Moon Consulting’s Senior Executive Search Consultant Simon Quinn meets with James Liang, Managing Director of Chinese fast food chain Hotcha, to find out about his innovative business model, ambitious growth plans, entrepreneurship in revolutionary China, deskilling complex processes and why he doesn’t think he’s a success… yet.
I meet James Liang at the head office and central kitchen of Hotcha, based in a business estate in South Bristol. It is from here that the entrepreneur plans to create the biggest chain of Chinese restaurants in the UK.
James has a reputation for business innovation, winning the title ‘Entrepreneur of the Year’ from South West Business Insider in 2013. “I would say that entrepreneurship is in my blood” he smiles, “my great-grandfather and grandfather were successful entrepreneurs but lost their businesses during the Cultural Revolution. My father started his own business at the age of 30: I watched him grow and successfully sell it, and I always wanted to do the same myself. I moved to the UK when I was 12 years old, my ambition was not to work in the family business, but to create my own.”
Before setting up Hotcha, James worked at a mirror and glass furniture wholesalers supplying some of the biggest retailers in the UK. He worked with the manufacturing teams on buying trips to China, but the business stumbled as the Chinese economy entered its boom stage. “During 2009, production costs doubled and wages tripled: profit margins became very thin and retailers started dealing with Chinese manufacturers directly.”
It is in this context that James started looking for his next retail business opportunity and contacted family and friends working in the £7bn UK Chinese food industry. “I met with a large number of Chinese restaurant owners, all of whom told me not to enter the market due to high costs, large time commitments and narrow margins,” says James, “cost of food keeps going up, skilled chefs are rare and expensive and running a restaurant takes over the whole life of owners.”
It is this dependence on skilled chefs that spurred James to create a different business model for Hotcha. Chefs are highly skilled and highly paid: when a head chef leaves it can devastate a restaurant, especially if he’s responsible for multiple outlets. “We realised that we had to deskill the cooking process as far as we could while maintaining quality” explains James, “Preparation of meats and sauces are made in our central kitchen and shipped out to each location, fresh vegetables are bought and prepared in store. Recipes are simple, consistent and good quality. A staff member can be trained in the necessary wok cooking skills within 6-8 weeks.”
It took some time for James to settle on a model that worked: he started with four restaurants running on a traditional model with individual chefs and managers. “Running those four initial stores was harder than running the ten we have now!” laughs James “The chefs were always varying recipes, they are creative by nature but don’t understand the value of serving a consistent product over many locations.”
Hotcha currently has ten restaurants across the South West, with 145 staff. I ask James why he chose to set up in the region. “We identified the South West as the best area to find the customers we need. The overheads and costs in London are enormous and Bristol offers us a big market. When we set up in 2011, there were lots of empty retail units: we were able to find excellent locations, such as our store on Baldwin Street, which was previously vacant for three years. Finding sites today is more difficult with the improving economy and increased competition.”
Hotcha experienced very rapid growth in its early years and in June 2014, James announced a well-publicised UK wide-expansion plan following an extensive feasibility study on locations across the country. So what is the future for Hotcha? “There are two key factors to our continuing expansion”, says James, “The first is that we need to ramp up our food production to supply any future stores. The second is that future stores will be franchise based.”
This new franchise model was born from strategy meetings with Clive Mellor and Andrew Emmerson, former operations and business development directors at Dominos, now working with James to realise his dream of making Hotcha ‘the Dominos of Chinese’. “Franchising is the only way to deliver the kind of growth that we want” explains James, “We are looking at opening five franchised stores in 2015, so we are looking for franchisees that have food or retail experience to maintain the quality that customers expect. Ideally we would like franchisees that are capable of running several stores in a particular location.”
With such a clear strategic vision for his company, we ask what advice James would give to other entrepreneurs or directors that were looking to emulate his success. “First of all, I don’t consider myself a success,” he counters quickly, “not when our ambition is to have 1000 stores across the country. The most important factor in successful business is to get your core values, products and services right. If you get the simple things correct, the more complex issues will be much easier to deal with.”
I leave our meeting feeling that I have met a very ambitious, focussed and determined entrepreneur who truly believes in his vision. James has a clear strategy to facilitate success, informed by careful consultation with both experts in the field and his potential customers, but he is also aware his journey is in its early stages and he is not afraid to quickly change tactics if they are not delivering. Moon Consulting are sure that we will be hearing big things from Hotcha in the year ahead
I leave our meeting feeling that I have met a very ambitious, focussed and determined entrepreneur who truly believes in his vision. James has a clear strategy to facilitate success, informed by careful consultation with both experts in the field and his potential customers, but he is also aware his journey is in its early stages and he is not afraid to quickly change tactics if they are not delivering. Moon Consulting are sure that we will be hearing big things from Hotcha in the year ahead.