Journal of China Tourism Research

ISSN: 1938-8160 (Print) 1938-8179 (Online) Journal homepage: />
Hai Di Lao Hot Pot: From Employee Stimulation to
Service Innovation
Chen Chen, Huawen Shen & Daisy X.F. Fan
To cite this article: Chen Chen, Huawen Shen & Daisy X.F. Fan (2015) Hai Di Lao Hot Pot: From
Employee Stimulation to Service Innovation, Journal of China Tourism Research, 11:3, 337-348,
DOI: 10.1080/19388160.2015.1082526
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Published online: 25 Sep 2015.

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Journal of China Tourism Research, 11: 337–348, 2015
© 2015 Taylor & Francis
ISSN: 1938-8160 print / 1938-8179 online
DOI: 10.1080/19388160.2015.1082526

Hai Di Lao Hot Pot: From Employee Stimulation to
Service Innovation

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海底捞火锅：从员工激励到服务创新
CHEN CHEN
HUAWEN SHEN
DAISY X.F. FAN
The management of Chinese restaurant chains has for some time followed the western
model while accommodating Chinese customers. The new Hai Di Lao Hot Pot
Restaurant chain has established its own management style, pioneering chain catering
management to help the Chinese restaurant industry establish a professional image,
explore a local management model, and maintain high standards of food safety. The
objectives of this case study are to introduce the Hai Di Lao managerial strategy,
investigate the secrets of its success from a human resources management perspective,
to explore its innovative service, and to assess why it has inspired both marketers and
the catering industry. The results show that human resources management can change
employees’ behavior and emotional states by addressing a wide variety of needs. In
addition, attention to service quality can improve customer satisfaction and retention.
KEYWORDS. Hai Di Lao Hot Pot Restaurant, service quality, service innovation,
customer satisfaction

中国连锁餐厅的经营已有一段时间跟随西方的模式，并同时满足国内客户。海
底捞火锅餐饮连锁店已建立其管理风格，并开拓连锁餐饮管理，帮助中国餐饮
业树立专业形象，探索当地的管理模式，及保持高标准的食品安全。本案例的
目的在于引进海底捞火锅店的管理策略，从人力资源管理角度探讨其成功的秘
诀，探索其创新的服务，并评估它因何激发营销人员和餐饮业界。研究结果显
示，通过处理员工各样需求，人力资源管理能改变员工的行为和情绪状态。此
外，重视服务质量也能提高顾客满意度和忠诚度。

关键词: 海底捞火锅, 服务质量, 服务创新, 顾客满意度

Introduction
China has a long history of serving traditional food, an activity which has both rich cultural
connotations and enormous intangible value. As China’s society and economy develop, so too is
At the time of writing this paper, Chen Chen was a doctoral student at the School of Hotel
and Tourism Management at The Hong Kong Polytechnic University, Hong Kong SAR, China.
He is currently a lecturer at Department of Tourism, Xin Zhou Teachers University, Shanxi, China
(E-mail: ).
Huawen Shen is a Lecturer at Faculty of International Tourism and Management, City University
of MACAU, MACAU, SAR (E-mail: ).
Daisy X.F. Fan is a PhD student in the School of Hotel and Tourism Management at The Hong
Kong Polytechnic University, Hong Kong SAR, China (E-mail: ).

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its catering industry experiencing rapid growth, with a profound impact on lifestyles. The sales
volume for China’s restaurant industry reached a record of $444.8 billion in 2012, employing
12.08 million individuals (Ministry of Commerce of the People’s Republic of China
[MOFCOM], 2012). It is known that service quality can have an impact on customers’
behavioral intentions, enabling firms in the service industry to secure a competitive advantage
(Berry, Carbone, & Haeckel, 2002; Cronin & Taylor, 1994; Hernon, Nitecki, & Altman, 1999).
However, it is also well documented that restaurants have the highest staff turnover of all service

industry firms in China, with a figure of 127% (overall) and 31% (management) (MOFCOM,
2012). Therefore, gaining competitive advantage in the catering industry means not just outperforming other firms, but also identifying how to motivate employees and offer better
customer service.
Founded in 1999, the Hai Di Lao Hot Pot Restaurant is famous for its customer-oriented
attitude and attentive staff. This case study examines in detail how “treating employees like
human beings” is so crucial to Hai Di Lao’s success and evaluates its service quality from a
customer perspective. It does so through a combination of participant observation and textual
analysis of over 20,000 online reviews. The rest of this article is organized into four sections.
The first of these sections provides a brief overview of the literature in service quality and
discusses its relationship with customer satisfaction. The sampling and data analysis methods
are described in the following section, followed by the presentation of results evaluating both
internal and external (customer-oriented) service quality. Finally, the paper discusses future
challenges for the firm in this case study.

Literature Review
Service Quality
In the early 1980s, the manufacturing industry as a whole implemented Total Quality
Management (TQM) and similar approaches (Kim, 2011). A large number of studies have
examined service quality in the hospitality industry and several models have been developed to
conceptualize the construct (Cronin & Taylor, 1994; Kim, 2011; Parasuraman, Zeithaml, &
Berry, 1985). Unlike in the manufacturing sector, service quality has been developed into a
unique concept in the service context, based on models of consumer behavior (Kim, 2011). By
placing emphasis on customer satisfaction, service quality can be defined as the difference
between customers’ expectations of the service and their perceptions of the service actually
received (Zeithaml, Berry, & Parasuraman, 1988). Lovelock and Wright (2002) show that
service delivery in the hospitality industry involves a lot of interaction among customers,
employees, and facilities. Customers are often involved in the service, so a distinction needs to
be drawn between process and outcome. One of the challenges for service industry managers is
to balance the need for routine and standardization with the need to treat customers as
individuals. Berry et al. (2002) suggest that service quality is critical to business success or

failure, which is rarely concerned with only one aspect of service but with the whole package.
Offering products or services alone is no longer enough; organizations must provide their
customers with satisfactory overall experiences (Berry et al., 2002). In addition, positive
employee attitudes promote stronger customer loyalty; thus, companies must attract and
keep the best employees and oversee their long-term development (Briggsa, Sutherland, &
Drummond, 2007).


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Customer Satisfaction and Service Quality Delivery
The relationship between customer satisfaction and service quality in the hospitality industry
has been examined in a number of studies (Cronin & Taylor, 1994; Oh, 1999; Tian-Cole &
Cromption, 2003). There is a broad consensus that they are different constructs (Tian-Cole &
Cromption, 2003). Service quality deals with customer satisfaction, whereas satisfaction itself is
transaction-specific and focuses on the customer’s personal and emotional reaction to the
service they have received (Oh, 1999; Zeithaml, Berry, & Parasuraman, 1996). Schneider and
Bowen (1999) suggest that satisfaction consists of two components; a service encounter and
overall service satisfaction. It has also been suggested that emotions play an important role in
perceptions of service quality and satisfaction (Dube & Menon, 1998). In the past, many
businesses selling products have been satisfied with meeting customers’ adequate expectations,
but nowadays more and more service industry companies place an emphasis on customer
satisfaction. A few service organizations seek to exceed customers’ expectations and achieve
excellence through customer delight, on the basis that the strength of the competition now
means that merely satisfying customers is not enough to retain them (Schneider & Bowen,
1999). Terrill and Middlebrooks (1996) suggest that many businesses continue to promise

exceptional service and to focus on providing better product and services, but only a few
actually deliver excellence.
Service quality involves every aspect of an organization. Furthermore, every business
has both internal and external customers (Hernon et al., 1999). Hernon et al. (1999)
suggest that paying attention to both internal and external service quality and customer
expectations will ensure that service quality meets or exceeds customer expectations,
something that is increasingly important to succeed in a fiercely competitive environment.
This combination of paying attention to both internal and external customer service
quality and identifying customer satisfaction is the focus of this case study.

Method
The overall objective of this study is to assess the management of Hai Di Lao Hot Pot
Restaurant, primarily by examining service quality (to identify the reasons for its success)
and then by evaluating service quality performance in terms of customer satisfaction. In
order to do this, the following activities were conducted.
First, a purposeful secondary research study was conducted to identify potential reasons
for the success of Hai Di Lao Hot Pot Restaurant’s products and service from the perceptive of
leadership and organization culture. A participant observation study was then conducted in
one of the Hai Di Lao Hot Pot Restaurant outlets in Shenzhen. Since customer expectations
and satisfaction as well as individual perceptions of a service are emotional responses that
change frequently at multiple levels, they are complex and difficult to measure. Participant
observation can uncover details about the service quality and enable reality to be observed
more richly by allowing the researcher to interact with employees and customers.
To complement the participant observation study, individual in-depth interviews were
also undertaken with 10 observers, guided by an open questionnaire.
Since research into the use of online comments in the hospitality industry is still in its
early stages, it makes sense to conduct a qualitative study to explore these comments.
Furthermore, a number of studies have used a similar qualitative approach to analyze an
Internet comment forum in order to identify insights about customer experience and behavior.
This study therefore also used customer reviews to examine customers’ satisfaction with Hai Di

Lao’s product and service. The sample consisted of self-selected online customer comments


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Table 1. The Screening Process and Screening Criteria for the Customer Reviews.
Screening process

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All reviews

Screening criteria
10,223 customer reviews from 4 Hai Di Lao Hot Pot Restaurants
in Beijing, Shanghai, Shenzhen, and Xi’an were obtained from
dianping.com.
10,223 customer reviews were selected based on length (>10
words) since shorter reviews cannot illuminate the customer
experience.

drawn from the specialized online review website www.dianping.com. This mechanism offers
customers the opportunity to provide their perceptions of restaurants and other service
organizations in China. The website was chosen for this study because it is one of the largest
online comment websites in China, with nearly 10 million monthly visitors (Xiao, 2013).
Moreover, online comments posted on this website are relevant to the purpose of this research.
Dianping.com allows customers to rate their overall satisfaction with the product and
service received using a 5-point Likert-type scale ranging from 5 = Excellent to 1 = Terrible.
Four Hai Di Lao Hot Pot outlets in Beijing, Shanghai, Shenzhen, and Xi’an were selected.

These constitute four metropolises in different regions of China and were chosen to
minimize bias. A total of 10,233 online comments were collected for analysis during a
six-month period from June through December 2014, as shown in Table 1.
To better understand customers’ comments about their perceptions of the service
quality, the service category was divided into four subcategories for coding purposes: (1)
core product, (2) human element of service delivery, (3) tangibles of the service escapes,
and (4) price (see Table 2).

Case Study
Background of Hai Di Lao Hot Pot Restaurant
China is known for its rich culture and cuisine; but with a population of 1.2 billion people,
patterns of food consumption have dramatically changed from meeting basic physiological
needs to becoming a lifestyle or recreational activity. The restaurant industry in China has rapidly
increased fourfold, from $109.2 billion in 2002 to $444.8 billion in 2012 (MOFCOM, 2012).
As part of this development, renowned hot pot restaurant brands continue to appear. In
addition, the concepts of quality, service, environment, and value imported by western fastfood chains have had a dramatic impact on local operators. After observing the success of
international restaurant chains in China, many local entrepreneurs have developed a growing
interest and experience in restaurant quality control and efficient human resources management within the Chinese culture. While most competitors struggle to win clients’ approval in
such a competitive environment, the Chinese chain Hai Di Lao Hot Pot is gaining popularity.
The hot pot concept is different from traditional Chinese cuisine. It allows customers
to participate in the cooking experience by offering different soup bases with a large
selection of preprocessed food options. While the hot pot is kept simmering, ingredients
are placed in the pot and cooked on the table. The cooked food usually goes with a
dipping sauce. Hot pot is one of the most popular foods in China and is typically based on
the collectivized cultural background (Huang, 2013). The story of how Zhang Yong, the


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Table 2. Factors Influencing Customer Perceptions of Service Quality.
Factor
Core product cuisine

Explanation

Authentic
Fresh
Attentive
Prompt
Neat appearance
Understand needs
Courteous
Knowledge of menu
Exceed expectations

The core product portrays the
“content” of a product
Refers to all aspects
(reliability, responsiveness,
and so on) that fall under
the domain of the human
element of service delivery

Tangibles of servicescapes

Environment
Temperature just right
Appropriate lighting

Cleanliness
Adequate parking space

The tangible factors of
service quality (equipment,
environment, and so on)
popularly known as the
servicescapes

Price

Paid what was expected Price influences customers’
overall evaluation of
Expensive
service quality and their
Paid more than expected
satisfaction on services and
products

Human element of service
delivery

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Item

Note. Adapted from Sureshchandar et al. (2002, p. 365).

owner of the Hai Di Lao brand, has managed to turn a Hot Pot restaurant into an upscale
service quality phenomenon has become very popular in the dining industry in China and

in the general society.
Founded with 10,000 RMB in 1994 in the small city of Jianyang, Hai Di Lao, whose
name roughly translates to “scooping treasure from the bottom of the sea”, has become the
dominant hot pot restaurant chain in a country obsessed with hot pot (Zhao, McFarlan, &
Zheng, 2011). In 2012, its annual turnover approached $6.6 billion and its net profit was
3.3 billion Yuan ($500 million). In 2014, the Hai Di Lao company owned 91 chains in
China, one in Singapore and one in the United States; and has over 14,000 employees (Li,
2000; Lu, 2011).
Such a legendary success can always be deconstructed into several underlying
concepts. In this case, the vital factor that has made the Hai Di Lao brand and service
successful will be analyzed from the perspectives of both employees and customers. The
brand sells authentic Sichuan-style hot pot with exceptionally good service and offers to
really spoil its customers. Long queues are common in its branches. Like most restaurants,
its labor force is composed mainly of young professionals born in less-developed suburban areas. Its entrepreneurial founder has instilled unique values and encouraged its
staff to be enthusiastic and motivated to deliver extraordinary customer service in creative
ways. Thinking about this a little differently, could this service strategy give the brand an
advantage over the competition? Can the successful example of Hai Di Lao give the
service industry any inspiration? And what are the essential drivers of Hai Di Lao’s
success?


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Business Strategy

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Hai Di Lao’s business strategy can best be captured by its employee-centered values. Its

approach to human resource management has its origins in the company’s philosophy.
Therefore, we must look at how this value took root in Hai Di Lao and how it influenced
its development. Where do the company management’s ideas come from? How are these
ideas transmitted across 90 branches? How does this influence the organization, employees, and customers? These questions are all relevant to the transfer of the founder, Zhang
Yong’s, Confucianism. In an interview with Zhang Yong, Ma (2008) states,
Hai Di Lao has imported American standards to our kitchen, which can
control the temperature of our warehouse. Hai Di Lao also uses washing
machines and has a modern distribution system. The biggest difference
between Hai Di Lao and others is how they train their employees.
As a labor-intensive field, the entry level of employees in the restaurant business is
not high; however, the high turnover rate is one of the most serious issues facing the
industry. According to a survey, the turnover rate of frontline catering employees in China
is as high as 40%, which reflects the low salary but heavy labor intensity and bad working
conditions. The job duties of frontline employees are monolithic and employees lack the
authority to make decisions. Moreover, the incentive mechanisms in most restaurants are
deficient, with a negative impact on employees’ creativity and initiative (Ma, Qu, & Njite,
2011; Qu, 1997). Like most other restaurants in China, the majority of frontline employees of Hai Di Lao come from rural areas in China and most have not received higher
education. However, its monthly frontline staff turnover rate is just about 10%, which is
far below the national average; at the management level the rate is almost zero.
Human Resource Management
Zhang Yong suggests four reasons for the low turnover rate: (1) developing a motivational
system for the workforce; (2) offering competitive compensation; (3) showing workers
that they are respected and valued; and (4) providing rewards tied to performance.
Developing a Motivated Workforce. Unlike other dining enterprises, Zhang Yong argues
that the best way to attract and keep employees is to create a company culture in which
people are treated with respect and consideration at all times (Huang, 2013). According to
the Hai Di Lao cultural precept, “the value of fairness and taking fate into your hands”,
the company not only favors employing the young and well educated, but also selects
according to essential qualities such as honesty, a hard-working personality, friendliness,
helpfulness, and so on. New employees in Hai Di Lao are required to work through a

month’s trial including 4 days of orientation to help them understand the company culture
and undergo skills training. In an attempt to motivate them and create enthusiasm, all
managerial positions are filled by internal promotions. In addition, anyone who wants to
be promoted at Hai Di Lao must rotate through other positions and receive a certificate of
approval from each of them, a move intended to guarantee that managers understand the
needs and expectations of customers and employees (Huang, 2013; Zhao et al., 2011).
Offering Competitive Compensation. In China, front of house jobs (such as waiters or
waitresses) are normally regarded as unstable and of low social status. However, Hai Di


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Lao stands out from the crowd, and its employees contribute to its outstanding market
performance by being enthusiastic and creative. They normally report high levels of
satisfaction as the company offers competitive compensation. Based on “the value of
fairness and taking fate into your hands”, Hai Di Lao retains and motivates employees by
providing better conditions and more structured payment levels than other enterprises and
providing more opportunities for career development (Hong, 2011; Huang, 2013; Ma,
2008; Zhao et al., 2011). All employees are allowed to live in rent-free apartments with
air-conditioning, Wi-Fi, washing machines, televisions, and even nannies. Those who
have worked as assistants or higher-level managers for more than six months can also
receive a subsidy for their parents. Furthermore, Hai Di Lao has a Family Care Team and
sets aside a budget of 100,000–200,000 RMB each year to help employees with family
crises and emergency needs (Zhao et al., 2011). Based on Zhang Yong’s collectivist
orientation, Hai Di Lao is viewed as a family by its employees. The principles of
impartiality, equity, fairness and justice, organizational and employee wellbeing, and

participation are embedded in ancient Chinese texts. However, Hai Di Lao has turned
these principles into practice. Taking the main characteristics of Confucianism and familybased collectivism as the main value base of Hai Di Lao ensures that employees and their
families feel cared for, respected, and trusted; and they operate as a family.
Respecting and Valuing Employees. In Hai Di Lao, the principle of interpersonal trust
strongly motivates passion and service innovation amongst employees. There is no KPI or
balanced scorecard; but in terms of Taoism it is believed that if you trust and respect
people, they will trust and respect you in return. Zhang Yong believes that employees
should be respected and trusted (Huang, 2013). Empowerment raises the efficiency of
employees’ interactions with customers in Hai Di Lao. For example, frontline employees
are granted the authority to make decisions about whether to offer free appetizers or
discounts to customers, enabling them to respond quickly to unexpected situations.
Providing Performance-based Rewards. As noted above, Hai Di Lao motivates employees
by providing better compensation and living standards; moreover, its performance evaluation system is based on customer satisfaction and employees’ passion for their work.
Assessment includes not only the service quality during the meal, but also greetings from
waiters, the ordering process, the dining experience, the post-meal service, and much
more. For instance, in order to encourage service innovation, every Hai Di Lao restaurant
compiles employees’ ideas and suggestions on a monthly basis and reports them to the
company’s creativity team. The creativity team then evaluates the ideas and selects those
which are practical for implementation. Those who proposed the ideas are rewarded with
bonuses.
Service Quality and Customer Satisfaction
Every customer is bound to have their own perceptions of what they expect from a
restaurant. As mentioned above, customers play an active role during service delivery.
Accordingly, it is important to investigate the service offered by Hai Di Lao Hot Pot
Restaurants and the effect on customer experience. There is no doubt that customer
service management is the critical factor in Hai Di Lao’s success. Therefore, participant
observation in this study focused on how staff of Hai Di Lao offer exceptional service to
their customers and how service innovation contributes to the business. The main purpose



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of the online comments analysis was to understand customer satisfaction with the chain’s
products and services.
Exceeding Customer Expectations. Customers’ perception of value and satisfaction begins
with the initial purchase and continues throughout actual ownership and the overall
service experience. Normally, the queue for a table at Hai Di Lao is long, so advanced
reservation is necessary. In general, the Hai Di Lao telephone operator is careful to ask for
every customer’s particular taste in order to facilitate good preparation. Once the customer
arrives, free parking and a free car cleaning service are available. When the customer
arrives at the restaurant entrance, he or she will be warmly welcomed by ushers who will
introduce extra services such as complimentary manicures, board games, and a play area
for children.
Once all members of the party have arrived, each will receive an apron to protect their
clothes from food stains. Extra care is taken to ensure that their belongings are protected
from food. For customers with long hair, hair bands and clips are provided to prevent their
hair from falling into the food. Guests with glasses are given a lens cleaning cloth to deal
with steam from the hot pot. On a buffet table nearby are a wide range of condiments and
sauces. All drinks come with free refills. In addition, all the dishes can be ordered in half
portions. During the observation, it was noticed that as customers ate and talked, different
servers came in and scooped away the layer of oil that gathered on the top of the soup,
gave details of the specials, and served and refilled drinks. A highlight of the menu is the
Sichuan Opera face changing (an ancient Chinese dramatic art that is part of the more
general Sichuan opera), which is performed at the tableside in front of the customer. A
customer was observed to ask the waiter for some watermelon, and after a few minutes the
waiter brought two trays of hand-cut fruit, which was a surprise and much appreciated by

the customer. After the dinner, Hai Di Lao provides two flash photographs per customer
for free.
All customers participating in the observation thought that the whole experience was
very enjoyable. Not only was the food fresh but, more importantly, the customers felt
relaxed and cared for, with consistently outstanding service. The observers, for example,
commented, “I thought that was very considerate of them!”, “I have to say, this place
really lived up to its name of providing the best service and excellence is really in all the
tiniest details”, and “we had such an enjoyable time; we had a four-hour lunch there! Yet
none of the staff ever pressurized us to leave, and it was all considerate”.
Service Innovation in Hai Di Lao. The importance of service has been widely recognized
by corporations, institutions, and governments. Service innovation is essential to create
value and maintain competitiveness. However, it is difficult for many firms to shift from
innovative concepts and process into practice. For Hai Di Lao, the reality is that it is easy
for competitors to imitate their shoe shine and nail polish stations, even if the chain is
legendary for its customer service. In China, good service is rarely found outside private
dining rooms in formal banquet restaurants. However, to maintain competitiveness,
service innovation and standardization remain important. According to the participant
observation and secondary data analysis, the founding principles of innovation in Hai Di
Lao can be characterized as having two levels: service- and firm-level innovation.
Since 2013, Hai Di Lao has been operating 24 hours a day and providing takeaway
service. Customers place orders on the phone and Hai Di Lao delivers the food, an
electromagnetic pan, an induction cooker, a wiring board and so on, to their homes,
helping customers to mix the seasoning, and then collects everything the next day. In


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terms of firm-level innovation, empowered employees are likely to be more cognitively
active and able to modify their own behaviors and attitudes towards customers. They
internalize customer feedback into their personal conduct and analyze the effects of
different behaviors on outcomes. To motivate employees’ service innovation, each Hai
Di Lao restaurant compiles employee ideas and suggestions on a monthly basis and
reports them to the company’s creativity team. The creativity team evaluates the ideas,
chooses the practical ones and implements them. The ideas are posted on the staff intranet
and follow-up assessments are conducted every three months after implementation. Hai Di
Lao creates an open-minded platform to enable employees to contribute their ideas and
suggestions based on their practical experiences. During the participant observation, it
was noted that Hai Di Lao provides a Sichuan Opera face changing performance during
the meal. When a customer orders noodles, the chef will offer a noodle-pulling demonstration at the tableside. Customers can take pictures and print them out at the restaurant.
Customer Satisfaction. It is commonly said that what is not measured is not managed.
Service quality can be used as a measure of how well the service level delivered matches
customer expectations; but it is difficult to measure due to the unique characteristics of
services: intangibility, heterogeneity and inseparability (Zeithaml et al., 1988). Customer
satisfaction alone is sufficient to generate repeat purchases. Indeed, it is a basic prerequisite in the highly competitive restaurant industry. According to Zeithaml, Parasuraman,
and Leonard (1990), customer satisfaction is measured by items related to the service,
food, and overall feeling about the experience. The intangible nature of restaurant services
makes the industry heavily dependent upon the image of companies and word of mouth
for generating repeat and recommended sales (Bowie & Chang, 2005).
Although it is essential for service providers to know and understand what customers
want, it is still difficult for them to meet these needs and deliver high-quality service. The
gap between service providers and customers still exists in practice (Wildes, 2007).
Customer satisfaction depends on how well the service received by customers matches
their expectations (Zhang, Zhang, & Law, 2014). Online user comments and reviews have
therefore become important inputs to consumer decision making as well as a means to
express satisfaction, particularly for restaurants.
The preliminary analysis of customer reviews performed for this study indicated that

most comments focused on the service received in a Hai Di Lao restaurant. Some reviews
specified the name of the waiter or waitress in order to personalize their experience and to
express their customer satisfaction when the employee had made their dining experience
unforgettable. Table 3 lists the four main thematic categories of the positive comments
posted online (Sureshchandar, Rajendran, & Anantharaman, 2002). The reviews indicated
that a large number of customers were impressed by the service quality of Hai Di Lao,
which was considered the main reason to dine there. Meanwhile, the factors characterizing
the excellent service received in the four selected restaurants were very similar to those
identified in the participant observation.
It was also apparent that customers were impressed by service that had exceeded their
expectations, and that this was more likely to motivate their emotional relationship with
the restaurant. For example, some online comments referred to having a birthday dinner
for their parents at a Hai Di Lao restaurant and being well cared for and offered special
services and gifts. This encouraged the commenter to be loyal to the brand. Some
customers preferred Hai Di Lao due to the relaxed, enjoyable, and pleasant social atmosphere created by the service. It was also apparent that customers who received service
beyond their expectations tended to provide more details about their experiences, such as


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Table 3. Customer Comments about the Four Factors of Service.

Category
Core product
(2 items)

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Human element of

service delivery
(8 items)

Tangibles of
servicescapes

Price

Item

Example quotation

Authentic; Fresh

Great taste, especially delicious mashed
shrimp wah.
Tomato pot is my favorite.
Attentive; Prompt; Neat The food is delicious, and the service is
appearance;
impeccable.
Understand needs;
Hai Di Lao has very humanized services
Courteous;
with valuable price.
Knowledge of menu; Service is still as superb as always.
Exceed expectations It is one of my favorite restaurants, and I
especially like the service here.
A waiter with glasses was always warm,
smiling, and understood our needs.
The ramen performance is attractive and

interesting.
I like Hai Di Lao since it allows me to
order half portion, and I can return the
food if it is too much.
The main reason I always have hot pot
here is due to the thoughtful service.
They are sincerely improving the
customer experience from all aspects.
Even during the waiting time, we enjoy
the service in Hai Di Lao.
Environment;
The food and service are good, and the
Temperature just
environment is also very nice.
right; Appropriate
It’s a good restaurant for family dining.
lighting; Cleanliness;
We always come and the environment
Adequate parking
is very good.
space
Paid what was
It’s a little bit more expensive than other
expected; Expensive;
hot pot restaurants, but dining in Hai Di
Paid more than
Lao is more comfortable and happy.
expected
Everything is good, except that the price
is getting more expensive.

Cheap and affordable, but always a long
queue.

Note. Based on a sample of 10,233 online customer comments about Hai Di Lao Hot Pot
restaurants located in Beijing, Shanghai, Shenzhen, and Xi’an on www.dazhong.com

what they had eaten, the waiters/waitresses’ names, a specific service that had impressed
them, their sensations and feelings, and so on. This is probably because the reputation of
Hai Di Lao’s service is such that customers attend with certain expectations, with the
legendary service mentioned in a large number of the online customer comments.


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Looking Forward
Although it is essential for service providers to realize what customers want, it is still difficult
for them to realize customer’s desirable needs. The gap between service providers and
customers still exists in practice. Hai Di Lao provides a typical example of managerial
practices that motivate employees to express enthusiasm based on the nature of their background and the organizational culture. The Chinese service industry, particularly in catering, is
fiercely competitive. While other brands are now learning from the Hai Di Lao experience,
Hai Di Lao has also prepared for its own future by expanding its market into the United States
and Singapore. It is also investing in information technology to control raw resources and
continually improving customer satisfaction. Despite having a solid staff and customer base
and focusing on innovation, Hai Di Lao’s future development will still take time and face the
pressure of competition. The demands of both internal human resources and external customer
expectations are high given the rapid expansion of the brand and risk inhibiting development,

therefore Hai Di Lao’s product and service standardization still faces challenges. Ultimately,
the success of the company depends on the performance of its employees. Nonetheless, with
increasing labor costs and more “Generation Y” entering the labor market in China, human
resources management will remain a big challenge for Hai Di Lao.

Disclosure statement
No potential conflict of interest was reported by the authors.

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