Hot pot originates from Sichuan, China. Typically, hot pots involve cooking lamb, beef and all kinds of seafood and vegetables in boiling water, seasoning it with herbs and then eating them with dipping sauce. There are so many types of hot pot, yet customers visit Hai Di Lao for many different reasons, including the “unique spicy taste of Sichuan” and its “friendly service.” There might be nothing special about it, really. Being a country famous for its food, China has an enormous food industry and a well-developed and competitive market for hot pot.

When you search for ‘hot pot’ on Baidu, China’s version of Google, it returns more than 1 trillion results. Even if you narrow it down to ‘Sichuan hot pot,’ the number still comes to almost 10 million. This is not surprising, considering that the Chinese restaurant industry reached KRW 400 trillion in size as of 2013, with the hot pot market maintaining a high annual growth rate of 20%, with the market size set to reach KRW 34 trillion in 2015. By comparison, the size of the Chinese C&T market was KRW 29 trillion (Source: The Korea Economic Daily) and Korea exported KRW 1 trillion value of C&T products from January to August 2014 (Source: Korea Customs Service). Although direct comparisons are difficult to make due to the different base years used in the statistics, you might be able to see from these numbers just how huge the Chinese hot pot market is. There are a countless competitors in China. While it is not able to estimate the national scale due to a lack of precise statistical figures, the capital city Beijing is said to already have more than 4,000 hot pot restaurants.

If so, what made ‘Hai Di Lao’ so special?

Consumers wanted to enjoy the kind of hot pot that was rich in ingredients and sauces. However, Xiao Fei Yang kept focusing on fresh lamb meat, selected ingredients and implemented a ‘no sauce’ policy. The result was it ended up being acquired in 2011 by Yum! Brands, a US fast food giant that also owns KFC stores. Yum! Brands aimed to target the Chinese food service industry for its high-growth potential, with the acquisition a way for it to diversify its business. Yet, Xiao Fei Yang has since experienced a crisis with a drop in net profit of 20% since 2011. While you can still find Xiao Fei Yang stores dotted around China because of their phenomenal past success, they have long since lost their shine.

Now let us find out what made Hai Di Lao so successful. I’m sure they must have a special secret recipe, but since introducing new food is not the purpose of this column, I'll concentrate on other factors besides taste.

Hai Di Lao instantly attracted Chinese people. Hot pot does not require any special skill or method to cook. The secret to its success, then, lay in its management policy: ‘how to delight customers.’ According to an analysis from Beijing University School of Management, Hai Di Lao is said to focus on service in everything it does as a way to differentiate itself amid the competitive hot pot market.

In the early days, one customer visited the store in dirty shoes after farm inspections. One of the employees cleaned his shoes without thinking any more about it. Word of this spread, though, resulting in a shoeshine service being offered at Hai Di Lao. Now, they provide the service to waiting customers.

There is more. Hai Di Lao was the first to introduce disposable plastic bags for cell phones, which you can now find at any restaurant. To protect cell phones and hair from stains while eating hot pot, they provide a plastic bag, with a hair tie offered to women with long hair. In addition, they set up board game tables, offer complimentary fruits, snacks and drinks, and provide nail care service for customers who are waiting.

Hai Di Lao’s service doesn’t stop there. The sanitary condition of their restrooms rivals that of any hotel, which leads to a positive customer surprise. Forbes, the US magazine, advised that anyone who wants to learn customer service in China should look at Hai Di Lao.

Some of you might feel disappointed with Success Principle #1 and #2, because those kinds of services can be easily adopted by anyone. I admit that they are a bit unusual, rather than revolutionary. However, Hai Di Lao’s ‘people centered management’ is genuinely unique.

As Hai Di Lao became famous, many restaurant brands started to offer similar services. However, there was one thing no other business can imitate: employee loyalty. As academics at Beijing University noted:

“A company can standardize service to ensure consistency, but as individual customers have different needs and conditions, it is impossible to standardize one-on-one service. Therefore, the success of the service depends on the attitude of individual employees. This is highly related to Hai Di Lao’s happiness management, which moves employees’ heart.”

Hai Di Lao already has more than 7,000 employees. Whenever it hires new employees, they keep the tradition of treating new hires’ family to a courteous dinner at Hai Di Lao before employee training begins. Who would hate a company that expresses the deepest gratitude to the employees’ family through such a warm reception? It’s a way of saying thank you for allowing them to work at Hai Di Lao. Meanwhile, since most employees are migrant workers to the city, the company arranges dormitories within a 20 minutes’ commute and the place is equipped with facilities for their convenience, such as air conditioning. They also choose high-quality uniforms and shoes to reduce employee fatigue when having to stand all day. That’s not all: they also provide travel vouchers to the parents of the best employees.

Hai Di Lao’s CEO, Zhang Yong believes that, just as employees are closest to the customer, they should work happily in order to be able to make customers happy. Therefore, while other competing brands focus on increasing the number of stores, Hai Di Lao puts greater emphasis on raising customer awareness through service experience. (以夸张式服务成为中国最知名的火锅品牌)

Where did this management principle originate and how did it become so successful? The answer is simple: ‘people centered management.’

“As a matter of fact, we don’t have a lot of stores in China (101 stores as of November 2014). But our customer awareness is quite high. The services we offer are impressive, too. The most important thing, however, is that we provide boundless services to our employees. Hai Di Lao’s management principle is ‘people centered.’ Our goal as a company is to make our employees happy.”

“The starting salary is not so big. It begins at 2,500RMB (KRW 430,000) and increases to 7,000RMB (KRW 1.2 million) two years later upon promotion. However, such a moderate rate of increase cannot be the reason Hai Di Lao has an employee turnover of just 8%, compared to the food service industry average of 40%.”

What does he think is the key of 8% turnover? The CEO revealed that it’s because they provide childcare expenses to the parents of employees. Most employees come from the countryside and leave their children with their grandparents. So, the company introduced this policy once they saw how customer service was affected by employees worrying about family care. The actual amount is not so large. However, this small investment leads employees to trust the company and the value of the investment is reaped several times over in terms of greater management effectiveness.

What Hai Di Lao takes the biggest pride in is not the taste of its food or its quality of service, but its employee-centered corporate culture. The CEO has great affection for his employees. As people from the countryside constitute a high percentage of all employees, he even established Hai Di Lao University to give them the chance to achieve their dreams through education. He is willing to invest in under-privileged children who are increasingly missing opportunities, as the gap between the city and the countryside widens. This seems to be related to the fact that he spent a poor childhood himself in the countryside. When he first started the business, he suffered a loss of starting capital on three separate occasions and came to the brink of bankruptcy. What enabled him to survive in business was the congenial spirit shown by employees. Thanks to them, he managed to revive the business and reached where he is today. While he works, he always keeps in mind his appreciation for his employees and rewards them accordingly.

Hai Di Lao is considered more successful than Xiao Fei Yang, which boasts 700 stores. Let me finish up this article with the CEO’s answer when asked what the secret of his success is:

“I’ll focus on employee satisfaction, even if it means opening less stores. That is the way you can meet more customers.”

(“我宁可店少一点，把员工照顾好一点，这样消费者才会多一点”)