SHANGHAI BABI Catering Management Co Ltd - operator of a popular restaurant chain that serves steamed buns - said it plans to increase its outlets fivefold within the next three years and is courting venture capital firms to support the expansion.

The retailer plans to be operating 150 stores nationwide by next year and 500 by 2010, BABI General Manager Ye Qing said over the weekend. Two hundred stores will be wholly owned, and the others are slated as franchises.

Founded in 2003, Shanghai BABI now operates 97 stores, 90 percent of which are in Shanghai. It launched franchises in 2004 and now has 61.

Some of the new stores in Shanghai will be set up in cooperation with global retailers such as Wal-Mart.

"For the next stage, we will pursue opportunities in Shanghai's suburban areas, China's second-tier cities and even the overseas markets to make our traditional Chinese snacks as successful as McDonald's and KFC in China," Ye said.

The firm expects to boost sales revenue sevenfold to 360 million yuan (US$48 million) by 2010 from last year and generate 36 million yuan in profit.

Last year, BABI's revenue rose 32 percent to 48.7 million yuan, and net profit increased 23 percent to 5.8 million yuan.

BABI, which began by selling steamed buns priced at one yuan each, has diversified its product range to more than 12 traditional Chinese snacks, including rice dumplings, baked goods and soybean drinks, banking on those higher-value-added items to boost profits.

BABI has also started cooperating with restaurants, hospitals and schools, selling packages of frozen steamed buns through a food processing plant set up in 2004.

Over the weekend, BABI staged a road show for more than 25 venture capital firms, including Softbank China Venture Capital, Harbinger Venture China and SIG.

"There is still no time frame for us to introduce venture capital, as it depends on the VC firms' suggestions to help us grow in a better and more efficient way," Ye said. "Regarding the proper investment scale, US$10 million might be a minimum offer."

Su Tongming, an analyst at China Seed Ventures, said BABI's business model has good profit potential.

Venture capital firms have been cashing in on China's licensing industry over the past few years, particularly catering retailers such as Chongqing Cygnet Group, Chamate Corp and Inner Mongolia Little Sheep Catering Co.