Opening and running a high-end restaurant is hard enough without having to do it in China, and yet that's exactly what owner of Steak Factory, Michael Yip, did…twice in the last decade. Michael was commissioned in 2006 to build a Western diner concept restaurant for a wealthy client in Beijing, before the man in question went bankrupt and abandoned the project. Michael was left with the pieces: a vacant restaurant on Baiziwang Lu, outstanding debt and unpaid bills for his services. With no better options and the hope of realizing a childhood dream, he decided to switch career paths and take over the restaurant. Six years later, he has three branches in Beijing, is planning to go national by 2014, and international by 2020. Michael agreed to sit with us to discuss the challenges and everyday difficulties of running a restaurant in China.

eChinacities: What was your original reason for coming to China?

Michael Yip: I originally wanted to explore new horizons in architecture and business after graduating from college in North Carolina. I felt like I had a lot of new ideas after college and some of my friends convinced me to head over to Beijing in 2000 to see what the market was like. That year I founded Mi2, an architecture and design firm that is still doing business in Beijing today, and made my home in Beijing's architecture and design field. I had no idea how long I was going to stay in China, I just thought it would be a good idea.

I was born and partly raised and educated in Hong Kong and the US. I think being both American and Chinese allowed me to be more familiar with the market and with what the customer in China wanted.

eC: What inspired you to go into the restaurant business? How did you go about choosing the concept?

MY: It seems that fate pushed me into going into the restaurant business. I fondly remember working in my Grandma's restaurant in Houston. With the whole incident with being left with the restaurant on Baziwang Lu, my passion, and with 2006/2007 being a great year for the food and beverage industry, it seemed like the right thing to do. In terms of the concept, since the restaurant and kitchen were built to meet the standards of a Western diner, we were kind of locked in to what we could do. Also being from North Carolina, a meat and potatoes restaurant just made sense. In 2007, when we sold over one ton of fillet mignon in one month, I knew we were off the ground.

eC: What kind of paperwork did you have to go through (if any) to set up your restaurant? Being born in Hong Kong, was it easier for you?

MY: In terms of paper work there was the usual: alcohol permit, business registration, lease agreement with the landlords, etc. But there were a few other things that I wasn't used to. For instance, our lease is directly tied to our sales: we pay according to how well we are doing. So if we sell higher in one month and lower the next, we pay a higher lease rate that month and a lower one the next. Also puzzling are strange rules that can come up at any moment. Recently, we had to enlarge the kitchen because of a new rule that states that the back of the house has to be a certain size in proportion to the front of the house. So to comply with that rule, we had to expand the kitchen.

Being from Hong Kong and from a Chinese family helped in the sense that I had fewer barriers in terms of language and culture, but I still had to learn Mandarin Chinese. Once in a while I still throw in a Cantonese word in my Mandarin just to keep up that "Hong Kong mystique".

eC: What were some of the difficulties you encountered when first opening Steak Factory? Can you give specific, day-to-day examples of how things might be different running a restaurant in China, rather than in Hong Kong or in the U.S.?

MY: The two main difficulties we usually have are supply and employee turnover. In terms of supply it is incredibly hard to lock in a long-term supplier. We actually have two suppliers per item in case one supplier falls through because it is actually quite possible that a company won't have beef for over a month! Sometimes people will come and try to sell us unacceptable items such as the one time when we're given a T-bone steak that looked great raw and then as soon as we put it on the grill and tried to flip it we found that it was actually a T-bone with two filets glued onto it.

The other problem is employee turnover. We are currently at a very high turnover rate. We try to hire young faces to keep the restaurant looking fresh and modern, but the problem is that after we train them many of them disappear to get jobs at other restaurants. Sometimes competitors will come and offer a bit more than us and just grab our staff, but it doesn't mean they are getting better training or options than us. We try to keep people around by providing incentives such as free English lessons, free meals, parties, company outings, etc.

eC: How is the bureaucracy here? Is it easy to get something approved for permits and licenses? Did you have to establish "official" relationships?

MY: We have to handle bureaucracy all the time. As a designer, it took me weeks to go through official challenges to get the permits I needed and I still couldn't get anything done. After one call from a friend to a friend to a friend, suddenly those same officials who turned me down showed up at my door with all the paperwork I needed. Now at the restaurant, we do remember those important individuals during the holidays and attempt to entertain and please them. It's not that we absolutely have to in order to get things done, but it does make things easier. It's really more about the human angle vs. black and white regulation. It's a whole new way of doing business that I've never encountered in Hong Kong or in the US, but I'm in Beijing now, and the human angle takes on a more dominant role here. It can be difficult for me to kowtow to the red tape, but I do what I have to do.

eC: What particular challenges and issues are you confronted with when dealing with Chinese customers on a daily basis? Were you worried they would not catch on to your concept?

MY: We were concerned then and we are concerned now. We still get people in here who want chopsticks or demand that the steak be cut up for them. We want to provide an alternative dining experience, but it's not easy. We sometimes have to hold ourselves back when customers pair their medium-rare steaks with a nice bottle of Sauvignon Blanc, or drop ice and add soda to a glass of fine Bordeaux. I get a bit frustrated at people who don't appreciate what we are doing. Sometimes I think it might be easier if we were selling Kung Pao Chicken. But it's truly a blessing when someone comes in, knows what they want, and enjoys what we are doing.

eC: How is the notion of 'service' different in China? What does a typical Chinese client expect from a server?

MY: Service is definitely a different animal here. In my opinion, Chinese customers expect more because they expect to be served like they have been given their own butler.
Paradoxically, they expect less in the sense that they are not looking for suggestions or the traditional American notion of service; they just expect the server to be there waiting to serve them at any minute and for them to jump at the first "FUWUYUAN!"

The service industry is definitely lagging in China because being a waiter is still tied to the notion of domestic service. In the US, being a waiter may be seen as a lowly profession but there's at least the notion that you can acquire a certain skill set on the job. Chinese customers or waiters themselves do not recognize that. The combination of this negative image of service and the high turn over rate makes it difficult for any restaurant in China to maintain quality staff.

eC: Do you have any advice to other expatriates who want to open a restaurant or food and beverage business in China?

MY: BE PATIENT! And be determined: be ready to ask the same questions over and over again. There is never a dead end in China; there is always another person to talk to and another road to follow. I would also advise anyone opening a business in China not to come here with inflexible notions of how a business should be run; you're in China, it's your job to adapt to the rules and customers. Finally, be willing to make friends: you never know who might end up helping you when you need it the most.

Note: Steak Factory will be hosting a speed dating event in Beijing on August 25 for both Chinese and expats alike. Click here for more information.

Related links
Guide to Opening a Restaurant or Café in China
The Great Gamble: Starting a Business in China
Tips to Starting a Business on China's Taobao

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