Doing Business In China Business. Yee Ha

China company formation lawyers

Just read a story in the Austin (Texas) Statesman, entitled, Texan fired up for barbecue in China: Former Austinite creates Texas haven in downtown Beijing [link no longer exists] The story is on Tim Hilbert, who, at 48 years old, went from a career in the software industry to open Tim’s Texas Bar-B-Q restaurant in downtown Beijing last summer. I liked the story because by focusing on how this restaurant became profitable so quickly, it contains a slew of good tips for SMEs seeking to do business in China.

I gleaned the following tips for foreign companies doing business in China from the story, with my comments in italics:

  • “I thought there was room for a Texas barbecue because there was nothing like it here,” he [Hilbert] said as he sipped an iced tea at his restaurant “The U.S. market is completely saturated. Over here, there are niches that are readily obvious and where there’s a lack of competition.”  There are definitely such niches in China and foreigners are oftentimes best able to spot and exploit them.
  • “China’s growing foreign population also contributes to profits.” China’s ex-pats are a wealthy consumer sub-group and fellow ex-pats are oftentimes the best equipped to serve them.
  • “To teach his Chinese chefs to make beef brisket and pork ribs, he [Hilbert] . . . eventually hired Austin chef Tim Teal to spend three months in Beijing training the staff.” Training a Chinese staff in Western business takes time and money.
  • One chief concern among foreign companies doing business in China is that while Chinese laws treat foreign and Chinese companies equally, in practice, Chinese officials often hold foreign companies to higher standards.” Most of China’s business laws facially treat foreigners and Chinese equally. However, in practice, the Chinese authorities are far more demanding of foreigners (particularly Westerners) doing business in China than they are of Chinese companies.  If you take away anything from this story, take away that you as a foreigner must abide by Chinese law, even if it seems your Chinese competitors do not.   
  • Fuzzy regulations are also a problem for many foreign business owners. To open his private company last year, Hilbert had to make two trips to Texas to have credit reports certified by a state office and stamped by the Chinese consulate in Houston.  The regulations for forming companies in China are actually fairly clear, but the authorities can be inconsistent in how they handle company registration and each city can also be different.  It seems strange Mr. Hilbert had to make two trips to Texas to get the proper documents as we have never found this aspect of Chinese company formation terribly difficult and in our discussions with other China lawyers who do a lot of China company formations we have never heard talk of this issue.
  • Another problem is maintaining quality. Hilbert had to “train a local butcher on the cuts of meat he needed” and “local beverage distributors repeatedly have delivered fake bottles of alcohol.” Companies doing business in China usually must both train their suppliers and remain ever vigilant of them. 
  • “Once you open up a successful store, it starts getting copied by locals, and their costs are a whole lot less than Westerners, largely because of noncompliance with regulations that Western businesses feel compelled to comply with.”  Foreign businesses in China must seek to protect their intellectual property (IP) in China, particularly since domestic companies typically have lower cost structures.  Your IP is oftentimes that which allows you to charge more. Register your trademarks in China (in particular your company name and your brand names) so that you will have grounds to stop anyone from using your company and brand names.

Yee Ha.

16 responses to “Doing Business In China Business. Yee Ha”

  1. Howdy Mr. Harris, and it is yet another great post!
    One of our clients is in the Bar-B-Q business, and in our conversations I have mentioned it would be a wonderful idea to let the Lone Star flag display its beauty in the midst of Texas motifs and authentic country music right there in the heart of China. He concurred, but nothing came out of that conversation, partially I think because of the perceived difficulties of doing such a thing in China.
    Now that the word is out, Mr. Hilburt needs to worry not only about competition from local Chinese but also his fellow Texans ready to make a move.

  2. Must say I’m a little irritated, as it is now past 1am here in Beijing and there is currently no way to satisfy the craving for Tim’s beef brisket (and margaritas) this post has brought on.
    Brad, as one of the fellow Texans you refer to, I can safely say that Tim has little to fear from competition. In my opinion he has already filled the niche that existed for this sort of restaurant. It may sound obvious, but one of the best routes to success for foreign enterprises in China is to find a niche market and then to absolutely fill the vacuum before competition moves in. By being first and having a quality product, Tim has left a huge barrier to imitation in his wake.
    LGT Tim’s listing:

  3. I’m there. Enough of the Beijing duck – next time I’m in the city I’m havin’ barbeque.
    And speaking of unexploited niches, why hasn’t anyone opened up a decent Mexican/Tex-Mex place anywhere in China? Here’s some free IP for you: real Texan nachos are NOT made with Cool Ranch Doritos.

  4. I liked the old John Bull and I’m a big fan of Tim’s. “Authentic” Tex Mex flavor is tough, but continuing on the Texas theme for a moment, Pete’s Lone Star Cafe is around the corner from Tim’s. I’m not saying it’s the best Mexican, but it’s decent and it’s a not a bad place for lunch. (Then again, I’m from New Hampshire, so what do I know about Tex-Mex?)

  5. Benjamin —
    Don’t even talk to me about having a Bar-B-Que Jones. I have not had a lick of meat since my firm represented the supplier of meat to Jack in the Box back in the e.coli days 15 years ago. When people ask if I miss “a good steak,” I always tell them that what I really miss is good Bar-B-Que. Let me tell you, there is NO veggie substitute. So what I am saying is do not look to me for sympathy.
    Do you really not believe there isn’t room for another one across town?

  6. boyce —
    I think your tip is absolutely critical and I was actually wondering how someone could go into China without real on the ground assistance. Now I know. I have found (almost without exception) that the businesses that succeed in China (and I am basing this on our own clients) are invariably really knowledgeable in their own industry AND they do a good job in terms of finding the right people to help on the ground.
    I thank ya’ll kindly (that’s Texas speak) for adding this fact.

  7. Dan, here’s another tip that can be gleaned from that story, though it requires some inside knowledge: be careful with whom you partner.
    According to the article, Hilbert “co-owns [Tim’s Texas BBQ] with another American…”
    What the article doesn’t mention — which is surprising to me – is that the other American is Frank Siegel. Frank opened the first non-hotel bar in Beijing (Frank’s Place, in 1989) and owned John Bull Pub for about ten years, until it was gutted to make way for Tim’s Texas BBQ. You think he might know something about F&B in Beijing?
    In fact, Frank’s involvement guaranteed that Tim’s Texas BBQ started with a well-trained wait staff (the old John Bull Pub staff), that Hilbert had someone with ample F&B experience from whom he could learn, and that there was a base clientele due to fans of Frank’s previous places and of Frank himself.
    To give one example, John Bull Pub had one of the city’s best quiz nights (with Frank being the quiz-master) and that tradition continues at Tim’s. To give another, I organized a Whiskey tasting, with buffet, at Tim’s based on the strength of my relationship with Frank.
    I seriously doubt if Tim’s Texas BBQ would be so successful without Frank’s involvement.
    Cheers, BB
    PS @ Brandon: If you want decent Mexican food, go to Tim’s on Friday. More than a year ago, Frank encouraged a guy from Mexico City, who’s making tortilla shells in Beijing, to set up a cart and make authetic quesadillas, tacos, and more. Good stuff…
    You might also try Mexican kitchen – I haven’t been, but have heard good things about it.

  8. Well, maybe there is room for one across town…because Tim is opening a Road House on Nurenjie near where the new US Embassy will be.
    It’s a shame to go through life not eating meat. I’d encourage you to find a local farmer and buy direct. You can go and see the pig/cow before purchase to check out the premises and make sure everything is up to par. Have the farmer recommend a local butcher, probably someone who cleans deer during hunting season, and check them out too.

  9. benjamin —
    I actually stopped eating meat as an experiment during the e.coli furor, but I felt so much better without it that I have not had it since. I do not doubt that there are plenty of good butchers out there with very healthy meat. Conversely, there are plenty of tainted veggies and fish out there. So….

  10. Mr. Harris,
    I agree w/ ya that there is more than one place to skin the cat, and BJ is just one spot. There is still the vast, meating-loving interior where I hail from. I doubt the timing is ripe yet, though.
    “True Texan with a bit o’ the Chinese experience”–I’m proud to call me a Texan, but mah folks around me might argue with ye on that. But that don’t matter! Because as they say here in Texas–“Not born here, but got here as fast as I could…”

  11. Brad Luo —
    My brother done gone and went to Texas right after graduating from college, just like darn near everyone from Michigan back then. He tells me the only folks in Texas who talk like they is from Texas is from Michigan.

  12. David Yu —
    Amazingly enough, this is the second time I have been corrected on this and it is not only due to my not being from Texas, but also to the fact that I cannot spell to save my life, y’all.

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