Haidilao Hot Pot’s Success
It is not usual to relate a fancy word such as 'unstoppable' with a restaurant chain, this traditional business model just does not sound sexy any more nowadays. However, the success of Haidilao Hot Pot, a chain of hot pot restaurant, is phenomenal in the China market, and it is on the way of overseas expansion. The secret recipe of Haidilao lies at the superior dining experience it provides to the customers, and the way it aligns its business model with operation model in order to provide the experience.
It is not usual to relate a fancy word such as ‘unstoppable’ with a restaurant chain, this traditional business model just does not sound sexy any more nowadays. However, the success of Haidilao Hot Pot, a chain of hot pot restaurant, is phenomenal in the China market, and it is on the way of overseas expansion. The secret recipe of Haidilao lies at the superior dining experience it provides to the customers, and the way it aligns its business model with operation model in order to provide the experience.
When talking about Haidilao, its seemingly unsurpassable service is always the first thing its customers would mention. The business has been developed in every way that it can better serve the customers.
At the very beginning, in 1994, located in Sichuan Province, Haidilao was just a hot pot restaurant whose owner paid special attention in service details. For example, Haidilao even provided eyeglass cleaning cloth to help the customers who wear glasses deal with the fogging issue caused by sitting close to hot pots.
The extremely considerate services helped Haidilao stand out in this highly competitive industry. Along with its business expansion, with around 20 new stores open every year, Haidilao kept to surprise its customers with continuous dining experience improvement. To compensate for the time its customers might need to spend waiting for tables, Haidilao not only prepared free drinks and snacks but also made nail salon services available for free. And in 2013, its new service that customers in any of Haidilao restaurants could see each other via video conference fertilities to remotely and simultaneously enjoy the food became a social buzz in every media platform.
When customers seemed greatly satisfied with Haidilao’s existing services, this creative restaurant evolved its business model to surprise everyone.
It opened online stores on both e-commerce platforms, such as Alibaba, and its own official website, targeting to serve customers who want to have Haidilao hot pot at home. All a customer needs to do is placing an order, a waiter will then deliver the food, soup, and all needed tableware including the hot pot to the customer’s home at appointed time. Just let Haidilao know when finished, the waiter will come back help do all the cleaning jobs and take the tableware back.
Secondly, to make it more convenient for the customers to dine in its restaurants, Haidilao adopted a strategy to open more small stores, each with around 60 stores compared with its old stores that each serving over 100 tables, that are located closer to major residential communities.
There were also tons of efforts spent to satisfy customer’s needs by Haidilao behind-the-scene. As a nationwide restaurant chain, it was not possible to purchase raw food by Haidilao’s boss himself every morning in a farmer market any more. To hold the bar high for food safety and quality, Haidilao first sought for help from the logistic service provider of McDonald’s and KFC. Later, instead of purchasing the services from a third party, Haidilao established an enterprise dedicating to meet its high standard logistic and supply demand. Haidilao wanted the raw food to be delivered in the way that is not only clean and safe, but also highly effective for its restaurant operation.
The primarily principles of Haidilao’s kitchen operation are standardization and labor force minimization. With its logistic sub-company’s help, all food delivered to Haidilao is packed in the size that is needed to be served to customers. What a worker in Haidilao’s kitchen needs to do is just to put the food on plates and put different plates with food together based on customer’s order.
On the contrary to the roles employees play in the kitchen, the waiter and waitress of Haidilao play roles that are empowered with great autonomy and can not be more important. The rational is really simple and direct: they are the interface between Haidilao and the customers, thus they can do whatever that will make the customers feel great about the dining experiences. You can take a watermelon home just because you mentioned to a Haidilao waitress that the watermelon you had when waiting for a table tasted good. This is not an exceptional case, this kind of surprises is happening everyday in Haidilao, delivered by every employee you are interacting with in the restaurant.
A critical part of the operation model that motivates Haidilao’s employees to try their best to make their customers happy is the company’s incentive and welfare mechanism. On one hand, an employee’s salary is largely determined by the customers’ feedback towards his or her services. On the other hand, Haidilao targets to take care of its employee’s life in many different aspects, ranging from free dorm and food to clear career paths via the promote within mechanism (not a common thing you would find in this industry).
In 2014, Haidilao Hot Pot’s revenue exceeded 5 billion RMB. And it plans to open 70 to 80 new stores annually in the coming years. The success of Haidilao is a great example of the alignment between an organization’s business model and its operation model.
Student comments on Haidilao Hot Pot’s Success
Awesome summary Yao. I’ve never heard of Haidilao but now I definitely want to go through the experience at some point. I’m particularly interested to know if there are any other similar hot pot delivery services that exist in the United States? If not, does Haidilao ever plan to expand to here in the US? I can imagine their business model perhaps transferring easily to a dense city like San Francisco or New York. There are new start ups in these cities that are able to deliver food very fast (within 10-15 minutes after order) based on the operating model of having a set menu of only 3-4 items. I could see a hot pot restaurant trying something similar by only offering a limited 2 soup bases and either just “fish”, “beef”, or “chicken”, all offered with the same veggies. I also find it fascinating that Haidilao will pick up your used hot pot materials as well. That’s an interesting concept on food delivery on it’s own. I don’t know of any food delivery service here in the United States that will essentially loan you materials. If this exists already….let me know!
Great post, Yao! I went to Haidilao in Beijing and loved it (especially the noodle dancing). I appreciated that it was a premium hotpot experience. I was really excited when I heard that it was opening up in Arcadia (east of LA) but I never ended up going, as the Yelp reviews were pretty mediocre compared to other hotpot places: http://www.yelp.com/biz/hai-di-lao-hot-pot-arcadia-3
It is interesting to me that the chain has had a difficult time at its US location, whereas other Chinese hotpot chains (Little Sheep comes to mind) have been quite successful. I think one of the primary reasons is that there is a lack of consistency in service and quality of food at its US location compared with its Chinese locations. Another reason may be that there is a lot more variability in quality of food (especially meats) in the Chinese market; US consumers expect high quality meat no matter where they go, so they are less willing to pay for a premium hotpot experience. You can read more about it here: http://www.forbes.com/sites/christophermarquis/2014/01/22/successful-chinese-hot-pot-chain-stumbles-in-us-expansion/
I hope they can figure out their operations in the US, as I would love to have the same type of experience as I did in Beijing here!