About Opening a Foreign-invested Restaurant in Shanghai
By Vincent Cheung
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
“Path To China“ is an International Business Consulting Firm that provides foreign investors with business registration service in China.
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January 28th, 2007 at 5:59 pm
Hi Vincent, Thanks for the article. Could you let me know what’s the Min. required investment capital to have a restaurant management company setting up in Shanghai? Thanks in advance.
November 30th, 2007 at 6:01 pm
Hello David, the minimum registered capital for a catering management company is 140,000 USD.
The amount you should invest should be decided by your own needs. the number branches ( restaurant, bar, coffee house, etc) you’d like to open, how big is the branch, it’s highend or lowend, how many people you will hire.
December 17th, 2007 at 2:07 pm
Hi,
How would an American citizen go about opening a restaurant in
Shanghai? What are the regulations, etc… What is a typical startup cost
to open a restaurant at one of the shopping malls in Shanghai? Please
advise.
Kenny
January 2nd, 2008 at 5:02 pm
Hello Vincent,
May I ask if I choose to open a cafe/bakery but not wholly foreign investment, what do I need? Is it a must to have 2 local Shanghainese Friend name so that I can obtain a license?
And also how much of a capital do I need for the register?
Thanks!
Diana
January 2nd, 2008 at 6:04 pm
Hello Diana,
Do you mean you will open a cafe/bakery in your Shanghai Friends’ name instead of yours? You can write to me at vincentisv@gmail.com, cause It seems I need more details before I answer your questions.
April 23rd, 2008 at 9:39 am
Hey Vincent,
I’m a Malaysian citizen. I would love to open a restaurant in Pudong, Shanghai. What are the procedures and what would be the investment like. This coming June i’ll be going to pudong to look around for the best location for my restaurant.
It would be great if we can meet up somewhere in pudong area but to tell you the truth i’m still not good in location. Please give me your details so i can call you when i’m there.
Thank You
Christopher Chua
April 30th, 2008 at 1:44 am
May i know if there is anyone who is interested in setting up a F&B outlet in Singapore-Hangzhou Science and Technology Park. This is a new project who will be conveniently linked by the coming metro line in Hangzhou.
Please let me know so that i can share more exciting info to you
Thank you.
May 17th, 2008 at 2:46 pm
kindly find out the china laws before opening a restaurant, these companies claim to get you licences but unfortunately it takes ages to get hygiene licence and you land up paying rent for months before even starting your restaurant
May 17th, 2008 at 2:50 pm
my sincere advise if you have good contacts then open a restaurant but if you are ordinary person like us it is difficult to get hygiene licence,
May 19th, 2008 at 11:09 am
Hi everyone:
I have extensive direct experience opening restaurants, bars and clubs in China and also throughout Asia (over 1 million square feet). If you are interested write me for more information on the operational issues as I’m sure Vincent can help you with the others. Write to: shanghaiworld@hotmail.com
July 12th, 2008 at 8:48 am
I’m a Pakistani citizen. I would love to open a restaurant in YIWU. What are the procedures and what would be the investment like. This coming october’ll be going to yiwu to look around for the best location for my restaurant.
PL INFORM ME THE DETAILS WHAT IS THE LEAGAL REQUIREMENTS FOR THE RESTURANT AND APPROXIMIATELY HOW MUCH AMOUNT REQUIRED TO DO THE SAME
Thank You
YAMEEN
August 23rd, 2008 at 9:03 pm
Hi Vincent, I’m a Malaysian and would like to open a cafe in Shanghai. Could you let me know what’s the minimum registered capital required for my cafe business? Thanking in advance.
September 8th, 2008 at 1:07 am
Hello,
“simply” open a restaurant is a gross simplification.
You got to rent a space that is fully licensed, i.e. cooking/frying/baking should be permitted. The fully licensed locations are rare and expensive. Most “restaurant” space is actually only “cafe” licensed, i.e. no cooking/frying. Usually, landlords say “can get” and latre renege on their promise.
You need commercial, hygiene, tax and fire-brigade licenses. The latter one you better consult long before designing your space, because they tend to have different ideas than you do. Competencies overlap between government offices. Do not underestimate the massive bureaucracy here, they have brought many businesses to a screeching halt.
Without proper licensing, you will not be able to issue tax receipts or accept credit cards, and competitors will make sure that the relevant offices will crack down on you.
Same as in the U.S. or elsewhere, do not entrust a local and let him/her have “nominal”, “pro-forma” ownership in order to obtain licenses, Else you may find yourself out of a restaurant pretty soon. It happened to seasoned hospitality entrepreneurs, who thought they were in good hands, you have been warned.
Staff is a major, major issue. People come and leave as they like, with or without contract. Chefs usually try to take your recipes along. Utensils and gear tend to evaporate, especially the expensive stuff. You will have no loyalty from your staff, unless you are hands-on and ever-present.
Make sure, you pay social security, that is another nasty threat to your business as a whole.
There is absolutely no lack of any kind of restaurant in Shanghai, unless you have a real novelty you are well advised to do at least 6 months of on-location market research.
There are about 20 million eaters here in Shanghai, however, 99.9% of prefer to eat cheap, much cheaper than you could imagine. That includes expatriates. Again, if you do not have the super-novel conecpt, be prepared for cut-throat competition on the price-front.
If you do have a novelty, be prepared for copies popping up within a year, supported by your ex-staff.
Finally, if you think you have a great concept, what prevents you from testing it in your home-country, before venturing into an unknown and potentially hazardous place, whose rules you have yet to learn by experience?
Best
Thomas
April 5th, 2009 at 6:06 pm
Hi eveyone,
I am from India and wish to open a quick take way and a small restaurant or a cafe but with the indian snacks and food in nanjing (Near Nanjing International University). I would like to know about 1. The rules and regulations
2. The approx. Budget
3.The minimum area requirement.
4.The Real estate-prices in area like shanghai lu, Hankou lu.(Nanjing).
I am currently in nanjing so if someone would like to meet and talk abt it. It wud be great. U can write back On karishma.thawani@gmail.com.
Thank You.
Regards,
Karishma.
May 28th, 2009 at 8:29 am
I am fully satisfied with the post, It is not only interesting but also is a informative article. Can you please provide me some more links for similar articles.
July 13th, 2009 at 12:16 pm
Dear Vincent,
Where could I possibly find an English translation of the regulations of food sanitation of Shanghai issued by the Shanghai Municipal Food and Drug Supervision Administration.
November 6th, 2009 at 7:43 am
Hi eveyone,
I am from pakistan and wish to open a small restaurant with chinese cuisens as well as some ppakistani in Tongliao which is placed in innermongolia province. I would like to know about
1. The rules and regulations
2. The approx. Budget
3.The minimum area requirement.
4.The Real estate-prices in area like beijing, shenyang and inner mongolia.
I am currently in tongliao so if someone would like to meet and talk about it. It wud be great. you can write me on my personal id:- azeem20037@hotmail.com