Chapter 1: The Hot Pot That Changed Everything - A Founder's Story

In the chill of a Sichuan winter in 1994, smoke from countless hot pot restaurants curled into the gray sky over Jianyang, a small city whose claim to fame was its fiery cuisine and even fiercer local pride. On a modest street corner, beneath a peeling red sign that read “Hai Di Lao” — a name borrowed from a popular Mahjong term meaning “high sea” or, as some would later interpret, “to go all out” — five individuals stood amidst the clatter of pots and the hiss of gas stoves, their breaths visible in the cold air, their futures uncertain. Zhang Yong, a former tractor factory worker with sharp eyes and a quieter demeanor than his partners, adjusted his apron and surveyed the empty dining room. Beside him, his wife Shu Ping checked inventory lists; Shi Yonghong, the pragmatic accountant, fretted over the day’s meager receipts; Li Haiyan, responsible for the kitchen, stirred a pot of broth with a weary arm; and Wang Yan, the front-of-house manager, practiced a smile that didn’t quite reach her eyes. They were not chefs, nor were they seasoned restaurateurs. They were dreamers, each having pooled their savings — a total of about 8,000 yuan (roughly $1,000 USD at the time) — to open a small hot pot eatery that, they hoped, would be different. Different how? They weren’t sure yet. All they knew was that the traditional hot pot joints they’d frequented were often loud, smoky, and serviced by weary staff who seemed to care little beyond collecting the bill. There had to be a better way to feed people, to make them feel welcome, to create a place that felt like a warm hearth on a cold night. What none of them could have predicted was that this humble beginning, fraught with mistakes and near collapse, would sow the seeds of a service philosophy so powerful it would eventually redefine an industry and spread across continents. This is the story of how a simple, almost accidental, insight — *care for your employees, and they will care for your customers* — was born not in a corporate boardroom, but in the steam-filled back alley of a struggling Sichuan restaurant. It is a story of how a culture was first stumbled upon, then deliberately cultivated, and ultimately systematized into a legendary code that would become the soul of Hai Di Lao.

The Founders: Dreams and Determinations

To understand the philosophy that would emerge, one must first understand the people who forged it. Zhang Yong, born in 1968 in Jianyang, was not the stereotypical fiery Sichuanese. Described by early employees as reserved and observant, he possessed a deep empathy that often manifested in quiet acts of kindness. Before embarking on this venture, he had worked at a local tractor factory, a stable but unfulfilling job that offered little prospect for upward mobility. The economic reforms of the 1980s and early 1990s had opened doors, but for many in Jianyang, opportunity meant either migrating to coastal cities or starting a small business. Zhang Yong, along with his wife Shu Ping, chose the latter. Shu Ping, a former textile worker, brought organizational skills and a nurturing presence that would later influence the company’s familial approach to employees. Shi Yonghong, an accountant by training, provided the financial rigor that would keep the enterprise afloat during its darkest days. Li Haiyan, with a background in the food industry, handled the kitchen, ensuring the broth was consistently flavorful. Wang Yan, with her natural warmth, managed the front hall, learning quickly that service was not just about delivering dishes but about reading customers’ unspoken needs.

Their motivations were a blend of personal ambition and a desire for community. “We wanted to build something of our own,” Zhang Yong recalled in a later interview. “But more than that, we wanted to create a place where people felt happy. In Sichuan, eating is a social ritual. We believed a restaurant could be more than just a place to eat; it could be a place of connection.” This idealistic vision, however, crashed against the harsh reality of running a business with minimal capital. They rented a 400-square-foot space with leaking ceilings and an unreliable gas supply. The furniture was secondhand, the tables scarred from years of use. They couldn’t afford a professional chef, so Li Haiyan spent endless hours experimenting with broth recipes, balancing the numbing spice of Sichuan peppercorns with the heat of dried chilies, the umami of beef bones and the fragrance of dozens of herbs. The early days were a cycle of hope and despair. On opening day in April 1994, they served just four tables. The next week, they sometimes had as few as two customers for lunch. The partners took no salaries, surviving on a single meal a day, often sharing a simple bowl of noodles. The stress was palpable. Arguments flared over menu pricing, over whether to cut corners on ingredients, over how to attract more patrons. One evening, after a particularly slow day, Shi Yonghong spread the ledger on a wobbly table and sighed. “We’re losing money every hour we’re open. Maybe we should close.” Zhang Yong looked around at the faces of his partners — the exhaustion, the flicker of defeat. “We came here to build something,” he said quietly. “Closing now means we never even tried.” That stubborn optimism, coupled with a refusal to give up on each other, would become a foundational trait of the company’s culture.

The First Restaurant: A Rough Start

The physical space of that first Hai Di Lao was a study in minimalism and makeshift solutions. The dining area was divided by low partitions into cramped booths that offered little privacy. The ventilation was poor; the air was perpetually thick with the smell of chili oil and sweat. The kitchen was a narrow corridor where Li Haiyan and two assistants moved in constant, perilous proximity to open flames and boiling pots. There were no uniforms; staff wore their own clothes, which quickly became stained with grease. The most glaring deficiency, however, was in the service model. In the early 1990s, the hot pot industry in Sichuan was highly transactional. Waitstaff were typically low-paid migrants with little training. Their primary responsibilities were to take orders, deliver ingredients, and clear tables. Politeness was optional; efficiency was measured by the number of tables turned, not by customer satisfaction. Tips, while not officially sanctioned, were often expected and could lead to preferential treatment — a extra scoop of premium meat for a generous tipper, a slower refill for someone who didn’t tip. This created an environment where service was inconsistent and often begrudging.

Zhang Yong and his partners, lacking experience, initially fell into this pattern. They hired whoever was available, often fellow villagers looking for any work. Training was nonexistent; new hires were shown the menu and pointed toward the kitchen. Unsurprisingly, service was erratic. Some customers received attentive care; others were ignored for long stretches. Complaints about cold soup, missing items, or rude staff were frequent. The partners tried to compensate by working longer hours themselves. Zhang Yong would often bus tables, Shi Yonghong would man the cash register, and Shu Ping would help in the kitchen. But their efforts were band-aids on a deeper wound: the team was disengaged, unmotivated, and saw the restaurant as a temporary pit stop, not a career.

The financial strain was relentless. Rent, ingredients, utilities, and the meager wages they paid ate up every yuan of revenue. There was no money for marketing; their only advertising was word-of-mouth, which, given the service quality, was often negative. “We were dying a slow death,” Li Haiyan later admitted. “Every day we wondered if the next day would be our last.” The partners’ relationships were tested to the breaking point. They argued over whether to lower food quality to cut costs, whether to extend operating hours to catch after