The Kuntai Building along Chaowai Street in Beijing is serving as a battlefield between western fast-food chain McDonald’s and Kungfu, a fast-food diner run by the Kungfu Catering Management Co., Ltd. Both are clean and bright inside; the only difference between them is their logos outside: a friendly Ronald McDonald and a Kungfu master preparing to fight.
The businesses of both fast-food restaurants thrive thanks to their prime location in the central business district. Customers usually crowd Kungfu at mealtimes. In contrast, most seats in McDonald’s are taken even at non-mealtimes, as people chat and indulge in some snacks.
Gan Wenping, the manager of the Kungfu restaurant in the Kuntai Building, says that between 600 and 700 people eat there each day. Many of them are foreigners who are Chinese food lovers, as the Ministry of Foreign Affairs is nearby. Gan thinks that the employees need some basic English training because many of them have a hard time dealing with foreign customers. His employees usually figure out what foreign customers want through pointing and body language. But Gan believes foreign customers can be much better served if his service staff could speak basic English.
As a Chinese fast-food restaurant featuring nutritious steamed food, Kungfu, unlike many Chinese food restaurants, has made a technical breakthrough when it comes to standardizing cooking methods. It seems that Kungfu has found the right recipe for operating a Chinese fast food brand.
In January this year, Capital Today and another venture capital invested RMB300 million (US$39.5 million) into Kungfu. “The developmental difficulties of a Chinese fast-food restaurant chain boil down to the issue of standardization,” says Capital Today President Xu Xin. “But they [Kungfu] have solved the problem.” Xu once invested in Yonghe King, a Chinese fast food franchise, when he was a partner in Baring. It was a successful investment, which makes Xu feel confident about his investment in Kungfu.
With a mature business model and sufficient funds, Kungfu is planning to expand its business. It is expected that Kungfu’s total number of restaurants will exceed 400 across the country by 2008. The company will open 100 new restaurants in 2007 and 150 next year.
Creating a New Business Model for Chinese Fast Food
Since its founding, Kungfu knew that borrowing elements from McDonald’s success could help it create a successful Chinese fast food operation model. Standardization was the first step in Kungfu’s booming business.
Cai Dabiao, chairman of Kungfu, was deeply impressed by McDonald’s standardized and industrialized business operation when he first read the book The Myth of McDonald’s. He believes that McDonald’s success lies in its standardization, which makes its food all over the world taste the same. That, in turn, gives rise to customers’ senses of safety and trust in any McDonald’s restaurant in the world. Compared with western fast food, Chinese food is more nutritious. Therefore, Cai believed, Chinese fast food could become a strong rival for McDonald’s and KFC in the international catering market as long as it can manage to standardize its cooking and management.
Cai started his own business after he graduated. After a thorough investigation with his business partners, Cai decided to focus on steamed food. Steamed food is a kind of traditional Chinese food in Guangdong province favored by most local people, including steamed rice, meat, soup and dessert. Steaming is advantageous because it does a better job of preserving the nutrition in the food, as the temperature does not rise beyond 100 degrees Celsius. This gives Chinese food an edge over western fast food. Most importantly, steam cooking is much easier to standardize.
Traditional steam cooking is not easy. It requires a gas cooker, a steam boiler and steam boxes. Steam boxes are layered on the steam boiler, so if a chef wants to take out the food in the bottom steam box, he has to move away all the steam box layers above. Steam cooking results in high temperatures inside the kitchen, and fires in the gas cookers are often hard to control. As a result, food quality is not always uniform.
All of these problems were hurdles to standardize steam cooking. Cai began concentrating on solving these technical issues as far back as 1995. His team of technicians found that the drawer-like cooking equipment with temperature and time controllers used by western fast food restaurants could be modified to adapt to Chinese cooking. They decided to devise computer-controlled steam equipment.
Energy was another technical problem. At first, they thought of mimicking the steaming procedure in stokeholds, in which steam was transferred to the steam equipment through pipes. But even a small stokehold was too large for a fast-food restaurant. Later, they found that the steam can be used in ready-made clothes factories was exactly what they were looking for.
In 1997, the computer-controlled steam equipment was finally put into operation. The new equipment guaranteed the standardization of food cooking: the food had the same taste at any time with the same temperature and pressure during cooking. Nutrition was also better preserved by using the new equipment. Meanwhile, Cai Daobiao began to learn more about the way McDonald’s standardizes its management. Based on what he had learned from McDonald’s and his own experience in the catering business, he compiled eight handbooks which detailed every procedure in cooking and management and specific rules for his employees to follow. Staff training and their performance assessments were all based on the handbooks.
At the end of 1997, Cai opened his fourth restaurant in Dongguan, in South China’s Guangdong province. Cai changed the name of his restaurant chain from “168” to “Double Seed.” He learned every detail of western fast-food restaurants’ standardization, ranging from interior decoration to the counter where customers could order food. Double Seed even tried to catch up to McDonald’s with respect to efficiency; food could be put in front of customers within 80 seconds of ordering.
