In the year 2011, I was in China for the first time. I remember that I was traveling with my best friend, and as he was passionate about coffee, he couldn’t hold out and ended up paying more than 40 Yuan for a black coffee at a Chinese hotel.
One year later, in 2012, I went back to China to learn the language. I arrived in Yantai (in the Shandong Province), a small coastal city with a large amount of South Korean and Japanese influence (if you ever go to Yantai, you will most likely try Korean and Japanese food). In Yantai, I saw how people were starting to open up small specialty coffee shops, some of which had coffee from many different places of origin, and how Chinese customers were slowly starting to try the drink.
Since 2013, coffee shops of this type have slowly started to increase in the city and the offering is getting broader, following the Chinese precept of the art of war… Or maybe the art of imitation.
When lots of people saw that the small coffee shops were generating a good income and that the lifestyles of their owners were not limited to gloomy office hours, many of them immediately thought of opening up the same business. So, that was how the offering increased. This caused a decrease in prices (a welcome surprise for consumers), but unfortunately, the rent of spaces in China didn’t decrease along with them. On the contrary, it went up, and even more if the landlord realized that your business was doing well.
In the year 2015, I moved to Chengdu (Sichuan Province). This time I wasn’t alone. At my side was my battle mate, who was really the person who wanted to open the coffee shop. Paradoxically, she was who introduced me to the world of coffee. That was how the two of us, with her being from Xiang Yang (Hubei Province) and me being from Bogotá (Macondo Province), opened up a coffee shop more than a year ago in Chengdu.
Chengdu is a city in the interior of China, where life is a little slower-paced than in coastal cities, and because of that, coffee culture has not yet fully caught on. The market in this part of China is still growing. However, the question is if it will keep on growing, which is something I don’t dare to answer at the moment.
How to open up a small coffee shop in China
There are two ways to open up a coffee shop in China: to do it yourself or to look for an intermediary. The first way is cheaper, but you’re going to have to deal with the Chinese bureaucracy and the speed of its employees.
Despite the fact that the coffee shop is operating in the name of my wife, who is clearly Chinese, to make everything simpler, she chose the second option. We went to a Chinese friend who had another friend who knew an intermediary for these types of processes. Although we paid him quite a bit more, it saved us time and headaches (and they say that time is money and knowledge is even more).
In fact, in Chengdu, there are companies specialized in these types of processes. If you have lived in the city and are used to taking the subway, you should be familiar with the Ding Gua Gua sound, which is one of the most-advertised companies in the city for these types of procedures.
There is a third way (which is very common in Chengdu), which is called “the wait period.” To put it simply, it consists of opening the business and not bothering with a business license and health license. You just open up to “try out” the business. Some of the small restaurants that sell the most savage Sichuan dishes operate for years by using this method.
The happy face means that you more or less comply with hygiene standards and the requirements of the local government. Obviously, the happy face is happier if your red envelopes are fuller as well.
The costs of opening a coffee shop in China
Opening a business yourself will take time and patience although it isn’t expensive, costing approximately 3,000 Yuan (without including red envelopes). This procedure does not guarantee you that they will give you the necessary certifications, as you have to pass two inspections: Utensils Hygiene and Furnishing of the Locale.
Obviously, using an intermediary is more expensive, but it will save you time and headaches, and you don’t have to worry about understanding how the red envelope works. The intermediary will charge between 8,000 and 9,000 Yuan, and if you are a friend, he’ll most likely charge you 7,999 Yuan. However, by using this process, you’ll be 80% sure that you’ll be able to get all of the necessary certifications.
Renting a locale
In Chengdu, the rule is that they charge you by square meter, so don’t be surprised if they tell you that the rent is 140 Yuan. That means that a 50 square meter locale (which is considered small for Chengdu) can cost 7000 Yuan per month, which is normally paid annually.
The prices of spaces outside of business areas range from 140 to 250 Yuan, while in business areas, they can go up to 450 Yuan per square meter.
With your locale, you can do what you want inside, and before you start to think about it, out of nowhere, hundreds of remodeling companies will start to call you offering the best modern design for your space. I don’t recommend them, as they all offer you the best of the best, including their own design, but in reality, the materials they use aren’t the best, and after a year, your sign might be falling to pieces or your walls might start to lose their paint.
Like always in China, the best thing is to find a friend of a friend who can introduce you to a master who takes the responsibility for developing your ideas for the best price and with the best materials.
Is it profitable to open up a coffee shop in China?
To make a living and to learn, it does a good job. You will be able to more closely communicate with Chinese people and get to know their tastes. Even so, I don’t want to lie to you; at times business isn’t the best.
This is due to many factors, obviously including the fact that there is no coffee tradition in Chinese culture.
Things to keep in mind
As for the prices of different types of coffee, you have to keep in mind that you’re competing with large brands. You can position your prices above theirs, but to start I don’t recommend it. Instead, start with prices at 5 or 6 Yuan less and slowly introduce new flavors and new types of coffee to customers.
If you sell desserts, I recommend that you don’t add lots of sugar to them, considering that the majority of your customers will be women who are watching their waistline and who will order, for example, a cheesecake without a lot of sugar and if possible, without milk.
When you open, you can advertise a lot and lots of people will show up, and even more if you offer special discounts. However, I have come to the conclusion that these types of customers are like when you’re a kid and have a new toy. You play with it every day until it becomes an old toy after a month, and then you only play with it sporadically. Therefore, you should be prepared to receive a huge amount of people during the first day because you will be a novelty, although as the days go by, there will be less and less. Only loyal customers will continue to come and buy your product.
Finally, don’t be surprised if…
- You get more than one person per day asking: Do you sell tea as well as coffee? Chengdu is a paradise of tea houses. In tea houses, they give you a pot of hot water as well as a cup with the tea you choose, with prices starting at 20 Yuan (and at some starting at 12 Yuan). Because of this, you can see people who sit at the same tea house for the whole day, only drinking four different teas, and using the entire space and bathroom all day, among other things.
- There are people who will turn your coffee shop into their personal office: They will order the cheapest product on the menu will sit there for the whole day, and at times you will have to politely tell them that you are going to close. The special thing about these types of customers is that after finishing their cheapest drink, they will incessantly ask you for water all day, sometimes hot water and sometimes ice water.
- Your coffee shop will turn into a museum: The only people who come in are people who say that they only want to look. They take photos, smile, ask you a bunch of questions, don’t consume anything, and then say ciao bello.
- Professional baristas come in and ask you if you have Blue Mountain coffee or if your espresso is good quality, and out of nowhere (they are standing in front of your espresso machine), will tell you that they can’t see that you have a machine to make espresso. That’s when your barista is discovered, and you have nothing left to do but to say that you are standing in front of the machine right now. When that happens, they don’t say anything else and leave without consuming.
- A foreigner alone arrives and starts to talk to you for the whole day, to the point that you have nothing more to talk about. You start to get uncomfortable and try to occupy yourself with something or pray that 10 customers arrive at the same time to end the conversation naturally.
- Your coffee shop has multiple signs saying that smoking is prohibited, and a customer sits down in the corner and starts to light up their cigarettes.
There are tons of things that will surprise you when you open up your coffee shop, so just do it and take the risk of learning something new and getting a closer and different perspective on the tastes of Chinese customers.