For all of us (foreign) ‘locals’ in Beijing, we have seen the massive growth in foreign-owned restaurants over the past several years. Not only are such establishments popular (and very profitable), they are adding to the international cuisine and outlook of the nation’s capital. In this article, we outline the various procedures required to establish a restaurant. (There are alternatives in establishing a management office first, then a restaurant as a branch of the office; however, we will discuss this in later articles.)
2. BUSINESS ENTITY
In order to establish a restaurant, the owner must decide what type of entity will own and operate the establishment. In China, this is much more difficult than in other markets such as the US, where individuals can own and operate businesses. Fortunately, the restaurant industry is quite open and the operating entity may be either a Wholly Foreign Owned Enterprise (WFOE) (owned by a company or individual) or a Joint Venture (JV) (if partnering up with a Chinese national), though it is not possible for a foreigner to own the restaurant business directly as a sole proprietorship. Further, to open a restaurant, there are additional licenses and approvals that are necessary in addition to the traditional requirements of a limited liability company. However, once the company is set up with the proper business scope and registered capital, it can be used to open additional branches, though, of course, each branch will require certain approvals for that specific location (see below Health and Hygiene, Environmental Impact, etc.)
Unless there are compelling reasons otherwise, such as locating and trusting a suitable Chinese partner, the WFOE, a limited liability company wholly owned by the investor, is the likely choice for foreigners, as it offers the most autonomy. Although previously quite common and unfortunately still prevalent, for the sake of simplicity, many foreigners opt to allow Chinese partners to open the restaurant as a domestic (Chinese) company. In this case, the Chinese partner(s) will be sole shareholder(s) of the company, leaving the foreign investor with no legal ownership rights. (Given the often very large upfront personal investment, we caution investors to consider the appropriateness of such an ownership structure.)
3. INITIAL PROCEDURES (UNIQUE TO RESTAURANTS)
In chronological order, the following procedures must take place prior to establishment of the business entity, itself:
i) Apply and obtain company name approval notification with the Beijing Administration of Industry and Commerce (BAIC)
The name (in Chinese) will be in composed of, and in the following order:
Part 1 – City of WFOE: In this case it would be: Beijing; Part 2 – Company name (i.e. Bill’s BBQ); Part 3 – Business type (i.e. Restaurant); Part 4 – Form of organization (i.e. Limited Liability Company).
All together, the Registered Chinese name would read: Beijing Bill’s BBQ Restaurant Co., Ltd.
It is advisable that the applicant chooses at least three names to be checked for availability. The company name should be consistent with the actual business type, and should not explicitly or implicitly step beyond the scope of business.
ii) Selecting a Restaurant Location
The location of the restaurant is obviously important from a business standpoint, but based on the Beijing Municipal Environmental Protection Bureau’s (BMEPB) regulations if the restaurant 먹튀검증 is located near residential areas (within 50 meters), the residents will need to approve. At this point there are no regulations defining “approval by the residents”, and, currently, the BMEPB has found the following to be sufficient (depending on the circumstances): survey or completed questionnaire of residents, and approval letter by the local residents association.
iii) Apply and Obtain Health and Food Hygiene License with the Municipal Health Bureau
Various documentation must be furnished, including but not limited to the location and site map of the restaurant and the restaurant’s internal health and safety rules. Within 10 days of the documents submission, the Health Bureau will notify applicant and arrange the on-site inspection. The primary areas of inspection will include the hygiene and safety of; 1) raw foods preparation area; 2) kitchen area; 3) employee changing area; 4) faucet and sink area; and 5) waste disposal area. Inspectors should provide an on-the-spot list of non-compliance and recommendations to remedy the situation. For certain minor problems, a submission of a photo by the applicant of the modified area should suffice, so as to not require a second visit by the inspector. Notification of approval, assuming all areas of inspection do not require repeat visits, should be within 20 days.
iv) Alcohol Permit Registration
Though the registration of Alcohol Permit will not be completed until after issuance of the business license, Tax Registration Permit, and Health and Food Hygiene License, the applicant will need to reflect its intent to sell alcohol in the Health and Hygiene application. The Health and Food Hygiene License application will need to include the approved wording in the business scope to note that it will sell alcohol.
v) Environmental Protections (EP) Examination and Approval (District Level)
Restaurant applications do not require a separate EP Impact Report. The two forms required include: 1) Environmental Impact Application form – to be completed by the applicant; and 2) Environmental Impact Report Form – to be completed and stamped by an authorized environmental evaluation entity.
The Report Form shall primarily examine, among others, the following: an environmental evaluation of the indoor and outdoor surroundings and near by building, an environmental analysis of the site, potential and future environmental impact of the surroundings, and recommendations for environmental protection. The primary focus of the environmental impact application is to assess potential and actual noise and water pollution, fire protection, and waste disposal of the site.
In selecting a restaurant location (see above) it is important to note that the outdoor smoke ventilation exhaust fixture shall be located at least 20 meters from any residence or above any residential area.