Lao Xiang Ji publishes its dish traceability report. Isn’t it afraid that its peers will copy it?

This article delves into the strategic intentions of Lao Xiang Ji’s public dish traceability report, analyzes why Lao Xiang Ji is not worried about being copied by its peers, and the importance of brand positioning in the catering industry. It guides readers to understand the deep value of brand premium and market positioning, and I hope it will be helpful to you.

In April 2024, Lao Xiang Ji released a traceability report for 188 dishes, and even attached supplier information. In other words, if someone is optimistic about this business, they can completely copy a fast food brand based on the information provided by Lao Xiang Ji.

So the question is, isn't Hometown Chicken worried about this problem? What's the reason for it to do so?

We believe that Lao Xiang Ji’s confidence comes from three aspects: one is the management capability of large-scale catering organizations, which cannot be replicated by capital alone; one is the cost advantage of large-scale procurement, which cannot be replicated in the short term by capital alone; and the most important is Lao Xiang Ji’s brand premium ability, which is its most fundamental confidence.

Because organizational management capabilities can actually be solved with money (just poach people from KFC, McDonald's, and Hometown Chicken); the cost advantage of large-scale procurement can also be solved with money (it's nothing more than enduring short-term losses, and the cost will come down after the scale reaches several hundred stores).

The only thing that money cannot buy is brand premium. Lao Xiang Ji already has the same brand premium as Haidilao, Tai Er Pickled Fish, KFC and Starbucks: it can obtain rent reductions from business district operators.
Even if you can copy all its management and products, as long as you are not Lao Xiang Ji, you will find it difficult to obtain the same rent reduction advantage. This is the real reason why Lao Xiang Ji dares to publish the traceability report of its dishes.

Competition in the catering industry is almost the most brutal in the world, with a store closure rate of over 90% within 5 years. This makes it the industry that needs business consulting the most, because it is well known that the more competitive the place, the more external consulting is needed.

Most catering entrepreneurs focus on physical products, such as store decoration, food research and development, storefront design, menu design, stock design, etc. These are of course very important, but the higher-dimensional competition lies in customer perception, and Haidilao, Banu and Lao Xiangji are well aware of this.
We call the products participating in this kind of competition cognitive products, which include the brand's marketing events, founder's views, entrepreneurial stories, customer reputation, etc. In short, it is different from physical products and belongs to the cognitive and cultural level.

The importance of this type of product is that it can help brands become the unquestionable choice of customers. Wherever the brand opens, customers will follow. It is precisely because of this attribute of bringing in traffic that business district operators are willing to give them preferential treatment of rent reduction.

Because of companies such as Xiangcunji, Laoxiangji, Banu and Zhengongfu that were the first to apply the "positioning theory" and achieve results, the catering industry has begun to pay attention to what "positioning" is. All cognitive products start with "correct positioning", and even physical products need to be redesigned based on "positioning".

A correctly positioned restaurant brand can gain at least the following three benefits: consistency in external customer perception, synergy in internal operations, and enhanced competitiveness.

1. Consistency of external customer perception

If you are both a fast food restaurant and a pub, it will be difficult for customers to think of you when choosing fast food, because Lao Xiang Ji, Xiang Nong Ji and Zhen Gong Fu are professional fast food brands.

It is also difficult for customers to think of you when choosing a bistro, because Helen's Bistro is more professional. Before these expert brands open next to you, you can of course continue to open your fast food restaurant and bistro, but if you are a brand with a little ambition, it is better to focus on one word.

Some people may say that Haidilao and Xiabuxiabu are also selling milk tea, but please note that these brands first occupied a word in the customer's cognition and then sold milk tea.

The first step to correct positioning is to first discover a valuable word and then occupy it.

When we talk about Haidilao, we think of hotpot. When we talk about Banu, we think of tripe. When we talk about Tai Er, we think of pickled fish. When we talk about Xiangcunji, we think of Sichuan fast food. When we talk about Fengmao, we think of freshly grilled skewers. When we talk about Xijiade, we think of dumplings.

The brands in front occupy the word behind, and the word behind is also the valuable word in cognition.

Correct positioning can make external customers’ cognition consistent, so when customers need these words - that is, when a demand arises - they will think of the corresponding solutions: that is, the corresponding brands.
When a brand finds, occupies and expands a word, the benefit is obvious rent reduction. Haidilao's rent cost is 4%, Tai Er Pickled Fish's rent cost is 10%, and KFC's rent cost is 2.5%.

The normal rental cost in the catering industry is 25%. The reduction in rental costs alone has brought huge profits to these brands.

Why is it that finding, occupying and expanding a word can bring rent reduction? When customers have a demand for a word, they think of a brand and will actively look for the brand, even if it is located on the rooftop.

At this time, customers become the brand's private traffic. In order to purchase this traffic, shopping malls will subsidize brands, that is, reduce or exempt rent, or even subsidize decoration after reducing or exempting rent.

They even have to sell stores in prime locations to brands at low prices, and let the brands sell them to their franchisees at a higher price. This is the internal logic of rent reductions brought about by correct positioning, and its premise is the consistency of external customer perception.

Some people ask, what about KFC? Why doesn't KFC say which word it occupies?

This is the first photo and the first advertisement of KFC when it opened in China in 1987. KFC clearly stated that it is the American KFC Hometown Chicken (it seems to have some American Country Chicken meaning).

So we should not look at what KFC did after it became successful, but what it did to become successful. Even today in 2021, no one knows what KFC is, and it still presents category information on its packaging.
35 years have passed, and KFC is still telling customers what it is. Many of us entrepreneurs may start thinking about expanding our product categories in less than 35 months.

For example, Xibei.

Now when we talk about Xibei, what is it? Northwestern cuisine? Kungfu cuisine? Oat noodles? On the one hand, customers are trying hard to pull Xibei into the position of Northwestern cuisine, and on the other hand, Xibei is trying hard to get rid of this word. Sometimes oat noodles, sometimes big bone sticks, and sometimes Kungfu cuisine, it really looks hard.

2. Synergy of internal operations

After positioning itself as a nutritious Chinese fast food, Zhen Gongfu decisively cut out fried foods. Since Country Style is a Sichuan fast food restaurant, it focuses on Sichuan-style fast food, and Shaxian snacks and other foods will not appear in the store.

20% of operations produce 80% of benefits.

After finding our own position from external cognition, the remaining thing is to focus on 20% of core operations. We once planned a small hot pot brand, Ma Xiaoxuan Health Hot Pot.
First, it is positioned in the mid-to-high-end market, getting rid of the image of traditional hot pots as dirty and messy. Second, it is focused on health-preserving hot pots, which is also an effective tactic from the front line.
We found that this generation of young people started to take care of their health early on. The twenties of those born in the 1990s and 1995s are very different from those born in the 1970s and 1980s.

Some ingredients and soup bases with strong flavors are reduced, while ingredients with health benefits such as green vegetables, black chicken, and yam are increased.

The same is true for Lao Xiang Ji.

After positioning itself as a Chinese-style community fast food, its operations are very different from those of Western-style fast food. While others open stores in the core of urban business districts, Hometown Chicken opens stores on the edge of communities.

Others focus on set meals because they want to be fast, but Homegrown Chicken does not focus on fast food because it wants to have a sense of community. Customers can choose freely in their own community and will not be deliberately guided.

Others’ seats are hard because they don’t want you to sit for too long. Others’ lights are brighter because they don’t want you to sit for too long. Others’ music is louder because they don’t want you to sit for too long.
Lao Xiang Ji adjusts the lighting, seats, and music to a comfortable level, and doesn't mind you staying a little longer. Not only that, Lao Xiang Ji also insists on serving new dishes every month, which places high demands on the supply chain system of a catering company and is not easy to achieve.

Lao Xiang Ji's service is also differentiated. Its service is not like Haidilao's, which treats customers as guests, but as family members. The relationship between them is equal, rather than a generational difference in status.

The same is true for Tai Er Pickled Fish.

After positioning itself as the Lao Tan Zi Pickled Fish, Tai Er focused on one category, with no other main dishes. The side dishes were all cold dishes that could be combined.
At the same time, we keep educating customers that Tai Er’s sauerkraut tastes better than fish, and emphasize that old-jar sauerkraut is the key to making sauerkraut fish.

Corresponding to external cognitive consistency is internal cognitive consistency.

The synergy of internal operations is caused by the consistency of internal cognition. Drucker once said that the mental resources of an enterprise are the least valued resources and the most wasted resources.

If a team thinks about pickled fish in the morning, thinks about beef noodles in the afternoon, and brainstorms about curry rice in the middle, then the mental resources of the team will be dispersed.

Not only do external customers not know what the brand is doing, internal managers also don’t know what they should do.

In fact, the key to Xibei's expansion across the country is to catch up with the trend of urban complex construction, and it was able to catch up with this trend because it focused on 33 dishes from 300 dishes. The costs of supply chain management, kitchen management, and front office management have all been greatly reduced.

We believe that the key to Quanjude's expansion across the country is to focus on one main dish.

After IBM's various segments such as software, hardware, chips, and operating systems were dismembered by expert brands, it repositioned itself as an integrated computer service provider.
For large organizations such as banks, governments, and large enterprises, it is more convenient to find a general contractor than to find Dell, Google, and Apple for services. On the one hand, it is more difficult for each expert brand to communicate with each other, and there are also information security issues.
IBM is the best candidate. The most important thing IBM did after repositioning was to break down the communication barriers between internal departments, so that the previously independent departments could achieve internal synergy. This is the value of positioning to lead strategy, and also the value of positioning to transform innovation.

Without a clear positioning outside IBM, internal departments will not be able to collaborate with each other.

3. Enhancement of Competitiveness

In this section, we will talk about the tea beverage brand Cha Yan Yue Se, which focuses on Changsha, and Ling Zhi Mei Zi Seafood Rice Noodles, which focuses on Dalian.

Once consistency in external cognition and synergy in internal operations are established, enhanced competitiveness will follow.

Cha Yan Yue Se is perceived externally as a Chinese-style tea brand. In terms of internal operations, it focuses on the Changsha market, opens stores intensively, focuses on three core products, and appropriately increases trendy products.

In terms of media communication, it deliberately creates the perception of Changsha as a city card and grafts Changsha's local culture onto the brand. For example, it will put elements of Changsha's tourist attractions, Changsha dialect, and Hunan Satellite TV in media communication and on product packaging.

Let local customers regard it as their own city brand.

The following elements - focusing on opening stores in Changsha, featuring local style, focusing on core products, and external recognition of the Chinese-style tea brand - have formed a growth flywheel, with each element forming an interconnected, mutually reinforcing and empowering effect.

The most direct effect is to reduce operating costs and achieve cost leadership. Cha Yan Yue Se can produce products of the quality of Hey Tea's 30 yuan products at a price of 15 yuan. Why? It has low management costs and is located in Changsha. It has a simple supply chain with only three core products. It has low advertising costs and Changsha people regard it as their own brand.

When the entire industry is chasing trends, it can remain calm and not be afraid of being copied by others, because you can’t copy it.

Brands that fail to understand this logic can only imitate one part of it and fail to see the complete strategic logic.

Entrepreneurs are generally anxious. First of all, they don’t know what valuable words are in the minds of external customers, and they will be led astray by the trend.

Secondly, they didn’t know how to adjust their internal operating system based on external positioning, and they couldn’t focus. After Lao Xiang Ji decided to make Chinese fast food, it gave up its previous name - Feixi Old Hen Chicken. The cost of the storefront materials was tens of millions.

The same logic applies to the Lingzhi Girl Seafood Rice Noodles in Dalian. Focusing on Dalian and seafood rice noodles, they sell rice noodles at a price lower than the cost price of their peers, and they can still make money with 12 yuan per serving.

Although it is far behind Cha Yan Yue Se in connecting with Dalian's local culture, it is enough to deal with regional competitors.

In short, we believe that restaurant brand positioning is the same as other brand positioning, which is to discover a word from the perception of external customers, then occupy this word, and then continue to expand this word.

The first step to correct positioning is to gain consistency in external customer perception, the obvious benefit of which is rent reduction.

The second step to correct positioning is consistency in the cognition of internal managers. Sun Tzu's Art of War says that those who have the same desire will win. If you want your superiors and subordinates to have the same desire, first you have to let everyone know where you are going.

The consistency of internal management cognition is the synergy of internal operations. If the difficulty of the first step is that it is difficult for entrepreneurs to have external thinking, then the difficulty of the second step is that it is difficult for entrepreneurs to focus and give up.

After Lao Xiang Ji positioned itself as a Chinese community fast food restaurant, it changed its original name and the material costs amounted to tens of millions.

The third step of correct positioning is to enhance competitiveness through consistency of internal and external cognition. After establishing an interlocking operation system, the brand is like a castle that is constantly being reinforced. It is calm enough in the face of external competition and can remain clear enough about the changes in industry trends.

Author: Zhang Zhiyu WeChat public account: Zhang Zhiyu