Before joining Haidilao, did you know that it does not make money from products and services?

Haidilao has always been famous for its service attitude and has recently encouraged franchising. Are you ready to join in?

On March 4, Haidilao announced that it would implement a franchise model for restaurants, further promoting the expansion of its restaurant network with a diversified business model. Haidilao is a positive example in many courses: its high welfare mechanism for employees and its reputation for excellent service to customers.

He represents kindness, integrity, and traditional business values: be genuinely good to your employees, and your employees will be good to your customers, and your business will be good.

Haidilao is also deliberately promoting this business philosophy, which seems simple to learn and full of positive energy, just like the study of success.

But after all these years, we haven't found another Haidilao. The real reason why you can't learn Haidilao is that you want to become Haidilao in Haidilao's way. To become Haidilao, you definitely don't do it the way he said.

What they say is what they want you to know, and what they want you to talk about and spread. They are certainly not stupid enough to cultivate competitors for themselves.

Haidilao makes money not from services and products, but from the cognitive premium of its brand.

Someone will say, without service products, how can there be brand premium? In fact, brand positioning comes first, followed by service and products. Without occupying an advantageous position, it is impossible to become Haidilao by relying only on products and services.

If being nice to your employees and customers means you can be successful, then any loser can chase Lin Chi-ling.

1. The willful Haidilao

As a consumer, you may not be able to feel the strength of Haidilao. If you have friends who are engaged in business district investment promotion, you can understand the capriciousness of Haidilao.

You may not be able to imagine the conditions that a commercial complex requires Haidilao to move in: in addition to three to five years of free rent, they also have to subsidize decoration costs and even ensure that their daily turnover can recover their operating costs.

To ensure that operating costs are recovered means that if the cost of a business in a business district is 50,000 yuan a day and the profit is only 30,000 yuan, the business district will have to subsidize 20,000 yuan. If it is a commercial complex such as Mixc or Wanda Mall, the conditions may be more relaxed, but a substantial rent discount will also be provided.

Haidilao's capital for being willful is its love for its customers. Business districts are willing to waive rent, provide subsidies, and even pay out of pocket because customers love Haidilao.

When Haidilao opened, customers came to the business district, and other brands in the business district had traffic. In essence, the business district purchased Haidilao's traffic and then sold it to other brands. The high entry fees of other brands are actually traffic fees.

The rent cost of ordinary catering brands accounts for 20%-25% of the total cost, while Haidilao's rent cost is 4% and its profit is 10%. In other words, the rent cost saves Haidilao 20% of its cost. If Haidilao pays the same rent as its peers, its profit will be negative 10%.

Starbucks' rent costs account for 10% of its total costs, and its profit is 16% (according to Starbucks' 2018 financial report: Starbucks China's revenue was US$1.2273 billion and its profit was US$221.5 million). If Starbucks pays the same rent as its peers, based on a 25% rent cost (coffee shops are usually opened on the first floor), Starbucks will have to pay an additional 15% in costs, and its profit will only be 1%.

Fortunately, it doesn’t suffer losses like Haidilao, but a business with 1% profit is not a business at all.

Why can't you learn from Haidilao? The reason is this. Even if you copy everything from Haidilao (except the brand) - the same location, the same high wages, the same quality of ingredients - and assume that your management level is as high as Haidilao, if nothing unexpected happens, your financial report will be a loss of 10%.

Because you have to bear higher rent costs than Haidilao. Usually your management level is not as good as Haidilao, so your loss figure will be about 15% or even higher.

The same goes for Starbucks.

Let’s go back to the point at the beginning of this article: It is impossible to become Haidilao by simply providing the same or even better services and products, just like being nice to Lin Chiling does not guarantee that you can pursue her.

Your brand needs to offer something a little different.

2. The opposite of Haidilao: Banu Maodu Hotpot

Banu’s advertising slogan has changed several times:

Fight for taste!

Service is not our specialty, mushroom soup and tripe are.

The service is not excessive and everything is exquisite.

Go deep into the place of origin and select good ingredients, but it is obvious that they are standing on the opposite side of Haidilao. Haidilao's label is service, and Banu's label is product.

Haidilao's products are not bad, but Banu's approach has created a correlation effect. It also clearly defines its own category: tripe hotpot.

Focus is a good tactic. Many people think that consumers only know that I am a tripe hotpot restaurant, so what if they don’t like tripe? Why should I limit myself? This is an entrepreneur who doesn’t know how to focus.

On the one hand, Banu stood in opposition to Haidilao, and on the other hand, it subdivided the hot pot category and focused on the subdivided category of tripe hot pot. These two actions alone surpassed many of its peers.

Banu's breakthrough of Haidilao is very similar to Robam's breakthrough of Fotile. Both companies focus on a large category and clearly define themselves as the category representative. Robam has become the category representative by focusing resources on its powerful range hoods.

By focusing on economical SUVs, Haval Motors has become the world's most profitable automobile brand. It has not only broken through the blockade of domestic automobile brands, but also continued to launch an offensive against joint venture automobile brands and foreign automobile brands.

Banu continues to focus on its product positioning and has launched products such as New Zealand tripe, Hubei Qingjiang fish, wheat-flavored fried dough sticks, and sunshine hydrangea mushrooms.

Only by focusing resources on products (especially tripe) and accelerating its evolution can Banu break through Haidilao's encirclement. Otherwise, if you have tripe and Haidilao also has it (even at a reduced price), Banu will be in danger. Starbucks' opposite: Luckin Coffee and Heytea.

Starbucks' cups are green, while Luckin uses blue cups; Starbucks advocates the "third space" outside of home and office, while Luckin focuses on the "second space" of the office; Starbucks opens stores in offline business districts, while Luckin focuses on online spaces; Starbucks creates a space for person-to-person business meetings, while Luckin focuses on the consumption scenarios of corporate users.

Luckin Coffee’s slogan is even more blatantly in opposition to Starbucks:

Good coffee is actually not expensive.

Why should foreign street drinks be sold as luxury goods in China?

Do you drink coffee or a cafe?

What is the difference between Chinese coffee and American coffee?

The difference is confidence. Are milk tea shops also rivals of Starbucks? Yes. Do you have to consider competing with Starbucks when opening a milk tea shop? Yes.

Customers’ stomachs are limited, and any brand that competes with you for customer stomach capacity is a competitor. Just like users’ time is limited, when users stay on Douyin and Kuaishou for too long, they become competitors of WeChat.

When Wanglaoji became the representative of the herbal tea category, other beverages became its competitors. Many people may not realize that it was when the ready-to-drink milk tea shops represented by Heytea replaced the cup milk tea that Xiangpiaopiao disappeared from the mainstream beverages.

Haidilao can also add tripe products, and Starbucks can also put tea drinks on the shelves, but they can't do better than Heytea. Starbucks' tea drinks have very bad reviews online.

Huang Hai, an investor in fast-moving consumer goods, said:

Is it difficult for a company like Starbucks, which has a market value of 100 billion US dollars, to make a delicious drink? It's not that it doesn't want to, but it really can't. The drink is unpalatable because Starbucks' fruit tea is made from canned fruit, which is definitely not as delicious as Heytea's drink made from fresh-cut fruit.

So why can't Starbucks also use fresh fruit? First of all, cost considerations. As a listed company, Starbucks will not take the initiative to do things that reduce its profit margins. But more importantly, Starbucks' human resource structure and store design do not support it.

How should I put it? To make fresh-cut fruit tea, Heytea needs more than a dozen people to cut different fruits. The kitchen and bar area of ​​Heytea is one-fourth the size of the store.

But the 150-square-meter Starbucks store has less than 10 square meters of bar and kitchen space, which is not enough to accommodate so many people. There are only two or three people making drinks at the bar, and employees only need to learn how to use the coffee machine. Multinational companies pursue standardization of production, and the simpler the process, the better.

Whether it was intentional or accidental, Heytea had the genes to break through Starbucks' siege from the beginning. Heytea's approach should be a lesson for Banu in dealing with Haidilao's siege.

At present, the opposition between Banu and Haidilao is only at the cognitive level, and there is not much difference in internal operations. If Haidilao uses its capital power and brand advantage to block it, Banu may not be able to maintain its base.

3. Strategy comes first, then tactics can be effective

Too many of us like to replace strategic laziness with tactical diligence, and we are willing to do anything to avoid real thinking.

The core of Starbucks and Haidilao's real profitability is that they occupy a solid position in people's cognition: eating hot pot is Haidilao, drinking coffee is Starbucks, no need to think or choose.

This perception leads to the fact that wherever brands open stores, there will be traffic. In order to attract this traffic, the business district would rather reduce or exempt rent or even subsidize decoration costs, and the reduction of rental costs has further become a way for brands to make profits.

Low rents make it easier to open more stores, and more stores increase brand influence, and stronger brand power attracts greater preferential policies. When this growth flywheel starts running, other brands in the same category will have little room to survive.

The breakthroughs of brands such as Banu, Heytea, Luckin Coffee, and Blue Bottle prove the importance of strategy first. Under the guidance of the right strategy, the tactics of better products and better services can really play a role.

We can even say that when there is no correct strategy, the more diligent the tactics, the higher the probability of death.

Author: Zhang Zhiyu WeChat public account: Zhang Zhiyu