This article is an update to our previous article WFOE Requirements on Restaurants. Previous article has been revised pursuant to current applicable laws and regulations.
This article depicts a different approach for establishing a company and running a restaurant business in China.
Restaurant WFOE or Restaurant Management WFOE
A restaurant WFOE is a company stipulates clearly in its business scope that the WFOE can open and run a restaurant legitimately in China, while a restaurant management WFOE may be formed for the sole purpose of investing into restaurants business.
- In forming a restaurant management WFOE, you can use a virtual office as registered address (virtual offices usually could be arranged by third parties);
- In forming a restaurant WFOE, you need a location meets specific requirements to securing all license such as Catering Services Permit, Hygiene Permit (if the restaurant is over 150 squre meters) and others, which means there will be a series checkups of the restaurant-to-be by various bureaus before registering a WFOE.
- Literally translating into English, company names would be different: restaurant WFOE would be called as “XXX Food & Beverage Limited Company XXX餐饮有限公司” and restaurant management WFOE could be called as “XXX Food & Beverage Management Limited Company XXX餐饮管理有限公司”.
- Both restaurant WFOE and restaurant management WFOE can serve as mother company if you consider opening chain stores in near future, but there is a registered address issue: imagine that you registered your WFOE under a location that you uses and pay a lot of rent, later you need to relocate, then you need to apply for a change of registered address because obviously your ex landlord would request to cancel your registration so the location can be rent to someone else to register a business.
For the purpose of this article, I will be mainly talking about Restaurant WFOE at below.
Steps to Form a Restaurant WFOE
Subject to local policies and orders, steps for establishing a restaurant WFOE are as follows:
Step 1: find a location and sign a letter of intent and/or a lease (but better have an attorney to check all documents before signing the lease)
Step 2: apply and register a company name (in Chinese) – 5 working days
Step 3: engage an accounting firm, which is able to assign a qualified accountant to file monthly report to the tax bureau;
Step 4: having various bureaus gives through checkups and secure reports that required by those bureaus from qualified third parties.
Step 5: securing investment approval from the local Municipal Commission of Commerce and/or similar bureaus
Step 6: register the business with local Industrial and Commercial Bureau, securing Business License, Taxation Registration Certificate and Organization Code Registration Certificate. – 5 working days
Step 7: capital injection
Documents preparation for opening a restaurant WFOE could be simpler than for opening a restaurant management WFOE, due to the fact that most investors are individual(s) (if not all) who reside or intend to reside in China. Hence, at least the document which prove their identities won’t have to go through notarization and certification as required by the registration office here.
In details, documents required from investors (as individuals) are:
- Copies of shareholders’ passport(s) (originals need to be checked at some point)
- Bank Reference Letter, original, issued by the bank that shareholders use outside of mainland China, to prove the good standings of shareholders’ financial situations
- Business Plan (we need this to draft some required documents. If cient don’t have a business plan, please at least provide us with relevant information via emails, meetings and so on)
- 2 photos (2’) of the Legal Representative of the WFOE-to-be
- CV of the Legal Representative (detail to month, since high school)
- A copy of the Supervisor’s passport and/or ID. (It is required by the PRC Corporate Law that there shall be a Supervisor of the company-to-be; the Supervisor could be either a foreign or a local Chinese)
Do You Need a Chinese Partner?
In the past few years, we have handled quite a few Joint Ventures shareholders disputes. The PRC laws do not demand a local Chinese partner listed as shareholder for a restaurant business, so we usually advise our foreign clients not to take on Chinese partner(s) as shareholder(s) unless it is really desirable.
Nevertheless, having a trustworthy Chinese GM or a local helper is certainly crucial for making a successful WFOE business. This is for very simple reason: there will be so many bureaus govern the WFOE, you probably need someone who can talk to them and cooperate with other third parties such as your lawyer and your accountant.
Email us at email@example.com for more information or directly book a consultancy meeting. We will try to get back to you as soon as possible.