Maybank leads $25m round for China casual dining platform

Existing backers LionRock Capital and Ignition Capital also participated, as well as several individual investors. The latter group includes Koh Boon Hwee, former chairman of DBS Bank and Singapore Airlines, and Peter Tan, former Greater China president of McDonald's and ex-Asia Pacific CEO of Burger King.

The proceeds will be used to expand both YPX's network of directly-owned stores and its franchising system. With Cloud 9 now operating 40 stores in 12 cities, the company hopes to add two more brands to its portfolio over the next year. Some of the proceeds have also been earmarked for R&D to diversify menus, brand awareness, and IT investment.

This year will also see YPX become a franchisor. Chris Tay, the company's CEO, noted that franchising earned a poor reputation in China due to poor monitoring, a mismatch in values between franchisors and franchisees, and unethical practices by franchisors who emphasized short-term gains over long-term brand sustainability. However, he believes the market is now maturing and franchisees are better educated than before.

YPX was founded in Shanghai in late 2010 and received $5 million in Series A funding from Qiming Venture Partners to launch the Cloud 9 franchise. First, the VC firm found a CEO to lead a greenfield casual dining venture: Tay, who ran IT systems for the group that licensed Dairy Queen and Yoshinoya in China, before leading casual dining and ice cream parlor businesses for Tingyi Holdings and Yili Group, respectively. Then it identified a suitable brand to license: Cloud 9.

The YPX business model is rooted in expansion-led logic. Rather than use central kitchens, it outsources food preparation to third-party vendors in a system built on strong IT and logistics. This allows the company to open new restaurants quickly and at comparatively low cost.

A Series B round worth $15 million came in 2011, led by Taiwan's Hotung International, with institutional commitments from Qiming and Mitsui Global Capital, as well as personal contributions from high net worth individuals. The company then received $4 million from Series B investors who exercised warrants and $2.5 million in debt financing from Silicon Valley-based Western Technology Investment.

LionRock led an $11.5 million Series C round in November 2012, with Qiming and Ignition also participating.

"The upside for this segment in China is enormous, given the increasing middle class population. We are also comforted by the fact that we are investing in a sound business, backed by an experienced management team to help us navigate through the intricacies of operating in this market. We are very excited to be part of what I believe will be a successful partnership with Chris [Tay], his team and all the other shareholders," Phen Tee Keong, CEO of Maybank PE, said in a statement.

Maybank PE, the captive private equity unit of Malaysian lender Maybank, targets minority investments in Asia across the consumer and consumer-related segments. The YPX investment was made through MAM PE Asia Fund I.

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• Topics
• Venture
• Consumer
• Expansion
• Greater China
• Lion Rock Capital
• Maybank
• Growth capital
• Venture
• China
• Consumer