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How to Open a Restaurant in China

Wednesday, January 5, 2011 | By:

After a few years of experiencing China’s jam-packed pizza buffets and never-ending lines at Western fast food joints, there comes a time in every foreigner’s life when they contemplate opening their own restaurant. Given young Chinese people’s immense appetite for trying food from beyond China’s borders it seems like a good idea. If McDonald’s can rake in the money then why can’t you? How hard can it really be?

Pretty hard, it turns out.

I once tried to open a restaurant in China—and failed miserably. Ambition is a good first step, but it’s no replacement for experience. So I went out and spoke to some success stories to find out just what it takes to make your restaurant dream a reality.

 

It’s all about the experience, baby!

Even though all the restaurant owners I interviewed were from different backgrounds, cooked different food and had different outlooks on life, they all shared one thing: years of experience in the food and beverage industry (F&B). It might seem straightforward, but you would be amazed at how many prospective foreign restaurateurs ignore the importance of experience in planning a restaurant.

Youssef Escobar, the owner ofBeijing’s Argana Moroccan Cuisine, told me about a Finn who came to China and tried to open an Italian restaurant, with no experience. As Youssef put it, “It was a disaster!”

Intent on emphasizing his point, Escobar looked me straight in the eye and said, “Just because you are a foreigner doesn’t make you qualified to open a restaurant. Please do us all a favor; if you don’t have any F&B experience then just stay home!”

What to do if you don’t have experience and still want to open a restaurant? Hire someone who does have experience, and fast. But don’t fool yourself into thinking it’s going to be easy when you’ve got no experience in the profession you’re entering.

 

Location, of course, matters

The next step to realizing your restaurant dream is to find a good location. While most restaurant owners will say location is key, it is a good idea not to get too attached to a place. Of the many foreigner-run restaurants that I consulted, all but one had changed locations since their original opening.

Ras Ethiopian—run by the easygoing, afro-sporting Danny Bekele—is currently located inside a Beijing drive-in theater complex; its third location in as many years. His first location didn’t work out, so he moved to a sprawling 400-square-meter spot in Beijing’s popular Sanlitun neighborhood.

“One of the main reasons we moved to Sanlitun was to make our restaurant easier to access, but the place that we got was just too big. Even if you had 60 people there the place seemed empty,” Bekele explained. And this big empty place was cutting into Bekele’s bottom line. After paying for the rent, wait staff and utilities, Bekele found himself treading water instead of moving forward.

“If I had to do it over again I would have been more patient and done things on a smaller scale,” Bekele said.

It is a theme echoed by Justin and Lulu Clements, the husband-and-wife owners of Old Bike Café, located in Beijing’s Weigongcun area.

They started with a small café-style restaurant, barely 60 square meters. All of the design and remodeling they did by themselves. It took them three months of sweaty, backbreaking labor but they saved a lot of money and moved at their own pace.

“From our own experience it really helped that we started off small. China is such a different place and you really have to learn as you go,” said Justin.

 

Dot every “i” and cross every “t,” but not over a bottle of baijiu!

Of course, before you can officially open you are going to have to overcome a mountain of paperwork and the unfamiliarity of dealing with a Chinese partner.

The difficulty of paperwork in another language is self-explanatory, but do you really need a Chinese partner? There is some division on this issue—you can create your own “Wholly Owned Foreign Enterprise” (WOFE), but it takes a big chunk of money and time. As any potential Chinese partner will tell you, it is quicker and cheaper to set up a joint venture or Chinese-owned company. In addition to saving money and time, you’ll also be rewarded with their connections and knowledge.

This is the area where you have the potential of running into the majority of your problems. The overlapping of relationships and legal paperwork has caused the downfall of many successful foreign restaurateurs in China. The story of Olav “Kro” Kristoffer Bauer stands as a warning to all.

At the height of its popularity, the Kro’s Nest could boast that it served the best pizza in Beijing and had a growing chain of restaurants to back its claim. But in the spring of 2010 everything came crashing down around the legal issues of ownership between Bauer and his Chinese partner Yuan Jie were not made clear enough in the original paperwork. Like all legal tales, the details are complicated—these are muddied with rumors of fistfights and jail time. But similar tales abound, such as in Sam Goodman’s experience-filled book “Where East Eats West,” so here’s the short version: never leave anything as an oral agreement. Get everything you need on the legal side down in writing.

When Brian Connors first opened his popular Beijing student hangout The Bridge Cafe, he partnered with a Chinese cafe company. When the partner moved into franchising, and demanded Connors pay franchising fees for his own cafe, a legal battle ensued. But in this story, Connors had a solid contract, and all agreements in writing. The decision went in his favor.

While you do need to protect yourself legally, you also can’t neglect relationships with your Chinese partners. Everyone has heard about the importance of guanxi, but consider what some successful restaurateurs have to say about this subject.

Nell Chen, a co-founder of The Bridge Cafe, put it simply: “In China relationships are always first, then your sense of morals and then the law.”

Danny Bekele echoed this in his own matter-of-fact way when he said, “You know it doesn’t matter what you sign, relationships are everything here man.”

Relationships come first and you shouldn’t be pushy about the whole legal thing, because your Chinese partner will have trouble building trust in you. This is not to say that you shouldn’t make sure you can prove your ownership legally; you should just do it quietly. Don’t go behind anyone’s back, but as Kro’s case illustrates,you can’t totally rely on guanxi. You need to have legal protection too.

Maintaining good relations with your business partner and protecting yourself legally is a balancing act that could very well be more difficult than marriage.

That being the case, some restaurateurs have decided they might as well make it one. “My advice,” offered Justin Clements, “is to just find a Chinese person and marry them. If you get into an argument you can always kiss and make up.” His wife Lulu smiled in agreement.

While it is possible to avoid a Chinese partner when starting a restaurant, in reality it is not a good idea. You will miss out on vital contacts and knowledge of the market you are trying to operate in. So if you’re serious about the dream, be prepared to walk the balance beam.

Why of course that’s beef, I promise you!

Once you have a location and a partner and the paperwork done, it’s time to start operating an actual restaurant.

The first problem you’ll face is getting supplies that will make your food taste just like it does at home.

“When it comes to unique items for your dishes, it’s better to get them straight from home,” said Bekele. With the number of planes that fly in and out of China, this is not much of a challenge to pull off. It does cost a little extra to do, but if you want to be authentic then it is well worth the price.

Aside from rare ingredients like the teff for Ethiopian injera, you can get almost anything in China. But this doesn’t mean it will be as easy as just paying a delivery man. “Back in theU.K., suppliers come looking for you. In China, you’ve got to go looking for them,” said Justin Clements.

Further, you can’t take anything for granted. Lulu Clements, who is Chinese, double-checks everything, and warns to err on the side of caution.

 

Hey, don’t burn the garlic!

Even if you cook the food yourself, there will come a time when Chinese employees will be involved in the kitchen.

The Clements’ warn about cultural differences in the early days. “At first it can be a bit difficult, as they are used to cooking the Chinese way, but you just have to closely monitor them and slowly but surely they will learn how to do things correctly,” Justin said.

Youssef Escobar mirrored this, cautioning that, “In China you might burn garlic but in Mediterranean food we never do that. I’ve had a hard time getting some people to realize this.”

 

Getting the word out

Now that your kitchen is turning out steaming hot plates of foreign goodness, it’s time to get a little bit in the way of recognition. A big advertising campaign is the first thing most people would think of, but every restaurant owner I talked to said they relied mostly on word of mouth to get the job done.

It is always a good idea to plug yourself into the local community. “Get yourself in the local expat magazines,” urged Bekele. “It doesn’t necessarily have to be an ad; it can be an article about your unique food. The point is to get your name out there.”

While many of your guests might be foreigners, don’t forget the Chinese community. They may not be familiar with the crazy foreign food on your menu, but there are some easy fixes, like localizing your offerings. “All you need is a good barbeque offering,” Bekele suggested. “The Chinese love that. Along with the barbeque, they will order your more unique dishes little by little.” Or try fusion offerings.

But in the end, as Youssef Escobar said, “A restaurant is a very personal matter. It is your vision, your philosophy… never lose that.”

 

It is better to eat one bite at a time

If you’ve got customers flowing into your new restaurant, then you’re well on your way, but never let your excitement get the best of you. Your travails are not over. Running a restaurant in China is something you have to learn, step by painfully-small step. At times it will seem you are in a constant uphill battle with just about everyone over just about everything. But if you can get past this point and connect with your customers and employees, then you are well on your way to success.

  • open
  • kāi
  • restaurant
  • fàndiàn 饭店
  • successful
  • chénggōng 成功
  • to burn
  • hú le 糊了
  • Let’s open a restaurant together.
  • Zánmen yīqǐ kai fàndiàn ba. 咱们一起开饭店吧。
  • Excuse me, the garlic is burnt.
  • Bù hǎoyìsi, suàn shāo hú le. 不好意思,蒜烧糊了。
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2 Responses to How to Open a Restaurant in China

  1. alex says:

    Great article. Thanks for the heads up.

  2. Michael says:

    I am interested in setting up a German Restaurant in Shanghai next year with a friend of mine, we do not have a lot of experience in the food and beverage market, but we are really ambitious and think it is the right time for opening such business. We are not completely sure where to find the right business partner for this kind of business environment, do you have any idea where we could find such a business partner ? Me and my friend are finishing up next year our a Bachelor in Business Management and we may have the opportunity to go to Shanghai. Our dream is to open up our own business and I think Shanghai would be a great opportunity for us, because it has the infrastructure and the environment to open up for example a nice German restaurant. I think Chinese people Like German food and who knows best which german food is the best one ? – Germans. Does anyone have any connections to someone who we could contact for setting up a business in Shanghai ?

    Many Thanks