Why Are Chinese Restaurants So Similar? (Secrets of the Fujianese-American Restaurant Industry Go Public)
Why Are Chinese Restaurants So Similar? - Menuism Dining Blog, February 18, 2019
My first clue into the answer came from an unexpected place: a story the financial press which I only stumbled upon while Googling something else. My experience as an attorney and a CPA enabled me to follow the trail to find source documents that were filed with the Securities and Exchange Commission (SEC) that provided a trove of information that had never been made public. And it took a combination of these things, along with my eating at many Chinese restaurants for this article to come about!
But I'm getting ahead of myself. Let's start at the beginning.
Fujianese domination of Chinese restaurants
Since the late 1980s, immigrants have been flowing, largely illegally, from China’s Fujian province to New York City. Little Fuzhou, the Fujianese corner of Manhattan Chinatown, has since developed into a central hub. Here, dozens of employment agencies staff Chinese restaurants throughout the east, Midwest, and south. Fujianese workers travel to and from jobs in various U.S. cities through a system of independent bus lines.
These Fujianese workers, therefore, have incredible mobility while changing jobs. Dissatisfied with your job in Orlando? Well, catch the Manhattan-bound bus, pop by one of the Chinatown employment agencies, and scarcely hours later, be on another bus to your new job in St. Louis.
The Fujianese now dominate the whole Chinese restaurant industry east of the Mississippi River. However, their influence has grown largely away from the public eye. After all, the trend is comprised of actions of literally thousands of small Fujianese takeout operations, rather than by a limited number of large players.
Gathering the clues
A 2001 New York Times special report called “Fujian, U.S.A.” provided the first in-depth look at the Fujianese mothership. While the Times did not focus specifically on Fujianese restaurants, it did introduce me to the employment agencies, restaurant workers on bus lines, and Fujianese wedding banquets, which I wrote about years later. Numerous articles in other publications then profiled itinerant Fujianese restaurant workers. From these stories, I learned that these workers often live in dormitories owned by their employer, meaning housemates don’t always get along with each other. I learned that employees take turns making the weekly Monday sojourn to Manhattan Chinatown to pick up supplies. And I learned that some workers may change jobs (and job locations) as often as several times in the same month. But these accounts provided little insight into the restaurant operations themselves.
About a decade ago, I carefully followed two discussions on Chowhound.com’s message board. One East Coast observer noted that certain dishes prepared at different Chinese restaurants in his local area appeared to be indistinguishable from each other. Another commented that Chinese restaurants near him offered almost identical menus.
While neither poster was likely aware that their local Chinese restaurants were run by Fujianese immigrants, message board respondents raised the possibility of a central hand: some kind of Fujianese organization promoting a degree of uniformity among disparate and unrelated mom-and-pop businesses. Comments suggested perhaps a mainstream food supply company like Sysco, or maybe a cluster of specialized Chinese food supply companies provided ready-made ingredients to local restaurants. Messages hotly debated whether small Chinese takeouts prepared their dishes in-house, or whether they resorted to outside food suppliers. In the end, lacking firsthand knowledge, these discussions lingered unresolved.
The break in the case
Those who suggested that Fujianese food supply companies helped to standardize small Fujianese-operated Chinese restaurants turned out to be correct.
As you may know, except for the smallest entities, most U.S. businesses formally operate as corporations or limited liability companies. These companies may be owned by a single owner, several family members, or two or more business associates. As a business grows, it may need to bring in outside investors. And if it grows into a large enterprise, it may sell stock to the general public through an initial public offering (IPO) registered with the SEC. Once public, its stock is listed on the NASDAQ or New York Stock Exchange.
During 2018, such an IPO took place for a company called HF Foods Group Inc (NASDAQ—HFFG).
HF Foods Group
Headquartered in Greensboro, North Carolina, HF Foods Group is led by Chairman and CEO Min Ni Zhou.
In 1989, Zhou immigrated from Fujian to Manhattan, part of the early wave of Fujianese migrants. Zhou started at the bottom of the Chinese restaurant industry. Working tirelessly and ambitiously, he owned eight Chinese restaurants and a catering business within four years of his arrival. Procurement of specialty products bedeviled his businesses, so six years later, in 1997, Zhou established HF Foods Group to supply his restaurants with Chinese goods. Eventually, the business expanded to procure Chinese food supplies for third-party restaurants, too.
At the time of the IPO, HFFG registered $300 million in sales from a customer base of 3,200 Chinese restaurants throughout 10 southeastern states. A fleet of over 100 refrigerated trucks services warehouses in Greensboro, Atlanta, and Ocala, Florida.
Described by HFFG’s website as local employees “[w]ith a cultural understanding and a common language,” a call center located in Fujian province is available 24 hours a day for restaurant customers. From the filing documents, I estimate over 80 percent of HFFG’s customers are Fujianese. Not only do these sales personnel speak the same dialect as HFFG’s customers, but by centralizing procurement for thousands of restaurants, HFFG can offer them economies of scale. Besides food items like meat, seafood, noodles, rice, and vegetables, HF Foods also provides packaging supplies such as chopsticks and take-out containers, and even services including website design and menus.
Beyond the southeast
Clearly, HF Foods Group is a big player in the Chinese restaurant supply sector. But because HF Foods currently only operates in the Southeast, I wondered whether similar companies operate in the Midwest and East. The filing documents provide clues in this regard, too. Going public means HF Foods Group can raise the capital to expand its geographic footprint. The filing refers to the general fragmentation of the Chinese restaurant food supply industry in the United States and plans to acquire smaller existing companies in the same niche.
If successful, HF Foods Group may become a nationwide purveyor. Chinese takeout food across the U.S. may become even more homogenous. But at least now we’ll know why.
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