Haidilao, known for 'spoiling' its customers, does not extend the same treatment to its employees

Reporter Chen Qijie, Shenzhen report for Sing Pao

An employee accusation incident that sparked heated online debate has prompted Haidilao to reflect deeply.

On the evening of April 13, Haidilao issued a notice stating that since January 1, 2025, it had conducted a comprehensive investigation into the status of its more than 1,300 stores nationwide starting from April 10. An anonymous reporting channel for all employees was also opened. As of April 13, Haidilao confirmed four cases where employees were required to buy gifts at their own expense, involving an amount of 1,237.9 yuan, which had been fully refunded by April 12.

Zhang Yong, CEO of Haidilao who returned to his position in January this year, will personally apologize to the four involved employees.

The trigger for this self-examination was a report on April 9 by a former employee with six years of experience at Haidilao, claiming long-term exposure to improper management practices at one of Haidilao's outlets. The report mentioned that whenever customer complaints occurred, regardless of reasons, the outlet would force employees to buy gifts worth 500 yuan as punishment, along with repeated violations resulting in fines.

Two days after the incident escalated, Haidilao issued a public apology and admitted that the situation was largely true.

In the past, Haidilao, known for 'spoiling its fans,' stood out due to its exceptional service to consumers. It was also famous for good employee benefits and practicing a 'family-oriented culture.' However, with sluggish growth in recent years, Haidilao's operational pressure and responsibility to delight customers have increasingly shifted onto the shoulders of its employees.

In its latest announcement, Haidilao attributed the primary responsibility for the store’s misconduct to the board of directors rather than the store managers. 'For many years, the board has excessively incentivized store managers while weakening the construction of headquarters functions. Unrealistic demands were placed on store managers to handle as many managerial tasks as possible, and excessive performance evaluations created fear and anxiety among store management, ultimately transferring stress to frontline staff.' Haidilao stated.

Haidilao said the company plans to address these issues in two phases: short-term and long-term. The short-term plan involves ongoing investigations and refunds, while the long-term plan focuses on strengthening mid-level operations within a year, improving lean management, and reducing store performance assessments.

Sing Pao sent a letter to Haidilao regarding the self-examination process and questions on strengthening mid-level operations and reducing store evaluations. No response had been received as of press time.

Overstepping labor management

According to the announcement, the four incidents of self-inspection by Haidilao are similar to the situation initially exposed by a former employee. In all cases, employees were forced to take responsibility for resolving conflicts after complaints were made against the stores.

The announcement mentioned that in January 2025, two Haidilao employees purchased children's toys worth 127.9 yuan and approximately 60 yuan respectively to appease customers following complaints. In March of the same year, an employee bought a 50-yuan gift to address customer dissatisfaction. In February this year, an employee at a Hangzhou store was unlawfully required by management to purchase gifts worth 1,000 yuan, calculated based on three days of wages as a waiter, due to failing to promptly monitor reservation waitlist information.

Du Shuang, a lawyer from the Taihe & Partners (Wuhan) Law Firm, told The Sing Tao that this Haidilao incident is not simply a case of improper internal management but rather a typical example of an employer exceeding the boundaries of labor management authority and infringing upon workers' legitimate property rights and remuneration entitlements. The implicated stores arbitrarily set economic penalty rules, undermining the fairness, voluntariness, and equality foundational to labor relations, constituting an abuse of labor management authority.

"Employees earn wages through their labor, a basic right established by the Labor Law and the Labor Contract Law. When stores compel employees to personally pay compensation, it essentially amounts to disguised wage deductions, severely violating the right to labor remuneration. This is imposing 'punishment' to force employees to bear operating costs that should not fall on individuals," Du Shuang said.

In Du Shuang's view, enterprises, as civil entities, lack the legal standing to impose fines, rendering such punishments baseless under the law. According to Article 16 of the Provisional Regulations on Wage Payment, employers can only legally request compensation if employees cause direct economic losses to the unit due to intentional or gross negligence. Customer complaints stem from various factors—food quality, ambiance, processes, or differing consumer expectations—and do not inherently equate to employee fault. The implicated stores’ blanket punishment approach fails to distinguish responsibilities, evaluate losses, or follow democratic procedures, thus not meeting the legal requirements for lawful recourse.

Haidilao also stated in its latest announcement that to address management loopholes, the company has established a special task force for partner rights protection, continuously collecting leads on violations, verifying them, and then refunding payments and holding responsible parties accountable. All current and former partners who have faced unreasonable penalties violating company policies in the past can report these incidents, and verified cases will be refunded and corrected promptly.

Increased pressure on employees

Haidilao was once renowned for its exceptional service—offering manicure services while customers waited in line, having staff pay close attention to diner needs during meals, and presenting birthday songs and gifts for celebrating customers. On a broader level, Haidilao expected employees to not just 'provide good service' but to 'be good people.' Haidilao founder Zhang Yong famously expressed an internal viewpoint: If employees see an elderly person fall outside, they should feel free to help them up because the company would back them up.

However, such extreme and somewhat abstract expectations sometimes lead to operational distortions. For instance, Haidilao once mandated that 'customers wearing glasses must be given lens cloths' and 'water glasses cannot be empty,' which led to absurd situations. Some customers refused phone pouches, yet servers secretly attached them anyway since failing to do so would result in point deductions.

In fact, this is not the first time Haidilao has been embroiled in employee-related public opinion storms due to allegations from former employees about mandatory gift requirements.

According to a previous report by The New Yellow River, in January this year, a former Haidilao employee complained on Weibo about Haidilao's work system. The employee claimed that there was an implicit 'spot-check system' within Haidilao, where senior management would visit stores unannounced without prior notice of inspection. If the service staff performed below expectations, the store manager would be penalized. As a result, all employees at the store faced significant pressure.

The employee also mentioned that while working at Haidilao, actions such as customers helping themselves to soup, fetching napkins, or failing to greet customers with a three-step run were not allowed. Employees would occasionally face punishments like physical penalties or being made to copy texts.

However, according to a report by the 21st Century Business Herald, there is no so-called 'spot-check system' within Haidilao. Multiple grassroots employees of Haidilao considered it a routine inspection.

But it is true that the workload pressure on Haidilao employees has increased. A former employee stated, 'In recent years, at Haidilao, one person does the work of two, and two people do the work of four.'

Some employees emphasized that their daily work pressure stems from the store manager, who seeks efficiency and intentionally reduces employees' working hours during daily operations. This aligns with Haidilao’s reflection on 'excessive performance evaluations for stores leading to fear and anxiety among store management.'

There are indications that Haidilao employees feel a heavier workload. Data shows that after the end of the COVID-19 pandemic, Haidilao's employee count recovered to 154,000 by the end of 2023. However, over the following two years, Haidilao's employee numbers continued to decline. By the end of 2025, Haidilao had 126,000 employees, representing a reduction of more than 28,000 employees over two years. However, the number of Haidilao stores did not decrease. By the end of 2023, Haidilao had a total of 1,374 stores, and by the end of 2025, this figure was 1,383.

Simply calculating the average number of employees per store, from the end of 2023 to the end of 2025, Haidilao's average number of employees per store decreased from approximately 112 to approximately 91.

Entering a bottleneck phase

From a performance perspective, behind the transfer of pressure onto employees, Haidilao has faced challenges in recent years such as weak growth in its core business and declining table turnover rates (from a peak of 5 times per day to 3.9 times per day by 2025).

The ** found that in 2023, Haidilao emerged from the shadows of past large-scale expansion missteps and the pandemic, with revenue recovering to the RMB 40 billion level. However, in the following two years, Haidilao's revenue growth rate remained in the single digits, at 3.14% for 2024 and 1.1% for 2025.

During the same period, Haidilao’s net profit growth attributable to shareholders also slowed down. The growth rate fell sharply from 227.44% in the previous year to a single-digit 4.65% in 2024, and in 2025, it saw a negative year-on-year growth of 13.98%.

▲ Haidilao's Operating Revenue and Growth Rate Over the Past Five Years

In 2025, Haidilao served a total of 384 million customers, a decrease of 7.5% compared to the previous year. Regardless of whether it was in first- or second-tier cities or other regions, Haidilao’s average daily sales per store were declining. In 2025, Haidilao’s overall average daily sales per store amounted to RMB 79,500, representing a year-on-year drop of 6.69%.

▲ Average Daily Sales per Same Store at Haidilao

In search of new performance drivers, in August 2024, Haidilao launched the Red Pomegranate Plan, which aimed to explore a second growth curve by incubating diverse restaurant brands. According to financial reports, by 2025, Haidilao’s Red Pomegranate Plan had shifted from internal incubation to market expansion. By the end of 2025, the group operated 20 sub-brands across niche markets such as seafood stalls, sushi, Western light meals, small hotpot restaurants, and Chinese fast food, totaling 207 restaurants.

However, currently, the direct contribution of the Red Pomegranate Plan to Haidilao remains limited. In 2025, Haidilao’s operating income from other restaurants increased by 214.6% year-on-year to RMB 1.521 billion, accounting for 3.52% of total revenue. This growth was mainly attributed to innovative dining brands launched under the Red Pomegranate Plan and contributions from various dining scenarios such as camping hotpot and corporate hotpot.

Amidst these challenges, in January this year, Zhang Yong returned to his role as chairman and CEO of Haidilao several years after stepping down as CEO.

It is reported that after returning to Haidilao, Zhang Yong focused on advancing business along three main lines. First, he stabilized the core hotpot business by optimizing products and store models to enhance profitability and brand appeal. Second, he continued to push forward with the Red Pomegranate Plan, exploring a second growth curve through multiple brands and identifying opportunities amid uncertainty. Additionally, he accelerated the construction of an intelligent central platform to improve data and system capabilities.

Editor︱Liang Jingqin

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