Secrets of Fujianese American Restaurant Industry Go Public

My latest Menuism article carries the title "Why Are Chinese Restaurants So Similar."  However the title I gave the piece was "Secrets of Fujianese American Restaurant Industry Go Public."  While the titles are vastly different, the text is largely the same, with a small amount of editing consistent with the published title.  But the spin in the two titles is different.  The Menuism title emphasizes the result at the restaurant level of similar dishes and flavors at different restaurants.  On the other hand, my title emphasizes the new discovery of how the Fujianese-American restaurant industry is organized, with a single food supply company furnishing goods and services to over 3,000 mom and pop Chinese restaurants throughout the Southeastern U.S.  In the end the information contained is mostly the same, but the message is a tad bit different.  Here is my original article.

In the past quarter century, the growing influence of Fujianese American restaurants has been one of the major developments in Chinese dining in the United States. For the most part, most of this activity has been below the radar, away from the public eye, particularly since these events are attributable to the actions of literally thousands of mom and pop Fujianese restaurant operations, rather than involving a limited number of large players.

Fujianese immigrants have been flowing from China to a New York “mothership” since the late 1980s, and as we have written, has now reached the point where Fujianese dominate the Chinese restaurant industry east of the Mississippi river. From the Fujianese mothership in Manhattan Chinatown, Fujianese owned Chinese restaurants throughout the eastern United States are staffed via dozens of Manhattan Chinatown employment agencies, with newly hired workers ferried from Manhattan Chinatown by a system of independent bus lines to various points throughout the east, Midwest and south. This bus system is necessitated by the fact that a large portion of these Fujianese workers are illegally in the United States, and do not have the identification required for other modes of transportation. It also gives these workers incredible mobility in changing jobs—dissatisfied with your job in Orlando? Well, catch the Manhattan bound bus from Orlando, pop by one of the employment agencies in Manhattan Chinatown, and scarcely hours later be on a bus to your new job in St. Louis.

A general description of the Fujianese New York mothership was first publicized in 2001 in a New York Times article about Fujianese Chinatown.    While not focusing specifically on the Fujianese restaurant industry, it did introduce us to employment agencies, restaurant workers riding the bus lines, and Fujianese wedding banquets. Numerous subsequent articles in various publications have focused on the lives of individual itinerant Fujianese restaurant workers. We learn that Fujian restaurant workers are often housed in dormitories owned by their employer, that employees take turns as to who make the weekly Monday sojourn to Manhattan Chinatown to pick up supplies, and that some workers may change jobs (and job locations) several times in a month. But these articles provide little additional insight on the restaurant operations themselves.

The first clue that these Fujianese owned Chinese restaurants in the eastern United States were not exclusively a random aggregation of mom and pop operations appeared in two discussion threads a decade ago on the Chowhound message board.  One east coast observer noted that certain dishes appeared to be identically prepared at different Chinese restaurants in his area, while another eastern observer commented that some Chinese restaurants in his area appeared to have nearly identical menus. It is likely that neither observer was aware that their local Chinese restaurants were run by Fujianese immigrants, but message board responders caught on and raised the possibility that some kind of Fujianese organization was guiding these mom and pop operations in a manner promoting a degree of uniformity among these unrelated businesses. Some responders suggested that a mainstream food supply company like Sysco, or perhaps specialized Chinese food supply companies were providing ingredients to local restaurants. This led to a heated debate on the board as to whether small Chinese restaurants prepared all their dishes in-house, or whether they resorted to outside food suppliers.  In the end, with the lack of first hand knowledge, these discussions ended up unresolved, but certainly did plant the seed that there was some kind of guiding hand, be it some kind of cooperative organization or restaurant supply companies, helping the legions of Fujianese operated Chinese restaurants in the United States.

In the end, those who suggested that there were Fujianese businesses engaged in providing food supplies to small Fujianese operated Chinese restaurants were correct.   Interestingly, it has taken a financial news item to shed the light on the process. As you may know, except for the smallest businesses, most businesses in the US are operated in corporate or limited liability company form, for sound legal reasons. A small corporation may be owned by a single owner, or perhaps several family members, or two or more business associates. However, as a business grows it may have to bring in strangers as outside investors. And if it really becomes a large enterprise, its capital needs may result in the corporation selling stock to the general public in an initial public offering (IPO) registered with the US government’s Securities and Exchange Commission, and have its stock listed on NASDAQ or the New York Stock Exchange.

During 2018, there was such an IPO for a company called HF Food Group (NASDAQ—HFFG) out of Greensboro, North Carolina. A 20 year old man named Min Ni Zhou immigrated from Fujian to Manhattan in 1987, part of the early wave of Fujianese migrants. Starting at the bottom of the Chinese restaurant profession and working tirelessly and ambitiously, within four years of arriving in the US, Zhou owned a chain of eight Chinese restaurants and a catering business in the Southeast. Six years later in 1997, bedeviled by problems of procurement of supplies for his Chinese food operations, he established HF Food Group. Eventually, HF Food Group expanded into procuring Chinese food supplies for third party Chinese restaurants. At the time of the IPO, HF Foods had sales of $300 million with a customer base of 3,200 Chinese restaurants throughout 10 southeastern states, serviced by a fleet of over 100 refrigerated trucks. It operated warehouses in Greensboro, Ocala FL and Atlanta, and operated a 24 hour call center for its customers located in Fujian province. HF Foods’ filing documents also confirmed the dominance of Fujian restauranteurs within its trading area, estimating that over 80 percent of their customers were Fujianese.

Clearly H F Foods is the big dog in the Fujianese American Chinese restaurant supply sector. But H F Foods only operates in the Southeast, so are there similar companies in the Midwest and East? The H F Foods IPO filing does provide a couple of clues as to this question. One reason for H F Foods going public is to provide it the capital to expand its geographic footprint. In this regard, H F Foods refers to the general fragmentation of the Chinese restaurant food supply industry in the United States, and the need of H F Foods to make acquisitions of existing participants in the industry to expand its geographic footprint. This would lead to the conclusion that there are similar Fujianese operated Chinese food supply companies operating in the United States, but not nearly on the scale operated by H F Foods.  In any event, we are fortunate to have gotten this peek as to a major element of the Chinese restaurant industry in the United States.