After a year of waiting, the world-renowned Zen Chinese Cuisine has finally made the decision to open a branch in Qingdao.

With its first restaurant established in London by Hong Kong native Liang Tingbin in 1980, Zen Chinese Cuisine has opened more than 30 branches in many major Chinese and foreign cities, such as Beijing, Dubai, and Mexico city. It is said to be one of the top ten Chinese restaurants in the world.

Zhang Jixing, manager of the Chinese market department of the Hong Kong Zen Chinese Cuisine Restaurant Management Company, said, "The restaurant will be opened at the beginning of 2011 after the interior decoration is finished. This will be an important strategic step after we establish branches in Shanghai and Beijing."

Zen Chinese Cuisine is a comparatively late comer for Qingdao's high-end restaurant market. As early as March, 2008, the South Beauty Group, an upscale Chinese restaurant chain with IPO on the Hong Kong stock exchange market opened its Qingdao branch on the 3rd Yan'an road. The high-end Grand Mansion Chinese Restaurant began to receive customers in Qingdao's Silver Sea World sight-seeing dock area in May, 2009. Later, the rising star Net Accor Group's restaurant also inhabited the Silver Sea World. Moreover, Taiwan restaurant Din Tai Fung, widely considered one of the world’s top 10 restaurants, also showed up in Qingdao Belle Plaza this July.

"After giving a consideration of Qingdao's potential consumption level and market affordability, we have determined that these high-end restaurant giants put confidence in the future of this city's restaurant industry, which demonstrates recognition of Qingdao's investment environment," said Yang Yan, secretary general of the Hotel and Culinary Association of Qingdao city.

High-end restaurants come one after another

"In the past few years, we were cautious about entering the Qingdao market because we thought the city had neither a mature business banquet market nor an ideal white-collar niche," said an official of the South Beauty Group.

However, the group didn't give up their attempt to enter the market in Qingdao, the leading commercial city in the Shandong peninsula. They studied some cases of how other restaurant companies entered the Qingdao market. The official said, "Qingdao has been listed as the key business-developing city in China since a high-end, more targeted niche is evolving."

Liu Hongli, the planning department manager of Din Tai Fung explained that as Qingdao further develops its economy, the residents' consumption ability will go up accordingly. The only way to stand firm in this market is to make prior arrangements before any business opportunity slips.

Din Tai Fung opened its restaurant in Qingdao this July and its daily turnover held steady at 50,000RMB ($7,535) in the first month. But one official at the restaurant believed the Qingdao market had the potential to double its revenue.

"Zen Chinese Cuisine restaurant has a special location. We chose our place at the Pacific Palace in Hong Kong, Shanghai's Xintiandi, and Beijing's Qianmen Street. In Qingdao, we will open our new restaurant in the Hyatt Center, which is adjacent to the 2008 Olympic Sailing Center so as to meet our high-end brand position, and to provide more development room for our future business operation in Qingdao," Zhang Jixing said.

After entering the Qingdao market one year ago, the Net Accor Group fully recognized the high-end consumption potential of the city. Zhang Sui, the manager of the brand department, said that the group was planning to open two more restaurants and three cafeterias alongside the coast in Qingdao within five years.

Integrating into the local market the hard way

South Beauty gained great attention among Qingdao consumers after its debut in 2008, which demonstrated its brand reputation. However, the flourishing business didn't keep up for long. Since Qingdao residents were not quite accustomed to its dishes and felt that the price was somewhat high, before long the restaurant met its first downturn in revenue. Now the South Beauty Group has made a decision to cease selling the restaurant's franchise rights, and instead open a directly affiliated restaurant in Xinhai Square this April. But the damage to the group's image might take a while to repair.

At the beginning of 2010, the Net Accor Group launched its grand debut in Qingdao, investing 120 million RMB ($18.1 million) into its restaurant with a capacity of 1,200 people in the Silver Sea World. "The managerial system we co-developed with IBM can record each customer's reference, so as to make them feel at home by providing the best services,” the brand department manager Zhang said.

Even if the group had done its homework carefully, the business of its Silver World restaurant wasn't so satisfactory. The total turnout in the first few months didn't meet the group's expectation due to two factors: the competing businesses in Qingdao’s high-end restaurant market were fierce, and it's uneasy to change the customers' consumer inertia. However, the hotel managed to develop a certain group of patrons, and business has been consistently on the rise in recent months, Zhang added.

Learning from other restaurants' lessons, the Qingdao restaurant of Zen Chinese Cuisine will appoint Huang Caizhu, the chief cook at the group's restaurant in Beijing Qianmen Street, to lead its Qingdao crew. He will be in charge of the classic Cantonese cuisine, dim sums, and tonic soups, the manager Zhang Jixing said.

Meanwhile, Din Tai Fung pays more attention to its interior design and tableware—an open kitchen gives customers a direct view of the cooking process, and its dinner sets are delicate bone china.

Despite these differences, all high-end restaurants have one thing in common—the high price. At Din Tai Fung, a meal consists of a half plate of mini steamed buns, a half plate of vegetable dumplings, a half plate of shrimp dumplings, and two dishes cost 144RMB ($21.7), which is apparently not affordable for ordinary citizens. In addition, the average consumption per person in the Net Accor restaurant is 200RMB ($30.1), 300RMB ($45.2) in Zen Chinese Cuisine, and 150RMB ($22.6) in South Beauty.

Pose challenges for the local companies

"At first, Qingdao's high-end restaurant market was in the hands of local restaurant companies. As Qingdao gradually gained economic power and a reputation as a modern commercial city, non-local brands came to account for 70% of the city's high-end restaurant market," said Dong Shushan, a Chinese master chef and a professor at the Qingdao Hotel Management Occupational College.

One analyst on the restaurant business explains that the restaurant industry tends to "change its appetite from time to time." Consumers are always curious about new dishes, which is by itself the reason that restaurants are always a booming industry. Meanwhile, traditional Qingdao cuisine is a branch of northern Shandong cuisine, so the cooking method is already a limitation for the local restaurant companies. With Qingdao expending its urban scale and more and more immigrants swarm into the city, traditional local cuisine, with its heavy and spicy taste, can no longer satisfy the consumers’ taste buds.

Professor Dong says the non-local restaurant companies with a booming business in Qingdao usually have their own set of standards. If local restaurant companies want to have long-term development, they must not only set a standard system, but also develop more middle- and high-end dishes so as to win the business battle with the competitive non-local companies in Qingdao's restaurant market.

"But local companies need not worry too much for their future. As Qingdao gains more acceleration in its urban development and the residents' living standards improve, the high-end restaurant industry will explore a bigger market. A company with its own characteristics will eventually find its place in the city's restaurant market," said one inside source, who requested anonymity.

By Audrey and Chen Zhilin