Subscribe to our newsletter

     By signing up, you agree to our Terms Of Use.


    • About Us
    • |
    • Contribute
    • |
    • Contact Us
    • |
    • Sitemap

    Warm Reaction to Haidilao IPO as Expansion Plans Brew

    China’s most famous hot pot chain appears to be on fire — but labor complaints and cultural differences could cause its global expansion plans to boil over.
    Sep 26, 2018#business#food

    SHANGHAI — With free manicures, teddy bear dining companions, and staff who spin noodles from balls of dough, China’s most famous hot pot chain, Haidilao, is about more than just boiling broth. Some fans even describe it as “Disneyland.”

    On Wednesday, Haidilao debuted at HK$17.80 ($2.28) on the Hong Kong Stock Exchange, jumping almost 10 percent during trading before finishing almost flat. Along the way, there was plenty of heat from fans and analysts alike. “We ate Haidilao all the way to an IPO!” one net user exclaimed as trading kicked off.

    “We’ll keep providing high-quality service to our customers according to our consistent standard,” a Haidilao spokesperson told Sixth Tone when asked how the company was celebrating its IPO.

    The hot pot chain now has a valuation of about $13 billion — many times more than its 10.6 billion yuan ($1.5 billion) in revenue last year. And Haidilao has even bigger dreams: According to its prospectus, 60 percent of the company’s total revenue will be used to open new restaurants.

    The company’s current lofty position is a far cry from its humble beginnings. In 1994, former factory worker Zhang Yong and his wife opened a small restaurant with four tables in southwestern China’s Sichuan province. They called it “Haidilao” — which roughly translates to “fishing in the bottom of the sea” — and offered a local style of hot pot called malatang, a spicy and tongue-numbing concoction used to cook fresh ingredients like lettuce, meatballs, and mushrooms.

    In a bid to distinguish his restaurant from other hot pot joints, Zhang began to introduce bonus services, which became Haidilao’s selling point. Nowadays, the chain has over 300 locations across the globe, including outlets in Sydney and Los Angeles, and ranks as China’s largest hot pot restaurant chain by revenue. Haidilao has even been taught at Harvard Business School as a case study of a business that inspires “a real level of loyalty” among its employees.

    Haidilao has also inspired loyalty among its fans. “When my foreign friends visit China, I always bring them to Haidilao,” Liu Yang, a 35-year-old financier from Shanghai, told Sixth Tone earlier this month as he was waiting to get a table at a Haidilao branch. Liu said he once waited for over two hours. “It’s the perfect and most interesting place to enjoy authentic Chinese food,” he said. “You can eat while watching Sichuan opera and getting your nails done.” Jiang Jingwen, a 19-year-old college student who was also waiting for a table, put it more simply: “Haidilao is home, probably even better than home — it’s like Disneyland.”

    Disneyland might be an overstatement, but there are certainly plenty of perks. Diners can now play board games, get their shoes shined, have a massage, or enjoy a free manicure while they wait. Once inside, there are unlimited snacks, and customers who dine alone are given life-size teddy bears as table mates. “I had a fight with my mom at a Haidilao branch, and minutes later the restaurant staff sent us this,” wrote one netizen on microblogging platform Weibo, under a photo of a dish with “mother and daughter forever” written on it in ketchup. Another wrote that when she once tore her silk stockings at a Haidilao branch, she was brought another pair by the waiter as she went to leave.

    “Haidilao is a perfect example of taking customer service to the ultimate,” said Sun Yanyan, the founder of Hot Pot Canjian, a WeMedia account dedicated to analyzing China’s hot pot industry. She pointed out that Haidilao’s customer service stands out in China, where there isn’t a culture of tipping and waiters are often cold, rude, and overworked. Founder Zhang has been innovative to instill family values into the company’s culture, she said.

    But Sun cautioned that there are limits to how far Haidilao can go by riding on its customer service. Although Chinese customers enjoy the restaurant’s renowned service, which involves frequent interruptions, it might be annoying for foreign customers and young Chinese diners, she said. Even if overseas customers enjoy the service, it might be harder to maintain abroad, where there are higher wages, she said.

    Hu Yang, a 27-year-old software engineer, said that he found the company’s service a bit overwhelming when he visited Haidilao’s Los Angeles branch last year. He recalled that most of the customers were Chinese. “Sometimes you just want to sit down and enjoy your food,” Hu said. “The food itself was not that unique, and it was super pricey,” he added, explaining that a meal costs $50 to $70 per person.

    An even bigger headwind facing the company is hygiene. Last year, undercover reporters found that two of Haidilao’s Beijing branches had serious cleanliness problems. Both branches were temporarily closed before reopening with live video feeds which allowed customers to see inside the kitchens. In February, a Singapore branch was fined nearly $600 and had its business operations suspended for two weeks after it was found to have unsanitary food-handling practices. Earlier this month, China’s second-largest hot pot chain, Xiabu Xiabu, showed what could happen to hot pot chains with unsavoury soup: Its value was slashed by $190 million after a pregnant customer found a rat in her broth.

    “Food safety issues are prevalent throughout the hot pot industry,” said hot pot analyst Sun, explaining that the industry is still new, and as such lacks regulation. “If hot pot is to go global, the companies and the authorities should improve both regulations and staff training.”

    Despite Haidilao’s emphasis on treating its staff and customers well, the chain has been hit with complaints about how it treats employees. A recent article from online publication Huxiu accused Haidilao of exploiting its staff by making them work excessively long hours and imposing a strict employee ranking system that compels staff to provide extraordinary customer service. In an online forum about Haidilao, former and current employees commented anonymously to describe the company as a Foxconn-like sweatshop. Haidilao did not respond to a request for comment, but its employee turnover rate is much lower than the average rate in China’s hot pot industry, according to the company’s prospectus.

    “Working here is exhausting but enjoyable,” said Tao, a Haidilao server who began working at one of the Shanghai branches three months ago. The 25-year-old wasn’t willing to be identified by his surname for fear of repercussions. “We don’t usually get enough hours to sleep, but the company provides dormitories and training [to help you get a promotion] if you do well.”

    Despite the labor complaints, Sun the hot pot industry analyst remains optimistic. “It’s easy to build the hardware of a restaurant, but it’s hard to win people’s hearts,” she said. “Corporate culture will always be a problem for big companies, and even as a 24-year-old hot pot chain, there’s a lot for Haidilao to learn.”

    Editor: Julia Hollingsworth.

    (Header image: A face-changing artist performs at a Haidilao hot pot restaurant in Hong Kong, Sept. 22, 2018. Anthony Kwan/Bloomberg via Getty Images/VCG)