Starting a restaurant business in Hong Kong

Hong Kong’s competitive food and beverage industry has consistently shown growth and innovative development over decades. Opportunities abound, from the smallest independent startups to multinational franchises and prestigious Michelin star chef projects, while many niches and underserved market segments remain to be explored.

 

According to the Census and Statistics Department, the first quarter of 2019 showed total receipts of HK$ 31.5 billion, a 3% increase over the same period in 2018. Non- Chinese restaurants increased receipts by 4.8% and fast food outlet receipts increased by 5.8%. The provisional estimate of total restaurant receipts increased by 3.9% by value and 2.8% by volume. Although the first half of the year saw a 1.4% increase in receipts compared to 2018, revenues have fallen over the summer due to ongoing political protests that resulted in a 4.6% fall in earnings during the second quarter, with various retail businesses shutting down.

 

However, the real attraction of Hong Kong’s F&B sector for new investors is now the delivery market, where revenues have increased not only because people opt for delivery instead of eating out, but also because of innovations in the business development process that enable new ventures to test the market via virtual branding, entering the market via delivery services that only rent kitchen premises, thereby bypassing the real estate barrier to business setup in Hong Kong. Virtual brands launched through Deliveroo have seen an 85% revenue increase in Hong Kong, even higher than the global average increase of 70%. Established dine-in restaurants, whether independently owned or franchised, also increasingly generate revenue from delivery. According to a UBS forecast, food delivery revenue could grow 20% a year with a worldwide value of US$365 billion over the next decade. Deliveroo currently provides relatively inexpensive shared kitchen space through its Editions program in Hong Kong, but more providers are expected to enter this market worldwide in the near future. Japanese conglomerate Softbank, for example, has acquired car park management companies with the intention of leveraging the space and software towards providing mobile kitchens to food delivery services. Even without going through a third-party service provider, renting a small kitchen space in Hong Kong is simple, inexpensive and flexible.

 

The landscape for restaurant businesses is likely to remain profitable in the future, despite recent difficulties, and the emergence of new business models in a less saturated marketplace (due to store closures and local demand for new dining options) could present a timely opportunity for those interested in exploring investments in Hong Kong restaurant businesses.

 

If you are interested in opening any kind of restaurant in Hong Kong, you can benefit from this overview guide to the set-up procedure. New enterprises will have to register a company, decide on their venue, acquire all necessary licenses, and staff their establishment.

 

Hong Kong company registration for any kind of business requires a certificate of incorporation from the Hong Kong Companies registry. The process includes choosing the type of company (limited by shares or guarantee), choosing the company’s name, filling in the required forms, providing a copy of the company’s articles of association, notifying the Business Registration Office and paying the application fees. Once the application is approved, certificates will be issued within four working days.

 

Choosing the premises involves selecting the appropriate location and unit size, and ensuring that the conditions satisfy the Food and Environmental Hygiene Department (FEHD)’s Health Requirements, Fire Safety Regulations and Building Safety Requirements. Food premises should also be free of unauthorized building works and comply with all conditions set out in the government lease. Working with an established shared kitchen provider or ‘cloud kitchen’, once the services are more widely available, will cover these requirements. Opening a cloud kitchen would require compliance with premises and licensing requirements.

 

Once the location has been finalized, a General Restaurant License is necessary. The application procedure involves submitting documentation to the FEHD, having the premises and layout plans inspected, and meeting with a panel comprised of officers from the FEHD, Fire Safety Department and Buildings Department.

 

The documentation required is as follows:

  • Application form
  • Copies of Business Registration Certificate, Certificate of Incorporation, Company Articles
  • Layout plans
  • Notice of Situation of Registered Office
  • Annual Returns statement
  • Tenancy agreement
  • Documentation of appointment of an authorized person to represent the company for license application purposes

  

Serving alcohol, importing ingredients, serving restricted foods subject to stricter safety regulations (i.e sushi) operating an onsite bakery, preparing take out packages, providing catering services, installing vending machines, setting up outdoor seating and serving milk, ice cream and fresh fruit juice, all require separate licenses from the FEHD.

 

Setting up a culinary business is a challenging and rewarding endeavor. With the right staffing, market research and business plan, Hong Kong has been the platform for many success stories. While the barriers to entry have never been easier, the company setup process involves many legal requirements. Working with a professional services firm can help you navigate any licensing and staffing related concerns and enable you to focus fully on your competitive edge. We pride ourselves on innovation and adaptation in the local business environment, and we are happy to do the same for our clients. Should you have any interest in setting up a new business venture in Hong Kong or China, please contact us for a consultation today.

 

 

References:

https://insideretail.hk/2019/06/27/deliveroos-virtual-restaurants-number-set-to-double-by-years-end/

https://www.forbes.com/sites/andriacheng/2018/06/26/millennials-are-ordering-food-for-delivery-more-but-are-they-killing-the-kitchen-too/#2f18331c393e

https://www.info.gov.hk/gia/general/201905/07/P2019050700324.htm

https://www.fehd.gov.hk/english/licensing/guide.html

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