--FILE--A security guard stands in front of a branch of Papa Johns Pizza in Shanghai, China, 22 May 2012. Private-equity firms are looking to satisfy the appetites of Chinas growing middle class as the economy slows and high-end restaurants lose favor following recent government curbs on lavish spending by officials. Recently they have begun to shun high-end restaurants in favor of such names as Dairy Queen and Chinese hot-pot chain Xiabu Xiabu, reflecting a desire to offer Chinese consumers more affordable menus and capture strong growth in fast-food sales. EQT Partners, for example, is considering buying a minority stake in RCS Group Co., which owns franchise rights for Dairy Queen and Papa Johns Pizza in some provinces in China, from Warburg Pincus LLC, a person with knowledge of the matter said late last month. The likely size of the deal was unclear. Also, U.S. private-equity firm General Atlantic bought Actis Capitals majority stake in Xiabu Xiabu in December for an undisclosed amount. Investments in higher-end restaurants appear less appealing. On the Shenzhen stock exchange, for example, shares in Beijing Xiangeqiang Co. Ltd., a chain that serves Guangdong, Hunan and Hebei cuisines, have fallen 24% this year. The Shenzen benchmark has lost 14% during the same period. Shares of Shenzhen-listed China Quanjude (Group) Co., which operates a chain of restaurants specializing in Beijing duck, are down 5.6% this year. China Quanjude said in April that it expects an up to 40% drop in net profit for the first half of the year, due in part to a decrease in corporate banquets and high-end services.
