THE legal representative of a Shenzhen-based catering company, Chengshichuzi, posted an announcement on his WeChat moments recently, declaring that the company was facing bankruptcy, the Southern Metropolis Daily reported.

    Chengshichuzi was founded by Liu Jianli in 2008 in Shenzhen, and it now owns eight franchise restaurants that cover most districts in the city. Apart from two of the restaurants, which were expanded with collective funds raised from dozens of investors, the other six restaurants were operated independently by the company itself.

    The news of the company’s bankruptcy has raised concerns amongst investors over the company’s business mode of “expansion through crowd-funding.”

    The two restaurants, which were opened with funds collected from dozens of investors, are located in Xiangmihu of Futian District and the Coco City shopping mall in Longhua District.

    One of the investors of the Longhua restaurant, surnamed Wang, said that Chengshichuzi had sought investment into the restaurant in May 2015. Through a friend’s recommendation, Wang purchased 1 percent of the restaurant’s stock with 27,000 yuan (US$3,926).

    According to the plans mapped out for the restaurant, Chengshichuzi would lead the restaurant’s expansion with 60 percent of its shares and the other 30 investors would collectively own 40 percent of the stock.

    The overall investment was set to be 2.7 million yuan and the company had promised to pay back the investors within two years along with a bonus that would be shared from July 2015.

    However, according to Wang, the restaurant only paid bonuses four times, and each time the bonus was only around 1,000 yuan for each investor, which was far from what the company had previously promised. Also, the restaurant did not undergo a physical expansion, but instead just added a few new dishes.

    The same thing happened to the investors of the other restaurant in Futian District. More than 60 investors had invested over 5 million yuan to upgrade the restaurant, but the profits were never the same as promised.

    In the long article explaining the catering company’s bankruptcy, Liu wrote that Chengshichuzi had signed deals to invest and operate a Taiwan catering company’s brand on the Chinese mainland in 2013, but the Taiwan company applied for bankruptcy in January this year, which fatally undermined Chengshichuzi’s operating capacity and may eventually lead to its bankruptcy.

    A series of chain reactions broke out after Liu’s announcement. Suppliers, investors and staff members of the company all complained about Chengshichuzi’s sudden retreat. Liu himself could not be reached.

    Th啊e labor supervision department in Longhua District has received the employees’ applications for advanced salary compensation. Futian police have also stepped in to conduct an investigation. (Zhang Qian)