Overseas Little Sheep

Si Duong deftly picked up a piece of raw lamb meat with his wooden chopsticks and plunged it into a boiling pot of water sitting on the table in front of him. He watched eagerly as the red meat quickly grayed and a smile came across his face as he chewed the tender mutton slice.

This scene is common across East Asia, but for China's leading hotpot chain, Little Sheep, it's been tough getting Americans to chow down on the traditional Mongolian grub.

Si Duong first ate at a Little Sheep restaurant in the US a year ago, but he can still remember what he had with four friends.

"Lamb, beef and chicken, and basically everything Little Sheep offered in China," said the 28-year-old hard-core hotpot fan. "The Little Sheep here in San Francisco is almost the same as in China, except it is much more expensive here in the US." It cost them around $200 for dinner, or $40 for each, said the American Chinese who studied in China in 2005, the year when Little Sheep first entered the North American market. The average price in San Francisco Little Sheep is usually $20-25 per person, if no liquor consumed, according to Wang Fang, CEO of XFY Holding.

XFY Holding, the sole agent of Little Sheep in North America, now runs nine Little Sheep in North America, four on the west coast of the US and five in Canada, after buying a 69 percent stake in early December from Little Sheep China in its restaurant in Union City, California.

At the time, that was the only outlet the Inner Mongolia-based hotpot giant operated directly in North America.

The deal was worth $345,000, according to a statement released by Little Sheep China December 11.

But breaking with the original brand doesn't mean the end of Little Sheep in America. XFY plans to franchise, and open four to five outlets each year from 2010, to bring the total number to about 60 in five years, said Wang Fang, the CEO of XFY.

The first two outlets were opened in Asian communities, but new restaurants were then opened in downtown areas.

"We do not want to stick to China Town like a lot of Chinese restaurants do, though we first targeted Asians who have some knowledge of hotpot," Wang said.

The Little Sheep restaurant in Houston, Texas is located downtown, near the Yao Restaurant owned by NBA star Yao Ming.

Most of Duong's friends have dined at Little Sheep. Most are Koreans or Japanese, with a few Western-ers. Wang, the XFY CEO, said about 20 percent of the chain's customers are now Westerners.

To appeal to North Americans, XFY has localized some of its restaurants.

Animal innards are a popular hot pot food on the Chinese mainland, but very limited offal products are offered to Chinese customers only in North American outlets and they are not showed in the full size color menu so that people will not be offended when they check out the menu. While Mongolian barbecue items were added to the menu. Some of the locations also feature a conventional bar.

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