Affordable restaurants bring cheer as catering industry bounces back

China's catering service sector saw revenue in the first half of 2014 rise 10.1 percent year-on-year amid expansion of affordable restaurants, the China Cuisine Association said in a report on Monday.

The report, which surveyed restaurateurs nationwide, said combined revenue reached some 1.3 trillion yuan ($208.1 billion).

Many high-end restaurants were affected by the central government's campaign against luxury and extravagant spending in 2013.

Former leading high-end restaurant chain Beijing XE Flavor Group Co, which was among the first publicly listed companies in the country, announced it had become China Science Cloud Technology Group Ltd, the result of a collaboration between the restaurant chain and the Institute of Computing Technology at the Chinese Academy of Sciences. After experiencing a severe slump in business, the chain decided to reposition itself in the new media and big data sector.

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Shanghai-based Xiao Nan Guo Restaurants Holdings Ltd, which owns one of the largest full-service restaurant chains in the country, also put effort into developing its new brand The Dining Room, serving Shanghai-style cuisine in a casual setting, the report said.

At some restaurants, rising costs of labor, rent and other items have squeezed profit margins of catering services providers.

"In 2014, a restaurant needs to secure 125 percent occupancy in order to be profitable, while 75 percent was needed in the past," the report said.

Diners said they can see the changing landscape of the dining world in China. Luxury and high-end restaurants now offer dishes below 20 yuan each, and some restaurant have canceled their 15 percent service surcharge.

"Last weekend, it cost only 600 yuan at lunch for a table for four, and it included seafood. Last year, a similar occasion cost some 1,000 yuan," said Yao Jigang, a 42-year-old finance consultant in Shanghai.

Analysts said affordable and popular restaurants, especially those not from a chain brand, needs to guarantee service and food quality in order to survive.

But the solution for thinning profit margins is exactly the opposite: creating better food, enhancing service quality and hiring enough staff to maintain an operation's effectiveness. Adjusting floor plans and menus based on market research also will be helpful, said Lu Deqing, a catering consultant with Shanghai Meizhuan Co Ltd.

Restaurateurs might also think about developing their own unique themes, such as a special menu for children or a lunchtime buffet, said Zhong Ming, a consultant with Yixing Catering Solutions Co Ltd.