To open restaurants in Shanghai, you’ve got two options:

1. Establish a wholly foreign owned catering management company.
2. Simply open a restaurant 

If you want to franchise in Shanghai or intend to sell your restaurants in the future, option 1 would be fit for you, or you can simply open a restaurant. You don’t have to rent a room in an office block to have the catering management company established. For setting up a catering management company, a suitable place for opening a restaurant is sufficient. As soon as it’s established, you can start to open restaurants, bars or coffee houses as its branch companies. Since the catering management company, which is licensed to engage in investment consultancy, business consultancy, corporate management consultancy, catering (food, dessert, beverage, alcohol) already has most of the required licenses and permits for engaging in catering business, you don’t need to apply for them when you are opening branch companies. 

The most critical issue is the location of the restaurant. A few approvals and licenses are needed before you submit your application to SMERT (Shanghai Municipal Foreign Economic Relation & Trade Commission). Shanghai Environment Bureau imposes demanding requirements for the restaurant. The discharge of smoke, sewage, solid waste, the possible influence on the neighboring residents, etc, are critical factors. Before you sign the lease agreement with the landlord, invite the officials from Environment Bureau to inspect the place, making sure the location is ok, then hire an environment evaluation agency to make the environment evaluation report. The officials from public security will come over to inspect the fire and security facilities, fire permit and public place license won’t be issued if they think your facilities don’t meet the requirements. So, before you start the decoration, consult those two authorities about their requirements, or you might risk yourself redecorating the place. For instance, there are specific requirements for the height and location of the vent. Shanghai Health Department will also send people to inspect the place, public & Food Hygiene License will be issued if they find the food and facilities are in compliance the regulations. Besides, they will also check your employees’ health certificates. Annual physical is required for waiters and cooks. 

Besides, license for the sale of alcohol, permit for the use of electricity and water, license for special industry, etc, are needed.

You should be very careful with the lease agreement. When the landlord is an individual, the first page of the four-paged property right certificate copy needs to be signed by the landlord, photocopy of the landlord’s ID card with signature needs to be provided. If the landlord is a company, its business license needs to be provided and the first page of the property right copy needs to be stamped. In case the landlord is a sublessor, the letter of authorization of the original landlord, sublease agreement stamped by the original landlord needs to be provided. You have to be sure that the office hasn’t been registered. 

Only after all abovementioned issues are properly handled, can you start to apply to SMERT for a Certificate of Approval, to SAIC (State Administration for Industry & Commerce) for a Business License, to the Tax Bureau for a Tax Registration Certificate, then register at the Shanghai Foreign Exchange Bureau, have you an RMB account opened, inject and verify the capital, finally renew the business license.

It would be ideal if you’ve got a few friends who are currently doing catering business in Shanghai. Give them a call and ask them to share their experiences, so you can avoid a lot of wrong decision-makings.

Vincent Cheung, www.pathtochina.com