Hai Di Lao, a successful Chinese hot pot restaurant chain featuring waiters who swing 10-foot-long noodles around tables, tries to make the jump to the U.S.

May 21, 2013, 6:49 p.m. ET

Chinese Hot Pot Chain Hai Di Lao Makes Move to U.S.

By LAURIE BURKITT

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A Hai Di Lao employee, near right, performs a ‘noodle dance’ at a table of diners at a Beijing branch of the restaurant.

If P.T. Barnum had ever opened a restaurant, it might look a lot like Hai Di Lao, the popular chain of 75 Chinese eateries planning its first foray into the U.S. market this fall. Talk about a three-ring circus: Diners pass the time in the waiting area with Internet terminals, board games and kids’ toys. They can nibble on unlimited free snacks. Or kick back for a shoeshine, manicure or hand massage. In the dining room, patrons wearing full-size aprons provided by the restaurant lean together over the boiling caldrons embedded in each table, dropping morsels of uncooked meat, fish, vegetables or tofu in a spicy steaming broth, then dipping them in flavorful sauces. On special holidays, magicians in colorful, traditional masks perform tricks. Patrons order using iPads. Periodically, a server breaks into the restaurant’s signature Olympic-style “noodle dance.”

Such showmanship, along with service, has set Hai Di Lao apart in China’s burgeoning restaurant landscape and has distinguished it from competitors that also sell hot pot, the traditional communal cuisine that originated in Mongolia centuries ago. Spicy versions emerged from the southwestern city of Chongqing and expanded in neighboring Sichuan province and then across China. Hot pot is particularly popular with groups of young people and families. The act of pulling food from the caldron lends to the chain’s name, which in Mandarin means “fishing in the bottom of the sea.”

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Patrons waiting for a table pass the time with Chinese checkers and snacks.

Owner Zhang Yong, who launched Hai Di Lao in Sichuan in 1994 and opened his first international branch in Singapore last year, hopes the touches that established his brand in China will also pave the way for his first U.S. outpost. It is scheduled to open this September in the affluent Los Angeles enclave of Arcadia. Hai Di Lao has the potential to do for Chinese cuisine what Benihana Inc.—famous for its hibachi-style restaurants where chefs prepare food in front of guests—did to boost Japanese food in the U.S. in the 1980s, said Shaun Rein, managing director of Shanghai-based China Market Research Group.

Only in the past several years have Chinese companies significantly embarked outside the country. But most have centered on sectors like energy and manufacturing. Mr. Zhang is one of the few who have gone after consumers.

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A magician in traditional garb performs at the restaurant.

“One great thing about Americans is that they are a very curious group of people,” said Mr. Zhang.

In China, every Hai Di Lao employs a handful of “noodle masters,” who train an average of four to six months before starting to perform their dance in the middle of the dining room. They stretch foot-long wads of dough into at least 10 feet of slender, ribbonlike noodle by whipping the center out like a jump rope and rippling and swirling it through the air like the ribbons twirled by Olympic rhythmic gymnasts. Often, the dancer flings the dough over customers’ heads as they squeal and clap, before folding it with a flourish and dropping it in the broth.

Another offering Hai Di Lao hopes will attract American attention: a private “cyber” dining room outfitted with two giant flat screens, a sort of large-scale Skype-while-you-slurp concept initially rolled out last year to allow businessmen to replace long plane rides between Beijing and Shanghai with virtual dinner meetings. For a total of $65 per hour, 12 guests—six in each city—meet and eat via private screening rooms. Mr. Zhang says it hasn’t been as popular as he thought it would be, but he enjoys having the option for guests.

Hot pot itself isn’t totally foreign to the U.S. market. Yum Brands Inc., YUM -0.40%which owns KFC and acquired Chinese hot-pot chain Little Sheep in 2011, already has a dozen outlets in the U.S. They are predominantly in areas with high Chinese populations, like Flushing, N.Y. According to the most recent census, Arcadia, Hai Di Lao’s new U.S. home, is more than 50% Asian.

Tong Xin, a 22-year-old college student in Beijing, once arrived at Hai Di Lao after getting caught in the rain.

“They took one look at my soaking sneakers, offered me slippers and somehow managed to dry my shoes out by the time I left the restaurant,” said Ms. Tong. She says she eats at the chain about once a month.

The staff doles out a steady stream of hot towels and other niceties: hair elastics to longhaired customers (to prevent hair from falling in food), eyeglass wipes to the bespectacled (all that steam can fog one’s vision) and plastic bags to phone-toting eaters to protect mobiles from getting messy. Unlike at many Chinese restaurants, patrons don’t have to yell out for menus or checks. In the restrooms, they have access to an array of free perfumes and lotions.

Wait lists for tables on weekends average 50 to 75 names in peak traffic times. Like many customers, Zhao Xiaoyi, a flight attendant in Beijing, is willing to wait for a full hour, playing chess and snacking on cherry tomatoes and animal crackers. “It’s absolutely worth the wait,” Ms. Zhao said.

Hai Di Lao’s 75 outlets made more than a 10% profit on 3.127 billion yuan ($510 million) in revenue in 2012, up 54% from a year earlier, Mr. Zhang said.

The entrepreneur is well aware that not every trick in his playbook will work for the U.S. market. Manicures in restaurants aren’t likely to pass muster with U.S. food-safety inspectors. Costs for amenities like hot hand-towel service and dancing wait staff are bound to be higher in the U.S., just as they have been in Singapore.

Some broth flavors, like the sour vegetable fish soup, may not translate, either. Mr. Zhang said he would tweak the menu to fit consumers’ tastes, but using chopsticks to eat remains a must.

He also said he would offer individual pots for U.S. customers rather than the group caldrons used in China. The reason, Mr. Zhang said, is that Western dining is more individual. “Whatever they want is what I’ll give them,” he said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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