I tell smaller companies to stay away from China, a market in which so many of the world’s great corporations have been eaten alive. I believe in tackling the easiest markets first, seizing the low-hanging fruit. But, once in a long while, I see a smaller company that might just have a chance in what, for many, proves to be the toughest market in the world. It takes an akamai entrepreneur (for you non-Hawaii folk, that’s a really smart one) with an extraordinarily flexible approach to business. Eddie Flores, co-founder of L&L Drive-Inns, may be able to make a go of it in China – precisely because he knows how tough it is going to be.L&L is a Honolulu-based chain of Hawaiian-style restaurants. Hardly a start-up, L&L hit the Honolulu dining scene in 1976 and moved into franchising in 1988. L&L is known for what we call “plate lunch” in Hawaii. Here’s how they define it:
The traditional Hawaiian plate lunch consists of two servings of rice, a serving of macaroni salad, and features a generous serving of a hot entrée (a smaller “mini” version of the traditional plate lunch consists of one serving of rice, a serving of macaroni salad, and a small serving of a hot entrée).
Those “hot entrées” typically include teriyaki beef or chicken, kalua pork, Korean shortribs, chicken katsu, fried Spam or other local delights. You find plate lunches all over Hawaii at drive-ins and food trucks, so L&L learned early how to compete. They expanded sensibly in Hawaii, then opened up in California in 1999. Realizing that a mainland American audience had no clue about plate lunches, L&L billed itself as “L&L Hawaiian Barbecue”, taking full advantage of the Hawaii branding cachet. They now have nearly 200 stores in ten U.S. states and American Samoa, and have picked up international experience in Japan and New Zealand. A primary reason the concept has worked is that L&L brings a taste of Hawaii while changing its menus to reflect local demand. I know that’s not unique, but L&L does it well. (McDonalds even tried to do plate lunches in its Hawaii stores, but couldn’t make it work. Ronald was more successful when they added local favorites Spam, Portuguese sausage and saimin to their menus.)
Erika Engle, a columnist for the Honolulu Star-Advertiser, published the results of an interview with Flores last Friday, in which he announced that L&L plans to open its first Chinese franchise in January. [Here's the link, but I can't guarantee you will get in. The newspaper has a ferocious pay wall.] You’ll never guess where L&L is going. They are passing up the first and second-tier cities where competition is immense, and will start out in a smaller city north of Hong Kong called Fumen. Fumen has about 800,000 people and offers an opportunity for L&L to experiment with its concept before tackling China’s larger urban markets.
The Fumen store will be called “L&L Hawaiian BBQ” and will have a U.S. theme, as well as its Hawaii concept. Many Chinese don’t realize that Hawaii is part of the United States. They will be positioned in a new shopping center and, ironically, near a McDonalds. Flores says he hasn’t figured out the Chinese menu yet. A Hawaii plate lunch is heavy on protein and carbs, and he expects that he will have to emphasize veggies in China. He says he won’t be putting laulau on the board. Laulau is pork steamed in taro leaves. Loved in Hawaii (they taste like spinach), taro leaves are considered animal fodder in China.
L&L is going into China with their eyes open. The company already knows about copycats and imitators. Following L&L’s success on the U.S. mainland, there is now an Ono Hawaiian BBQ chain in several western states. L&L has found copycat stores featuring identical menus, decor and employee uniforms – and that’s in the United States. Flores has been careful to trademark “everything under the sky” before heading to China.
I am especially impressed that L&L is starting out in a smaller city rather than insisting on Shanghai, Beijing or Guangzhou. A single store can only serve so many meals anyway, so you don’t necessarily need the larger population numbers. And a smaller city means lower costs, less competition, and the opportunity to make your mistakes before you try to make a splash in a bigger city. Besides, even though Fumen is a smaller city in China, it is roughly the same size size as Honolulu, which supports 37 L&L outlets. Shanghai can wait.