Does the sight of a jam-packed Western restaurant in China get you dreaming about opening your own eatery here? While many China expats have turned this dream into a successful reality, many more have failed miserably. In a bid to be totally realistic, here are five things to consider before opening a Western restaurant in China. It’s better to be prepared than a dreamer.

Source: Archie MacDonald52

1) Ownership and partners

First thing’s first. You have to decide what type of business entity you’re going to create. Many foreign restauranteurs in China choose to establish a Joint Venture with a local partner since it is the fastest and often easiest means of setting up a business in mainland China. However, be aware that challenges can arise when radically different cultures are expected to cooperate on something like a restaurant, for which vision and ethos is so important. You also have to be able to really trust your Chinese business partner because they will ultimately hold all the cards.

If a Joint Venture isn’t appealing, you can set up a Wholly Foreign-Owned Enterprise (WFOE), which will give you control of the business without the challenges of dealing with a local partner. However, expats who take this route are faced with a longer and more expensive process. You will likely be confronted by a multitude of hurdles you never even thought about, such as weak market structures, poorly specified property rights and institutional uncertainty. Furthermore, the intricacies of government policies, local business practices, operational conditions and so on, can be difficult for a foreigner to ascertain.

While foreigners setting up a WFOE can hire a local agent to help with these challenges, having a local partner you trust is invaluable when it comes to reducing political risk and/or achieving political advantages, both of which are still very much part of the course in China’s business world.

Whoever you decide to open the business with, whether they are local, another expat or an agent, remember the first several months will likely be incredibly stressful. The pressure can easily lead to arguments, so be prepared to see your relationships tested.

2) Customer base and eating habits

Even before this, perhaps, you need to think about your customers. A lot of unsuccessful foreign restaurants in China forget to factor in the tastes of the local community and therefore fail to satisfy them with their menu offerings. Remember that although the Chinese are becoming more worldly, you can’t expect everyone to expand their culinary horizons to fit your menu.

The Chinese are relatively conservative when it comes to food, even though they have a reputation for eating everything. I’ve met people in Wuhan who are reluctant to eat Shanghainese cuisine, for example. I also find that when eating Western food, Chinese people tend to compare every dish on both taste and price to something they see as the equivalent in Chinese cuisine. We all know Chinese people love a bargain, so why spend 200 RMB on a wood-fired pizza when they can get “the same” Chinese shaobing for a mere 5 RMB? While I’m not saying you should offer anything other than authentic Western cuisine at the appropriate price, just be aware of the cultural hurdles you might face with local diners. Even if you are mainly targeting other expats, at least offer one or two dishes that are likely to suit local palates and pockets.

The next point worth discussing is the way Chinese people feel about foreign food in general. A crowded McDonald’s, KFC, Starbucks or Pizza Hut is a common sight here, but don’t let that fool you into thinking the Chinese love Western food. I was once told by a Chinese friend that she can’t stand Western food but is always being invited to meals at foreign restaurants by one particular friend. She believes the appetite for Western food in China has little to do with the taste and more to do with associated status.

In the opinion of some Chinese, dining at a Western restaurant shows you are middle class with money to spend. So even though they are really craving local delicacies, some Chinese people will choose to spend more money on the fashionable Western restaurant, just to show they can.

3) The cost factor

Money will always be a challenge when opening a restaurant in China, and underestimating this could lead to the failure of your venture. Not only will you need to lay down a hefty chunk to cover the initial investment, you’ll also need to have enough working capital to operate the business in the beginning stages, including unforeseen costs and emergency expenses.

You’ll need to carefully consider your suppliers, as this is an area where foreign restaurant owners can loose a lot of money in China. If you’re paying high prices in the hope of receiving a superior product, make sure you’re getting the real thing as there are a lot of fakers out there. If possible, go personally to see and inspect the source of all your mainland products, double-check your order receipts and carefully inspect every delivery for quality to make sure no-one is benefiting from your RMB. Importing ingredients from abroad is more of a guarantee of quality, but this can get expensive fast. Remember that China is a huge and fertile country with lots of amazing local fare that will help keep your menu prices competitive. You just need to do due diligence with your suppliers.

Related to the cost factor is the overall size of the restaurant — an area where a lot of first-time restauranteurs go wrong. The rent, wait staff and utility expenses required to run a big location will make it hard to get ahead when you’re first starting out. Many successful expatriate restaurant owners in China emphasize the importance of starting small. A small space will allow you to learn the Chinese market with lower overheads. You can always expand once you feel confident and well established.

Furthermore, you’ll need to consider the cost of designing and remodeling a new space if it wasn’t a restaurant before. It’s also crucial to make sure your chosen location can legally be used as a restaurant. If you lease a premises before getting a business license, you risk becoming trapped in a contract for an unsuitable location.

4) Cultural considerations

Opening a Western restaurant in China has many inherent challenges. First off, the language barrier will put almost any foreigner at an overwhelming disadvantage. Even if your Mandarin is pretty good or you have a Chinese partner to assist you, you will likely always miss out on a few subtle but important nuances.

The next thing to consider is your Chinese employees. Hiring an all-foreign staff is impractical and expensive, but the Chinese are used to cooking the Chinese way and receiving Chinese-style service. Those who haven’t worked in a Western restaurant before will likely find some concepts, such as using less oil to cook and not taking a nap during quiet times, hard to pick up. With close supervision and perseverance, however, you’re local staff will get there.

5) Business know-how

It’s easy to have a bad meal at a Western restaurant in China and think, “I could do this better,” but anyone who hasn’t at least managed a restaurant before will be at a significant disadvantage. Ambition is a good first step, but it’s no replacement for experience. Lack of experience is probably the most common factor in expat-run restaurant failures in China.

As one expat chef in Beijing puts it, “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.” If you’re a veteran of the industry who really knows the F&B business, the Chinese city you’re operating in, the supply chain and customer base — plus you have the discipline and the energy running a restaurant requires — you might just be okay.

Another important consideration when opening a Western restaurant in China is that widespread, low-level corruption is still just part of the fabric of doing business here. A new restaurant is basically an open invitation for people such as landlords, government officials, fire chiefs, etc. to come knocking on your door with their hands out. Unfortunately, this can’t really be avoided unless you want to make life very difficult for yourself.

This is where a local partner with good guanxi can really come into their own by helping to keep these additional “costs” as low as possible. The co-founder of a Beijing cafe I frequent puts it simply: “In China, relationships are always first, then your sense of morals and then the law.”  And as another restaurant owner in Nanjing says: “Gifting cartons of good cigarettes can help speed up the process.” 

6) Visa issues

And as far as visa issues go, be aware that it’ll take more than three months to complete the business registration process and you won’t be able to apply for a work visa or residence permit before obtaining this. You’ll need to be employed elsewhere or on another type of visa while you’re getting things set up, therefore.  

After that, make sure you’re willing to eat, sleep and breathe your business. The first couple of years (if you’re lucky enough to get that far) are likely to be filled with long hours and stress, so don’t get too cozy in that seat by the bar.

Opening a Western restaurant in China can be an extremely difficult undertaking, but if you have a realistic business plan and are prepared for what could be a multitude of setbacks, you may just persevere and, who knows… succeed.

Hot New Jobs recommended for you
Literature/ELA Teacher, No Office Hours Think & Grow Education 20,000 - 30,000 CNY /Month Beijing Full Time
Kindergarten Teachers in Beijing i2 Education 28,000 - 35,000 CNY /Month Beijing Full Time
Risk Analyst Shanghai Wutu International Trade Co., Ltd. 5,000 - 40,000 CNY /Month Shanghai Full Time|Part Time
Science Teacher China-Canada Cultural Exchange Center Co., Ltd. 25,000 - 30,000 CNY /Month Nanjing Full Time
English Teacher for September-Chaozhou Chaozhou A Way To Success training centre 10,000 - 15,000 CNY /Month Chaozhou Full Time
Part-Time English Teacher BeeSMART English 350 - 450 CNY /Hour Shanghai Part Time
IBDP English A/B Teacher Shenzhen Senior High School 25,000 - 35,000 CNY /Month Shenzhen Full Time
Junior Wealth Advisor deVere Group 12,000 - 15,000 CNY /Month Shanghai Full Time
High School Math Teacher BEST Educational Organization 20,000 - 25,000 CNY /Month Zhengzhou Full Time
Global Social Media Manager SINOWELL 20,000 - 30,000 CNY /Month Shanghai Full Time
View More Jobs

Warning：The use of any news and articles published on eChinacities.com without written permission from eChinacities.com constitutes copyright infringement, and legal action can be taken.

Keywords: opening a Western restaurant in China