Name: This $9B Chinese Restaurant Chain Wants to Conquer the U.S. | WSJ The Economics Of
Uploaded: 2024-08-16T21:01:10.000Z
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It's Haidilao, China's biggest hotpot chain worth more than $9 billion.

There's free services like manicures while you're waiting in line.

And while you're dining, there's entertainment.

The restaurant even has its own boy band?

But are these gimmicks enough to make it a success outside of China?

Haidilao has grown to over 1,000 outlets across the globe.

And with fresh funds from a recent public listing, the company plans to expand across the U.S.

But can a local Chinese chain restaurant take on America?

It's a centuries-old cuisine in China meant to be eaten communally, with everyone sat around a table.

You have to cook all the kind of dishes, fresh dishes, to cook it together and share the food around.

The restaurant chain offers more than just hotpot.

Besides free manicures, there's also playrooms for kids in almost every outlet.

With an in-house nanny, the restaurant provides.

The most important thing for us is very friendly, because we want our customers to have a good experience in the restaurant.

Haidilao's over-the-top performances and customer service sets it apart from competitors.

And it keeps customers coming back, driving up revenue.

Its net profit last year reached $620 million, almost double the amount in 2019 before the pandemic.

You do it by building the ambience and building the service culture that makes people want to come back again and again and again.

The company prepares all of its food in centralized kitchens off-site, which keeps overhead costs low.

Meat and vegetables are purchased in enormous quantities.

And the soup stocks are prepared and packaged here before they're sent to the outlets.

The strategy has worked out for the company, and now it wants to ramp up its international presence by attracting more investors.

In May, Haidilao's international operator SuperHi listed in the U.S., raising nearly $53 million, with shares surging more than 40 percent on its Nasdaq debut. 70 percent of that new money is earmarked for the company's global expansion.

The United States or American market is a very important market for us, not only just from the consumer perspective, but also from the capital perspective.

We felt that Haidilao can also leverage on the experience, leverage on the market.

The company's first foray into the U.S. was in 2013 when it opened an outlet in Los Angeles.

In the decades since, Haidilao has opened more than 20 stores across North America.

Now its second biggest international market, making up nearly a quarter of its overseas revenue.

L.A. is a more diverse city, so it is more suitable for hotpot business.

The restaurant chose not to open in Chinatown to set itself apart from other overseas Chinese businesses, a strategy it applies to all of its global ventures.

In the U.S., that's helped it to attract a cult following, including Hollywood stars.

If you open a Chinese restaurant in the States, your target is to attract more non-Chinese customers.

But appealing to American consumers may be easier than Wall Street investors.

New Chinese listings on U.S. stock exchanges slowed dramatically in 2022 because of tensions between Washington and Beijing.

Analysts say, however, that Haidilao's expansion plans defy the bubbling tensions.

Haidilao flies under the radar with politics, and that makes it a great company to grow internationally.

Most people are never going to know what is the organizational heritage of Haidilao.

People are not concerned about dropping $100 in Haidilao as compared to spending $35,000 on a BYD vehicle, which is then pitched as eliminating 50 American jobs.

There are other difficulties, however, in exporting a business that's centered on selling not just food, but a very specific restaurant experience that the staff provide.

These extravagant services can be challenging to reproduce in all its global outlets.

It had to shut down manicure services in the U.S., for example, because as a restaurant, it couldn't get a cosmetology business permit.

The company has about 1,400 outlets across the globe.

All of them are operated directly by Haidilao, unlike some of the biggest fast food chains in the world that have expanded via franchises.

The company aspires to grow into a global restaurant juggernaut, such as McDonald's and KFC.

Like its peers, Haidilao is now considering franchising its business, but only in China, and it's doing so cautiously.

Haidilao's success mainly relies on the direct communication between customers and our staff.

Whether franchising can or will change it, it is still a question mark.

Whatever direction Haidilao takes, analysts say the company's ambition for global growth comes at an opportune time.

So when we think about international expansion in the next 10 years, we're going to be looking at the rapid growth of companies from both India and China.

So Haidilao is a harbinger for what we can see for the future growth of Chinese companies internationally.

Haidilao's unrivaled customer service may have given it an edge over competitors.

But it may also slow the company's global expansion as it tries to keep replicating that experience around the world.

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This $9B Chinese Restaurant Chain Wants to Conquer the U.S. | WSJ The Economics Of

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