Chinese hot pot chain HaiDiLao is set to close 300 restaurants before the end of 2021. The chain – famed for its world-class customer service – is set to rid its portfolio of poorly performing outlets that haven’t attracted enough footfall. Pressure from Covid-19 has also negatively impacted the company, as less people have been able to visit restaurants and there have been changes in consumer behaviour spurred on by the Pandemic.
What is HaiDiLao?
The restaurant chain, which was founded by Zhang Yong in 1994, offers communal hot pot dining. Diners choose from a four-pot broth in which they select from four different spice pots in which to cook their meat, vegetables, noodles and other food types.
The company underwent rapid expansion during 2019 and, as of 30th June 2020, had 868 restaurants in mainland China. HaiDiLao opened 308 new restaurants in 2019, 544 in 2020 and 299 in the first half of 2021. As of June this year, the chain had almost 1,600 locations on the mainland.
In recent years, the company has also stepped up its expansion overseas, although restaurants outside mainland China still account for less than 10% of its overall turnover. Popular stores in the US, UK, Hong Kong and Canada are examples of such outlets.
HaiDiLao’s fame has also allowed it to venture into other market sectors, such as by selling lipsticks inspired by its four-broth bases on Alibaba’s Tmall earlier this year.
Reaction to the closures
Some of the stores are set for temporary closures (up to a maximum of two years), but the company – which is floated on the Hong Kong Stock Exchange – stopped short of giving any dates for reopening. HaiDiLao’s valuation has tumbled US$44 billion this year, wiping 75% off its market valuation. Shares have since rebounded with news of the upcoming closures.
Chinese netizens on Weibo have commented that HaiDiLao should slow down its expansion and focus on what it was initially famed for, good food and excellent service. Customers have also been left disappointed by price hikes in the restaurants following the Covid-19 closures.
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