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.