A Chinese restaurant company has enjoyed skyrocketing growth in the past more than three years since its inception, all the while many of its competitors lament of slowdown or even contraction in sales. Its founder is hotly pursued by MBA schools and conference organizers for lectures so that the general wonder and fervour can be somewhat abated.
His business started from an outlet of a dozen square meters and ten staff in August 2012. Now he has 45 outlets, directly owned, and a labour force of 1,500 people, in Beijing and Shanghai. "During the past three and a half years my business grew at a compound annual growth rate of 485 percent," said he, now 34. "At this speed, I should become the No. 1 player in the Chinese food service industry in five to ten years' time."
The restaurant's name is Huang Taiji (黄太吉), which sounded exactly as the venerable name for the second emperor of Qing Dynasty, the restaurateur being a native of Harbin in Northeast China, the cradle for the Qing Dynasty. He is He Chang (赫畅), boasting nearly a decade's working experience in Baidu, Google, Quna'er and some digital advertising companies before venturing into a totally new industry, but the philosophies he has learned and refined in these Internet-related companies cry out loud in how he has chosen to enter this industry and the way he runs it.
“We are so grateful for the times, which has given us such an opportunity of launching a modest tidal wave in the general transformation of the food service industry from the lowly grassroots level, and we are honoured to be a pioneer in this."
His success can be credited to a bundle of at least five tricks as follows.
1) Blue sea.First, he cut into the market with an absolutely blue sea product. He chose to produce and serve a rather obscure food product, a classic blue sea product. It is not easy to explain what his obscure Chinese snack is exactly in proper English even. Youdao Dictionary translates the product as "Chinese hamburgers". Named Jianbing Guozi (煎饼馃子), it is a thin mung bean flour-based pancake with eggs, shreds of green onion and some sauce spread out and simmered on a big flat oven, wrapped up and served steaming hot, usually by migrant people from rural areas, most commonly in Northern China.
When he opened his restaurant in a prime office building of Jianwai SOHO in Beijing's Central Business District, it created a sensation among the tens of hundreds of white-collar professionals in that area. Consumers had to queue up long outside its restaurant as it were an Apple store. By the end of that year, sales amounted to five million yuan cumulatively.
2) Social media. As an IT guru, he naturally understands the power of social media, so he has conducted aggressive and effective social media campaigns for his restaurant, and thus developed tens of thousands of followers online, who are glued to what he has to say and offer. Sometimes he drives his Daimler Benz car to deliver the snack but has made it a point of sharing this highly pompous experience on his Weibo account. A consumer forwarding his Weibo message to ten people is awarded with a free boiled egg, on the spot.
3) Preference for light assets.Foreseeing the potential limit in growth of Huang Taiji focusing only on that pancake and some supplementary products, in 2014 he incubated and created new brands: Newton (牛炖), Big Yellow Bee (大黄疯), among others, each sub-brand focusing on a different core food product or meal. In 2015 he also made equity investment into another almost equally legendary restaurant brand, "Jiaoge Yazi" (Meaning "calling over a duck" 叫个鸭子).
4) Online delivery and platform. Then he deliberated that online delivery is the way for fast growth and introduced a meal ordering platform, in the likes of Eleme, Meituan Waimai and many others, but stood apart from them by being more selective in the kinds of products to place on his platform. He terms his model as "Internet+Product", while all other platform competitors followed the "Internet+Restaurant" model, serving only as an extended arm of restaurants, paying no care to what meals it receives orders for. While selling his own products, he also signs up other restaurants onto his platform, which, on the one hand, helps bring down the cost of operating this platform, on the other hand, brings over lucrative rental-like service fees from the various star food or meal products it receives orders and delivers on behalf of their respective restaurants. Thanks to this strategy, his company, with the latest valuation standing at CNY 2 billion (USD 300 million), became cash positive in June last year when online sales rose to 55.7 percent of its overall sales. In January 2016 the ratio had further expanded to 70 percent.
The reason he wanted to start online delivery results from the opportunities mobile Internet is bringing about as he sees it. Internet enables simplification of the process of transaction to the extent that many intermediary links can be foregone, which makes reshufflling and reconstituting the cost structure possible and much gainful. In his typical He Chang-ism, he urges "immovable assets going mobile", which means that consumers can now be encouraged to make transaction and consumption at their own homes or offices, rather than in his physical outlets, but meanwhile, the physical outlets will have to take on some supportive functions for the online channel in view of the role change. In the traditional way, he would have to add more and more physical outlets to push out its sales boundary, but the corresponding cost of rent and manning them can be prohibitively high.
Some of Huang Taiji's restaurant outlets are equipped with kitchens as shown above, to put final touches to semi-processed food from external and contracted central kitchen operations in the up-stream, into final products for both in-store consumption and deliveries to both their sisterly outlets without such kitchens and more importantly, the online channel.
He chaffed at the industry's obsession with O2O, or Online to Offline. "O2O is in fact a very old concept in China. Do you remeber where you booked your hotel and air tickets from en years ago? Do you remember when you booked your film ticket and even selected your seats in a cinema three years ago? Do you remember how you hailed a taxi a year ago?" he challenged, attending an online seminar via WeChat from his smart phone with as more than 100 people glued to their phones worldwide recently, while he was in Sydney in preparation for opening his first overseas restaurant there.
He Chang (in the middle) posing in a Syney tennis match in January 2016, stealing a moment for his sport passion, away from all the hassles of preparing for the opening of his first ever overseas outlet, in Sydney.
He added that Ctrip,Gewaraand Didi as used in the above three cases were all some form of an O2O business, but these companies have all conducted their businesses differently from the traditional companies at least in one fundamental aspect, in that they started their businesses and enjoyed their fast growth by way of reverse engineering that tackles consumers' pain pionts head-on with the bold, and not to mention innovative, use of mobile Internet technologies. He Chang's progress from a restaurant to a chain to an online delivery company and further on an online delivery platform of star food and meal products from the general restaurant industry, is exactly the culmination of this strategy.
5) The necessity of specialty division and sharing. For his own company's products, he outsourced the production of the first few steps to other companies specializing in central kitchens. He also has around a dozen outlets that are larger than the "standard and usual ones" and are thus equipped with their smaller kitchens to put the final touches on the semi-finished products transported over from the third-party upstream central kitchens, selling the final products directly to consumers while also delivering the final products to their sisterly outlets without their own kitchens. The outlets with kitchens, he calls factory outlets.
He stressed the importance of sharing and utilizing resources of third-parties. Therefore, cold chain storage, transport and deliveries are shared by his own facilities as well as third-party ones.
In the middle is the poster distributed in the online conference via WeChat, just before He Chang's turn came for his speech in the late night of 27 January.
To sum up, Huang Taiji impressed me by its scalability and a self-willingness to upgrade itself against all odds to reach out to ever better and longer-term market opportunities. It is easy to go from one standalone restaurant to a chain of a few dozen, but the difficulty and complexity increases steeply when a chain restaurant wants to transform into an online delivery company, and even more so to an online booking and delivery platform.
Many restaurant companies have got stuck in one way after settling down, only to make some minor tinkering, if at all, afterwards, denying, downplaying and even resisting the tides and trends of the market as if ostrasizing were the way to immortality. Huang Taiji's proactiveness and resolve to change and iterate, in He Chang's words, "to launch revolutions against myself", which involves exerting beyond its comfort zone and is no doubt painful, is probably the most important gene for its success, underlying whatever gimmick it has taken.