Recently, Chinese food delivery platforms have been embroiled in a subsidy war, with a surge in traffic. At the same time, unlicensed “ghost restaurants” have blatantly entered major food delivery platforms through intermediaries. While “ghost restaurants” are not a recent phenomenon, they have persisted despite bans. Analysts believe that the fundamental reason lies in financial motives, with underground workshops and unscrupulous intermediaries taking advantage and food delivery platforms turning a blind eye.
“Ghost restaurants” originally referred to businesses without relevant business licenses or storefront photos. However, through fraudulent packaging by unscrupulous intermediaries, “ghost restaurants” now obtain business licenses, health permits, and other qualifications, making it harder for consumers to distinguish them.
According to publicly available information, in order to join a food delivery platform, businesses need to provide copies of their business licenses, food operation permits, copies of the legal representative’s ID, photos of the storefront, and interior of the shop, among other documents.
One intermediary told a journalist, “Nationwide agents can join food delivery platforms without storefronts or documents, they can open multiple stores without limits.”
Another intermediary explained in more detail, “Opening a food delivery store is very simple now. You just need to provide an address for riders to pick up the orders, whether it’s at home or on the street. You don’t need to provide a business license or food operation permit; we can arrange all of these for you. The cost is 1800 yuan per store, and we can open it in as fast as two days.”
Investigating as a prospective business owner, the journalist learned from multiple intermediaries that they mainly help businesses open stores through brand affiliation. After placing an order, the intermediary provides a ready-made business account to the business owner, which includes all the necessary licenses and information, such as the business license and food operation permit.
Many intermediaries informed the journalist that brands like Malota, MABA, and Xinbaidao are available for affiliation in the fried chicken category. After affiliation, the store’s name can be a combination of the brand name and a customized suffix, or the business owner can choose their own name without using the brand name.
These affiliated businesses are considered brand stores and are not subject to local platform regulations. They can ignore any food safety requirements of the brand and bypass on-site inspections by platform regional managers and regulatory authorities. As long as there are no major safety accidents or instances of falsifying orders, the business can operate steadily without being shut down.
But how do these intermediaries acquire business licenses and food operation permits? Blogger “Cao Shuai Fast Food” shared in a video on social media platforms, “Besides falsifying documents through Photoshop, one strategy is for a single store to apply for two sets of business licenses, as well as applying for a food service company’s business license, rather than a sole proprietorship. When registering on Meituan, use the impressive certificate of another food company to open a store. In theory, one license can open dozens of stores. Crucially, this is still legal and compliant.”
The gray profit chain of “ghost restaurants” is not a new phenomenon. In March of this year, Beijing launched the “Protecting Consumers” crackdown, focusing on combating “ghost restaurants”. Ganzhou in Jiangxi and Baotou in Inner Mongolia followed up in May, with Baotou shutting down 116 non-compliant businesses.
The presence of these illegal establishments can also be seen on platforms such as Meituan, Ele.me, and JD.com. According to a recent announcement by Meituan, between March 15th and May 31st, they verified a total of 63,595 stores for qualification issues, with 13,364 businesses found to have discrepancies in documents or food safety concerns.
A tweet from “JD Blackboard News” in April indicated that up to 8000 “dine-outless” stores had been removed. The official website of Ele.me shows that over 31,000 non-compliant merchants have been removed, including a significant number of suspected “ghost restaurants”.
The persistence of “ghost restaurants” can be attributed to financial incentives, with underground workshops and unscrupulous intermediaries taking advantage, while food delivery platforms turn a blind eye.
A video by “Jiangxi News Radio”, which has 1.52 million followers on social media, highlighted on Thursday (July 10th) that the lure of profit is significant. For black workshop businesses, they can operate without physical stores, proper qualifications, or high costs, leading to substantial profits. Unscrupulous intermediaries further aid these businesses in joining platforms, allowing them to profit unjustly.
Moreover, authorities have various loopholes in platform screening. Though there are screening processes, some platforms relax their standards due to financial motives, even turning a blind eye. Some are approved with just a few photos and basic information, providing “ghost restaurants” with an opportunity.
An article from “China Economic Net” explicitly states that “ghost restaurants” stem from platform screening failures. In the era of big data, platforms slipping up on controlling “ghost restaurants” is not a matter of inability, but rather unwillingness.