Cafe de JarGor acknowledges rent arrears, reports over HK$14 million loss for fiscal year 2023

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1st March 2024 – (Hong Kong)  Former Miss Hong Kong winner Halina Tam, and her husband Cai Qiangrong, the duo behind the once-popular ‘Cafe de JarGor’, are confronting tough times as they grapple with financial woes and rent arrears at their Kowloon Bay outlet.

The restaurant, renowned for its traditional Hong Kong snacks, opened to much fanfare in early 2020, with queues snaking down the street. However, the business has since faced a downturn, particularly in the aftermath of border reopenings, with the owners candidly admitting to a challenging two-year period.

The couple has been enduring a silent battle against escalating costs, with Tam and Cai opting to prioritize their staff and suppliers over their rent commitments to keep the business afloat. Despite these efforts, a notice of unpaid rent has been posted at the restaurant’s entrance. The notice declares a debt of HK$1.3 million in rent, alongside additional management fees, bringing the total arrears to nearly HK$1.5 million.

Cai Qiangrong, currently in Canada, acknowledged the mounting debt but expressed a steadfast commitment to his employees and suppliers. He has maintained that salaries and suppliers have been paid to date, a testament to the owners’ dedication to their workforce over their rental obligations.

In a sector where margins are typically tight, the restaurant industry has been particularly hard-hit, and ‘Cafe de JarGor’ is no exception. Despite the looming threat of closure by the property owner if rents are not settled, Cai remains hopeful. He conveyed that while the future is uncertain, the restaurant will continue to operate as long as possible, potentially for a few more months, unless the situation becomes untenable.

The partnership with Most Kwai Chung (1716), which began in 2018, has also faced its share of tribulations. The collaboration initially seemed promising as it expanded the ‘JarGor’ brand into the food and beverage sector. However, the partnership has since dissolved after more than three years due to severe disagreements over the valuation of share buybacks.

Despite the setbacks, ‘Cafe de JarGor’ has benefitted from the support of Most Kwai Chung’s celebrities over the years. Tam, once hailed as the ‘Queen of Fish Balls’, has successfully transitioned from beauty queen to a respected figure in the food industry, expanding the business from a small snack shop to a recognized brand within Hong Kong.

The company’s representative, Dickson, known for his ‘nerdy and laid-back’ appearance, has been a visible advocate, highlighting the cultural significance of the brand and its offerings, which include a variety of Hong Kong’s beloved street foods such as rice noodle rolls, fish balls, siu mai, and fish meat lettuce.

However, the financial year 2023 has not been kind to ‘Cafe de JarGor’, with the 1996, Kowloon Bay, and Wan Chai outlets all reporting losses, totaling an alarming HK$14.03 million.

The Mong Kok franchise faced a particularly short lifespan, lasting only nine months. High rent was cited as a key factor in its demise, compounded by less-than-anticipated business during the summer, leading the franchisee to withdraw.

It is noteworthy that between 2018 and 2020, Most Kwai Chung invested approximately HK$5.44 million to acquire 49% stakes in JarGor 1996, Cafe de JarGor (Kowloon Bay) , and Cafe de JarGor (Wan Chai) while the remaining 51% stakes were held jointly by the JarGor couple and other individuals.

Most Kwai Chung’s stock showed positive movement today, rising 2.4% to close at HK$0.43.

Addressing the potential for imminent closure, a representative from JarGor commented, “At the very soonest, we are looking at a few months down the line. If we can manage to catch up on the rent, there won’t be an issue, and the landlord won’t have the right to shut us down. However, if we really can’t keep up, it’s natural for parties to go their separate ways. Cafe de JarGor will simply have to close earlier and complete its historical mission.”

The couple, who ventured into the snack shop business in 2014 and later the cha chaan teng sector, had their equity stakes in JarGor 1996, Cafe de JarGor (Kowloon Bay), and Cafe de JarGor (Wan Chai) acquired by Most Kwai Chung for HK$2.5 million, HK$1.47 million, and HK$1.47 million, respectively, over the period of 2018 to 2020. The remaining 51% of the stakes were held by Cai Qiangrong, his wife, and others.

In 2022, Cafe de JarGor had expressed an intention to buy back the 49% stake from Most Kwai Chung but was shocked by the valuation proposed.

‘JarGor 1996’ had a profitable year with earnings of HK$2.52 million.

As for the performance of Cafe de JarGor and its related food businesses, according to Most Kwai Chung’s financial report for March 2022, the Wan Chai and Kowloon Bay branches of Cafe de JarGor reported a combined loss of HK$6.307 million, leading to an overall loss of HK$3.783 million for Cafe de JarGor.

For the financial year ending March 2023, JarGor 1996, Kowloon Bay, and Wan Chai Cafe de JarGor reported revenues of HK$13.765 million, HK$23.803 million, with the Wan Chai branch having closed, and respective losses of HK$4.344 million, HK$8.724 million, and HK$0.966 million, totalling a loss of HK$14.034 million. Most Kwai Chung pointed out in its 2023 annual report that the management believes the performance of JarGor 1996 was below expectations due to the challenging economic environment and intense market competition.