With its carefully measured 18 folds and paper-thin skin, restaurant chain Din Tai Fung’s xiaolongbao soup dumpling has won international fame as an icon of Chinese cuisine.
Made to precise specifications, the xiaolongbao has turned Din Tai Fung into one of the most successful international brands in Asian dining and spawned several imitators.
Unlike many other “signature” foods – MacDonalds Big Mac, for example – Din Tai Fung did not invent the soup dumpling; it is thought to have originated in a suburb of Shanghai. Yet the chain has become so synonymous with the xiaolongbao that its chefs churn out more than 10 million of them a month.
Din Tai Fung’s approach to business is conservative and cautious but also highly focused
Meanwhile queues of hungry customers regularly wait an hour or more at its restaurants to tuck into the golf-ball-sized parcels of minced pork and broth.
Intrigued by the growth and international success of Din Tai Fung, I spent 18 months following the restaurant’s top management at its headquarters in Taipei. My insights became the basis of a business school case study that last year won the Best Teaching Case Studies Award at an international gathering in the US.
Din Tai Fung’s approach to business is conservative and cautious but also highly focused. Here are four lessons from a successful Asian service business taken from our study.
1. Cherish your reputation
Din Tai Fung opened its first restaurant in Taipei in 1972, but it was not until the mid-1990s that it began to expand beyond its native Taiwan. It was then that the New York Times listed the restaurant as one of its Ten Best in the World.
Two years later Japanese department store Takashimaya persuaded the chain to open its first overseas branch in the Shinjuku district of Tokyo.
Today the Din Tai Fung brand has expanded to more than 100 restaurants in 12 countries and territories across Asia, the Middle East and the west coast of the US. Its reputation has made it a coveted tenant in high-end department stores and shopping malls, with many offering favourable terms to secure its presence and draw customers.
It is better to do well by keeping standards high, rather than rush to grow quickly and see standards fall
With Michelin stars and other awards Din Tai Fung has built a gourmet recognition that is rare among chain restaurants. Yet it continues to rely on word of mouth as the basis of its marketing, spending only minimally on advertising for most of its outlets and nothing at all in its native Taiwan.
Every week Yang Jihua, the CEO of Din Tai Fung and son of the chain’s founder, receives dozens of letters from investors eager to set up new outlets in places as diverse as Mongolia and Russia, almost all of which he turns down.
He finds the firm’s success “very scary”, he told me, and feels a heavy sense of responsibility to maintain Din Tai Fung’s high standards. But Yang is in no hurry to expand, believing that it is better to do well by keeping standards high, rather than rush to grow quickly and see standards fall.
2. Focus on consistency
Din Tai Fung’s philosophy is built around perfection – an approach exemplified in its restaurants where glass-fronted kitchens have become a signature feature of the restaurant theatre, showing off the chefs at work crafting xiaolongbao and other dumplings.
From the firm’s modest head office in Taipei, CEO Yang Jihua keeps close watch on operations across Din Tai Fung’s restaurants, holding daily video conferences with branch managers and staff.
But unlike many businesses Yang puts little emphasis on sales turnover as a mark of performance. Instead customer expectations always take priority over profits.
Daily sales targets and turnover are used only as a reference to prepare ingredients and schedule manpower, Yang says, while Din Tai Fung’s continued success depends on emphasising quality at every level.
3. Approach business as you would family
|Din Tai Fung Factfile|
|Din Tai Fung was originally founded as a cooking oil retail business in Taipei 1958.|
|In 1972 changing demand forced a rethink and the firm transformed its shop into a dumpling and noodle restaurant.|
|Today, Din Tai Fung has more than 100 restaurants in 12 countries and territories.|
|In 2010 Din Tai Fung’s Hong Kong branch was awarded a Michelin Star – a rare accolade for a chain restaurant.|
From a firm that began as a one shop family business, Din Tai Fung maintains a family-oriented approach across its operations – from top management through to frontline service staff. One insider sums up the firm’s philosophy as “treating your staff and customers as you would treat your family members”.
It’s an approach that the company also applies to its relationship with suppliers. Recognising that delivering consistent quality depends on top quality inputs, Din Tai Fung builds close ties with its suppliers and often pays more than its counterparts for ingredients.
Gilbert Lee, the firm’s director of production technology says Din Tai Fung’s buying principle is “quality first, price second”. He says suppliers recognise this as a mutually beneficial relationship: Din Tai Fung gets the best ingredients for its kitchens, while suppliers drive up their own standards and reputation.
4. Value service staff
Din Tai Fung’s family approach is also reflected in what insiders say is an almost parental regard toward staff development and remuneration.
The company values quality service as equally important to quality food. As a result more than 50 percent of revenue goes to staff training, benefits and pay that are among the highest in the industry.
The firm sees its continued success as dependent on maintaining precise and high standards. But while there are many standard operating procedures it also encourages staff to be proactive and apply their service approach to individual customer’s needs.
Across Din Tai Fung’s restaurants staff are required to keep a daily work log, not in order to monitor sales or targets but to serve as a basis for company-wide learning and continuous improvement.
“Treat every customer as you would treat your family member; genuinely show them your care and concern,” is the mantra from CEO Yang Jihua.
Passion for precision
Din Tai Fung’s philosophy combines a passion for precision, excellence and consistency with recognition that the firm’s continued success depends on always living up to its reputation. It has taken many years to build and can easily be lost if standards are allowed to slip.
For a firm that emerged from a struggling family-owned cooking oil business, it’s a philosophy that has served Din Tai Fung well.
It’s amazing what you can learn from the humble soup dumpling!