26 Aug Guide to opening a restaurant in China
For many expats based in China, the idea of owning a restaurant, café or bar is an attractive one. With China being the largest food market in the world, it offers many exciting opportunities for two main reasons. Firstly, foreign food is increasingly growing in popularity. As people’s opinion of food and restaurants is diversifying. Secondly, there has been a huge growth in the average Chinese disposable income. Meaning the Chinese are more willing to spend on foreign cuisine. In this article, we map out a guide to opening a restaurant in China..
1) Market Research – The first step to opening a restaurant in China is to find out how much of a demand there is for your product or service. For example, if you want to open a bakery, it would be wise to find out how many bakeries there are in the city. Then, it would be useful to also find out what types of bakeries (both Western and Chinese) and also to garner a better idea of the current market situation. As long as you have a plan of what to provide, stick to it. There’s nothing wrong with wanting to offer a little bit of everything, but if you are trying to open a place that offers authentic Thai food with great beer on draft, an intimate café atmosphere and an expansive dance floor, then you are probably taking on too much. It will be very wise to take a simple original idea and stick with it.
2) Prime location – It is not wise to simply choose a location based on what you feel is right; moreover, it is important to know the clientele and demographics of the area, along with their demands and whether your shop will stand out from the crowd.
The major business centers like Beijing and Shanghai may not be your only options, as the second tier cities in China have developed fast with the average citizens’ living standard raising up to a new stage. Huge demand and opportunities for foreign food industries are exposed in these cities, where one can benefit from not only decreased competition, but also preferential government policies regarding taxes.
Once you have settled in a region, you have to find a location for your business. This can be particularly tricky, as the investor must lease the restaurant premises before starting the registration process for the food and beverage business. In order to avoid renting out a location that will be denied business registration, investors are suggested to ask for consultations from the Environmental Protection Bureau, Hygiene Bureau, local department of the Ministry of Commerce and the Administration of Industry and Commerce (AIC) to verify certain requirements.
3) Find how you would like to design the exterior and interior of your restaurant – It is advisable to hire architects/designers to choose the layout and create a detailed plan of how the shop will look upon completion. Also, pay attention to the environmental standard of your restaurant, as before any catering service can began operation, it must get approval from the local Environmental Protection Bureau. This will include an evaluation of the indoor and outdoor surroundings of the site in order to ensure that the location complies with standards listed in the Directory for the Management and Classification for Construction Items and Environmental Influence.
4) The legal side of setting up a business is just as important – It is vital to choose an entity status and register with the government. In China, foreigners are not allowed to be the sole owners of the restaurant or food business, but they are able to open it as a limited-liability Wholly Foreign Owned Enterprise (WFOE) or through a Joint Venture (JV) with a Chinese citizen as a business partner. The business project will need to be approved by the Ministry of Commerce, who will issue an approval letter and an approval certificate that can be taken to the AIC to register the company business license.
After obtaining a company business license, investors then face the task of obtaining food and beverage licenses. There are three main types of food and beverage licenses, and some businesses may require more than one license depending on the scope of their business operation. You will need a Catering License, a Food Production License and a Food Distribution License. For food and beverage operations that will be serving alcohol, an alcohol permit is also required.
5) Once the product or service is in place – it is very important to create a brand that will showcase what you offer in an effective and appealing manner. To attract both local Chinese consumers and foreign consumers in China, it is a good idea to highlight your uniqueness as a foreign restaurant, as well as the localization part of your place. Often, companies can hire an individual or a company to focus on marketing. The latest trends show that businesses can save costs by setting up the social media accounts (such as Wechat account, Weibo account) and strategically market themselves without any additional support.
6) The machinery you will use will most likely have to be brought into China – There are strict regulations in place to ensure that your machinery meets China’s standards. If they do not, then it can take 6 months to get approval, so ensure that you give yourself enough time before you open your business for trade, to bring in what you require. Alternatives include sourcing machinery from within China, which can be easier in some situations. It is also important to note that when importing goods from abroad, there is a strict procedure your business must follow to ensure that the quality of your product is not compromised. The rate of tax can exceed 30% and reach 40%, so it is vital to ensure that you know what to expect when handling costs of specific products not found in China.
7) Human Resources – Ensure that you have a team in place to begin recruitment early, as the worst case would be to have a finished restaurant with no staff. If at all possible, staff needs to be picked weeks before the restaurant opening. Also, you must ensure that every single member of staff has a heath certificate as required. A health certificate is a proof one gets after a checkup in the hospital. The owner can check it when he hires the staff and ask them to show him the certificate.
In conclusion, owning your own restaurant in China may at first seem like a daunting task. However, with the right motivation and assistance, it can be an amazing opportunity. Maxxelli can help kick start your business into a national economy, which is continually growing.