(Ecns.cn)--Zhang Lan, founder and chairwoman of South Beauty, one of the top Sichuan restaurants in China, has recently come under the spotlight again due to her public criticism of CDH Investments, an investor in her company.
"The biggest mistake was to accept funds from CDH," complained Zhang, adding that "they invested very little, but possess a large parcel of shares."
"Flash marriage"
A company and its investors are sometimes compared to lovers, according to insiders, who point out that South Beauty and CDH had a short-lived honeymoon followed by constant quarrelling--a fateful consequence of their "flash marriage."
In 2008, Zhang met CDH's co-founder Wang Gongquan at a party. The two clearly got along, and closed a deal eight months later giving CDH a 10 percent stake in South Beauty for 200 million yuan.
Zhang vowed then to set up 100 restaurants by 2009, with 50 in foreign countries such as the UK and Italy.
However, South Beauty has only managed to open about half that many.
"CDH is unsatisfied with the achievements of South Beauty. Zhang Lan failed to keep her promise--no branches have been launched in London, Milan or Taiwan," explained an insider.
"To some degree, CDH thinks it has fallen into a trap," added the insider, "while in Zhang's opinion, because the company's investments have been small, CDH has barely been helpful."
"We don't know whether CDH forced Zhang to sign the deal. If so, it is CDH who should be responsible for their broken relationship," said Andrew Y. Yan, of leading private equity firm SAIF Partners.
"Businesses are based on the respect and execution of the contract. If South Beauty was not forced to sign the deal, Zhang's criticism of CDH demonstrates a clear lack of credibility," Yan added.
However, Li Guoqing, CEO of dangdang.com, one of China's leading e-commerce websites, sympathized with Zhang, arguing that "entrepreneurs always get robbed by investors."
Contradictory mentalities
Zhang had hoped to terminate the agreement with CDH long ago, but failed to do so when CDH asked for much higher returns.
According to Zhang, Chinese restaurants struggle to win favor with investors, since their demands for high returns on their investments can only be met through rapid business expansion.
According to Li Tong, editor-in-chief of the Business Review, a high-end brand is usually associated with exorbitant prices and tidy profits. However, the brand value of South Beauty is still far from satisfying, making it unwise for the company to expand its business at a high speed.
"But it's quite normal for CDH to expect returns 10 times as much as their investments," commented an insider.
However, to Zhang, who grew the business with only $20,000, CDH's expectations have obviously gone too far.
