Monday, October 29, 2012

Terrace issue: how to solve a conflict in China?

One day in front of the restaurant, I see our new neighbour making some ciment and renovating the floor.
He tells me in Chinese: "I resurface the floor in front of my shop, I also do it in front of your restaurant. Otherwise the water keeps on flooding and it looks messy. You don't mind right? I build a cleaner street for everyone"
Stupid Georges, I thought to myself: "our new neighbour is nice" and told him that of course he could resurface the floor with ciment.

"In China there is no such thing as a free lunch"
How could I be so stupid and forget one basic business school principle: there is NO free lunch!
This is even more true in China. Whenever someone offers to help, wants to do something for you: remember the free lunch and think hard about it. No Chinese would ever do anything for free!

The neighbour put some ciment in front of his restaurant, in front of our direct neighbour, a small shop and in front of our restaurant.
He also installed a electrical plug on the pillar just in front of our restaurant.
He then buys tables and installs them in front of his restaurant, in front of the neighbour shop and in front of our restaurant!

The neigbour considers that since he has rebuilt the floor in front of our restaurant. He can therefore occupy the terrace in front of our restaurant!

He even lies and pretends that he asked me if he could the terrace and install his tables! 
Maybe he just assumed that by letting him resurface the floor, I implied that he can use the space in front of our restaurant?
You should know that in China: people have no word.
Everybody lies and there is no valid agreement. You can always retract yourself. As long as it is oral: you can say everything and nothing. If it is written you depend on Chinese law and in the end it is always about network...

What can we do?

  • Analyze the situation and evaluate your opponent strength
The neighbour attacks us and occupies the space in front of our restaurant. 
Who is the neighbour? He has a good network? Does he know the police? Does he have money What about his family?
What is my cards set: what is my network? Can I ask someone for help? I am foreigner or Chinese?

  • Discuss with the neighbour and try to find a compromise
We tried to discuss with the neighbour. 
We offered to pay his work and the ciment. He refused. 
We offered to divided the space in front of our restaurant: he refused. 
He only agreed to put his table after 11pm and allow us to have a few table before 11pm.

Our mistakes:
We didn't react fast enough. Chinese people test your limits and you must react quickly, show your muscle and put your foot down the table!
You must tell Chinese people that you won't take it and set the limits! Chinese people are like children: they will always try you. Sometimes they will threaten you. You need to appear more threatening and your opponent will almost always give up quickly: a lot of talk but little actions.

We should have for example: 
Occupy the space and install some table outside of our shop before any renovation work
Refuse that the neighbour resurfaced the ground
Discuss with the neighbour and refuse that he installed table in front of our shop...

We couldn't find a compromise!
We had two choices left

  • Giving up
We gave up: 
During the day we don't need any table in front of the restaurant. It is either too cold or too hot and Chinese people don't like to eat outside.
In the evening, we shut the restaurant and staying open would require too much extra work. 
The neighbour is not easy. He is/ was certainly a member of local mafia judging from his tattoo. He would have taken his table away but unpredictable he could break the restaurant at night or...

  • If we attack we know that we are sure to win
If we analyze the situation, we are sure to win:
Even if the neigbour have many contacts, he knows that if the police is involved:

  1. Tables outside of the restaurant will be forbidden.
  2. He could end up with a fine and have to close his restaurant.
  3. In the worth hypothesis if there were some physical fight, we would be shut down and the neigbour as well
The neighbour knows all this and wouldn't take any chance. He wouldn't get into trouble with foreigners.

Keeping this in mind, we can talk and negociate. 
We could ask for example: 4 tables in front of our restaurant and a delimited space. If he refuses we threaten to call the police. He knows that if the police comes he will lose too much: get a fine, no more table in front of his restaurant, everybody would shuts down.
Also the space in front of the restaurant legaly is the public space. Table are therefore just tolerated.

In the end we gave up since we didn't need the terrace that much. And our fear was that our neighbour would in bitter disappointement destroy our restaurant at night. 

Still I could verify the logic that I am just telling you. 
In fact a neighbour who lived just above our restaurant complaind to the police. The neighbour put too many tables in front his restaurant. He had the table outside at 6pm! And it is only tolerated to put table outside at 11 or 12pm! He even installed a giant screen to watch some movies. He also parked scooters in front of our restaurant!

The police came several week. Tables in front of the restaurants were forbidden except late at night. I don't think that the neighbour got a fine. But it was hard on his busineness.
I am still wondering how come the police came just because a neighbour complain. I am not sure that Chinese police would consider the complain of one simple neighbour. Maybe I am mistaken.

We bought back the terrace
As we want to sell the restaurant, I will tell you more about it soon, we had to buy back the terrace. However the neighbour was not willing to sell it to us.
He later changed his mind and asked us for a huge amount of money!

We asked the owner to arbitrate this negociation. This helped a lot.
In China you always need to look for a third party. The third party can support your cause or arbitrate a conflict. His authority will greatly help to reach a reasonnable agreement. You should however greatly take care that the third party will be fair and not support the other party.

With the intervention of the owner we could buy back the terrace at a fair price and this helped us a lot to sell the restaurant.

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