White Castle gets toehold in China

Harold and Kumar’s next trip might be across the Pacific Ocean.

White Castle, the Columbus-based chain famous for its sliders, opened two stores in Shanghai this summer. The stores are part of a partnership with ClearVue Partners, a Chinese privateequity company that also has worked with Outback Steakhouse.

White Castle has about 400 company-owned locations in the U.S. but it has been looking at ways to grow. ClearVue came to the company with a proposal, said Jamie Richardson, vice president at White Castle.

“We view it as an emerging opportunity,” he said. “There is a growing hunger for Western culture and food in Shanghai, and we have an iconic American brand.”

Early returns have been encouraging, but the stores have been open for just a few weeks, Richardson said.

China is a big target for American restaurant companies, said John Gordon, principal of Pacific Management Consulting Group and a restaurant analyst. It is the most populous country in the world, and Shanghai, on China’s eastern coast, is a city of more than 24 million. China is not saturated with restaurants the way most of the U.S. is, so there is plenty of room to grow, Gordon said.

“I have been saying for years that all of these retailers and restaurants need to consider China,” Gordon said. “Some brands struggle there and need to adapt, but I think this is a good idea. White Castle is a real representation of Americana.”

The menu in China is almost identical to that at U.S. stores, including basic sliders and cheeseburgers and grilled chicken sandwiches, all on the same type of buns and available by the case (30) or even crate (100). New items just for Shanghai include a spicy tofu slider and a smoked-duck slider with sweet cherry sauce.

The company sent 45 employees to China to help

train Chinese employees and open the two stores.

Although Gordon cheered White Castle’s expansion into China, he also noted that most other restaurants entering foreign markets stumble on supply-chain issues such as obtaining beef, finding bakeries and making sure that supplies are adequate. With just two stores to support, though, White Castle faces much less risk of such problems, he said.

The Chinese market is hungry for American fast food. McDonald’s, which entered China in 1990, has more than 2,500 stores there and plans to almost double that number by 2022. KFC is the largest restaurant chain in China, with more than 5,000 stores. Pizza Hut has 1,600 locations there.

White Castle hopes for big things in China but doesn’t want to get ahead of itself. The company tried to open stores abroad before.

“We experimented with international expansion in the late ‘80s, early ‘90s, but not successfully,” Richardson said.

White Castle entered Malaysia, South Korea and Mexico. The cravers never came.

“We learned from that experience,” Richardson said.

ClearVue is a experienced partner with knowledge of the market, he said. The experiment involves just two stores, not a big lift to support from Columbus.

“It is a long way from Indianapolis, where I had my first slider,” Gordon said. “If White Castle was publicly traded, this would be really exciting. Wall Street would love this.”