owlsbooks Chapter 249 Adds 500 Companies
Chapter 249 Adds 500 Companies
It's 6:30 PM at the North Gate of Shandong University. The two-story building on the street is brightly lit. The first floor is an internet cafe, with almost all forty computers occupied, and the sounds of keyboard typing and game effects can be faintly heard. The second floor used to be a warehouse, but it was converted into offices and a small training classroom last year.
The office, about 20 square meters, was simply furnished: an old wooden desk, three chairs, a metal filing cabinet, a map of China and several photos of internet cafe interiors hanging on the wall. On the desk were ledgers, a calculator, stacks of receipts, and several samples of different models of optical mice.
Zhao Weiguo sat behind his desk, meticulously checking the accounts item by item. His fingers tapped rapidly on the calculator as he muttered to himself, "Jinan Store 3, December revenue 87,000, cost 52,000, gross profit 35,000..."
Chen Lingling sat opposite her, organizing a stack of franchise application forms. She wore a beige turtleneck sweater, her hair tied in a neat ponytail, revealing a section of her fair neck when she looked down. Her pen moved quickly, marking the forms, and she would occasionally glance up at the clock on the wall.
Footsteps came from the stairs, and the two looked up at the same time.
Ling Yun walked up, his black down jacket open, carrying a brown paper document bag. Zhao Hu followed behind, stopping at the top of the stairs but not entering the office.
"Brother Yun!" Zhao Weiguo stood up, and Chen Lingling also stood up.
"Sit down." Ling Yun placed the file folder on the table, pulled up a chair, and sat down. "Busy?"
"Let's take stock of last year's accounts." Zhao Weiguo pushed the ledger over. "We've only covered up to December. Mr. Ling, would you like to take a look?"
"No rush." Ling Yun waved his hand and looked at Chen Lingling, "Chen Lingling, you've been in the US for almost half a year, are you getting used to being back?"
"I'm used to it." Chen Lingling nodded. "The pace is fast in Silicon Valley, but you learn a lot. When I came back, I found that Jinan is also developing very quickly, especially the internet cafe business."
"Hmm." Ling Yun looked around the office. "This place is a bit cramped."
"It's crowded," Zhao Weiguo said with a wry smile. "It used to be just me, but now with Lingling and two financial assistants, there are four of us crammed in here. The ledgers are almost overflowing."
"Let's move to a different location after the New Year," Ling Yun said. "We'll rent a proper office near the Software Park and put up a sign that says 'Spark Network Technology Co., Ltd.' The internet cafe business needs to be operated like a company; we can't keep making do on the second floor."
Zhao Weiguo's eyes lit up: "That's great! I've been wanting to say this for a while now. Business is booming, it's not right for us to stay cooped up here any longer."
"Tell me about last year," Lingyun said, getting to the point.
Zhao Weiguo cleared his throat and opened a thick notebook—not the ledger from before, but the annual operations summary report. The handwriting was neat but somewhat messy.
"In 1997, Xinghuo Internet Cafe's business was divided into three parts." He held up three fingers. "The first part was self-built and directly operated chain internet cafes. We selected, decorated, and operated internet cafes ourselves in first-, second-, and third-tier cities across the country, opening 103 new stores throughout the year. Adding to the dozen or so stores opened in 1996, the total number of directly operated stores is currently 118."
He turned to the next page: "The second part is franchising. We provide the brand, management software, decoration plans, and equipment procurement channels; franchisees invest and operate the business themselves. The franchise fee is 20,000, and the management fee is 10,000 per year. We plan to develop 105 franchise stores throughout the year."
"The third part is outsourced operation. Some internet cafe owners have money but don't know much about the business. We provide a full range of outsourced operation services, including store manager assignment, employee training, event planning, and supply chain management, taking a 20% cut of the turnover. We signed contracts with 92 companies throughout the year."
He looked up and said, "Together, we opened 300 new stores throughout the year. One-third of them are self-operated, one-third are franchised, and one-third are managed by third-party operators. Currently, we are actually involved in the operation of 210 stores (self-operated + managed by third-party operators), and with the addition of franchised stores, the brand exposure is 323."
"What about revenue?" Lingyun asked.
Chen Lingling handed over a printed financial statement. Ling Yun quickly glanced at it.
The revenue composition of Xinghuo Internet Cafe in 1997:
1. Revenue from directly operated stores: RMB 86 million (Note: including internet access fees, food and beverage sales, and hardware retail).
2. 加盟费及管理费收入：三百一十五万元（105家*2万加盟费+105家*1万管理费）
3. Revenue from agency operation commission: approximately 18 million yuan (estimated based on an average monthly revenue of 80,000 yuan for each agency store, with a 20% commission rate).
4. Equipment and software sales revenue: Providing equipment procurement services to franchisees and contracted operation stores, with a gross profit of approximately five million yuan.
5. Revenue from training and consulting services: 1.2 million yuan
Total revenue: approximately NT$113.35 million.
Costs and profits:
- The operating cost of directly operated stores is approximately 52 million.
- Headquarters management costs are approximately eight million.
- Net profit is estimated at approximately 43 million yuan.
After reading the report, Ling Yun put it down and said, "The profit margin is not low."
"The main profits come from directly operated stores," Zhao Weiguo explained. "Internet access costs ten to twenty yuan per hour, and a single machine can generate 150 to 200 yuan in daily revenue. In addition, beverages and snacks have high profit margins, and there are also price differences in hardware retail (mice and keyboards). The average annual net profit per store is around 400,000 yuan. Commissions from outsourced operations are pure profit, and franchise fees are also pure profit."
"Are there any problems with the operation?" Lingyun asked.
Zhao Weiguo and Chen Lingling exchanged a glance.
"There are several problems," Zhao Weiguo said, counting on his fingers. "First, the expansion has been too rapid, and management can't keep up. Some franchisees are secretly using pirated systems or their hygiene doesn't meet standards, which affects the brand image. Second, the training speed for store managers and network administrators can't keep up with the speed of opening new stores. Our own training system has only just been established, and we lack qualified personnel. Third, the equipment procurement channels are chaotic. Some franchisees buy no-name brand machines to save money, resulting in high failure rates and poor customer experience. Fourth, competition has begun. In the second half of this year, internet cafes imitating ours have sprung up all over the country, some even directly calling themselves 'Spark of Light' or 'Spark Alliance,' skirting the rules."
Chen Lingling added, "When I was in Silicon Valley, I observed that internet cafes in the US focus more on community and tournaments. Currently, we mainly rely on the hardware environment and games to attract people, which doesn't add enough value. Moreover, rents in first-tier cities are rising rapidly; for some prime locations, rent already accounts for more than 30% of revenue."
Ling Yun listened, tapping her fingers lightly on the table.
"Map," he said.
Zhao Weiguo stood up, took down the map of China from the wall, and spread it on the table. The map was covered with small red and blue round stickers. Red represented directly operated stores, and blue represented franchised/managed stores. The eastern coastal areas were densely packed, the central areas were sparsely populated, and the western areas were almost entirely blank.
"Currently, our network is quite extensive," Zhao Weiguo said, pointing to the map. "Our directly operated stores are mainly concentrated in provincial capitals and municipalities directly under the central government: Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin, Chongqing, Chengdu, Wuhan, Nanjing, Hangzhou, Jinan, Qingdao, Shenyang, and Xi'an. There are three to ten stores in each city. Our franchised stores are mostly in second- and third-tier cities, such as Xuzhou, Luoyang, Yichang, and Liuzhou. Our contract-operated stores are more scattered; we take on any business owner who has the money and wants to open an internet cafe."
"There are many blank areas," Lingyun said.
"Yes, especially in the Midwest and Northeast," Zhao Weiguo said. "We've visited these areas. They have the purchasing power, but market education is lacking. Many people still don't know what an internet cafe is. Moreover, the business environment in these places is complex, and there is local protectionism."
Ling Yun stared at the map for a few minutes, then looked up: "Next year's target: 500 companies."