Why High-End Dim Sum Is Becoming an Investment Experience And Who’s Cashing In

Dim sum is experiencing an odd phenomenon. The meal that used to be associated with elderly reading newspapers at sticky communal tables, when the loudest sound was a porcelain teacup striking a saucer, has found its way into the vocabulary of five year EBITDA predictions and private equity presentations.

Enter Hong Kong’s Mott 32, an underground dining room covered in gold and glass beneath a bank building, to witness professionals making deals while consuming dumplings loaded with truffles. Each lobster har gow costs roughly $15. No one blinks. It’s likely that the common steamer basket has developed into a significant asset class without anyone really planning it.

The figures are astounding, at least on paper. A well managed high end dim sum concept may produce $386,000 in EBITDA in its first year and, under aggressive scaling assumptions, surpass $19 million by Year Five, according to financial models that restaurant experts are circulating. With an anticipated return on equity of 58% and a payback period of only 14 months, the first capital cost, which includes the commercial kitchen build out, dining room furniture,

and leasehold improvements, is around $328,000. At upscale locations, weekend average order values are reaching $2,500, which is over $700 higher than the midweek total. Investors who have grown weary of fast casual burger businesses seem to find dim sum, when appropriately packaged, to be one of the most appealing restaurant options.

However, there is a huge, shrimp paste filled gap between a financial model and a dining room full of satisfied patrons. The dim sum market is expected to increase at a compound annual growth rate of around 6.87 percent from its estimated $7 billion in 2025 to over $12 billion by 2033. Urbanization, food tourism, and a growing desire for actual ethnic cuisines in places like New York, London, and Dubai are the main drivers of this rise.

Less is known about whether the enthusiasm of investors corresponds with what’s actually taking place in the kitchens. The level of skill required to make dim sum real dim sum, the kind where each har gow wrapper is neither too firm nor too soggy does not scale as a spreadsheet might imply.

Mott 32’s chef Lee Man sing has over 35 years of experience in the industry. A large number of his dim sum chefs are in their 40s and 50s. The labor pool is getting older, and the competition for qualified workers is getting more intense every year. He’ll tell you that there are young cooks, but dim sum requires attention to things that most people would never think about, like putting pieces of lobster into a precise three dimensional arrangement that collapses precisely when you bite into it.

A two week onboarding process doesn’t produce that level of information. It results from years of repetition, and the 14 day churn risk that occurs when new recruits are unable to keep up with the pace is rarely taken into consideration by financial models that anticipate spectacular growth.

When Tracy Chang, the proprietor of Pagu in Cambridge, Massachusetts, spoke candidly about the condition of dim sum eateries in America, she revealed a deeper tension. These locations were already a labor of love before to COVID. An army is needed to produce thousands of dumplings by hand, on a large scale, with attention and quality.

Rent increases, inflation, labor shortages, and the cultural animosity that many AAPI owned companies faced during the epidemic make it difficult to avoid wondering who precisely stands to gain from referring to dim sum as a investment experience. Who could blame first and second generation Asian Americans for not wanting to carry on the family tradition? As Chang noted, it’s hard work, it’s not easy money, and when was the last dim sum chef to win a James Beard Award?

A few operational levers that appear tidy in a pitch deck but get muddy in reality are the foundation of the investment thesis. The annual cost of products sold begins at an unsustainable 125 percent of income. One for many new ideas, and the model requires that number to be reduced to 97 percent annually.

Five through rigorous spoilage management, portion control, and bulk purchasing. In the first year, labor costs are fixed at $350,000 per year. Regardless of how many steamer baskets leave the kitchen, fixed overhead rent alone costs $7,500 a month in big urban markets amounts to $140,400 annually.

The calculation only makes sense if weekend AOV stays at $2,500 and daily covers reach 158 from day one. The 14 month payback period stretches in ways that worry investors if the average order value declines even slightly.

In the meantime, dim sum’s cultural aspect, which is what truly won people over, is gradually disappearing. The main fan base is getting older in Hong Kong, where dim sum began as a Silk Road rest stop snack and developed into the city’s soul cuisine. And so is the availability of talented chefs. Rents are rising to levels that make $7,500 seem insignificant.

Some of the oldest dim sum establishments in the city battle to remain open, such as the century old Lin Heung Tea House, where patrons still fight over pushcarts in controlled chaos. The experience there is completely different from what investors are financing. Piggy faced buns are not Instagram able.

No one alerts you to the time limit on your table. You take a seat, pour yourself some tea, unfold your newspaper, and stay for as long as you choose. That’s yum cha, which translates to drink tea and refers more to a social custom with no clear end than to a particular kind of eatery.

With its four outlets and cute animal shaped steamed buns, Yum Cha in Hong Kong is an example of the new breed of upscale dim sum that offers delicious food in a format that maximizes turnover. It’s serious cookery. The turnip cakes are really delicious. However, the waiters alert you when you must go to make room for the following party.

The old timers would find it confusing that the meal turns into a transaction. According to a Hong Kong expat, the locations she went to with her parents weren’t particularly noteworthy, but the cuisine wasn’t the main attraction. They went to calm down together, read the paper, and catch up. That was the important thing.

Investors appear to think that dim sum’s cultural appeal can be separated from its cultural setting and rebranded as a high end dining item. They are partially correct, as seen by Din Tai Fung’s international growth, Tim Ho Wan’s Michelin starred empire, and the rise of fusion concepts that combine Cantonese technique with ingredients like foie gras and Iberico pork. Driven by premium and fusion ideas in locations with well established Chinatowns, the dim sum market in North America alone makes for about 28% of the global total. At over 18% of the world market, Europe is expanding as well.

However, no one seems to bring up the subject of what is lost when dim sum turns into an investment experience during pitch sessions. Yum cha itself, that leisurely, cart driven, tea soaked get together that has brought families together for generations, may hold the key. For forty years, Chan Chun hung, chief instructor at Hong Kong’s Chinese Culinary Institute, has observed dim sum’s surge in popularity. When it comes to change, he is practical.

He feels it’s a good thing if new eateries can draw young people to dim sum in a manner that older ones can’t. The old and the new may coexist. Whether that coexistence is stable or if one will eventually engulf the other is still up for debate. For the time being,

dim sum continues to do what it has always done gather people to the same table, even if they came for quite different reasons. The steamers continue to roll out, the tea keeps pouring, and somewhere between the $15 crab har gow and the $2 turnip cake at a basic corner establishment.

i) https://www.blog.resy.com/2022/09/why-dim-sum-matters-more-than-ever/
ii) https://www.proficientmarketinsights.com/market-reports/dim-sum-market-3552
iii) https://www.desygner.com/blog/industry/how-to-start-dim-sum-restaurants-business