This is no ordinary restaurant. It's Haidilao. China's biggest hot pot 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. Lots of things. The restaurant even has its own boy. But are these gimmicks enough to make it a success outside of China? Haidilao has grown to over 1000 outlets across the globe, and with fresh funds from a recent public listing, the company plans to expand across the US. Manicures, shoe shining, and massages for waiting customers. How do I get a hold of that? But can a local Chinese chain restaurant take on America? This is the economics of Haidilao. So what is Chinese hot pot exactly? It's a centuries-old cuisine in China meant to be eaten communally with everyone sat around a table. Everyone will share in the same soup. Yeah, to cook all the.

all kinds of dishes, fresh dishes, to cook it together and share the food around the restaurant chain offers more than just hot pot. Besides free manicures, there's also playrooms for kids in almost every outlet with an in-house nanny. The restaurant provides waiters who also dance on request. The most important thing for us is to be very friendly because we want our customers to have a good experience in the restaurant. Haidilao's over-the-top performances and customer service set it apart from competitors and keep customers coming back, driving up revenue. Its net profit last year reached $620 million, almost double the amount in 2019 before the pandemic. Hot pot itself is not that unique a dish. So how do you make it unique? You do it by building the ambience and building the service culture that makes people want to come back again and again and again. And they've been very successful. 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 today a special day for us. It's not just about being in May. Haidilao's international operator super high listed in the US, raising nearly $53 million with shares surging more than 40% on its NASDAQ debut. 70% of that new money is earmarked for the company's global expansion. United States or American market is a very important market for us. Not only just the uh from the consumer perspective. But also from the uh capital perspective, we felt that Haidilao can also uh leverage on the experience, leverage on the, you know, the market. The company's first foray into the US 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, is a more diverse city. So it is more suitable for 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 US. 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 listing on US 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 US, for example, because as a restaurant, it couldn't get a cosmetology business permit. Quality control is another concern. The company has about 1400 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 customer and our staff. Whether franchising can or will change it, uh, 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.

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

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