Sunday, October 14, 2012

Houcaller: the incredible success of a Steakhouse for Chinese middle class

Chinese people all dream to eat steak same as foreigners. In the recent years, steakhouses scale the Chinese market. However beef meat costs a lot...

Even though, Houcaller, a Chinese steakhouse chain achieved the incredible: offer small price steak menu. Inspirate from a western fastfood Haucaller developed and offered, a concept (decoration, environment, taste, presentation...) that perfectly suits Chinese masses.

In 2007 the first Houcaller opened in Changsha. Today the chain has at leat 6 steakhouse in Changsha. I will explain the reasons of this success and the concept imagined by Houcaller.

  • The food offer: small price set menus: 50 rmb for the customer and minimum cost for the restaurant.

The restaurant offer set menus at extremely competitive price: 39 rmb for the cheapest! (it is pork meat). For the beef menu set: 50 rmb.

When we take a closer look we realize that the ingredients don't cost anything
Let's calculate:
Steak + egg + spaghetti: 4,5 rmb

Egg: 0,5 rmb
Spaghettis:1 rmb
Chinese prefer spaghettis and it is cheaper than french fries for example
Meat: 3 rmb
Beef meat is Chinese meat + the chain buys it in bulk. The steaks are cut very thin. A piece contains 30% fat as many Chinese people like fat and eat fat in Chinese food.
Sauce is delivered in cans, Chinese (middle class consummer) prefer artificial products with more spicies.
Soup 0,5 rmb

A corn soup with jely texture as Chinese people like

drink 0,3 rmb

This is water with Chinese brown sugar.
Watch out for the waitress! She will always ask what you want to drink with the menu. The drink included in the menu set free shouldn't stop customers to order an additionnal drink.

Two slices of bread: 0,5 rmb

Chinese people follow a cliché: foreigners have steak together with bread. In order to respect this cliché, the restaurant offer two slices of Chinese bread. customers like this, especially children.

Salad at will 2 to 4 rmb

Since a few years, Chinese people like more and more salad with sauces and saisonnings. Furthermore, they worry about their health: salad is good for your health. This is one of Pizza Hut selling arguments.

Houcaller understood this and in oder to attract customers, the chain offer a salad buffet at will! This is a huge risk when menu is 50rmb and it can cost a lot! The solution: a tiny salad bowl. The salad buffet is on the first floor and most seats are on the second floor, you should therefore go down and up in order to serve yourself again.

In the end, our calculation arrives at 9rmb maximum cost for a menu sold at 50 rmb. The margin is sufficient.

But don't forget, you should also pay for the rent, the decoration, the initial investment, the electricity and the employees.

  • Houcaller reduces all its costs:

No cook. 
For the set menu, i showed you, you need to heat the bread and the soup using a micro-wave, the steak in some oven with the egg and spaghettis. 

There are not many employees in the main room and salaries are low in China. They have micros in order to communicate with the kitchen, the cash register and the different floors.
The customer should note the table number in order to pay on his way out at the cash register. The service is therefore greatly reduce inspired from a fast food and it doesn't disturb Chinese middle class customers.

  • Modern but non expensive decoration

Many lights same as in a fast food like, modern, bling bling

  • No washing up, cutleries and plates are delivered

  • All plates and glasses are made of plastic in order to avoid breaking any

  • The restaurant can attract customers from 11h30 to 2pm and from 4h30 to 7pm. 
You should therefore should free seats quickly. How is it done?Chairs are confortable. However in order to have a fast customer turn over, they are especially low (and even for Chinese people who are relatively small).
After 30 minutes seated you want to stretch your legs. Of course customers don't undertand why they want to stretch their legs.

It is vicious but it works. Successful businesses are always vicious.

Waiting queue around 5h45pm.
For you I took many risks (the employees don't like it when you take pictures). But I believe that should have the right to share the knowledge and create from this basis. And this is even more true for places with high frequentation: commercial centers, shops, restaurants... I think that it is totally unfair to forbid pictures.

All is done in order to encourage consummer to buy more.
A wine bottle, a drink, another food. I even thought that decoration was sponsored by wine suppliers. To tell the truth, the steakhouse chain just emphazise on Chinese customers western clichés for its decorations: eat a steak together with a wine bottle. The billboards shows typical customers in order to remind this.

  • Customers like the offer

As for the presentation, it seems that you have value for our money. It is copious and bulky. Chinese customers always look at the quantity: did I get cheated? how much does it cost? 
Money is always central in Chinese customers thinking. Even for for very rich Chinese, they want to have value for their money: only the perception change. 

For the middle class: while offering many small, cheap dishes you convince the middle class customer that he has value for his money: soup, drink, salad bowl, bread... 
For example, the steak plate is willingly large with a wooden base and on its center a pan.

The presentation is also Chinese because dishes can be shared between several people same way Pizza Hut does.

As for the taste, it is suitable for Chinese middle class:
A marinated steak is bathed in a spicy sauce.
A sticky corn soup
The rest is more banal but it is sufficient.

As for the presentation all is done to strengthen the foreign image. You can choose spanish steak, english skewer... the image emphasizes on authenticity, foreign origin

Since 1993... this strengthen even more the image and prestige. For Chinese customers, older= more authentic.

1 comment: