Spice of success

Updated: 2011-03-04 10:47

By Yu Tianyu (China Daily European Weekly)

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 Spice of success

Zhang Yong started his hot pot business in 1994 and has expanded to more than 40 outlets across the country. zhang wei / China Daily

Hot pot chain founder gives a sneak peek behind his bubbling business

Zhang Yong, founder and president of Sichuan Haidilao Catering Co Ltd, has a dream to make his spicy hot pot dish as internationally available and popular as McDonald's hamburgers and Starbucks' coffee.

With a warm gleam in his eyes and dressed simply, Zhang, who was born in China's "gourmet paradise" of Sichuan province, always ends his conversations with hearty laughter.

"Our company is in the process of forging a standardized catering chain company with an eye on expansion into the world's catering market," the businessman says.

Haidilao is a mahjong term in Sichuan province, literally meaning fortune. It has certainly been felicitous for the middle-aged entrepreneur.

Established in 1994, Zhang's hot pot chain has expanded its footprint to cities across China with more than 40 outlets, four logistic bases and a manufacturing base.

In 2009, the company reported a turnover of 1 billion yuan (110 million euros) and a workforce of 10,000 employees. Zhang expects to increase the number of restaurants he owns by 20 percent a year.

People patiently stand in line at nearly all Haidilao restaurants. Many diners have been known to wait several hours to taste the dish, describing the craze as akin to demand for the iPhone 4.

So what is the secret of Zhang's success?

Back in 1994, 24-year-old Zhang Yong was a worker in a factory in his hometown, Jianyang in Sichuan, earning 93.5 yuan a month. With such a low income he could not even afford to pay the rent on his apartment.

So he decided to start a business. Zhang launched his hot pot in a small and dingy malatang booth with only four tables, using an investment of 10,000 yuan.

Malatang is a spicy soup like a hot pot that originated in Sichuan. It is cheap but very popular among Chinese people who like to "detoxify" their bodies with hot flavors.

"In the early days, I was not able to do what I wanted because of my limited skills and knowledge," says Zhang, who had just graduated from a vocational school.

It was a time when many Chinese people went into business on their own in a movement dubbed "going to sea". Zhang says that he was lucky because people were able to easily make a fortune through any business with the desire to improve their lives. An entrepreneur needed to pick up on just one of the millions of their demands.

"Catering was relatively easy and it didn't need much money to start with. That's why many Chinese entrepreneurs in 1990s chose the food business for their first bucket of gold," he says. "Also, Sichuan people grow up with hot pot so there were some emotional linkages involved."

That, at least, was the idea, but it was easier said than done. No customers visited Zhang's malatang booth for the first two or three days.

"I also didn't know how to make the typical Sichuan hot pot. I was constantly experimenting in the face of customers' complaints," Zhang says.

"At that time, when they said the hot pot was too salty or not spicy enough, I would immediately make adjustments and give them discounts or even not charge them," he says. "I learned lessons the hard way. However, the most important thing I learned was that kindness would eventually bring customers and money back."

Within a few months, Zhang had a string of regular customers, many of whom had become personal friends - from the city mayor to street vendors. By now his hot pot business was bubbling away nicely.

The motto at Haidilao is "Service first, customers first" and it has been known to push it to the extreme.

One of Haidilao's first tactics to lure Chinese diners was a free nail beauty service while they waited for a seat. There were also free drinks, fruit and cake as well as shoe polishing. Potential customers could kill time by surfing the Internet on the restaurant's computers or playing cards and chess.

One day during the summer of 2009, Zhang randomly visited a Haidilao outlet in Beijing and found the watermelons offered as free desserts were not sweet enough.

When asked why, the outlet manager said sweeter watermelons would cost them 10,000 yuan more a day.

Zhang took the matter very seriously.

He says: "Costs and profits, the financial figures - they are soulless. I believe that showing real feelings toward the customers would help boost your business rather than dwelling on these figures.

"In fact, there is room for more competition in the Chinese catering market. It has enormous potential. Chinese consumers easily find satisfaction if you care about them a bit more. We just made a little more effort to please our consumers and then won over the market," he says.

Zhang considered listing the business when the company was developing rapidly, but not for long.

He says that it would be dangerous to obtain a great amount of money after an initial public offering and then start aggressively adding more new outlets without a concrete system for the training and supply of human resources as well as quality services.

Many catering companies in China just went too fast and their brands disappeared after a round of blind expansion, he says.

Many say the service-oriented restaurant chain seems to be doing all the right things and avoiding most of the pitfalls plaguing others.

"Take McDonald's or KFC as an example. They have their corporate genes throughout the process of manufacturing and selling as well as their systematic management models, which is the difference between them and us," Zhang says.

There is a Chinese saying that happy families are all alike; every unhappy family is unhappy in its own way. "It is similar when it comes to successful and unsuccessful companies," he says.

Haidilao is "a family without blood ties". Employees all call Zhang Yong "big brother Zhang" while he usually calls them "my little kids".

The company rent apartments near the restaurants for employees with access to the Internet and air conditioning.

Zhang says that consumer satisfaction is difficult to measure, but ensuring that employees nurture a desire to take better care of them is vital.

Zhang is committed to establishing a proper human resources system for Haidilao. Most of his employees are young with limited education and from small towns or rural areas.

Shaking off poverty and improving one's destiny is undoubtedly an encouraging slogan for migrant workers.

"The core philosophy of Haidilao is that you can change your life using your own hands," Zhang says. "I give these so-called migrant workers hope of a better life by working hard."

At Haidilao, every employee has the chance to be promoted. Zhang says that he avoids appointing managers who did not start in "the lowliest of positions".

Yuan Huaqiang is an example. The countryside boy used to greet customers at the entrance, as well as a dishwasher and waiter.

Now, at 27, he is a general manager in Beijing and has been the owner of a 3 million yuan apartment in the capital since 2007, where he lives with his parents.

Employees of more than three years' standing can also get an annual subsidy for their children's education, worth anything from 3,000 to 10,000 yuan.

Zhang still hopes to take his catering business outside China, taking the view that a fiercer competitive environment could boost the company's development and improve service considerably. The domestic business will then benefit from that.

"Chinese cuisine has its market abroad. However, it is all too often labeled cheap and low-end," he says.

"I hope that Haidilao will eventually help change that image."


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