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his past fall was pretty hectic for Zhang Yong. His popular restaurant company, Haidilao, was entering the public stock market, and he was also determined for the business to keep up its frenetic growth. A second Hong Kong location of Haidilao was debuting, and shortly after its doors swung open for the first time, Zhang dropped in for an inspection. As he walked through, servers and cooks rushed out to meet him, eager to greet Zhang da ge, or “big brother Zhang.”
“Putting faith in my staff has paid off for me,” he says. “Giving them responsibility and autonomy is how you show trust.”
All the trimmings for a Haidilao hot pot.Graham Uden for Forbes
Haidilao serves hot pots, basins of boiling broth in which diners cook their own meat and vegetables tableside. The experience is communal, like roasting marshmallows around a campfire, and it is ubiquitous in China, where hot pot restaurants crowd streets. What has made Haidilao a hit—with revenue now passing $1.5 billion—has more to do with its ambience than its selections of sole, abalone or crispy, Sichuan-style fried pork.
Zhang, 48, has made the company famous for its high-touch service and installed a carefully structured corporate culture that continually funnels well-trained employees throughout his ever-growing Haidilao empire. It now has 370 locations in China, Seoul, Singapore and America (in New York and Los Angeles), up from 112 in 2015. And with Haidilao’s stock faring well since its September IPO, Zhang, the company chairman, is a billionaire (net worth: $6.5 billion) along with his cofounder wife Shu Ping ($1.7 billion). And Zhang’s mindset for the business is firmly in place. “It’s better to scale fast and be everywhere instead of having a single towering presence,” he says.
Haidilao began as a four-table cafe that Zhang, a high school dropout, opened in rural Jianyang, where he’d enjoyed little advantage growing up. “Any kindness I was shown left a great impression on me,” he says, and he got that from grandparents, often through food.
Serving meals became his own calling. “I didn’t have the technical knowledge or capital to do anything else,” he says. He often spent the night in his first restaurant on a metal foldaway bed. His most painful memory was breaking a $100 aquarium he had saved up for to display fresh seafood offerings. (Haidilao means deep-sea fishing or, literally, “scooping the bottom of the ocean.”)
Three friends helped with seed money, but he ran the place. “I personally made sure that any guest who came through my door would return,” using discounts and free snacks but also taking customer feedback seriously. He also kept his partners close. The other two cofounders, Shi Yonghong and Li Haiyan, a married couple, are also now billionaires, and Shi remains an executive director at the company.
At Haidilao today the service is impeccable. And expansive. Restaurants offer complimentary tableside manicures and smartphone detailing. Selfie printouts are standard, and some restaurants will gladly bring out a bed to smooth a diner’s cranky baby. The particular services offered in each location are left up to the manager.
The company empowers its store managers, or shifus, and rewards them with roughly 3% of the restaurant’s profits. When a shifu takes on a new location, he brings a third of his restaurant’s staff with him, leaving his apprentice behind as the new shifu there. Alternatively, an apprentice can apply to run a new location with the backing of his shifu, in which case, the shifu will get a cut of the profit from the new location. Promotions come only from within.
Zhang Xiaojun, 32, is a classic product of Haidilao’s upward ladder. He started with Haidilao 15 years ago bussing tables in Zhengzhou, the capital of Henan Province, and has rotated through six markets, taking on larger restaurant roles. After being bumped up to foreman in Tianjin, he became floor manager in Shenzhen. He now oversees both Hong Kong locations.
Like most of Haidilao’s hires, Zhang Xiaojun came from a restaurant’s immediate vicinity and had few formal credentials. He had to pass through ten posts as a mentee before his shifu could put him in a supervisor slot. (Shifus bear the financial burden of the training if their mentees wash out.)
Haidilao’s expansions are a function of hiving off talent. A Haidilao manager can open new restaurants but usually in the home province. Only apprentices who’ve achieved A ratings twice a year are qualified to expand outside their region, as in Zhang Xiaojun’s case. Mentors, meanwhile, are motivated to identify talent as they share a higher percentage of profits from their apprentices’ restaurants than from their own.
“If I didn’t make the decision to join Haidilao when I was 17, I would probably still be farming in my hometown today,” says Zhang Xiaojun, now a married father of three. “Joining Haidilao after junior high changed the fate of three generations for the better: myself, my parents and my children.”
Haidilao has rapid rollouts down to a science. New locations break even within one to three months. How does Haidilao achieve that? Partly with the help of proprietary artificial intelligence software to improve site selection. An algorithm screens targets by population density, commercial opportunities, nearby eateries and nightlife venues such as karaoke bars. Other considerations include the reputation of the real estate developer and accessibility to public transportation. Lee Theatre Plaza, in the busy Causeway Bay area that attracts many mainland tourists, emerged as the top choice for Hong Kong island. This is the just-opened site—Hong Kong’s first was in Kowloon’s Yau Ma Tai. (The eight restaurant closures that did happen in the past four years, Zhang Yong says, stemmed from changes in local zoning and commercial building codes.)
The AI software helps manage inventory by measuring table-turnover rate patterns, and consumption trends plot supply needs. It also keeps a watch on the levels of ingredients like lamb sourced from Inner Mongolia and New Zealand.
Even as the company grows—Zhang pictures doubling its size—he is adamant about one thing: “Haidilao won’t change the rhythm that it does things...We will keep doing what we did before.”
Reach Pamela Ambler at pambler@forbes.com. Cover image by Graham Uden for Forbes.
https://www.forbes.com/sites/pamelaambler/2019/01/28/meal-and-a-manicure-inside-a-billionaires-boomingand-unconventionalrestaurant-empire/ 2019-01-28 11:00:00Z
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