Tax owed: 342 million yuan! From a national brand to ST, where did Juewei Duck Neck's 700 million yuan franchisee renovation funds go? | Big Fish Finance

Ask AI · Why has the franchise model become a breeding ground for financial manipulation?

On April 4, Juewei Foods, known as the “king of duck necks,” issued a notice announcing a large sum of back taxes owed, drawing attention across the industry. The announcement shows that, after conducting a self-audit, the company needs to pay an additional 342 million yuan in taxes and late fees in total. The company has already paid the back taxes and late fees. Behind this tax payment controversy are the “bitter results” of five consecutive years of falsified financial statements by Juewei Foods. The relevant penalty notice issued by regulatory authorities at the end of last year makes it clear that from 2017 to 2021, Juewei Foods failed to include franchisees’ renovation expenses in revenue. Based on the figures disclosed in prior financial reports and the data revealed in the penalty documents, the total amount reached more than 700 million yuan. As a result, the company’s stock abbreviation was changed to “ST Juewei.”

Industry experts said that, unlike traditional financial fraud, ST Juewei falls under “reverse fraud,” meaning it conceals income rather than inflating profits, reflecting a loss of control in the company’s internal management. Juewei Foods’ off-balance-sheet operations fully cover the entire tax-evasion chain of “concealed income—false reporting—underpayment of taxes,” constituting a tax-related illegal act carried out with subjective intent. It is also noteworthy that this time, repaying the additional 342 million yuan in taxes and late fees can be described as a crucial “weight” that crushes performance. This large payment will be allocated into the profit and loss of 2025 and 2026, further locking in the company’s full-year loss scenario.

The top leader’s compliance awareness was lacking; ST Juewei’s “reverse fraud” was heavily punished

In fact, Juewei Foods’ back-tax payment this time was not initiated by an active tax investigation by the tax authority. Instead, it stemmed from the China Securities Regulatory Commission’s (CSRC) filing of a case related to violations of information disclosure by listed companies.

On June 7, 2024, due to suspected violations of information disclosure regulations, the CSRC decided to file a case against Juewei Foods and, in August 2024, issued a notice of case filing to Juewei Foods. Regarding the reasons for Juewei Foods’ information disclosure violations, there were various external speculations, but the truth was finally revealed a year later.

On September 20, 2025, the Hunan Regulatory Bureau of the CSRC issued a “Preliminary Notice of Administrative Penalty” showing that from 2017 to 2021, Juewei Foods did not include franchise store renovation income in revenue. The amounts were 5.48%, 3.79%, 2.2%, 2.39%, and 1.64% of the revenue for the corresponding years, respectively; over the five years, it concealed approximately 723 million yuan in total. During that period, the company’s revenue growth rate fluctuated sharply: in 2019, revenue grew year over year by 18.4%; in 2020, it dropped to 2%; and in 2021, it rebounded again to 24.1%.

In Juewei Foods’ business model, the headquarters uniformly designates or provides exterior packaging renovation services for franchise stores. Relevant payments flow through a jointly managed account called the “Franchisee Committee” and do not enter the company’s financial system. The prospectus only lists “management income from franchise fees” and does not disclose renovation income, indicating that this portion of funds had already drifted off the books before the company went public.

In April 2023, the regulatory authorities previously reported that from January 2017 to July 2018, Juewei Foods collected shop business receipts and franchise fees totaling 21.0707 million yuan through employees’ personal accounts, which were not deposited into the company’s accounts. Then-chairman Dai Wenjun and financial controller Peng Caigang, among others, were issued regulatory letters. Further investigation in September 2024 showed that Peng Caigang arranged for financial personnel to use personal accounts to handle renovation payments, proving that management not only knew about it but may have participated.

Industry analysis suggests that concealing renovation income may have been intended to beautify franchisees’ profitability. More than 70% of Juewei Foods’ revenue comes from selling products to franchise stores. To attract franchisees to expand, if the renovation costs that should have been borne by franchisees are hidden, the company’s on-paper profit margins can be artificially inflated, creating the illusion that “opening a store means making money.” Professionals point out that while artificially reducing revenue does not directly increase net profit, it can artificially lower indicators such as gross margin and turnover rate, misleading investors’ judgment of the company’s growth potential and the quality of its profitability.

A tax law expert said that, according to Article 63 of the Tax Collection and Administration Law, a taxpayer who “fails to list or lists insufficient income in its books and conducts false tax declarations, and does not pay or underpays the tax payable,” is clearly defined as tax evasion. Juewei Foods’ off-balance-sheet operations fully cover the entire tax-evasion chain of “concealed income—false reporting—underpayment of taxes,” which constitutes a tax law violation committed with subjective intent.

This violation was not a mistake made by individual financial personnel. Instead, it was a systemic action led by the company’s then chairman and financial controller, with coordination from multiple departments. Risk concentrated and erupted in the supporting renovation business within the franchise model, revealing that Juewei Foods’ integrated business, finance, and tax management across the entire franchise business chain was completely disconnected; the internal control and checks-and-balances mechanism had failed entirely; the risk persisted for five years without being discovered or corrected; and ultimately it erupted in a concentrated way.

The frantic expansion of stores backfired; trapped in three layers of hardship with no way to rescue itself

From a national brand to a typical case of tax evasion by a listed company, the “fall” of Juewei Foods in recent years is worth deep reflection.

In 2005, founder Dai Wenjun of Juewei Foods chose to establish Juewei Foods in Changsha to avoid direct competition in Wuhan’s local market with Zhou Heiya. The spicy, fresh, and fragrant taste resonated with people in Changsha. Juewei Foods kept opening stores, and its franchise model became the core route for brand expansion. Since then, the “king of braised flavor” began a frenzy of expansion.

In 2017, the number of Juewei Foods stores officially surpassed 10,000. With annual revenue of 3.8 billion yuan, it succeeded in listing. By 2024, the number of Juewei Foods stores had already approached 15,000. Similarly, Zhou Heiya and Huang Shang Huang—also two of the “three giants” in braised flavors—have store counts that together are less than half of Juewei Foods. Everywhere on streets big and small, shop signs related to Juewei duck necks can be seen almost everywhere.

On one side, stores were racing ahead with blind expansion, creating a leading advantage with a gap in the industry. On the other side, an expansion method highly dependent on franchise stores also caused backfiring effects against the company itself. Data shows that in 2022, Juewei Foods’ net profit was 235 million yuan, a year-on-year plunge of 76.06%. In 2023, while there was some growth, by 2024 there were again simultaneous declines in both revenue and net profit.

As is well known, Juewei Foods follows an expansion model of “central factory + franchise stores.” This approach is especially efficient during expansion periods. In 2019, the number of stores first surpassed 10,000. From 2020 to 2023, the figures were 12,399, 13,714, 15,076, and 15,950, respectively. However, as the number of stores continued to grow, while density expanded, franchisees’ revenue and profit margins were also flattened. From franchisees’ perspective, making money became increasingly difficult. From consumers’ perspective, it is even possible to see multiple Juewei duck neck stores along a single commercial street.

From 2019 to 2023, the company’s management income from franchisees was 55 million yuan, 68 million yuan, 67 million yuan, 75 million yuan, and 83 million yuan, respectively. Between 2020 and 2021, the company added more than 1,300 stores, but management income from franchisees actually declined. According to data from the Narrow Door platform, last half year, Juewei Foods’ management income from franchisees was 27 million yuan, down 20.28% year over year.

More importantly, Juewei Foods’ “direct-run + franchise” expansion model provides natural soil for financial manipulation. Multiple regulatory penalties show that, in the management of funds in franchise businesses, Juewei Foods had been in a long-term state of loss of control. One expert bluntly said: “With 700 million yuan of funds not entering the company’s accounts, it exposes the possibility of funds circulating outside the company. Under this operating model, large amounts of funds could directly flow into the pockets of related parties through off-book circulation, seriously harming the interests of listed company shareholders.”

Affected by a series of negative news, Juewei Foods recently released what is its bleakest performance since listing: it expects full-year 2025 revenue to decline by more than 12% year over year, and a loss of about 200 million yuan in net profit attributable to shareholders. This is the first time Juewei Foods has reported an annual loss since it entered the A-share market in 2017. The “crash” of the performance of a former giant in the braised-flavor industry has drawn widespread attention and heated discussion in the market.

Industry observers say that Juewei Foods is currently trapped in a triple predicament: “business decline + huge back-tax payments + internal control defects (ST).” Unless the company can prove that the problems have been resolved and that operations have rebounded from the bottom, investment risks are high.

Reporter: Su Ran Photographer: Su Ran Editor: Bai Lingjun Proofreader: Yang Hefang