(Yicai) Jan. 16 -- Xibei, a restaurant chain known for its northwestern Chinese cuisine, will close about a third of its outlets following a public controversy over the use of pre-cooked food, China Newsweek reported, citing founder Jia Guolong.

Xibei will close 102 of its restaurants in a single sweep, the report said yesterday. Last month, a source at the Beijing-based business told Yicai that customer traffic had plunged 45 percent at the worst point. “We’re definitely losing money right now,” the person said. “The pressure on cash flow is immense.”

The crisis began last September when Luo Yonghao, an online influencer with millions of followers, dined at a Xibei restaurant. "Almost all pre-made dishes. Still so expensive. Disgusting!,” Luo wrote of his visit, sparking consumer concerns and a debate about food transparency.

While insisting that initial food processing was done in a central kitchen, Xibei nonetheless suffered a drop in customer traffic, shrinking its revenues and denting its plans to go public this year.

In the wake of the storm, Xibei has tried to turn the situation around. It had begun making dumplings, lamb skewers, and some soups freshly to order by late September, and cut the price of 30 to 40 dishes by an average of about 20 percent in November. 

Xibei also launched a customer recovery initiative, offering incentives ranging from a “CNY100 [USD14.35] voucher with any in-store purchase” to “spend CNY50, get CNY50 free” promotions, as well as daily half-price dishes on food delivery platforms.

New national standards for pre-cooked meals have passed review, an expert involved in drafting them said to Yicai in September. For the first time, whether and how restaurants use pre-made dishes will be subject to information disclosure requirements.

“The standards primarily focus on defining the product and setting food safety indicator requirements,” the person said.

Editor: Martin Kadiev