Park Ha Cayman is a holding company incorporated in the Cayman Islands with no
operations of its own. Our Operating Subsidiaries conduct operations in China.
Our Operating Subsidiaries are (i) Xinzhan, which was incorporated in Wuxi,
Jiangsu Province, PRC on March 31, 2016 under the laws of the PRC, (ii) Park Ha
Jiangsu, which was incorporated in Wuxi, Jiangsu Province, PRC on August 13,
2019, and (iii) Park Ha Shanghai, which was incorporated in Shanghai, PRC on
April 17, 2017.
Our Operating Subsidiaries specialize in providing skincare and cosmetic
products under our brand name “Park Ha” in China. Our Operating Subsidiaries
develop our proprietary beauty products and offer complimentary after-sales
beauty services in our physical stores. Park Ha Jiangsu, in addition to
operating our two physical stores, is the research and development center
focusing on skincare product development and improvement for sensitive skin.
Xinzhan leads the marketing and promotional efforts and is the entity in charge
of our franchising business. Park Ha Shanghai is a training center for our
franchisee staff. As part of our value-added service for our products, our
directly operated and franchise stores offer “light beauty experience”, a quick
complimentary after-sales beauty service performed in the stores. Light beauty
experience is offered to our customers as an effective way to demonstrate how
our products are used in order to deliver best results.
In addition to the two stores directly operated by Park Ha Jiangsu, as of April
30, 2024, October 31, 2023 and 2022, we had 43, 38, and 49 franchisees in China,
of which 41, 36 and 45 franchisees operate under the store name “Park Ha”. As of
April 30, 2024, October 31, 2023 and 2022, we had 2, 2, and 4 franchisees
operate under a different brand name, “Geni”. Xinzhan has entered into
supplemental agreements with these franchisees that operate stores under a
different brand name, pursuant to which each such franchisee is allowed to keep
the existing store name and does not have to change the store name to “Park Ha”.
Two of the franchisees operating under the “Geni” or brand terminated their
franchise contracts with us in the year ended October 31, 2023.
Our revenues mainly consist of (i) products sales and (ii) franchise fees.
Products sales accounted for 35% of the total revenue and franchise fees
accounted for 65% of the total revenue for the six months ended April 30, 2024.
Products sales accounted for 16% of the total revenue and franchise fees
accounted for 84% of the total revenue for the six months ended April 30, 2023.
For the fiscal year ended October 31, 2023, product sales accounted for 26% of
the total revenue and franchise fees accounted for 74% of the total revenue. Our
total revenue was $852,928 for the six months ended April 30, 2024 as compared
to $1,371,587 for the six months ended April 30, 2023, representing a decrease
of $518,659, or 37.81%. The decrease in our total revenue was primarily due to a
decrease in the franchise fees, which is attributed to the decrease in the total
number of franchisees. Our franchise fees decreased by $594,398, from $1,146,368
for the six months ended April 30, 2023 to $551,970 for the six months ended
April 30, 2024. Our franchise system is divided into three tiers: regional
stores, skin management center stores, and single stores. We charge different
franchise fees for each tier. The franchise fee for a regional store is RMB 2
million (approximately $278,730) per year, RMB 550,000 (approximately $76,650)
per year for a skin management center store, and RMB 100,000 (approximately
$13,936) per year for a single store. From May 1, 2023 to April 30, 2024, we
added one regional store franchisee, one skin management center franchisee, and
four single store franchisees, as well as a decrease of 14 single store
franchisees. Furthermore, during this period, several regional store
franchisees/skin management center franchisees requested to modify their
franchise agreements into single-store franchise agreements. As a result, two
regional store franchisees were converted into single-store franchisees, and
three skin management center franchisees were converted into single-store
franchisees, which led to a decrease in franchise fees. The decrease in the
number of franchisees mainly stems from the following: (1) seven franchisees did
not renew their franchise agreements with us due to poor business performance or
market conditions impacted by the post-COVID-19 consumer downshifting; and (2)
we terminated the franchise agreements with seven franchisees because they did
not comply with the terms of the agreement, for example, sell unauthorized
third-party products. As such, our franchise fees from regional store
franchisees decreased by $233,082.23, or 51%, from $453,160 for the six months
ended April 30, 2023 to $220,077.77 for the six months ended April 30, 2024. Our
franchise fees from skin management center franchisees decreased by $300,208.48,
or 68%, from $440,148 for the six months ended April 30, 2023 to $139,939.52 for
the six months ended April 30, 2024. Our franchise fees from single-store
franchisees decreased by $61,107.22, or 24%, from $253,060 for the six months
ended April 30, 2023 to $191,952.78 for the six months ended April 30, 2024. We
offer certain cash subsidies to encourage renewals and attract new franchisees,
but we do not offer discounts on franchise fees. During the period from May 1,
2023 to April 30, 2024, we offered cash subsidies in the amount of RMB
1,080,000, which made up 18% of the total franchise fees from regional store
franchisees, to three regional store franchisees. We offered cash subsidies in
the amount of RMB 500,000, which made up 9% of the total franchise fees from
skin management center franchisees, to ten skin management center franchisees.
Despite the recent decrease in franchise fees, we do not expect this trend to
continue in future financial periods for the following reasons: (i) as we have
offered and will continue to offer some appealing franchising terms to attract
new franchisees and encourage renewals, we expect the number of franchisees to
gradually increase; (ii) with the expected growth in the number of franchisees,
not only will franchise fees increase, but we also expect our market share and
brand influence nationwide to expand; (iii) we are actively broadening our
online sales channels to attract more customers, and expect our product sales to
increase as well.
For the fiscal year ended October 31, 2022, product sales accounted for 51% of
the total revenue and franchise fees accounted for 49% of the total revenue. Our
total revenue was $2,459,102 for the year ended October 31, 2023 as compared to
$1,919,389 for the year ended October 31, 2022, representing an increase of
$539,713, or 28.12%. The increase was primarily due to an increase in franchise
fees, which was primarily due to the majority of our franchise fees associated
with the franchise agreements during FY2022 being recognized in FY2023, as these
franchisees entered into franchise agreements with us in April 2022.
Accordingly, for such agreements, we only recognized franchise fees for less
than 6 months for the fiscal year ended October 31, 2022.
Our products sales revenue increased by $75,739, or 33.63%, from $225,219 for
the six months ended April 30, 2023, to $300,958 for the six months ended April
30, 2024, which was primarily attributable to the introduction of new products
during the six months ended April 30, 2024. Our products sales revenue decreased
by $333,090, or 33.93%, from $981,835 for the year ended October 31, 2022, to
$648,745 for the year ended October 31, 2023, which was primarily attributable
to a decrease in the number of our franchisees, which were authorized to sell
our products from the “Park Ha” brand. The decrease in the number of our
franchisees resulted from their financial difficulties due to the recurrence of
the COVID-19 pandemic at the end of 2022.
Our franchise fee decreased by $594,398, from $1,146,368 for the six months
ended April 30, 2023 to $551,970 for the six months ended April 30, 2024. Our
franchise fees increased by $872,803, or 93.09%, from $937,554 for the year
ended October 31, 2022 to $1,810,357 for the year ended October 31, 2023, which
was primarily due to the majority of our franchise fees received from our
franchisees as of October 31, 2022 that were recognized in 2023 because those
franchisees started collaboration with us since April 2022 and the average
corresponding recognition of franchise fees was less than 6 months for the
fiscal year ended October 31, 2022.
Our net income decreased by $450,896, or 90.22%, to $48,900 for the six months
ended April 30, 2024, from $499,796 for the six months ended April 30, 2023. Our
net income increased by $660,744, or 345.40%, to $852,042 for the year ended
October 31, 2023, from $191,298 for the year ended October 31, 2022. The
increase was primarily attributed to the increased revenue in franchise fees
with a relatively high gross profit.
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Our principal executive office is located at 901 & 901-2, Building C, Phase 2,
Wuxi International Life Science Innovation Campus, 196 Jinghui East Road, Wuxi,
Jiangsu Province, People’s Republic of China 214000. The telephone number of our
principal executive offices is +86-400-012-7562. Our website:
http://ir.parkha.cn/.
Our registered office is located at Harneys Fiduciary (Cayman) Limited, 4th
Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman,
KY1-1002, Cayman Islands. Our agent for service for process in the United States
is Cogency Global Inc., 122 E 42nd Street 18th Floor, New York, NY 10168.