Entrepreneurs

How one man went from welding in a tractor factory to building a multi-billion dollar Chinese hotpot business

Haidilao CEO Zhang Yong
 Mai Shangmin | China News Service | Getty Images
Haidilao CEO Zhang Yong

Chinese billionaire Zhang Yong is a high school dropout who didn't even eat at an actual restaurant until he was 19 years old. But, nearly three decades later, he boasts a net worth of more than $3.9 billion and runs a restaurant chain with more than 300 locations around the world.

Zhang, 47, is the co-founder and CEO of Haidilao International Holding, the parent company of the Hai Di Lao chain of Chinese hotpot restaurants, where customers are served a boiling hot broth that's used to cook various meats, vegetables and noodles. Last year, the Beijing-based restaurant chain reported $1.6 billion in revenue and, in September, Haidilao raised nearly $1 billion in an IPO that valued the company at roughly $12 billion.

Zhang and his wife, Shu Ping, own 58 percent of Haidilao and, along with their other assets, the IPO gave them a combined net worth of nearly $8 billion, according to Bloomberg. That whopping valuation comes 24 years after Zhang, then in his early 20s, quit his job at a government-run tractor factory in his hometown of Jianyang to open a four-table restaurant in 1994.

As a young man, Zhang ventured out for his first trip to an actual restaurant in a rural part of Jianyang in China's Sichuan province. While the teenager normally ate at his factory's employee cafeteria, he told Bloomberg in 2017, he still came away from his first restaurant experience unimpressed with the rude staff and subpar hotpot meal.

Zhang had dropped out of high school to take the welding job at the tractor factory. But, in 1994, after getting into a dispute with his employers after being denied a company apartment for himself and his then fiancee (Shu Ping), Zhang left that job in order to open his first restaurant. He's admitted that he didn't even have a cooking background, or a strong handle on preparing the traditional Sichuan hotpot dish, he told Forbes in September.

But, Zhang had a vision of offering customers an inviting and memorable restaurant experience. Today, Hai Di Lao restaurants are known for offering customers services such as free manicures and shoe-polishing while they wait for a table. And, if you order a noodle dish, Hai Di Lao employees might perform an entertaining "noodle dance," which involves waiters dancing with long noodle strands like rhythmic gymnasts twirling a starchy ribbon.

Zhang has said that he believes in the importance of superior customer service. "I'm from the countryside, where rural people believe that if you take money from other people and you don't bring benefit to them, then you are a liar," he told The Wall Street Journal in 2013.

The formula and the food caught on with customers across China, as Hai Di Lao now operates hundreds of restaurants in its home country, along with locations in Hong Kong and Taiwan. The company is also expanding into foreign markets like the United States (where it opened a Los Angeles location in 2013), Singapore, Australia, South Korea and Japan.

Traditional hotpot restaurants have seen a surge in popularity in China in recent years, CNBC previously reported, with chains like Hai Di Lao and its rival, Xiabu Xiabu, benefiting with a surge in sales and new restaurant openings. However, both companies have also been hit with hygiene scandals, with a Hai Di Lao outlet in Singapore getting suspended earlier this year for hygiene violations. (Meanwhile, a viral video of a dead rat in the broth at a Xiabu Xiabu outlet in China caused that company's stock to lose $190 million in value at one point in September.)

Zhang attributes his company's success, in part, to the financial incentives he offers to the managers who run Hai Di Lao's locations, he told Forbes. The company reportedly offers managers a 3 percent share of their restaurants' profits, which Zhang believes serves as extra motivation for management to exceed expectations.

He also gives credit to employees for coming up with popular ideas that have been implemented across Hai Di Lao locations, such as giving customers plastic bags to store their phones so they don't fall into the boiling hot broth. (Hai Di Lao also gives hair ties to long-haired customers for the same reason.)

"If you want creativity, you have to let your workers invent and use their creations," Zhang told The Wall Street Journal.

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