Confessions of a Newbie in Restaurant Operations in China

21 January, 2021

I have been thinking hard these days…, if I were to meet “me” three years ago, what advice would I have given myself? The point that seemed to impress me the most is that entrepreneurship is like taking an exam. There are many multiple-choice questions. If you have made a mistake here and a mistake there earlier, then no matter how well you do in answering other questions later, you are likely to fail… It seems that making the right choices is of paramount importance.

Looking back on the three years of my restaurant entrepreneurship experience, I am certain that I worked really hard. But I made the following three mistakes (choices) at critical moments.

As a novice in business, I was impressionable. At that time of my life, the food product “beef cubes in a cup” was all the rage, so several of my friends decided to form a business partnership to explore and suss out the opportunity. We found out that the prospect was good, so we talked to several franchise chain brands that are already operating in this arena. However, after a few rounds of investigations, I felt that the tastes of these several brands did not meet our requirements. At the same time, through constant exploration and experiments, I also felt that I had mastered the way to prepare and cook these steak cubes. Therefore, quite naturally, I think, I made the decision to be self-employed.

My thinking is that joining a franchise will not guarantee success. There are franchising companies that recruit franchisees aggressively but very quickly their franchisees are left to fend for themselves. The popular term being used in China for this is “cutting leeks”—this slang is borrowed from the stock markets: It’s a metaphor for newbie investors who get “harvested”—that is, they follow the lead of seasoned investors but often end up losing their money.

Below are three ‘pits’ I fell into in my journey:

The first pit was pretentiousness. I gave my business an English name. At that time, because I was confident in the quality of the steak cubes I developed and that I only used the best ingredients, I thought I should give myself a high-end image. So, Wagyu Cup was born. However, in hindsight, I realized that many people could not understand these two English words, let alone read it. In the end, customers began to call our name as “the store that starts with W” Now that I think about it, if multinational brands like McDonald’s and KFC used equivalent (as close and appropriate as possible) Chinese names when they entered the Chinese market, it should be good enough for me (at least during the beginning) to have a Chinese name. I am a new brand with zero popularity. Is there anything more troublesome than customers not being able to read my brand name?

The second pit, no equilibrium in menu development vis-a-vis quality and mass production. Having decided to strike out on my own in this arena, one of the biggest problems faced by me was the research and development of menu items. For those of us who have no cooking experience, the difficulty of developing a set of dishes is hard to imagine. And because I am not an overly money-minded person, I refused to source and use inferior ingredients just so that I can make money. Therefore, when we were experimenting with all sorts of dishes, we got into
a cycle of constant exploration. I kept trying various ingredients to find the best combination and quality. Trouble was, after the quality was achieved, we found the costs too high; so, we went back to the drawing board…I spent a lot of time and energy on it. When we have had enough of trials and errors, we could only find a few items to put in our menu. In retrospect, I conclude that food cooked and served in the restaurant versus food cooked and served at home are distinctly different in terms of operational efficiency. Food cooked by yourself can be considered delicious as long as you have some cooking skills. The dishes you cook and serve in the restaurant test not only your cooking skills, but also the operating system capabilities behind them – e.g., supply chain management, cost control, quality control and marketing. Naturally, a dish that uses the most expensive ingredients will likely provide a very good taste, but it will be meaningless if this dish is so expensive that no one eats it. It is delicious at one time, but it is also meaningless to not be able to maintain stable standardized mass production. Therefore, if I were to start my own business again, I will definitely choose a set of market-proven, accepted-by-many and reliable dishes instead of wasting time to start from scratch. Franchising could be a good route to achieving my entrepreneurship dream.

The third pit, the business model: is it takeaway, street food or dine-in? Are our products good for dine-in, or should it be positioned as a street food, or pure takeaways? No one told us that we can only really find it out on our own. But as another Chinese colloquial put it “the tuition fees” are astronomical. Tuition fees here basically means paying for the lesson.  At that time, the main business model for steak cubes was mainly street food. However, because we had selected a shop located on the fourth floor of a supposedly new and hip mall, and since the flow of people would be less than that of street shops, so we decided to place a dozen tables for customers to dine-in. “Street food + dine-in” would be our main business model. Three employees each were employed to work in the morning and evening shifts. But after about two months, and realizing that the business was pretty bad, I fired three employees to save costs. At the same time, I signed up with Meituan (a Chinese O2O online-to-offline platform, connecting over 240 million consumers and five million local merchants via a comprehensive array of e-commerce services and products. It has 600 million users and almost 4.5 million business partners that cover nearly all China) to try the takeaway mode. Unexpectedly, and happily for me, the take-out mode suddenly became quite popular at that time. There were 30 or 40 orders in one afternoon during teatime. Inevitably, the staff was overwhelmed and were too busy, and we had to recruit people again. When the recruitment was completed, it was already wintertime, and my steaks, fresh salads, and cold drinks became off-season items. In the end, this project failed to survive the winter.

In the food & beverage business, whilst serving delicious food is important, knowing how to sell them is yet another key point. Sometimes, choosing the wrong business model is more terrible than choosing the wrong dish /menu item. This trial-and-error cost is also extremely high. There is a Chinese saying “定位定江山” which, loosely translated, means that how one positions himself/herself will affect his/her life. For us, a small and medium-sized catering company, it can be said that where we are located determines our fate. Because we are not like a big brand, whereby the leasing executives from huge commercial centers woo and invite to view the best locations, it is hard for us to secure a good location. I confess that I made a terrible mistake when I was choosing our site. When we decided to do the Wagyu Cup project, we actually had two choices: one site involved a ‘transfer fee’ of RMB $100,000, which, for a newbie catering entrepreneur with insufficient funds, was not an option; another site was located at the buzzing Dongmen, a subdistrict within Luohu District of Shenzhen. The shop was located in a new commercial center in the business district where young people would gather. I thought I had found a treasure. I signed it without hesitation. I did not even carry out any inspection on this commercial center.

Finally, when the mall opened, my investors and I discovered that the gate entrance of the mall was very small.  It was quite inconspicuous, and the elevator escalator on the fourth floor of the mall was also very small and not spacious. Worst still, the operations team of the mall property landlord was a weak one, with hardly any track record. In spite of very high footfall in a place like Dongmen, the flow of people in this particular mall is minimal. The tenants on the fourth floor has almost all changed in less than half a year. The most ironic thing is that the street shop I did not choose before was taken by another person and they were in the same trade –steak cubes. This reminds me of a Chinese saying: I am the biggest obstacle to happiness which I actually can attain.

Now that I think about it seriously, I might know where the biggest problem laid. In fact, it still appeared in the judgment of opportunity. Why did I think that steak cubes in cups, salads, and clams in hot pot were great food concepts and easy to operate (and profitable)? It has got to do with my mentality. Always. My trend of thought must had been like this: “this category is popular nowadays, and those who are in this category are making money, and the profit of a single product is high. And by simple calculation, as long as there are x number of customers in my shop even in the lowest-customer-count day, then my project can make a monthly profit, or that at least I will not lose money.” To make an analogy, this kind of thinking is actually like saying that a certain style of clothing is very popular nowadays, and if this or that famous movie star wears it well, so I think I will wear it myself (as I will look good in it, too).

My parting shots: I did not consider my own operational capabilities, and I did not factor in the competitors. When I thought about the profit that I might be able to make, my ego took control of my grey matter. I became over-confident. Entrepreneurship is a life-long journey. In billionaire Jack Ma’s words, entrepreneurial failure is inevitable, and success is accidental. Our efforts and hard work are only to increase the probability of success bit by bit, which is especially true in our food & beverage industry. I hope that every food & beverage entrepreneur will take note of the failure experience of others to increase their own probability of success. Maybe engaging a trust-worthy, experienced consultant might help me avoid the various pitfalls.

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