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Haidilao: In a Crowded Field, One Hotpot Restaurant Stands Above the Fray

By Yu Nan

 

For a company that claims its ultimate goal isn’t making profits, Haidilao has done well for itself. The restaurant chain reaps an annual 300 million renminbi in annual sales. CEO Zhang Yong, EMBA ’10, who founded the first restaurant fifteen years ago in Jianyang, Sichuan province, has presided over the company’s expansion to 75 outlets in big cities like Beijing, Shanghai and Xi An.

 

Haidilao’s growth story is all the more noteworthy given that it specializes in hot pot, a highly popular style of eating in China that involves dipping fresh meat and vegetables in simmering broth. While tasty, hot pot is also extremely simple, with a straightforward recipe and ingredients. For would-be hot pot competitors, the barriers to entry are low.

 

Yet under Zhang’s leadership, Haidilao has become one of the country’s best-loved hot pot brands. Its success testifies both to a reputation for strong customer service and high levels of employee loyalty – both rarities in the Chinese business world.

 

Consider how it goes about keeping customers satisfied. Haidilao is notorious for its long lines, with an average wait time of two to three hours to get a table. But to make the time go faster, the restaurant offers up freebies like Internet access, shoe polish service, and manicures. Instead of complaining and getting frustrated, customers have proved their willingness to wait, even setting up tables to play cards.

 

Once seated, restaurant patrons are immediately greeted by waiters bearing aprons, hair pins and cell phone cases to protect them from hot pot broth and offering hot towels for guests to refresh themselves.

 

Many customers cite the cheerful, friendly wait staff as one of Haidilao’s biggest selling points. On one popular restaurant blog, dianping.com, some of Haidilao’s fans have gone so far as to rave that the restaurant treats its patrons like gods. But as Zhang himself notes, not every customer can be accommodated in quite that fashion: People on a tight schedule usually prefer to eat elsewhere. Haidilao bills itself as a perfect place for family events and social gatherings for customers with a little extra time to spare.

 

To help ensure good customer service, Zhang goes to considerable effort to promote good morale among staff. The logic: employees who believe their boss cares about them will work harder on the job. That employee-centric philosophy is embodied in Haidilao’s slogan -- one that runs counter to mainstream management philosophy -- “Employees are more important than customers.”

 

Haidilao’s employees are all accommodated in serviced apartments with air conditioning, local phone service, cable TV, Internet, and 24-hour hot water – perks that would be considered luxuries by most Chinese. Haidilao also focuses on helping employees advance their careers as the company expands. Its management ranks include many employees who started at the bottom and worked their way up.

 

Admittedly, Haidilao faces a competitive challenge when it comes to differentiating its food. Because hot pot is uncomplicated and fairly easy to make, the restaurant chain faces heavy competition from other hot pot contenders.

 

In response, Zhang has opted to put a premium on the quality and freshness of its menu. Haidilao has built its own logistics centers around the country with standardized procedures, strict rules of quality control, and carefully selected suppliers. No matter which branch of the restaurant customers visit, they can expect to receive food of the same high level of quality and freshness.

 

Haidilao also offers new twists on standard hot pot fare, rolling out one or two new recipes a year and five to 10 new vegetable dishes each season. For example, besides traditional spicy Sichuan-style hot pot, it features seafood and twin-pot style hot pot.

 

Plus, the restaurant makes a point of continually working to improve its food. When customers awaiting a table were offered free soy milk, some complained it was too thick. In response, Haidilao immediately set to work improving the flavor and started to offer lemonade as an alternative.

 

When it ventured into noodle making, the restaurant opted to dispatch its noodle makers into the aisles of the restaurant to entertain patrons. Noodle-making in China verges on the athletic, with energetic men slinging wide, theatrical arcs of noodles through the air (a little like pizza makers twirling pizza dough). At Haidilao, the noodles-as-theater act proved a hit with customers, who got a free show as they slurped their hot pot. Fans have even posted videos online, where they became free advertisements for the restaurant.

 

Sure, Haidilao’s food wins high marks. But in a country where customer service is still too often viewed as an afterthought, it is Zhang Yong’s innovative approach to keeping customers and employees happy that has truly set his restaurant apart from the competition.

 

This article was originally published in longer form in Chinese. To see the original article, please visit CKGSB’s Chinese website at:

http://www.ckgsb.edu.cn/Article/Detail.aspx?ColumnId=401&ArticleId=6477.