VDP model.

Founded in 2012, Ruipai Pet has expanded rapidly through strategic acquisitions. As of June 30, 2025, the company operates 548 pet hospitals, of which

. Only 120 hospitals are self-built. It covers approximately 70 cities across 28 provinces in China, firmly ranking as the second-largest pet medical service provider in China.

This “acquisition-led, self-built supplementary” expansion model has caused the company’s goodwill to continue rising. As of June 30, 2025, the company’s goodwill book balance reached

, accounting for 34.6% of total assets, 68.4% of non-current assets, and the goodwill scale is equivalent to 1.02 times the 2024 full-year revenue.

Ruipai’s pioneering “Veterinary Development Partners (VDP)” model adopts a

when acquiring standalone hospitals or small chains:

• Ruipai Pet
  : Acquires approximately 60% equity to achieve controlling status
• Original Team
  : Retains approximately 40% equity and continues to participate in operation and management

This “franchise-style direct operation” model essentially

, seeking a balance between control and team incentives.

Ruipai has built a

to achieve differentiated resource allocation and standardized service output:

Hospital Level	Functional Orientation	H1 2025 Revenue Contribution
Urban Central Hospital	Diagnosis and treatment of complex specialist cases, high-end technology	31.5%
Regional Central Hospital	Regional diagnosis and treatment hub, specialist department development	43.9%
Community Hospital	Basic medical care, community service coverage	24.4%

Through internal referral mechanisms, complex cases are diverted to urban central hospitals, which not only improves diagnosis and treatment quality but also realizes intensive resource utilization.

The company has established

as a bottom-line guarantee for service quality, and actively promotes authoritative certifications:

• 22 hospitals have obtained the “Five-Star Certification” from the Chinese Veterinary Medical Association
  , accounting for 25% of the total number of such certifications nationwide
• Develops unified diagnosis and treatment specifications, service standards, and operation manuals
• Conducts regular quality inspections and compliance audits

After being integrated into the Ruipai system, acquired hospitals are included in the group’s centralized procurement system:

• Drugs, consumables, and equipment are centrally procured by the group to reduce costs
• Unifies supplier access standards to control quality from the source
• In H1 2025, Ruipu Biology was the company’s largest supplier, with procurement accounting for 22.5% of total procurement value

To bind the core medical team, the VDP model has designed a

profit-sharing mechanism:

• The original team retains 40% equity to share the hospital’s operating results
• Establishes a clear career promotion path (Community → Regional → Urban Central Hospital)
• Provides support for specialist department development and continuous training opportunities
• To date, the company has 2,137 licensed veterinarians, more than half of whom have over five years of experience

Although Ruipai has obtained legal control through 60% shareholding, the 40% minority equity means

. This model carries the following risks:

• Difficulty in fully unifying service standards
  : Acquired hospitals may retain original operating habits, conflicting with Ruipai’s standardized system
• Differences in charging standards
  : The Black Cat Complaint Platform shows significant charging differences across stores (e.g., abdominal ultrasound at Ruipai Beixi in Foshan costs RMB 550 vs. the market average of approximately RMB 200)
• Damaged brand consistency
  : Some acquired hospitals “only hang the Ruipai sign, but are actually still operated by the original team”

Integration challenges brought by M&A expansion have emerged in multiple dimensions:

Date	Involved Store	Violation Item	Penalty Amount
June 2025	Ruipai Anxin Wuqing Branch, Tianjin	Use of counterfeit and substandard veterinary drugs	RMB 15,000
June 2025	Jinan Ren Nuo Pet Hospital	Use of testing reagents without approval numbers	RMB 20,000
September 2025	Ruipai Hongtai Huandong Pet Hospital, Hangzhou	Violation of the Regulations on Veterinary Drug Administration	RMB 10,000

• The Black Cat Complaint Platform has received over 90 cumulative complaints, with core issues including misdiagnosis, opaque charging, and inducing consumption by exaggerating illness conditions
• In June 2023, a Hangzhou consumer reported that their pet cat died the night after treatment at Ruipai Hongtai Jiubao Branch, suspected to be due to the hospital’s failure to fully inform of risks
• In October 2025, a Foshan consumer complained that an ultrasound examination costing RMB 550 far exceeded the market standard

The huge goodwill has become a “Sword of Damocles” hanging over Ruipai:

• In 2023, the company recorded a
  goodwill impairment of RMB 137 million
  due to underperformance of some acquired hospitals
• In 2024,
  38 hospitals were closed
  , accounting for 6.7% of the total number at the beginning of the year
• The prospectus clearly warns: If the performance of acquired hospitals continues to fall short of expectations, goodwill impairment will directly impact profits

Under the VDP model, legal disputes arising from the role transition of original founders merit attention. From 2017 to 2018, after Ruipai acquired the pet hospital fully owned by natural person Zhang Yubin, Zhang Yubin retained 20% equity and continued to serve as the hospital director. In January 2019, Ruipai suspended him on the grounds of violating attendance rules, and the hospital subsequently closed due to unpaid rent.

The final judgment of the Foshan Intermediate People’s Court ruled that

, and ordered Ruipai to backpay wages and economic compensation. This case reveals the governance risk of ambiguous definition of shareholder and employee identities under the VDP model.

According to the 2025 China Pet Industry White Paper, the satisfaction rate of pet owners with diagnosis and treatment services in 2024 was only

, a decrease of 4.6 percentage points compared to 2023. Issues such as opaque pricing and arbitrary charging are prevalent in the industry, and Ruipai cannot be immune.

The VDP model has structural tensions between rapid expansion and service quality:

• Short-term profit-seeking motivation
  : As minority shareholders, the original team may tend to focus on short-term performance while ignoring long-term service quality development
• Insufficient integration period
  : After large-scale M&As, cultural integration and unification of management systems require a long running-in period
• High supervision costs
  : The scale of 548 hospitals makes it difficult for the headquarters to effectively supervise each store

The prospectus discloses that as of the latest practicable date,

, exposing major loopholes in compliance management. This data reflects the company’s neglect of compliance risks during rapid expansion.

Ruipai Pet’s VDP model has achieved certain results in

, making it the (net profit of RMB 15.54 million in H1 2025). However, the model has obvious limitations in service quality control:

• Gaps remain in the construction and implementation of the standardized system
• Consumer complaints and regulatory penalties indicate persistent compliance risks
• Goodwill impairment pressure reflects that the integration effect of some acquired targets falls short of expectations

To effectively guarantee the service quality of 78% non-controlled hospitals under the VDP model, Ruipai needs to strengthen the following aspects:

1. Strengthen SOP implementation supervision
   : Establish a regular quality inspection mechanism, and link the implementation of service standards to the equity income of the original team
2. Unify the pricing system
   : Promote standardized charging, publish diagnosis and treatment prices, and eliminate consumer dissatisfaction caused by information asymmetry
3. Improve the training system
   : Increase investment in professional training for the original team to ensure their skills are aligned with Ruipai’s standards
4. Optimize the exit mechanism
   : For acquired hospitals that continuously fail to meet standards, resolutely close them or repurchase equity to avoid damaging brand reputation
5. Clarify governance boundaries
   : Clarify the legal relationship between shareholders and employees under the VDP model to prevent legal disputes similar to the Zhang Yubin case

Ruipai’s sprint for a Hong Kong IPO is a key step in its leap from a regional chain to a national brand. However,

remain core challenges it must face directly. After listing, as a public company, it will face stricter information disclosure and market supervision, which may force the company to invest more resources in compliance management and service quality improvement.

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[1] 3-Year Loss of RMB 370 Million, Over RMB 1.8 Billion Goodwill Hanging Overhead: Ruipai Pet Charges toward Hong Kong IPO “in Shackles” - Eastmoney.com

[2] Watching New IPOs: Ruipai Pet’s Hong Kong IPO: A Leading Pet Medical Enterprise, Rapid Expansion Leads to RMB 1.8 Billion High Goodwill - Xinhua Finance

[3] Complained by “Pet Owners” for Diagnosis and Treatment Controversies: The Two Sides Behind Ruipai Pet’s IPO, a Pet Medical Giant - Phoenix Net Finance

[4] From “Small, Scattered, and Disorganized” to “Large and Strong”: Ruipai’s IPO Sprint Reshapes the Pet Medical Competition Landscape - Gudong Manager

[5] Pet Owners Can’t Sustain Pet Hospitals - CBNData

[6] Ruipai Pet Hospitals Submits Application to HKEX, Sprinting to Become “China’s First Pet Hospital Stock” - 21st Century Business Herald

[7] Analysis of Ruipai Pet Hospital’s VDP Model: Can It Solve the 25% Veterinarian Turnover Rate? - Jinling AI