Tsinghua SEM

TU0074 China Business Case Center

F. Warren McFarlan, Wu Weiku, Guo Jia

Meizhou Dongpo Restaurant:

Entrepreneurship, Leadership and Culture

On June 6, 1996, a restaurant in northeast Beijing quietly opened. The 300-square-meter

restaurant featured an elegant, warm and luxurious decoration style. Its walls were covered with
poems, essays, paintings, calligraphies and literary quotations of Su Dongpo, a great literature
maestro in the Song Dynasty. The menu's main dish ingredients as well as seasonable fruits,
vegetables and freshwater fishes all came from Sichuan. Employees were primarily recruited from
Sichuan. It was the first Meizhou Dongpo Restaurant.

The name "Meizhou Dongpo- is significant. Meizhou, the name of Meishan City in Sichuan
Province in ancient times, was the hometown of Su Dongpo, a renowned gourmet. It is also the
hometown of Wang Gang, founder of the Meizhou Dongpo Restaurant. These two ancient names
of Meizhou and Dongpo became the brand of the restaurant empire created by Wang Gang.
Meizhou Dongpo has grown from a small restaurant into one of the top 100 restaurant companies
in China. It was designated as a food and beverage service supplier for the Beijing Olympic
Games in 2008. It now has almost 10,000 employees and an established presences nationwide.
This extraordinary entrepreneurship story took place over the past decade in the highly
competitive traditional restaurant industry. High technology, well-educated staff, effective
managers, a new business model and financial support from banks or venture capital institutions
were not part of Meizhou Dongpo's success. How did Meizhou Dongpo score its achievements?
These achievements instead were driven by founder Wang Gang and his wife, Liang Di, both of
whom only received junior high school education, and started as chefs.

Wang Gang - Founder of Meizhou Dongpo

Wang Gangs childhood

In 1967, Wang Gang was born in Wangjiadu, Meishan City, Sichuan Province. He was a

This case was prepared by Gun Jia, research associate at the China Business Case Center of Tsinghua University
School of Economics and Management, under the guidance of Professor McFcrrlan at Harvard Business School and
Professor Wu Weiku at Tsinghua University SBA as the basis for class discussion rather than to, illustrate either
effective or ineffective of an administrative situation.
Plopyright 0 Tsinghua University SEAL To order copies or request permission for class use, call 4 -86 10 or
visit China Business Case Center websile klip://www.ecase.edu.ca No part of this publication may be duplicated,
transmitted or used in any form or by any means without the permission of Tsinghuo University School o f
E c o n o m i c s a n d M a n a g e m e n t
Copytightf. 41014 Tsinghua SEM

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China lholames Pao Caster Meizhou Dongpo: Entrepreneurship. Leadership and Culture

clever and smart boy with four elder sisters. From the beginning. Wang Gang always desired to
excel over others and showed an indomitable spirit perhaps due to his father's success as a soldier.
His father was awarded the title of " Hero as Bold as a Tiger - in the Korea war. where he
struggled alone on the, battlefield and was wounded and crippled. Shaped by the patriotism of his
family-. Wang developed a heroic spirit and a sense of justice. which played a critical role in
numerous significant decisions in his later life.

Wang Gang was smart, generous and loyal to friends. He liked sharing. Very entrepreneurial.
he began buying and reselling items when he was only seven years old. He bought student
preferential movie tickets for seven cents and then sold them for 15 cents to adults. Later on, he
acquired orange tree seedlings in a town 20 miles away and sold them in his hometown at a big
markup. Confident and competent: he enjoyed earning and spending money to please friends. At
that time, he did not understand the precious literary and ideological legacies left by Su Dongpo to
China. He only knew Su Dongpo as a name of both a local park and several enjoyable dishes.

An accidental opportunity

In 1984, Wang Gang was 16 years old. Soon after he graduated from junior high school, a
fellow soldier of his father who worked at the central government went to Sichuan to distribute
relief subsidies to ex-soldiers. After tasting delicious braised Dongpo pork hock with brown sauce,
spicy diced chicken with peanuts, and preserved meat and sausage, the leader advised those
ex-soldiers to open a Dongpo restaurant (not the later Meizhou Dongpo Restaurant founded by
Wang) in Beijing to improve their livelihood. Wang's father was disabled, so Wang in his father's
place started to work at the new Dongpo restaurant in Beijing in 1984.' This changed Wang's
direction of life.

At the beginning, Wang Gang, an unskilled laborer, was not even qualified for vegetable
cutting and ingredient mixing, let alone learning cooking skills from chefs. However, Wang was
eager to become a chef He worked late every day. He actively bought vegetables, washed
vegetables and dishes, carried trays and cleaned rooms. He was the last person to leave the
restaurant every day and never rested on weekends and holidays. He was happy to act as an
assistant to busy chefs. Wang also used his wages to buy tobacco and tea and wash uniforms for
chefs who came to like him. Gradually, the chefs came to not minding Wang watching them cook
and even asked him to cook one or two dishes when they were busy.

Later, Wang Gang became an apprentice of renowned cooking master Gan Guoqing'. When
Gan Guoqing visited the Dongpo Restaurant as a consultant, he noticed Wang Gang and after
several conversations came to recognize that Wang had the talent to become highly gifted in
cooking. Gan took Wang as his apprentice. Thanks to Gan's teaching and training, Wang Gang

Gan Guoging once cooked for Chiang Kai-shek and his sons, then cooked for Mao Zedong in the People's
Republic period and finally became a family chef of Marshal Ye Jianying.

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 Tsiailksa stag cads. Meizhou Dongpo: Entrepreneurship. Leadership and Culture

developed solid cooking skills in Sichuan cuisine and other Chinese cuisines, laying a solid
foundation for the dishes of Meizhou Dongpo he developed in later years.

With the combination of initiative and outstanding performance. Wang Gang successively
moved from being an unskilled laborer to an apprentice. to chief and head chef and finally general
manager of the restaurant. He believed that doing work in the dining hall and kitchen kept him
simultaneously informed of both customer needs and kitchen production issues. In this way, he
could both satisfy customer requirements and also speed up kitchen response, improve efficiency
while also lowering cost. Today, the small branch restaurants of Meizhou Dongpo encourage their
managers to take charge of both the dining hall and kitchen. The company has implemented
appropriate incentive systems to help make this structure work.

First pot of gold: Be generous in aiding needy people and make lots of friends

Wang Gang's purse was always empty at the end of a month when he was the manager of the
restaurant because he paid his sisters university tuitions, gave part of his salary to his parents and
spent the remainder on entertaining his subordinates and on restaurant operations. Regard ing
himself as owner of the restaurant, he never applied for expense reimbursement. Wang provided
high-quality service to customers and became fnends with some of the regular customers over a
period of 10 years in Beijing. He entertained potential customers with meals at his own expense,
many of whom were highly-placed celebrities or high-ranking government officials. They came to
appreciate Wang very much.

It was absolutely the most important five minutes in Wang's life. By 1995, Wang Gang had
served as restaurant manager and head chef for three years and gathered rich experience. One day,
a high-ranking official of the Ministry of Health was having dinner at the restaurant with his
subordinates. He felt the restaurant provided delicious dishes and high-quality services. During the
dinner, when one subordinate was discussing how to solve the fund shortage of a public institution
under his supervision, the leader turned and asked Wang, "Are you the boss of the restaurant?"
"No, sir. I'm manager and head chef," Wang replied. The leader then asked, "Do you want to
become a boss?" "Yes," Wang replied immediately. The leader said, -We have a good place for
your next restaurant. I can lease it to you at a low price. Do you want it?" "Yes," Wang answered
without thinking.

The leader immediately asked a subordinate to negotiate with Wang Gang a site lease. The
following day, Wang paid a visit to the subordinate. Wang Gang was familiar with the site which
was located to the south of the China-Japan Friendship Hospital in northwest Beijing, and thought
the site was very good for a restaurant. He finally agreed to pay an annual rent of RMB 220,000.
After returning home, Wang counted his money and found he only had RMB 10,000, far below
RMB 220,000. After thinking it over, he went to the leader and asked if he could solve the
problem by paying monthly. After hard negotiations, the leader approved Wang Gang's request.

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Meizhou Dongpo: Entrepreneurship. Leadership and CUlture

Wang Gang then confronted a new problem. His rough estimate was that the decoration work
would cost at least RMB 1 million. Borrowing money was the only solution. To his surprise. his
friends were willing to lend him money, thanks to his generosity in helping the needy in Beijing
over the past 10 years,and building relationships.

Wang Gang named his restaurant Meizhou Dongpo Restaurant. Wang got Wang Guangymg,
Vice Chairman of the National People's Congress and a customer. to inscribe a plaque for the
restaurant's main entrance. When the restaurant was opened, its success was immediate. Wang felt
the success, however, came as a result of the skills and relationships he had accumulated over
many years.

Wang Gang, within a year, paid the rent in full and settled all his debts by rewarding his
lenders with a 30% profit. After opening the restaurant, Wang made additional contacts.
entertaining all kinds of figures. Different from other catering enterprises, Meizhou Dongpo had
no upper limit for entertainment expenses. Wang warmly treated all friends and visiting scholars.
He continued to try every means to invite significant figures and celebrities in all sectors to dine at
the restaurant. Meizhou Dongpo's business boomed.

Wang Gang was very attentive to his customers. He believed Meizhou Dongpo critically
depended on word-of-mouth. Consequently, while he advertised the restaurant, he put primary
emphasis on building a favorable social network for it. After winning a reputation for delicious
Sichuan cuisine among high-ranking and famous people, Meizhou Dongpo continued to invite and
welcome numerous stars and celebrities, expanding its brand influence.

Liang Di Co founder of Meizhou Dongpo

-

The couple supplements each other

When Wang Gang first became a chef, he was transferred to the Dongpo Restaurant in
Qinhuangdao, where he met the person who became the most important one in his life Liang Di.
She later became his wife and co-founder and CEO of Meizhou Dongpo Group. Very few large
private Chinese enterprises are run by a couple. Usually one of the couple withdraws from routine
management because of the complexity in juggling the roles of the partnership and marriage. The
story of Wang Gang and Liang Di and their coordination is central to the creation and
development of Meizhou Dongpo. Indeed it is hard to tell whether Meizhou Dongpo contributes to
the couple or the couple contributes to Meizhou Dongpo.

Liang Di was born into a rich family in Emeishan in Sichuan Province and grew up in
Chengdu, the capital of Sichuan Province. After graduation from junior high school, Liang Di
refused her parents' proposal that she goes to high school. At that time, the wave of reform and
opening up swept China, and Liang thought a "door was open to her. She left home to find a job
outside Sichuan. Her parents repeatedly pleased with her not to leave, but they failed. On the night

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before she left. Liang talked with her sister about future life and said. --Sister. [11 succeed and earn
much money...

Liang Di became a waitress at the restaurant where Wang Gang served as head chef. Liang
was very ambitious arid not content to be just a waitress. She believed the kitchen was the most
important pan of a restaurant. As smart and diligent as Wang Gang. she always went to the kitchen
after finishing her other tasks. She rapidly stood out from the other waitresses. Liang Di took
every opportunity to work in the kitchen. She first acted as assistant in the kitchen picking and
washing vegetables. She then became a vegetable cutter and developed perfect cutting skills.
Afterwards, she learned how to prepare cold dishes and cooked delicious cold dishes with perfect
colorS, aroma and tastes. Even today chefs at Meizhou Dongpo find it difficult to surpass Liang Di
in cold dishes. Head chef Wang Gang took notice of Liang Di and became Liang's master when
she wanted to learn how to cook fried dishes. They found great compatibility around their
enthusiasm for cooking. Wang Gang eventually married Liang Di who was six years younger

The personalities balanced each other. Wang Gang is generous. open-minded and dexterous.
He is also a bit disorganized and unyielding while Liang Di is calm, considerate, thoughtful.
intelligent and passionate. Wang is more emotional, while Liang is rational: Wang likes to pioneer
in unknown areas, while Liang prefers to work steadily in the present.

Different Roles in Management

Wang Gang and Liang Di complement each other in the day-to-day management activities of
Meizhou Dongpo. Wang takes care of strategy and plays a decisive role in policy issues. He is
also a hands-on decision maker. He always visits the site where a new Meizhou Dongpo
restaurant is being considered. Sometimes he walks around alternative restaurant sites without
reading detailed feasibility study reports developed by the development planning department
before deciding whether to open the restaurant or not. Of course he has made some mistakes in
site selection.

Wang Gang sees the operation of Meizhou Dongpo through the lens of a normal customer. He
believes "the management of a restaurant is embodied in its dishes and services. I can only keep
informed of overall operation of Meizhou Dongpo by frequently visiting restaurants to experience
dish and service details".

Wang Gang shows little interest in routine enterprise management except for his roles as the
strategic decision maker and quality supervisor. Meizhou Dongpo has developed a relatively
sophisticated enterprise systems. Wang usually expresses his views by his humorous and
characteristic words and then his subordinates incorporate his broken words into formal enterprise
regulations. For example, when he said, "The lightest ink is superior to the strongest memory," the
corporation established the work log system; when he said "a gift presented by a superioi to his
subordinate is care, while a gift by a subordinate to his superior is bribery," Meizhou Dongpo then

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built strong inspection systems to prevent corruption in manager selection and promotion.

Liang Di supports Wang Gang in enterprise decision making in public It does not mean.
however, she has no ideas. Liang's opinions invanablv influence Wang's final decision. but she
never expresses her views in public. She always gives Wang advice and suggestions in confidence_
Wang and Liang are unanimous on major strategic decisions. Sometimes. however. Wang insisted
on his own ideas for operational decisions. In those cases. Liang would become the final executor
and defender of the strategic decision made by Wang even she did not agree to him. For instance.
Liang was opposed to the setting up the Wangjiadu Food Factory in Sichuan to produce packed
foods and serve as a material and auxiliary ingredient base. After Wang had made the decision,
however, she made every effort to establish the factory. Having no personal experience in a food
factory, she formally retained the regional president of Hormel Foods Corporation in China as her
teacher to teach her the necessary knowledge and operating skills of food industry. In the first two
years of development of Wangjiadu Food Factory, she led the team to travel around different cities.
Wang acted as a hands-off boss. "Wang is the birth mother of Wangjiadu Factory, but I'm the
stepmother,- joked Liang.

Liang Di is also an investor and boss of Meizhou Dongpo. However, she prefers her CEO
identity. She takes full charge of the routine enterprise operations and management and gets along
with employees as their CEO.

University enterprise Cooperation

-

In 2001, Wang Gang and Liang Di opened the seventh Meizhou Dongpo Restaurant in
Beijing. With their business constantly growing, they increasingly felt unsure about their
capability to lead the company toward the future. Having only limited financial understanding,
Wang Gang began to take some short-term management training courses. Feeling inadequate as a
result of those courses, Wang Gang and his wife decided to study at the best universities in China.
Wang Gang noted: "The best universities we decided were Peking University and Tsinghua
University. We then deliberately each studied at a different university. By talking with each other
after coming back from the courses. we combined the knowledge of the two best universities."

One day, Wang Gang invited Professor Wu Weiku, a teacher of his wife at Tsinghua
University School of Economics and Management (SEM), to dine at Meizhou Dongpo. What
Wang Gang talked about at the dinner surprised Professor Wu and later, Wang Gang was invited
by Professor Wu to talk to the MBA class at Tsinghua University SEM. In his speech, Wang Gang
shared the entrepreneurship and development of "Meizhou Dongpo" with students. A student
asked Professor Wu: "Meizhou Dongpo is very small, with only six restaurants, why do you select
such restaurant as a teaching case?" Professor Wu answered: -A small enterprise should grow up.
China's restaurant industry is still a low management skill industry. We need to inject MBA
knowledge and wisdom into the restaurant industry , so that China's restaurant industry can

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become better managed

Every year. Wang Gang and Liang Di now take their executive team to the MBA classes of
Tsinghua University SEM as guest speakers. telline the hardship of their entrepreneurial
experience, operating situation and problems to Tsinghua MBA students. The also have invited
MBA students to experience the management and dishes at Meizhou Dongpo. As a result, a new
case model was created by Prof. Wu and Wang Gang which tracks experience. This long-term
university-enterprise cooperation is believed by Wang Gang to have improved the learning ability
of his top management team.

Cooking Skills and Cooking Morality of Meizhou Dongpo

Ever since Wang Gang became head chef of his first restaurant, he valued the dishes and
kitchen cooking the most. He believes taste is the eternal truth of restaurants. He regards
deliciousness as the competitive differentiator in Sichuan and Chongqing, where popular
restaurants prevail over others by superior dishes rather than service and dining environment. To
pursue deliciousness, Wang does not allow chefs to produce the same dishes for many people in a
larger size. He also requires chefs to reheat certain dishes as many times as needed to keep a good
taste. Meizhou Dongpo requires exquisite cutting skills. Materials below the cutting standard are
not allowed to be used. For most dishes, duration and degree of heating constitute an
unquantifiable factor that can be only mastered by experience. Wang often made sudden
inspections to check chefs' skills in heating in order to ensure the technical level of dishes.

What consumers appreciate most is Meizhou Dongpo's dish "taste".. Most customers leave
"delicious," "great taste" and other laudatory messages for Meizhou Dongpo on customer
evaluation websites. Wang values customers' comments on Meizhou Dongpo very much. In his
opinion, however, "praises to the restaurant other than those relating to its dish taste are
meaningless". What's the best taste? Wang summarized the best taste is "mom's taste". To endow
dishes of Meizhou Dongpo with a mom's taste, Wang Gang and Liang Di frequently travel around
the country to collect recipes of delicious dishes. Most Meizhou Dongpo dishes originate from
Sichuan and Chongqing. Consequently, they continually ask about the popular local restaurants
there and analyze their cooking processes as well as accessory materials and ingredients that went
into their delicious dishes. If they failed to create the tastes by themselves, they spend significant
amounts of money to invite the local chefs to teach them or to employ them as their chefs in
Beijing by offering them high salaries.

After his initial success, Wang Gang studied delicacies on a larger basis. He communicated
with world-class chefs, tasting the most famous delicious foods in China and foreign countries,
taking part in gatherings of top-notch gourmets, and otherwise mobilizing a wide range of
resources to improve the taste of Meizhou Dongpo dishes. The couple divided the company's
Kitchen and Administration Department into two departments, one oversees kitchen affair

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administration and the other is in charge of R&D. The R&D Department brings together the most
gifted and experienced chefs of Meizhou Dongpo to develop and optimize dishes.

The combination of constant enterprise development, awareness of new cultural trends_

expanded personal contacts and horizon improvement enabled the couple to get more inspiration
and ideas about food. They gradually became aware that Chinese cuisines are profound and
extensive. They discovered other local cuisines also could boast their specialties and are not
infenor to Sichuan cuisine in terms of taste. Moreover, they found French cuisine and Japanese
cuisine equally prominent to Chinese cuisine. Another cooking craft door was opened for Wang
and his wife. They began to draw on features and advantages of other cuisines. Meizhou Dongpo
began to employ chefs of not only Sichuan cuisine, but also Cantonese cuisine, Beijing Roast
Duck and western cuisine. They enthusiastically studied and discussed a wide variety of new
cooking skills. In recent years, Meizhou Dongpo has integrated tastes, skills and dishing arts of
other cuisines in addition to traditional Sichuan cuisine to create many new Sichuan dishes.

Each new dish of Meizhou Dongpo goes through dozens of trials and errors, tasted by c hefs
at all levels including Wang and Liang. They are also evaluated by food consultants and ordinary
consumers. For a dish to be selected, it must out perform at least 10 rival dishes. The final
standardized cooling procedure, heating duration and degree, main material and ingredient mix of
each dish must go through at least 100 tests before it is placed on the menu. The couple regards
each dish as an artistic work and treat it like their child.

The annual cooking competition is a central activity at Meizhou Dongpo. The company
leaders and chefs respect deeply those who earn awards. Chefs regard it an honor to participate in
the competition. Each year Wang Gang makes comments and presents awards to winners. Chefs at
Meizhou Dongpo have a strong sense of professionalism and pride. They know they have a
proficient boss and thus do not complaint about his strict cooking skill requirements.

Besides taste improvement, Wang Gang has another important value - cooking morality. One
thing still remains fresh in Wang's memory. In his early years of learning cooking skills, Wang
Gang was good at cooking various delicious soups; one was called "Commander Soup". One time,
Wang served his Master Gan a bowl of -three fresh delicacies soup" in humble reverence and
Master Cran tasted it and nodded_ As Wang finished cleaning the cooking range and was going to
leave, Master Gan came over and asked, "Did you finish it? Did you wipe the pot clean?" "Yes,"
Wang replied. "Go get some clean water and wash your rag," said Master Gan. Wang hesitated
and subconsciously glanced at the shining iron pot and table, thinking, "I have wiped them very
clean." Then Wang brought a basin of clean water and washed the rag in the water. The water
became dirty and muddy. Master Gan became angry and said, "You drink the water." Wang was
stunned too. "You use the rag to wipe the pot and thus contact the dish. A customer eating the dish
is just like you drinking the rag water," Master Gan noted. When Wang's face turned red and was

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going to drink the water, Master Gan said, "Stop, remember it in the future."

From then on, Wang Gang strictly followed Master Gan's lesson. Meizhou Dongpo has a
motto cooking skill is the foundation, cooking morality is the essential spirit. A great restaurant
depends on conscientiousness.

Meizhou Dongpo is second to none in terms of kitchen sanitation and cleanness. Its kitchen is
divided into dry, wet, raw and cooked zones, with a careful layout of water supply and drainage.
Cooking utensils as well as materials and ingredients are placed in a good order. Kitchens are
carefully cleaned after work. To ensure chefs do not ignore sanitation and hygiene, Wang Gang
set a rule that all kitchens are open to all customers at any time: Meizhou Dongpo was a pioneer
in this regard. As a saying in the restaurant industa-y goes. "a customer will not eat a dish after
seeing the cooking process in the kitchen no matter how delicious it is." Wang wants to break
the convention. "Why cannot professional chefs keep as clean and sanitary a cooking process as
they do at home?"

At the beginning of this focus on cleanliness, the chefs were stressed and slowed their down
cooking speed for the sake of sanitation. After a while, however, they adapted to the new routines
and techniques which became summarized in a set of textbooks for the new chefs. In 2002,
Meizhou Dongpo introduced the Japanese 5S management system2 to further standardize the
organization of kitchen tools, materials and ingredients, to guarantee food freshness and prevent
cross infection.

Meizhou Dongpo created a testing laboratory to test the biochemical indicators of the raw
materials used in the dishes. Materials are tested when they enter the logistics center and again
when they are transported to restaurants. Samples are preserved to enable traceable quality
management.

Meizhou Dongpo changed its criteria for selecting suppliers as it grew stronger. It now uses
renowned big brands such as COFCO, Gold Arowana and Guchuan Group instead of the original
small suppliers whose quality was more uneven Wang Gang believes only when suppliers and
Meizhou Dongpo achieve win-win results can good long-term business relationships be achieved.
Therefore, when negotiating price with suppliers, he always gave suppliers a profit space.
"Whatever you're given, you pay for. If we give a too low price to a supplier today, tomorrow it
will send us inferior raw materials. As a result, customers will then experience quality decline and
we will finally suffer losses."

Culture of Meizhou Dongpo

Meizhou Dongpo is permeated with Dongpo culture. All employees at Meizhou Dongpo are
2
SS management system: SEIRI (dandy the materials into needed and unneeded), SEITON (ordering the needed
materials), SEISO (cleaning the workplace), SETKETSU (maintaining the result of the first 3Ss) and SI-El TSUKE
(keeping a civilized way of working and life).

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influenced by the following idea: to become a century-old enterprise, it must pay attention to
sustainable development and boldly undertake social responsibility. The idea comes from Wang's
view that "social responsibility is an important drivinp, force behind corporate development -.

After the Sichuan Earthquake on May 12. 2008. Wang Gang took measures to comfort
employees from Sichuan and collect information about employees affected by the disaster. He
worked with enterprises in the Beijing restaurant industry to rapidly set up a "Beijing Chefs
Delegation for Earthquake Relief- to bring tons of grains, vegetables and meat to cook meals for
earthquake-affected people in Sichuan. He personally headed this delegation. Afterwards, to
provide more help to the earthquake-affected people, Wang initiated a series of relief programs
including blood donation, large-scale charitable donation and fund contributions, to express care
and support from a Sichuan cuisine enterprise for its hometown.

Employee Incentive Mechanism

At present, about 70% of employees at Meizhou Dongpo come from Sichuan because they
know Sichuan cuisine culture very well and work diligently. 80% of new employees are recruited
from high school and the remaining 20% from society in general. Meizhou Dongpo began to
recruit university students two years ago and now has about 200 university-student employees
mainly majoring in hotel management and tourism. Meizhou Dongpo values the strong theoretical
knowledge these employees possess. They help supplement the skills of other senior employees to
realize win-win results.

Mid-level managers of Meizhou Dongpo are mainly promoted from employees at the ground
level. Most of them have worked at Meizhou Dongpo for over five years. Wang Gang has
formulated the development planning for each position, and set the position levels. Each restaurant
has a human resources officer who focuses on employee development. Basic staff such as
waiters/waitresses, chefs, security guards and service staff on the bar are evaluated every three
months (a combination of written test, demonstration of skills and the evaluation of the restaurant
managers). Their performance review is a key input for promotions. Administrative staff of the
headquarters are promoted according to the work ability. In general, they can be promoted by
one level only. If they are extremely outstanding, however, they can apply for across-level
promotions.

In March 2009, the Group started using the training base located in Tongzhou District,
Beijing, where new employees received a month-long induction training. The content of induction
training includes military training, company introduction, enterprise regulations, enterprise culture,
job skills, etc. The induction training not only improves the quality of new employees, but also
eliminates employees with low quality. After working in the restaurant, new employees also
receive training on the restaurant once every three days. This is mainly skills training. In order to
train new employees for a long term, Meizhou Dongpo adopts the way of "a mentor training an

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apprentice-. To motivate employees, mentors and apprentices are evaluated respectively. If the
apprentice has a good performance, the mentor will also benefit from it; if the apprentice has poor
performance. the mentor shall also be penalized. The store manager grades employ ees every
month. Employees also grade their foremen and other managers at higher levels. and their
evaluation results linked to their wages.

Meizhou Dongpo organizes a spring outing. karaoke competition and a Spring Festival party
every year. It selects and awards excellent employees on a monthly basis, presents a birthday gift
to all employees and invites parents of outstanding employees to travel in Beijing. It has improved
dormitory conditions and provides free laundry' for employees. One time, when an employee fell
ill, the employee was deeply touched after receiving RMB 4,000 donated by other colleagues to
cover his expenses. The Company has set up an office in Meishan to help solve employees'
difficulties in the hometown. For example, Wang Gang bought an air ticket for an employee whose
mother had a car accident while also dispatching a car from the office to send the employee home.

Employees have been strongly supported at Meizhou Dongpo. For example, during the SARS
period in 2003, all restaurants witnessed significant business decline. Many were closed down or
had to reduce employees. Conversely, Meizhou Dongpo Restaurant did not lay off any employee.
Consequently, the monthly employee turnover rate of Meizhou Dongpo is 10%, lower than the
average level in the industry.

Human Resource Management

Wang Gang attaches great importance to staff management. In his opinion, the restaurant
industry has moved from an era of goods shortage to an era of talent competition. Over the years,
Meizhou Dongpo Restaurant has elevated talent development management to the height of
strategic management, striving to change the traditional employment relationship between
enterprises and staff, and instead establish a win-win cooperative partnership. It tries to foster staff
loyalty to the enterprise. Meizhou Dongpo hopes to set up a stage without ceiling for employees to
follow an open career path with broad promotion space.

Meizhou Dongpo's salary management system was developed with heavy management
interaction. Employees basic salaries are higher than the industry average. The company also
provides merit pay according to the monthly business volume of each restaurant versus plan .

This has increased employee income and improved their morale. In addition, it was the first
company to give a two-day weekend holiday in the restaurant industry. Additional pay is provided
for overtime work, with three times usual pay being provided for holiday work and festivals.
Additionally, a significant bonus is issued at the end of the year The company is now considering
improvements in its wage structure. At present, the wage structure of most restaurants are too rigid
and does not appropriately motivate employees. Wang Gang's salary system is "Fixed Salary +
Performance Bonus + Sales Commission." The sales commission is directly related to corporate

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Tiblehlia gam Chi.* 9,..k. Cu* Meizhou Dongpo: Entrepreneurship_ Leadership and Culture

profit. At the same time. the wage structure is flexible, so assessments of employee quality can be
inserted. Ivleizhou Dongpo has also adopted a system of virtual equity_ making employees business
partners with an economic interest in the enterprise.

Employees physically live in facilities provided by the company. Thus the quality of
enterprise life is directly related to the improvement of employees' quality of life. Many
restaurants don't realize the subtle influence an enterprise's living environment has on the quality
of employees. For many years, Meizhou Dongpo has had a policy of providing accommodation.
Wang Gang has repeatedly stressed that employees are the second customer" of the Group, and
attached great importance to the quality of staff meals. The company uniformly arranges
accommodation and rent subsidies (bed sheets, washbasin, etc.), and regularly distributes labor
supplies (toothpaste, perfumed soap, towel and washing powder) and birthday gifts. A rest area is
provided for the employees in each restaurant. There are also recreation rooms and Internet rooms
equipped with air conditioning and fans in the restaurants. To simplify employee's lives. the
company arranges for cleaning of staff uniforms. Wang Gang gave significant options in potential
benefits to core employees. The employees can select those benefits which best meet their specific
demands, to maximize the efficiency of benefit expenditures. Through the employee virtual equity
plan, the employee profit sharing scheme and the flexible welfare option (including choice of
various welfare programs such as housing, health care and children education), the Group allows
the employees to select the benefits which best meet their needs.

Epilog
As of the end of 2013, Meizhou Dongpo Group included six divisions. These were Meizhou
Dongpo Restaurant, Meizhou Snacks, Wangjiadu Hot Pot, Xiaodu Hot Pot, Meizhou Home-made
Specialties and the Wangjiadu Food Factory. It had 80 restaurants in Beijing and an additional 14
restaurants in Sichuan, Shijiazhuang in Hebei, Xi'an in Shaanxi and Huanggang in Hubei.
Meizhou Dongpo Group had annual operating revenue of over RMB 1.8 billion, over 20 million
customers and more than 8,000 employees.

Wang Gang and Liang Di created Meizhou Dongpo through the combination of their firm
faith in food and diligence. Meizhou Dongpo has gone through many changes in the highly
volatile market over the past decade. The Wang Gang and Liang Di careers starting from being an
apprentices grew to become those of enterprise leaders. They experienced the ideological
transformation from being a traditional experience-based operation to one of modem standardized
and industrialized operation. Automation and standardization are everywhere. They consolidated a
long-term foundation while simultaneously remaining youthful and nimble. They keep an overall
roadmap of the group while simultaneously enabling each restaurant to undertake individualized
development. They implemented strict system management while also listening to employees'
voices.

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This document is authorized for use only by Yos Sunitiyoso in 2015.

 0 arm.gh.. SEE Cabbie 1. 4 6 1tC"bn
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- 06 . COI*
Dosi. iu. Meizhou Dongpo: Entrepreneurship. Leadership and Culture

China's restaurant industry has grown at a double-digit rate for two decades. People's living
standard has risen steadily while ones way of life is also changing. How in this context can Wang
Gang lead Meizhou Dongpo towards continued future growth?

Appendix : Facade Styles of Meizhou Dongpo Restaurants

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This document is authorized for use only by Yos Sunitiyoso in 2015.