Cafe de Coral wary about expansion

Hong Kong fast food chain Cafe de Coral (0341) remains conservative about expansion in the city, as labor costs are high and business has been hurt by northbound Hongkongers.

Chief executive Peter Lo Tak-shing, who will hand over the reins to managing director Piony Leung Ho-ting next Monday, sounded a note of caution on opening new stores, adding that business for the family-owned chain is yet to return to pre-pandemic levels.

Leung said northbound travelers were significantly hurting Cafe de Corals’ business. To handle the problem, she said the chain will keep updating its menu and improving its variety of offerings.

When asked whether Cafe de Coral will rent new shops in Hong Kong, Leung said the company is still looking for suitable ones.

Also hurt by northbound Hongkongers, local brand Kam Kee Cafe shut down seven of its shops in the New Territories. Link Real Estate Investment Trust (0823) admitted that its shopping malls also feel the pain, but stressed that the impact is not significant.

For Cafe de Coral, the Greater Bay Area will be the focus. The company plans to increase its number of restaurants in the region from 170 to 200 this year and to 280 in the coming three years, said mainland China managing director James Yang Bin.

Yang said weakening spending power actually benefits the chain’s business as the brand is still well-known in the mainland and its product quality is widely recognized.

The company is now opening new restaurants in local communities, beyond shopping malls, said Yang.

Lo will continue to serve as executive director after retiring as tchief executive on April 1. As the third generation in the family business, Lo has been an executive director since 1998 and chief executive since 2016 at the company founded by his grandfather’s brother Lo Tang-seong and his father Lo Hoi-muk.

Lo said the search for a successor started 10 years ago and the handover to Leung marked a transition to professional management.

He also revealed that he intended to retire during the pandemic but a handover during such a chaotic period didn’t make sense so he forced himself to stay on longer. Since the economy is recovering, Lo thinks it is time to pass the reins over to Leung.