Kro’s Nest, End of Days

141 comments by Damjan DeNoble on May 11, 2010

This past Sat­ur­day, with the arrest and pub­lic humil­i­a­tion of its for­eign owner by Bei­jing author­i­ties, the Kro’s Nest unof­fi­cially ended its five year run.  The offi­cial end will come at the end of the legal bat­tle that Saturday’s inci­dent has kicked off.  It’s a shame because things didn’t need to turn out this way.  I once believed that if God had it writ­ten in stone that every for­eign restau­rant owner in Bei­jing was guar­an­teed to lose every penny of invest­ment put in, no mat­ter the cir­cum­stances, Kro would still come out ahead, because  he was above the circumstances.

Indeed, Kro, for longer than a short while, was above a lot of things.  Above the ordi­nary, above expec­ta­tion, and above the law, or below it if you hap­pen to under­stand that  legal pro­tec­tions in China extend up the social hier­ar­chy, not down.  He graced the cover of mul­ti­ple inter­na­tional mag­a­zines, starred in CCTV cook­ing shows, and appeared in a FHM celebrity photo shoot, all before his twenty-fourth birth­day.  He was  pro­claimed a restau­rant prodigy by Beijing’s Eng­lish lan­guage press, and treated like a celebrity by Chi­nese gos­sip mag­a­zines.  Hated and loved, respected more often than reviled.

Whether The Truth be des­tiny, free will, or chaos, I believed he could defy the holy sub­lime just like he had defied the expec­ta­tions of young South­ern gen­try by refus­ing to be any­thing but blue col­lar while a stu­dent at Atlanta’s West­min­ster acad­emy; just like he had defied his pious, lawyer father, first by going to col­lege in Hawaii, instead of Ivy, and then get­ting a full body, seven dragon tattoo.

Today Kro finds him­self in a posi­tion where he may never see a dime of the many mil­lions of ren­menbi  his restau­rants have accrued over a five year period.  Kro is closer to broke than kept, think­ing about mov­ing back in with his Chi­nese par­ents - his sec­ond mother and father -  and his lawyers are work­ing this case pro-bono, unless any money is actu­ally recovered.

By con­trast, today Kro’s for­mer part­ner, Yuan Jie  (袁捷), who always insisted that Kro had, in fact, at least three fathers, because to him, too, Kro was like a son, has ten mil­lion RMB  sit­ting in a bank account.  It’s a joint bank account Yuan­Jie keeps with his wife, a China Revlon exec­u­tive.  It’s ten mil­lion RMB he’s not sup­posed to have, because the account­ing books his wife’s for­mer employee turned Kro’s Nest accoun­tant, Zhang Yan (张妍), kept and then showed to Kro say that this money does not exist.  Those account­ing books, indeed, say that the Kro’s Nest is los­ing money, and has been for more than a year now, even though this past Novem­ber the rent on the biggest of the three Kro’s Nest restau­rants fell by more than a half, an arrange­ment that Kro nego­ti­ated with­out Yuan Jie’s help.

Maybe this hap­pened because Yuan Jie’s wife gave birth to a baby boy two years ago, and Yuan Jie decided that there is noth­ing like a son except for a son.  Maybe it hap­pened because Yuan Jie’s wife no longer liked Kro. Maybe Yuan Jie no longer likes Kro.  In any case, Yuan Jie stopped talk­ing to Kro a month  ago, four weeks before this past, humil­i­at­ing Saturday.

Irri­tated, that’s how I feel.  I was one of Kro’s first for­eign employ­ees, and man­aged a large part of the busi­ness for a period stretch­ing from 2007 to the tail end of 2008, when I was the restau­rants’ “Da Jing Li” or Gen­eral Man­ager.  Kro and I spent so much time try­ing to prepar­ing so that a day like this past Sat­ur­day would never come that it’s plain irri­tat­ing that the day came any­way.  We saw it com­ing, for Christ’s sake!  Two years ago we saw it com­ing. We spent too many drunk hours build­ing rela­tion­ships with local police offi­cers and gov­ern­ment offi­cials. Sang too many Karaoke songs.  Made too many per­sonal com­pro­mises, traded in too many healthy days with the grand-kids. We both read Jim Boyce. Kro knew Sammy.  The whole city, it seemed, knew about Luga’s and the Sad­dle.  Even Dan Harris’s arti­cles made their rounds on the Kro’s Nest mail­ing list.   But, the day we fore­saw and swore would never come, came any­way because talk­ing and wor­ry­ing about prepa­ra­tion is not a sub­sti­tute for exe­cu­tion.  Exe­cu­tion is where the story begins and where it may end, though I hope it doesn’t.

In my mail­box today sit over two hun­dred emails that either directly sup­port Kro’s claims of being the owner and oper­a­tor of the Kro’s Nest, or that show evi­dence of an early and earnest effort to turn the Kro’s Nest into a truly legal entity.  I have the names of our Grandall Legal Group lawyers, and I even have the July 2008 ticket con­fir­ma­tions for Hong Kong, when one Kro’s Nest man­ager went down to Hong Kong and signed off on the com­pany found­ing papers.  Best of all, I have the orga­ni­za­tional chart approved by Kro AND Yuan Jie, that spells out exactly how all of their hold­ings would be incor­po­rated under one entity (they only owned four Tubesta­tion restau­rants , there were eight on this chart for the­o­ret­i­cal rea­sons, not because there were actu­ally eight of them).

I’m really hope­ful that every­thing I have is enough.  But I fear that what I don’t have may prove hard to overcome.

I don’t have an email from the Grandall Legal Group lawyers say­ing that the task has been com­pleted.  In their stead I have a cou­ple of of emails from Grandall ask­ing whether Kro and Yuan Jie have col­lected all of the nec­es­sary doc­u­ments, and whether or not they’ve signed all of the nec­es­sary paper work.  My sin­gle reply to both emails I have, and it says that the papers are on their way, soon.  I don’t have the email where I tri­umphantly tell the lawyers that the paper­work is all col­lected and signed, because I never got to write it.  I don’t have it in part because Yuan Jie pushed to shut me out of the process, and in part because Kro agreed.  Kro said that Yuan Jie had com­plained how this was their busi­ness, not 小巴‘s (Damjan’s) respon­si­bil­ity.  To pre­serve their friend­ship and “for the good of the com­pany” Kro said it was prob­a­bly best that I backed off.  But I shouldn’t worry, he insisted, I would be way too busy with other things in the busi­ness to worry about this.

Over the next three months fol­low­ing that inci­dent, Yuan Jie hired his wife’s good friend and sec­re­tary to be the Kro’s Nest accoun­tant.  No one in the com­pany, not even Kro or Yuan Jie, could make any deci­sions before she approved them, which meant before Yuan Jie approved them.  Yuan Jie had out­sourced my Da Jing Li duties.  I was impo­tent, and Yuan Jie only stopped short of ask­ing me to go back to serv­ing tables. First I left, then the head chef left, then the the rest of the for­eign­ers, an A-list cast of flu­ent Chi­nese speak­ers, left.  Before long Kro’s longest tenured employee, best friend, and most capa­ble Chi­nese man­ager left, so that by Decem­ber of 2008, four months after Kro and Yuan Jie had agreed on a com­pany struc­ture and the Hong Kong entity had been paid for and signed off on,  Kro had no allies left in the restau­rant.  Grandall Legal Group was told that their ser­vices would no longer be needed, and then Yuan Jie pro­ceeded to go about busi­ness like the issue of own­er­ship was no longer an issue. As far as the Kro’s Nest is con­cerned, that was the start of 2009 marked the last year of the Mayan calendar.

Did Kro let it hap­pen because he didn’t real­ize that he was being put into a cor­ner?  Or, did he just fig­ure that this was noth­ing more than the sea­sonal tur­bu­lence of a part­ner­ship that dated back to 2001, when Kro helped Yuan Jie open up the first Tubesta­tion and a hip hop club in West Bei­jing called Blue Jays? Was it some­thing more self-destructive?  If not that, than some­thing more naive?

I can only spec­u­late, but at one point, in an email exchange Kro and I had six months ago, when I was already in the US, he wrote of the legal sit­u­a­tion, “yuan­jie is well yuan­jie, so there is not much to say about that.”  Read­ing it helped me remem­ber - at least I think I remem­ber, and I cer­tainly hope that I’m not cre­at­ing a mem­ory here for the sake of this arti­cle - that more than being stand-offish about his rela­tion­ship with Yuan Jie and the com­pany, Kro often took a  Zen-like, go with the flow atti­tude because he felt he had to.    For bet­ter or for worse, Kro felt that his and Yuan Jie’s des­tinies were inter­twined until the end.  “You’re lucky.  If I wanted to get out of the com­pany,” he told me on the day I told him that my days with the Kro’s Nest were end­ing, “it would take me a year just to sort every­thing out with Yuan Jie.”   Kro believed he and Yuan Jie were stuck to one another, and for a while there Yuan Jie might have felt that way, too.  But, it seems cer­tain now that Yuan Jie was never quite as Zen about the part­ner­ship as Kro, and he started mak­ing his exit strat­egy early.  As soon as Kro found out about the strat­egy, Yuan Jie balked and cut off com­mu­ni­ca­tion.  So, here we are.

I’ve talked to Kro twice in the past thirty-six hours. The first time, at approx­i­mately 10:30 pm Sun­day, Bei­jing time, he was on his way to the police sta­tion for the fifth time that day.  On his fourth trip he thought that he had man­aged to secure Yuan Jie’s arrest for assault.  But then, “Yuan Jie pulled some fuck­ing guanxi and got out of it, so I have to go back again.”

That was all he had time to tell me.  “It’s David fight­ing Goliath,” he added. “But I’m gonna fight this tooth n’ nail. He’s not gonna win.”

I was left to won­der why he would want Yuan Jie arrested for assault and if he would suc­ceed, but I didn’t have to won­der for long.  The Global Time’s story by Hao Ying that went up this morn­ing  pro­vides the assault details, fully repro­duced here just in case the link goes dead;

Police have detained the Chi­nese part­ner of the pop­u­lar Kro’s Nest chain of pizze­rias for fight­ing, after staff were told that his Amer­i­can part­ner Olaf Kristof­fer “The Kro” Bauer no longer worked for the company.

San­l­i­tun police told the Global Times that Yuan Jie, the Chi­nese part­ner, had been detained for fight­ing at the north Worker’s Sta­dium area, but gave no fur­ther information.

Bauer told the Global Times that Yuan brought sev­eral police offi­cers to the flag­ship Worker’s Sta­dium branch of the chain, insist­ing that Bauer was only a cook and should be removed.

Bauer said Yuan “lost his cool” and threw a roll of pack­ing tape at him, then shoved him hard three times, push­ing him up against the oven, then the ice machine, then against the bar. Police say they have laid no charges against Bauer. Bauer told the Global Times, “The hard­est thing I ever did was not lose my tem­per. It was Gandhi-esqe.”

Bauer said he spent the night in the hos­pi­tal under obser­va­tion on an intra­venous drip, and suf­fered minor inter­nal injuries. He also said he spent much of Sun­day talk­ing to police, who urged him and Yuan to reach a quick res­o­lu­tion. Bauer later added he would let his lawyer deal with the nego­ti­a­tions, say­ing he con­sid­ered this to be the “first of a seven part series.”

A Kro’s Nest man­ager said staff were told Bauer is no longer part of the com­pany, and that the police were called because he was col­lect­ing money from cus­tomers. “Nobody wanted to see this hap­pen,” she added. She said it was unclear who owned the restau­rant chain, call­ing it a “busi­ness secret.” Another man­ager said the owner “saw no need” to talk to the media. Attempts to reach Yuan on his mobile phone failed.

Yuan’s deten­tion by police caps a four-year suc­cess story that saw a heav­ily tat­tooed young Amer­i­can and an aspir­ing Chi­nese restau­ra­teur 15 years his senior build Kro’s Nest from a Haid­ian stu­dent hang­out into a pop­u­lar three-restaurant chain.

Bauer befriend Yuan when the young Amer­i­can was study­ing abroad. Bauer later returned to China and opened the first Kro’s Nest with Yuan in 2006 near the Old Sum­mer Palace. The Kro’s Nest Web site boasts, “We’re not busi­ness guys.” Bauer says he lost $100,000 early on because he ignored account­ing books and made mis­takes like let­ting kitchen costs overrun.

Bauer and Yuan had a major fall­out in 2006 over a pizza sauce recipe. A few months later Bauer and Yuan rec­on­ciled, decid­ing to evenly split their equity in both restau­rants. The dis­pute was the sub­ject of a half-hour CCTV tele­vi­sion show and, accord­ing to Bauer, doc­u­ments their oral busi­ness agreement.

Bauer claimed their cur­rent dis­pute resulted from Yuan refused to show him their account­ing books, later offer­ing him 1 mil­lion yuan and the rights to the Kro’s Nest name to leave the business.

“I was the one that pushed to have a for­mal agree­ment. He said no need,” Bauer said. “I’m glad I’m mak­ing this mis­take at 26 and not at 62.”

Li Shuang and Xuyang Jingjing con­tributed to this story

Though it’s unclear whether Yuan Jie’s detain­ment is the one he man­aged to sneak out of, or whether Kro’s fifth trip to the police office was suc­cess­ful, it really doesn’t mat­ter.  After read­ing this in the early hours of my Ann Arbor Mon­day morn­ing, thanks to a bevy of mes­sages sent through­out the night by con­cerned Kro’s Nest patrons in Bei­jing, I real­ized that Kro had gone on the offen­sive.  I spent the next part of the after­noon on my Twit­ter account talk­ing to Stan and Boyce about the sit­u­a­tion, and then, at 12:54 am, Bei­jing time, I got hold of Kro.

While an offi­cial state­ment will be made by Kro today, what I can tell you is that he is not speak­ing with Yuan Jie and a rec­on­cil­i­a­tion is not pos­si­ble.  For now all of their com­mu­ni­ca­tion will be con­ducted through Kro’s lawyers.  Kro is also  fully aware that he faces an uphill bat­tle.  He said,  “Where [Yuan Jie] messed up is that he didn’t real­ize that you can’t try to cheat a man who’s got noth­ing but his shoes.”

Know­ing Kro, this story is not over, so be sure to stay tuned.  In the mean time, please, if you can, take some time to rally for the Kro’s Nest any­way you know how.  Pass along this arti­cle, get involved on the­Bei­jinger forum, or on CityWeekend’s web­site.  If you want you can even send me a mes­sage to pass on to Kro.  Twit­ter hash­tag is #supportKrosNest.

UPDATE:


141 Comments

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  1. dragan
    May 11, 2010 at 4:04 pm

    -++3

    If Yuan Jie wins and get full share on Kro’s Nest, can you pre­dict future for restau­rant chain? Will any­one (for­eign­ers or Chi­nese) con­duct busi­ness with Yuan Jie?
    Peo­ple are greedy, but did Yuan Jie thought that whole thing would just pass?

    It is not the first time that Chi­nese part­ner tries sim­i­lar thing, which hurt­ing China’s image to for­eign investors.

    Reply
  2. B-real
    May 11, 2010 at 5:51 pm

    -+

    That was the big warn­ing when my com­pany decided to open up shop in China. They all said the same thing “Part­ner­ship in china can lead to many things great, but the moment things start to look really good you make no money because the Chi­nese took it from under­neath your feet.”

    My 1st 3 years were good but lim­ited because of the old law of hav­ing a Chi­nese part­ner with 51% share. At first I was like that. My prod­uct, my work, my effort and they get the Lion’s share what a fuck­ing rip off. But last year I gave it a test try with the option to buy back. The prob­lem with that is that I lose ground made from the part­ner­ship. It has proven to be fruit­ful and now I can rene­go­ti­ate buy­ing more of my shares back. Im still a bit dis­trust­ful and the Amer­i­can part­ners and my lawyers always sug­gested to pay my self less and put more money into accounts that are not shared for the even these guys decide they have made enough of my money. For a rainy day I’ll have enough to start over.

    Reply
    • Damjan
      May 12, 2010 at 8:50 am

      -+

      I like this. It reminds me of what Mark Cuban advo­cates in entre­pre­neur­ship. He has main­tained that a suc­cess­ful entrepreneur’s strat­egy is to build some­thing until it makes money and then to sell it when a will­ing buyer comes along. In the con­text of what he was doing, it meant sell­ing a web­site for a guar­an­teed 25 mil­lion rather than bring­ing in VCs in the hopes of cre­at­ing some­thing that could pos­si­bly sell for 100 mil­lion or some­thing equally outlandish.

      In a for­eign busi­ness cli­mate I could see the ben­e­fits of build­ing projects to a point where the for­eign part­ner is will­ing to buy, but where you may not nec­es­sar­ily be get­ting what you see as the max­i­mum poten­tial value. Of course, this is a tough pill for any­one, includ­ing myself, to swal­low. I think your approach strikes a nice bal­ance between the max­i­mum reward and the cau­tion­ary pull back. I’ll keep this idea in the metaphor­i­cal back pocket.

      Reply
  3. Charles
    May 11, 2010 at 6:05 pm

    -++2

    This is too bad for Kro. I feel that, unlike his pizza, his ambi­tions were a bit too large and his restau­rants suf­fered from it. As a result I hadn’t been in years, but this is nei­ther here nor there. I’m not shed­ding a tear but I wish him all the luck in the world tak­ing on ‘the man’. This is the same story I’ve been hear­ing since I got here in 2005, but I hope this one has a dif­fer­ent end­ing. Too long have our Chi­nese ‘part­ners’ cheated us with impunity.

    Reply
    • Damjan
      May 12, 2010 at 8:59 am

      -+

      Like I said, he was loved or hated, but most often respected, and that reflected the fact that he didn’t hide his human­ity. He like all of us, is flawed. Who we stay in con­tact with and what busi­ness own­ers we choose to patron depends in part on which flaws we can stand. Few pref­er­ences are more jus­ti­fied than oth­ers. So, every­thing you said is legit­i­mate and per­fectly under­stand­able. And thank you for express­ing your sup­port for Kro in your own way.

      It’s hard to take some­one with dreams as big as Kro’s, seri­ously, but yet we still look for the ambi­tious dreamer who we can trust. At some point every per­son makes a gam­ble that some­one they know is that cho­sen one. I took the gam­ble with Kro then, and am tak­ing it now by tak­ing his side, (or maybe I’m just being a good friend, either way I’m at peace with it). But, I might very well be wrong. I don’t believe I am, but maybe.

      Reply
  4. David D.
    May 11, 2010 at 7:35 pm

    -++3

    let’s say it together one more time : WFOE !

    Reply
  5. Fransisco
    May 11, 2010 at 8:36 pm

    -++1

    hor­ri­ble! Used to love the piz­zas t Kro’s nest, but part of the fun was know­ing that it was an expat hang­out. I will never go there again. If this could hap­pen to Kro’s nest, this could hap­pen to any expat business!

    Reply
    • Adam Daniel Mezei
      May 12, 2010 at 5:03 am

      -+

      I’m glad I had a chance to get there this past win­ter before all of this guano hit the fan. I’ve got to thank James F. and DD for turn­ing me onto it in the first place. End of an era…

      Reply
    • Damjan
      May 12, 2010 at 9:03 am

      -+

      Let’s see what hap­pens with the Kro’s Nest now that this story has made its way to every major China expat site.…might not even be a Chi­nese hang out by the time it’s all done.

      Reply
  6. Bin Wang
    May 11, 2010 at 8:37 pm

    -++3

    That’s the risk v. reward propo­si­tion of doing busi­ness in China. It’s a mar­ket with HUGE poten­tial, but MANY pit­falls. That said, there is a cer­tain “quid pro quo” involved … you (for­eign busi­ness­man) cut me (Chi­nese part­ner) a larger share than I should objec­tively receive, and I help you nav­i­gate the pit­falls. Thereby, you reduce your risk, main­tain your abil­ity to tap into the large Chi­nese mar­ket, and I get com­pen­sated. Per­haps that arrange­ment, in of itself, is to be expected, until when/if the day comes that wining/dining local officials/police is no longer nec­es­sary in China. But, “guanxi” has been around a LONG time!

    None of the above should blind-side the for­eign busi­ness­man will­ing to assume these risks in order to gain a foothold in China. That said, what seemed to have tran­spired here, a com­plete takeover of Kro’s share by brute force and fraud, is com­pletely unac­cept­able I would think, even in Chi­nese eyes. It’s one thing to col­lect a roy­alty, it’s another to rob a part­ner of everything.

    The cur­rent sit­u­a­tion is now not unlike those peti­tion­ing directly to Bei­jing for relief. The more pub­lic­ity to be had, the more even Chi­nese peo­ple feel that Kro was wronged, not to men­tion for­eign investor uproar, the more the Chi­nese gov­ern­ment will real­ize this is unnces­sary pub­lic­ity which would only chill for­eign invest­ment in China. Some­one will be made an exam­ple of, the pun­ish­ment to the offender pub­li­cized as an exam­ple of: “see, we pro­tect for­eign investors,” and daily life within the grey areas, guanxi build­ing, small roy­al­ties, etc. will go on in China. It it what it is.

    So, all sup­port to Kro in this uphill bat­tle, and I hope this stays in the pub­lic eye for a while. Small advan­tages are taken, but within the bounds of some rea­son. Kro’s part­ner may have bit­ten off more than he can chew here. We’ll see!

    Reply
    • Damjan
      May 12, 2010 at 3:33 am

      -++1

      I agree com­pletely with your assess­ment of the quid pro quo rela­tion­ship, and of what tran­spired at Kro’s Nest going above and beyond that. I would explic­itly add (and should have done so in the arti­cle) that this type of sit­u­a­tion is not China spe­cific, and has an inter­na­tion­ally rec­og­niz­able story line, “No con­tract was signed, and the dom­i­nant part­ner - in this case, Yuan Jie is dom­i­nant because China is his home turf - took advantage.”

      (But, I am more adding this for the sake of peo­ple read­ing the com­ments than I am for you, Bin Wang, because your com­ments of this site indi­cate that you have a lay­ered and nuanced under­stand­ing of most issues being discussed.)

      And, yes, let us sup­port Kro and hope that this issue crosses over into the China lan­guage media sphere.

      Reply
      • Bin Wang
        May 12, 2010 at 3:50 am

        -+

        To all the attor­neys read­ing the blog, any promis­sory estoppel-esque pos­si­bil­i­ties in Chi­nese law? :-)

        Reply
        • pug_ster
          May 12, 2010 at 5:07 am

          -+

          I’m not a lawyer, but in my opin­ion is that the con­fir­ma­tion for flight to Hong Kong and the Org chart is hardly evi­dence because they are not offi­cial doc­u­ments. If Kro has proof that his ex ‘part­ner’ signed off on the com­pany found­ing papers in HK or some kind of proof that the Org chart was autho­rized by the gov­ern­ment, that would be a dif­fer­ent story.

          Reply
    • Adam Daniel Mezei
      May 12, 2010 at 5:05 am

      -++1

      Bin, like most of your replies, that was pure poetry. Gawd, that was lovely…D, be proud!

      Reply
      • Bin Wang
        May 12, 2010 at 6:11 am

        -++2

        Aw, shucks fel­las, yer makin’ me blush …

        I have to echo Susan’s com­ments below. China lacks reli­able, con­sis­tent and even-handed appli­ca­tion of the rule of law. Much like a child who knows that the threats of the par­ent are hol­low, non-enforcement and favoritism breeds belief that one can be above the law. Even in the U.S. where law is gen­er­ally respected by the pop­u­lace, some movie stars and ath­letes behave as if they are above the law. It’s because they’ve never been called to task. In China, for too long, minor offi­cials, local big-shots, those rich enough to afford mas­sive bribes, lots of cig­gies, gal­lons of mao­tai, etc., those in posi­tions of author­ity seek­ing to lever­age that author­ity for per­sonal gain, have behaved as if they were above the law. Under these cir­cum­stances, it’s not dif­fi­cult to imag­ine these things hap­pen­ing, sadly.

        Reply
  7. Mao Ruiqi
    May 11, 2010 at 9:21 pm

    -+

    Dam­jan, have you con­sid­ered, as one of the under­lin­ing “whys” of the Kro deba­cle, “unre­solved feel­ings toward the father”. Three of the four char­ac­ter­is­tics of unresolved-feelings are: 1) to be very charis­matic; 2) to be a bet­ter starter of things than a fin­isher, almost a com­pul­sion not to fin­ish crit­i­cal chores; and 3) to be self-destructive at the point of their great­est suc­cess. Notwith­stand­ing their near inbred self-destructive qual­i­ties, the good news is that such per­son­al­i­ties are at their strongest when they are at their respec­tive nadir.

    Reply
    • Susan
      May 11, 2010 at 10:49 pm

      -++1

      Chi­nese ripoff other Chi­nese too, I’ve heard it many times, even amongst friends. But maybe for­eign­ers are bet­ter targets.

      The under­ly­ing prob­lem is that solid rule-of-law is lack­ing here in com­par­i­son to places such as the U.S., and with­out the insti­tu­tional under­pin­nings, the urge for peo­ple to do things like this (cheat, fraud) gets car­ried out more often because more peo­ple think they can get away with it. I sure hope Mr. Bauer suc­ceeds, and I’m happy that he’s got youth on his side!

      Reply
    • Damjan
      May 12, 2010 at 9:08 am

      -+

      Strong point here. What rings par­tic­u­larly true with Kro is that he works best when his back is up against the wall.

      He is a very strong fin­isher when it comes to the tan­gi­ble things: the con­crete, mud, and dough of the oper­a­tion. Obvi­ously, the more con­cep­tual things need work.

      I would then add one more thing. Kro has always been a very good stu­dent, a sponge for cul­ture, lan­guage, and busi­ness. Do unre­solved feel­ings have any sort of dis­cernible impact on one’s abil­ity to bounce back stronger and wiser?

      Reply
  8. pug_ster
    May 11, 2010 at 9:33 pm

    -+-1

    Some peo­ple here sounds para­noid when doing busi­ness in China when in fact Amer­i­cans doing busi­ness in China is pretty good accord­ing to this survey.

    http://​www​.amcham​-shang​hai​.org/​N​R​/​r​d​o​n​l​y​r​e​s​/​C​1​D​F​B​C​B​D​-​4​A​8​A​-​4​E​F​A​-​8​8​6​0​-​E​F​B​5​7​4​C​F​4​7​3​B​/​1​2​2​7​5​/​v​i​e​w​p​o​i​n​t​_​0​4​1​0​.​pdf

    In any case, I got a feel­ing that you only told half a story from the per­spec­tive from Kro’s side. It sounds to me that Kro going around the world show­boat­ing while the Chi­nese part­ners are doing the grunt work run­ning the busi­ness. At some point there is going be some fric­tion and some­one is going to get hurt. I don’t think this is a Chi­nese thing, rather the prob­lem when a part­ner­ship went sour.

    Reply
    • B-real
      May 11, 2010 at 10:21 pm

      -+

      So then who came up with the orig­i­nal idea Kro’s Nest? Whose name is in the name of the Venue? Whose money was orig­i­nally invested? That is at own­ers dis­cre­tion to push his prod­uct how ever means nec­es­sary. If it take some going all over the world and show boat­ing well fuck yeah do it. Any pub­lic­ity is good publicity.

      Judg­ing by your link and skim­ming thru it, all I really get out of it is a use­less pam­phlet or mea­sur­ing the pros and cons of run­ning a for­eign estab­lish­ment in China. Just because some Amer­i­can group did some sta­tis­ti­cal analy­sis in con­junc­tion with China. Hmm­m­m­mmm smells a bit fishy. Stats may say 1 thing but oper­a­tions is another. As China grows so will the con­stant pol­icy changes that make it even more dif­fi­cult to make money sort of like in the US.

      Reply
      • bai ren
        May 11, 2010 at 11:08 pm

        -++2

        B-real
        Got to agree with you here. While I am sure there is more to the story than shared here (and it could go either way), the details of invest­ment etc are cru­cial to the issue.
        Kro is a damned well born guy, or mar­vil­iously tal­ented cook if he can loose 100 000 in his first year through aco­cunt­ing over­sights.
        But the ques­tion is alough he needed a to make his busi­ness a joint ven­ture, why choose an indi­vid­ual to part­ner up with, why this one, why not make it all for­mal and above board from the begin­ning?
        It may well be that fina­cially, rela­tion­shiply (ie to get per­mits prop­erty etc) Yuen was the man for him at the time and this is what con­nected them in his mind.
        This story shouldnt be seen as unqiue to China, although it is very promi­nate for cur­rent chi­nese busi­ness. rather it is a story of busi­ness rela­tion­ships.
        The main ques­tions are, what laws are relevent, how might the laws be under­stood to imply if this case is ruled accord­ing to Chi­nese law (does Yuen have com­mu­nist party mem­ber­ship????) and how will media atten­tion medi­ate other pos­si­ble fo9rces in deter­min­ing the amount of ruloe by law in this case.
        While upon read­ing the arti­cle I see and appre­ci­ate Damjan’s emo­tional etc con­nec­tion to the story, thats mostly what this account is, an emo­tional reac­tion. I hope to see a fol­low up arti­cle, and if there is one, I REALLY APPRECIATE the fast heads up on this devel­op­ing situation.

        Reply
        • Adam Daniel Mezei
          May 12, 2010 at 5:21 am

          -+

          Yeah, and to @pug_ster in reply addi­tion­ally, a pro­pos to this point in the thread…@bai ren is spot on: this is the only issue I’d take with DeNoble’s coverage…it might con­tain more than a healthy dol­lop of emo­tion­al­ity to it, ergo one can indeed make the case that DeNo­ble isn’t being alto­gether legally objec­tive in the post. Still, per­haps it’s the West­erner in me that finds the fact that Bauer can come in with a bold idea, work­ing up that biz into the pow­er­house it is today, only to be left with­out a miao in his pocket short of the sweat off a baboon ball’s sac all because of…well, that’s what the fol­lowup article’s going to tell us, isn’t it?

          Reply
      • pug_ster
        May 11, 2010 at 11:12 pm

        -+-5

        Kro’s nest is just a name of a restau­rant, and I don’t con­sid­ered as a rec­og­nized ‘brand’ like KFC, McDonald’s Gap, etc… So if Kro’s next would close tomor­row and re-opens as another restau­rant, I doubt that there would be any impact. Dam­jan said that many of the key peo­ple quit so it is pos­si­ble that they could’ve opened a busi­ness on their own tak­ing the busi­ness from Kro’s. As I said, I believe we only got 1/2 of the story from Kro and we don’t have the per­spec­tive from the Chi­nese part­ner. Also, doing busi­ness is hard in China and busi­ness fail­ures like this is not uncommon.

        Reply
    • Adam Daniel Mezei
      May 12, 2010 at 5:16 am

      -++1

      pug_ster, you’re neglect­ing the obvi­ous that DeNo­ble used to work there for a year and change, hav­ing got­ten to know all con­cerned par­ties pretty inti­mately, drank with them, and likely car­ried a few of them home over his shoul­der to make sure they got home okay. I’ve been there, and seen the setup, like most of the cats here.

      I’d say that your sug­ges­tion that DeNo­ble is merely spin­ning the story seems rather obliv­i­ous of the facts. Cui bono? DeNo­ble from shed­ding light on them? Hardly…

      Reply
      • m-dawg
        May 12, 2010 at 6:12 am

        -+-1

        Adam Daniel Mezei: “you’re neglect­ing the obvi­ous that DeNo­ble used to work there for a year … I’d say that your sug­ges­tion that DeNo­ble is merely spin­ning the story seems rather obliv­i­ous of the facts.”

        Fair point but let’s not for­get that the author was pushed out of the busi­ness by Yuan Jie and states as much in the orig­i­nal post, so it’s not unrea­son­able for him to be a bit biased towards Kro’s side of the story.

        Reply
      • Damjan
        May 12, 2010 at 9:13 am

        -++1

        I was inten­tion­ally emo­tional in the piece. Try­ing to keep the objec­tive tone of a 1960s net­work anchor would have been disin­gen­u­ous to any­body read­ing. I took a side, Kros, so lets let that point rest.

        Whether it’s only half the story is a dif­fer­ent mat­ter. Adam has it right. And I did, actu­ally, carry both own­ers home on mul­ti­ple occa­sions. We were all close at one time. Con­tracts peo­ple, con­tracts and WFOEs.

        Reply
        • Damjan
          May 12, 2010 at 9:15 am

          -+

          *Con­tracts peo­ple, con­tracts and WFOEs…they’ll make the friednship last longer, not the other way around.

          Reply
      • pug_ster
        May 12, 2010 at 11:09 am

        -+-1

        If you guys try to win in court, it is not whether you believe or not you are right, but whether what you can prove. In the end if Kro has enough paper­work and other doc­u­men­ta­tion and how the lawyers can present the case. Spend­ing all that time drink­ing with them is not exactly some­thing you can present to court in your favor.

        As I said I am not a lawyer. But I have to take some­one who owes me money to court twice this month. This chronic liar (he is Pol­ish btw) makes these ridicu­lous false alle­ga­tions that he ‘tried’ to pay me or did not make the proper demand that he owe me money, and I promptly show proof that he is not telling the truth. After I took him to court today he shook my hand and we have to move on.

        I really wish both you and Kro well, but in the end both of Kro has to take the emo­tional thought out of the equa­tion and think about what he can sal­vage out from the unhappy part­ner­ship of his.

        Reply
  9. James
    May 11, 2010 at 11:54 pm

    -++2

    Another rea­son why the gov­ern­ment needs to reform its laws deal­ing with for­eign entre­pre­neurs. The cur­rent laws are just harm­ing ambi­tions and cre­at­ing chaos. If it was eas­ier for for­eign­ers to own / run busi­nesses here, this would trans­late into many more jobs for locals.

    Reply
    • Damjan
      May 12, 2010 at 9:17 am

      -++1

      Agreed, and I think the same can be said for much of the world. Free­dom to do busi­ness is why the US is such a mag­net for the world’s drive migrants, other draw­backs notwithstanding.

      Reply
    • friendo
      May 12, 2010 at 2:43 pm

      -+-8

      Yes, like mow­ing your lawns and clean­ing your houses while for­eign­ers hol­low China out like a bunch of termites.

      Reply
    • B-real
      May 12, 2010 at 8:59 pm

      -+

      Totally agree. You can run and own a busi­ness here but its not to full poten­tial. Like some one said ear­lier you have to part­ner up with some one or some peo­ple who can get you that free­dom to make some real cash. I was once com­ing close to throw­ing in the towel because of the legal dif­fi­cul­ties. There shouldn’t be any dif­fer­ent laws. It should be the same across board. Money is money and the GOV should be happy with the stim­u­lus com­ing from these for­eign lands. Start ups should get way more free­dom than Satel­lite com­pa­nies out­sourc­ing. Just because the own­ers are not Chi­nese doesn’t mean they shouldn’t get the same oppor­tu­ni­ties as the Chi­nese. Give me my busi­ness license, and TAX ID and let me run my busi­ness alone.

      Reply
  10. Boyce
    May 12, 2010 at 1:48 am

    -++1

    Dam­jan,

    I am guess­ing we will see more such cases of part­ner melt­downs given that job oppor­tu­ni­ties are dry­ing up for many expa­tri­ates here and it seems -- at least in my cir­cles -- an increas­ing num­ber see open­ing a bar or restau­rant as an alternative.

    I am hop­ing more of them will look at how to pro­tect them­selves should the pizza pie hit the fan, as it did in this case. At the moment, far too many jump into the project and invest a lot of effort, fig­ur­ing that all that reg­is­tra­tion and con­tract stuff can be han­dled later. Some­times it can, but wait­ing until after all of the cash starts rolling in obvously places one into a weak­ened position.

    Cheers, Boyce

    Reply
  11. Damjan
    May 12, 2010 at 2:22 am

    -++1

    There’s a lot of good points in the com­ments, espe­cially those hint­ing how this is not exclu­sively a Chi­nese partner/Foreign part­ner prob­lem, but more broadly a no con­tract prob­lem. Dan Har­ris of China Law Blog chimes in his two cents here - http://​www​.chi​nalaw​blog​.com/​2​0​1​0​/​0​5​/​s​t​e​a​l​_​a​_​l​i​t​t​l​e​_​a​n​d​_​t​h​e​y​.​h​tml

    More­over, I cer­tainly have an emo­tional stake in the issue. I hope that was made clear when I detailed my involve­ment with the restau­rant. But, if I was not objec­tive in some aspects of my cov­er­age, then so what? I’m telling a story here, as I see it, and adding con­text to news cov­er­age that is oth­er­wise unre­mark­able for its con­tent (again, many have rightly pointed out that this story is not unique). Is it one half the story? It cer­tainly isn’t the whole story. But just because Yuan Jie doesn’t have a voice here doesn’t mean it’s just half a story.

    By the same token, my involve­ment with the con­flicts two cen­tral par­tic­i­pants can’t hide the short com­ings of a Chi­nese legal sys­tem that does very lit­tle to encour­age busi­ness. So for those claim­ing that all is fine in China busi­ness, it’s not. Espe­cially on the grass roots level. Con­ced­ing this much is the first step to mak­ing progress towards a safer envi­ron­ment for local entre­pre­neurs. For (as some­one men­tioned) more jobs in China.

    #sup­port­KrosNest

    Reply
    • pug_ster
      May 12, 2010 at 3:31 am

      -+-2

      I strongly dis­agree with you with the Chi­nese legal sys­tem does lit­tle to encour­age busi­ness. As Dan said in his blog, if you are going to make a part­ner­ship like this, you should get a lawyer involved. Per­haps you and Kro have a per­sonal stake in this and mak­ing this hard to let go. Yes it sounds like Kro has the shorter end of the stick but if Kro intend to go legal on him, Kro and his part­ner will lose alot of money in court fees and such. Unless Kro has the money to buy off his ‘part­ner,’ per­haps Kro with his entre­pre­neur­ial spirit, he should set­tle with his ‘part­ner’ and use the money to start another venture.

      Reply
    • MaLiang
      May 12, 2010 at 4:00 am

      -++2

      What is hap­pen­ing to Kro is unfor­tu­nate, both because he is a great guy who worked extremely hard to make his busi­ness a suc­cess and because this sit­u­a­tion will prob­a­bly make many smart entre­pre­neurs think twice before set­ting up shop in China.

      It is easy to say that Kro should have taken care of the own­er­ship issue early on, but it seems that cur­rent reg­u­la­tions are lim­ited when it comes to rec­og­niz­ing busi­ness enti­ties that are either fully or partly owned by for­eign­ers. Obvi­ously, there is always a way to take care of stuff like this by invest­ing a lot of money in all kinds of busi­ness licences, but those are expensive…at least they are for twenty some­thing year olds with good ideas and not much money in their pockets.

      There­fore, even though this might sound strange Kro’s strat­egy to make him­self indis­pens­able to the busi­ness was prob­a­bly the best shot he had at mon­e­tiz­ing his efforts. As of now it does not look like he is doing too well at this, but I am sure he will come out on top because of the per­son he is and because it will be very dif­fi­cult for the local part­ner to make a cred­i­ble argu­ment that Kro is “just a cook.”

      GOOD LUCK KRO!!!!!!

      Reply
  12. jj
    May 12, 2010 at 2:25 am

    -+

    Amcham isn’t Amer­i­can its Chinese

    Reply
  13. At work
    May 12, 2010 at 2:26 am

    -+

    Oh well, no point in my being a Mon­day morn­ing quar­ter­back. I just would like to say that after hav­ing heard this same story years ago with Win­dows in Shang­hai (and about 1/2 dozen other places) I won­der when will appear some enter­pris­ing lawyer/accountant who starts cold-calling on all new busi­nesses. Some enter­pris­ers with a satchel full of hor­ror sto­ries and a nice price to get peo­ple to stop mak­ing the same mistake.

    Reply
  14. Adam Daniel Mezei
    May 12, 2010 at 5:26 am

    -+

    You’re all neglect­ing the oh-so-obvious here: Bauer is “farmer” in German.

    Per­haps that’s what Kro was meant to do after all?

    Reply
  15. Sure
    May 12, 2010 at 5:57 am

    -+

    I don’t know any­thing about Kro or the Chi­nese guy, but clearly the for­eigner was not smart in how he went about his busi­ness. You must do every­thing above­board in China, not reg­is­ter­ing the com­pany name in your name, not get­ting proper visas, not pay­ing taxes is just stu­pid. 4 years of run­ning a com­pany and not both­er­ing to com­plete these things is just ask­ing for pain. If you can’t afford a WOFE and doing every­thing legally then you should just not be doing busi­ness in China.

    This dam­jan deno­ble sounds like he has no clue how to do busi­ness and does not show the chi­nese part­ners side at all. who invested the money? what is the chi­nese part­ners view? You really think the police are going to build great guanxi with a bunch of 22 year old for­eign­ers and trust them over a 40 year old local?

    This is an instance of a stu­pid busi­ness­man not pro­tect­ing him­self. That is why there are lawyers and a legal sys­tem. Sorry that is hap­pened to him but he was just ask­ing for it. Being able to make a great pizza or what­ever is not enough to be able to build a great company.

    Reply
    • stuart
      May 12, 2010 at 11:21 am

      -+

      @ Sure

      Thanks for that per­me­at­ing analy­sis. Now every­thing is per­fectly clear: it was laowai’s fault.

      Reply
    • Damjan
      May 12, 2010 at 11:42 am

      -+

      Clearly, you are the out­stand­ing mind that can show us all the way forward.

      Reply
    • pug_ster
      May 12, 2010 at 12:46 pm

      -+

      @Sure,

      I’m sure that there’s alot of China bash­ers out there and just want to give Kro a pat in the back say­ing every­thing is alright and ignore reality.

      Reply
    • MaLiang
      May 12, 2010 at 1:13 pm

      -++1

      I don’t think Kro defines him­self as a busi­ness­man. Nev­er­the­less, if you had seen him work, espe­cially in the early days you would have known that his restau­rant would have been suc­cess­ful. I am not say­ing that what he did was ideal under a legal stand­point, but to call Kro’s actions stu­pid under­scores the fact that Kro used the resources at his dis­posal to put together the right sys­tem of incen­tives in order to run the business…namely being the face of the Kro’s nest. By try­ing to force Kro out, the other part­ner is sim­ply being greedy, and clearly demon­strates a lack of busi­ness acu­men as the restau­rant mar­ket in Bei­jing is extremely com­pet­i­tive and Kro’s ideas and energy are the things that put Kro’s nest on the map in the first place and that would allow it to remain com­pet­i­tive in the future. Also, the fact that Kro is a for­eigner does not mean that the legal sys­tem will treat him unfairly. We will just have to wait and see what happens.

      Reply
    • Ghede
      May 12, 2010 at 3:50 pm

      -+

      @sure

      Yeah, I’m pretty sure all busi­nesses in China are run just the way you sug­gest. Noth­ing in China is ever done on the low down or pseudo-legally at all…

      *facepalm*

      Reply
      • pug_ster
        May 12, 2010 at 5:48 pm

        -+-1

        Ghede,

        The prob­lem is that Kro and Dam­jan didn’t bother to go thru the legal means to get a work visa. So that means if some­thing ‘hap­pens’ to them while they are at ‘work,’ they are not pro­tected. It is like ille­gal Mex­i­can work­ers suing their work­place when they trip and fell while they are at work.

        Reply
        • Damjan
          May 12, 2010 at 9:46 pm

          -++2

          We both­ered, unfor­tu­nately for us your country’s won­der­ful pub­lic ser­vants pre­ferred stretch­ing out the licens­ing process, and receiv­ing the ben­e­fits of patron­age with­out the actual patron­age. Kro and I fall into a cat­e­gory of very stub­born peo­ple, so despite the odds and the hap­haz­ard, rule of men legal pro­tec­tions we tried. Too bad for China that there are very few will­ing to do the same. Even fewer are will­ing to try again after they fail the first time.

          Did you read about the part of the story where the Chi­nese cit­i­zen stashed away 10 mil­lion RMB and dodged pay­ing taxes? You know those taxes are respon­si­ble for pay­ing your offi­cial Min­istry of Truth Troll salary, right?

          Reply
          • pug_ster
            May 12, 2010 at 11:31 pm

            -+

            Dam­jan,

            For one thing, it is not ‘my coun­try’ as I am not born in main­land China. I live in the US longer than you are born. And your col­or­ful excuses doesn’t elude the fact that you didn’t work there legally, and work­ing in a busi­ness that is not legal until 2008.

            Sec­ond, I never said that Mr. Yuan was Mr. inno­cent. Maybe he ‘stashed’ 10 mil RMB away, accord­ing to the ex-accountant and evaded taxes. I hope that he pays in order to make his busi­ness kosher. But, from what I under­stand so far, most of the busi­nesses are opened are under Mr. Yuan’s name and not Kro’s. And all the alle­ga­tions of hav­ing Kro’s name and him being an entre­pre­neur can’t take away that fact. That’s what you failed to men­tion this in your post.

          • Damjan
            May 13, 2010 at 12:04 am

            -++2

            Good­ness, pug_ster, I am glad you are here to serve as an exam­ple. Your con­ver­sa­tions with writ­ers and reg­u­lar com­men­ta­tors on this site are illus­tra­tive of what it’s like for China’s cit­i­zens when they try to engage gov­ern­ment offi­cials on issues that nec­es­sar­ily require the gov­ern­ment and it’s many insti­tu­tions to take a look at its own practices.

            “Every­thing in China is as it should be. Every­thing in China is fine. You stu­pid, mean, thank­less lit­tle chil­dren are the ones who are to blame. Don’t dare speak, but be ashamed. Look at how you break the rules of our per­fect society.”

          • Damjan
            May 13, 2010 at 12:13 am

            -++3

            “For one thing, it is not ‘my coun­try’ as I am not born in main­land China. I live in the US longer than you are born,” growled the voice of Pug­ster, the griz­zly troll of Pacific Bridge.

            His shadow jut­ted out from under­neath the bridge’s cen­tral divide, out into the sparkling water of the river bed below. Lit­tle Sam thought he could make out the out­line of a horned head, and two claws hold­ing on to a ham­mer and sickle, like the mon­ster was ready to cut down a wheat field and steady a horse.

            Then the ghastly troll stepped into the light, and the shadow dis­ap­peared. The troll was no mon­ster, but a man, decrepit and dirty, wear­ing noth­ing but a pair of badly stained under­pants. The yel­low of his teeth stood sharply out against the bright green of the oppos­ing river­bank. The horn that Lit­tle Sam thought he saw turned out to be noth­ing more than the shriv­eled penis of an ille­gally poached tiger that Pug­ster, the famed troll turned decrepit lit­tle man, had strapped to his head.

            “I am bet­ter than you and you should be ashamed,” screamed the filthy, wretched lit­tle troll-man.

            With that, Sam shrugged and crossed the bridge.

          • pug_ster
            May 13, 2010 at 12:45 am

            -+-2

            Good­ness, pug_ster, I am glad you are here to serve as an exam­ple. Your con­ver­sa­tions with writ­ers and reg­u­lar com­men­ta­tors on this site are illus­tra­tive of what it’s like for China’s cit­i­zens when they try to engage gov­ern­ment offi­cials on issues that nec­es­sar­ily require the gov­ern­ment and it’s many insti­tu­tions to take a look at its own practices.

            Your atti­tude seems to be that China’s laws are ille­git­i­mate, peo­ple like you and Kro chose to ignore them. That’s why Kro is in bind. Here in the US I think some of the laws and court sys­tem is stu­pid and out­dated. But I chose to abide them despite by opin­ions. That’s the dif­fer­ence between you and me.

            His shadow jut­ted out from under­neath the bridge’s cen­tral divide, out into the sparkling water of the river bed below. Lit­tle Sam thought he could make out the out­line of a horned head, and two claws hold­ing on to a ham­mer and sickle, like the mon­ster was ready to cut down a wheat field and steady a horse.

            Then the ghastly troll stepped into the light, and the shadow dis­ap­peared. The troll was no mon­ster, but a man, decrepit and dirty, wear­ing noth­ing but a pair of badly stained under­pants. The yel­low of his teeth stood sharply out against the bright green of the oppos­ing river­bank. The horn that Lit­tle Sam thought he saw turned out to be noth­ing more than the shriv­eled penis of an ille­gally poached tiger that Pug­ster, the famed troll turned decrepit lit­tle man, had strapped to his head.

            “I am bet­ter than you and you should be ashamed,” screamed the filthy, wretched lit­tle troll-man.

            I sup­posed this has any­thing to do with this topic. Maybe you should call your­self a troll.

          • Damjan
            May 13, 2010 at 12:47 am

            -+

            pug_ster

            Tell me, how does one abide by the law in China?

          • pug_ster
            May 13, 2010 at 12:54 am

            -+-3

            Tell me, how does one abide by the law in China?

            If you are seri­ously ask­ing this ques­tion, why are you there?

          • Damjan
            May 13, 2010 at 1:14 am

            -+

            I’m seri­ously ask­ing you. I want you to lay it out for me. Tell it to me from the per­spec­tive of Aver­age China Cit­i­zen Zhang. How does Zhang ensure that he is abid­ing by the writ­ten law? What can Zhang do if he is unjustly pun­ished accord­ing to the writ­ten law?

          • Jones
            May 13, 2010 at 2:30 am

            -+

            Pug_ster, just answer the freak­ing ques­tion and stop dodging.

          • pug_ster
            May 13, 2010 at 4:07 am

            -+

            You’re ask­ing a ridicu­lously rhetor­i­cal ques­tion that’s why I won’t answer it.

          • Damjan
            May 13, 2010 at 6:13 am

            -++1

            The PRC’s Min­istry of Truth School clearly doesn’t have a strong cre­ative writ­ing department.

        • Ghede
          May 12, 2010 at 10:58 pm

          -++2

          Don’t get me wrong, I’m not try­ing to sup­port what they did in this sit­u­a­tion (I can barely claim to know the full story). It’s just that Sure’s atti­tude that every­thing must be done above board in China is rather igno­rant - there are count­less busi­nesses here which aren’t run above board (hell, many busi­nesses that attempt to run entirely above board can run into trou­ble if they don’t pay the right peo­ple the right money - and that is cer­tainly not above board).

          Should Kro have done some things dif­fer­ently? I doubt you’ll find many peo­ple that would argue that point. But to say that you must do every­thing above board in China is not close to the whole truth.

          Reply
          • pug_ster
            May 12, 2010 at 11:55 pm

            -+-1

            Ghede,

            It reminds of a quote “If a tree falls in the for­est and no one hears it does it make a sound?” You’re right, there are many peo­ple in China run busi­ness above board, but they would be small busi­nesses where the own­ers can scut­tle the busi­ness and build another one a busi­ness who can cover their tracks. These busi­nesses prob­a­bly have no issues until some legal prob­lems hap­pen to the com­pany or some dis­grun­tled worker squealed, as this is what exactly hap­pened in Kro’s Nest. I don’t think this hap­pens just in China, as this hap­pens all over.

        • pug_ster
          May 13, 2010 at 1:27 am

          -+

          You seri­ously need to talk to a lawyer.

          Reply
          • Yun
            May 13, 2010 at 11:06 pm

            -++1

            Bah, I’m also an Amer­i­can of Chi­nese descent, but last time I checked rules and reg­u­la­tions in China, they HEAVILY favor Chi­nese (reg­is­ter­ing a com­pany is 30,000 RMB for a Chi­nese, but 100,000 for a foreigner).

            I tried start­ing a blog site as a bul­letin board to get par­ties going on the week­end. It’s been 8 months since I reg­is­tered with the on-line mon­i­tor­ing min­istry for the ICP per­mit. Not once have I heard from them, and they con­tinue to block my site. Mean­while my Chi­nese class­mates have had their sites up and run­ning within 4 weeks. It’s VERY biased.

            Work­ing within China is a very long and annoy­ing process, as China’s law and exe­cu­tion is still in a very developmental/selective stage. It’s inci­dents such as these that poke and pro­mote growth. Unfor­tu­nately, it’s great peo­ple like Kro that have to learn to “suck it up”. Since you’ve been out of coun­try for so long, I urge you to come back and check it out sometime.

            Sim­ply put - too many peo­ple, too lit­tle time for proper man­age­ment. There will always be inequalities.

  16. Kevin Slaten
    May 12, 2010 at 6:41 am

    -+

    A lot of inter­est­ing things have been said here about the lack of equal appli­ca­tion of the law (or no appil­ca­tion) among dif­fer­ent peo­ple in China or the abuses of law by peo­ple in power.

    How­ever, it has also been men­tioned here by some that peo­ple in coun­tries with a strong tra­di­tion of rule of law also have dis­crepen­cies in application.

    So the ques­tion yet to be hashed out here (or in Damjan’s next post!) is: how to work toward rec­ti­fy­ing this in a cen­tral­ized one-party state? More sup­port for lib­eral lawyers? More sup­port for social move­ments? Elec­toral pres­sure is hardly an option.

    Reply
    • King Tubby
      May 12, 2010 at 7:55 am

      -++3

      Kevin. Focussing on your last para­graph. Lib­eral lawyers and advo­cates for NGO’s have taken a ham­mer­ing in the last few weeks as you would be aware. Loss of annual reg­is­tra­tion and similar.

      Overt face-to-face protest is pure lunacy given the effi­ciency of the state’s repres­sive appa­ra­tus, while net protest is going to be fur­ther con­tained, when real name id is intro­duced in the near future.

      Mean­while, CS type trash celebrity cul­ture expands in China at a mas­sive rate, just like elsewhere.

      Thats the Chi­nese social con­tract I guess.

      I like the idea of an annual prop­erty tax as I would give trans­parency between cit­i­zen and govt an impor­tant open­ing. How are you spend­ing my money. KTVs or good social infra­struc­ture. Of course it would not touch the filthy rich, but would def­i­nitely exer­cise the minds of the mid­dle class.

      Your response????

      Reply
      • Kevin Slaten
        May 13, 2010 at 12:25 am

        -+

        Tubby (ha! Being able to legit­i­mately address you this way is too much fun), I think the crux of what you said was “That’s the Chi­nese social con­tract I guess.” I agree.

        Ulti­mately, a force for chang­ing the under­ly­ing social sys­tem (that has made and con­tin­ues to make uneven appli­ca­tion law pos­si­ble) will need to come from some crit­i­cal mass of pop­u­lar sen­ti­ment turn­ing against the state of affairs.

        And I don’t mean this is the dire “over­throw the gov’t in a rev­o­lu­tion” sort of way. Cer­tainly it’s a pos­si­bil­ity, but based on research in the area, bar­ring a major eco­nomic col­lapse, such a major rev­o­lu­tion­ary move­ment seems quite unlikely.

        Rather, the crit­i­cal mass could man­i­fest in a num­ber of reform-minded move­ments at sev­eral lev­els of inten­sity. Per­haps city­wide mobi­liza­tion in after a chain of badly-contained or badly-penalized cor­rup­tion cases. Per­haps it would be a large group of aggrieved busi­ness­peo­ple that use their accu­mu­lated lever­age to get laws enforced. Or per­haps, like many sources of social change, this could come by way gen­er­a­tional change as a more edu­cated and global-minded pop­u­la­tion reassesses cul­tural norms collectively.

        The point here being: based on the type/frequency of protests as well as gen­eral pub­lic sen­ti­ment, it seems that Chi­nese have col­lec­tively accepted the social trade-offs of the sys­tem for now.

        Also, as for this: “Overt face-to-face protest is pure lunacy given the effi­ciency of the state’s repres sive appa ra tus, while net protest is going to be fur ther con tained, when real name id is intro duced in the near future.”

        I would say a few things. 1) Protest can­not sim­ply be seen as march­ing or vio­lence in the streets. There are many forms of protest, and they hap­pen *all the time* in China. For exam­ple, home­own­ers asso­ci­a­tions (业位会) have been known to directly con­front local offi­cials by bad­ger­ing them at their offices to affect change or (in a more dis­rup­tive man­ner) boy­cotting pay­ments. To see protest as “Tiananmen-esque” alone is to miss all sorts of impor­tant civil soci­ety action.

        2) Protest is on the upswing, not the down­swing. There’s a pro­fes­sor at Chi­nese Cul­tural Uni­ver­sity in Taipei work­ing on more detailed num­bers, but in the mean­time, a gen­er­ally good overview of the increas­ing preva­lence can be read by Hong, Lai, and Xia (2006). For exam­ple, protests increased almost six-fold from 1997 to 2005. Most are not mas­sive, but thou­sands of protests are over 500 people.

        3) Despite (2), orga­ni­za­tion is the lag­ging fac­tor here. And this is where repres­sion comes in. Indeed, CCP repres­sion of protests is not as severe as some may claim. IT is the soft repres­sion of restrict­ing free­dom of asso­ci­a­tion that pre­vents the req­ui­site net­works for a more orga­nized mobi­liza­tion -- which, of course, is the point.

        Or so this is my take. Whatda think?

        Reply
        • King Tubby
          May 13, 2010 at 5:05 am

          -+

          Kevin. I go back to a my much repeated con­tention that China will expe­ri­ence dis­or­dered and pretty well non-rational social *change*. Mil­lenar­ian, inchoate protests with­out real organ­i­sa­tion or pol­icy objec­tives in rural areas, based on super­sti­tious beliefs and pre-modern prophe­cies. China has a long his­tory of such movements.

          How­ever, not so sure about what form urban change will take. Could even be around envi­ron­men­tal issues.

          Exclud­ing, your sec­ond sen­tence in para 3:Indeed, CCP repres­sion of protests is not as severe as some may claim.

          That was my implied point about NGOs and sim­i­lar in the first place, both here and in past posts. NGOs are real com­mu­nity based insti­tu­tions first and fore­most, before they go on to get a net iden­tity. They require lead­er­ship, rank and file and premises, plus the abil­ity to advo­cate their causes

          And yes, I am fully aware of the read­ily avail­able stats on *mass inci­dents*. I think the base fig­ure for a mass inci­dent is 10 people.

          I get the feel­ing from you that just because I enjoy a few/many car­toon posts, it ren­ders me inca­pable of deal­ing with seri­ous mat­ters in an ana­lyt­i­cal and his­tor­i­cal manner.

          Never wise to under­es­ti­mate your read­ers, since it only debases the argu­ments you wish to advance.

          Reply
          • King Tubby
            May 13, 2010 at 5:21 am

            -+

            Sorry, not para 3. Your point 3. Also note, I made no men­tion of vio­lence in an urban set­ting. Thats the last thing any urban NGO would want to win over hearts and minds. Totally coun­ter­pro­duc­tive, given the present power equa­tion in China.

            I was talk­ing about *the right* of NGOs to exist, and to be able to peace­fully advo­cate their mis­sion state­ment. If any­thing, the CP will not brook the exis­tence of any alter­na­tive insti­tu­tional modal­i­ties of enpow­er­ment, and therein lies its strength at present.

            Addi­tion­ally, couldn’t agree more about your com­ments about com­mu­nity asso­ci­a­tions. Pretty well links with my sug­ges­tion re prop­erty tax, which you missed.

  17. Jones
    May 12, 2010 at 6:55 am

    -+

    If I were Kro, regard­less of how it turned out, I’d move to Tai­wan and start over.

    Reply
    • Kevin Slaten
      May 12, 2010 at 7:02 am

      -+

      Haha. That’s one solu­tion: Tai­wan! Though the mar­ket is decid­edly smaller.

      If Kro so decides, then I’d sug­gest Kaoh­si­ung. It’s a gigan­tic urban area with rel­a­tively min­i­mal for­eign pop­u­la­tion -- espe­cially in light of the degree to which Taipei is sat­u­rated. There are a lot of neigh­bor­hoods here where a well-run and adver­tised pizza joint could sweep up all the latent desire for the ulti­mate “Amer­i­can food” -- pizza.

      Reply
    • Jay
      May 12, 2010 at 8:54 am

      -+

      No, try Tokyo. It’s not easy but you won’t be ripped off like in China.

      Reply
  18. King Tubby
    May 12, 2010 at 7:14 am

    -+

    Most all-round aspects are well cov­ered by the risk assessor’s post mor­tum of a (cau­tion­ary) tale which reads like Jamie Oliver’s less-than-excellent Bei­jing adven­ture. Read the piece very carefully:

    1. The per­re­nial intra­venous drip must be the biggest hos­pi­tal earner in China.

    2. Sounds like the accoun­tant is the major snake in the grass here, and the power behind Yuan.

    3. Most impor­tantly, read the pizza reviews and the fare sounds rot­ten. Even the pizza chains turn out a bet­ter prod­uct in my neck of the woods, if the pizza descrip­tions are any­thing to go by. All this expat menory lane stuff above is just that if the grub is not up to scratch.

    Gotta admire Kro, but it sounds like the burearcatic fix was well and truly in before the fisticuffs. Thats busi­ness in China. It could be worse. In some parts of the world, busi­ness part­ners hire a Mr Rentakill to sort out differences.

    Kro would be best advised to churn out a best sel­l­ler a la Gor­don Belford and then hit the lec­ture cir­cuit. Seri­ously, and he would make a ton more imme­di­ate money in the bank.

    Prob­a­bly hurt the feel­ings of expat supporters.…

    Reply
    • Kevin Slaten
      May 12, 2010 at 7:20 am

      -+

      We now have two run­ning option for Kro: move busi­ness to Tai­wan and start a speak­ing cir­cuit (after the req­ui­site book).

      I think these are eas­ily combined.

      Reply
      • Damjan
        May 12, 2010 at 11:40 am

        -+

        I ran both ideas by Kro. He likes Tai­wan. If he does even­tu­ally move there, we’ll know where to trace the idea back to.

        Reply
        • Jones
          May 12, 2010 at 10:45 pm

          -++1

          My Tai­wan sug­ges­tion time­stamp is a few min­utes earlier ; )

          Reply
          • Kevin Slaten
            May 13, 2010 at 12:34 am

            -+

            Kaoh­si­ung (specif­i­cally) busi­ness move **copy­right Kevin S.** May 12, 2010 at 7:02 am

            My con­tract­ing fee begins at one daily 卤味包 and a bag of tea eggs.

          • Damjan
            May 13, 2010 at 7:45 am

            -+

            @Jones - the copy­right is yours. Con­sider this email sig­na­ture to be legally bind­ing. You and Kro will split every­thing 50/50. I’ll hold on to the money and dis­burse it as necessary.

            @Kevin - if I could set some­thing up, could I sub­sti­tute a daily XiabuX­i­abu meal for the 卤味包?

          • Jones
            May 13, 2010 at 11:07 am

            -+

            I just want free pizza any time I’m in Taiwan.

        • King Tubby
          May 13, 2010 at 6:55 am

          -+

          Dam­jan. I know I alerted you to the struc­tured exis­tence of folk­tales. Your pug_ster griz­zly troll post must be the eight form, but don’t go over­board here.

          You are over-investing in every way on this one.….turning it into a mis­sion from god. But very under­stand­able, also.

          Chill. Its all over, or was all over when the accoun­tant acquired the books.

          The Chi­nese part­ner will take over the busi­ness, but it will go down the toi­let tres fast. Kro will come out of it all with a greatly enhanced rep­u­ta­tion because he has youth and looks, and go onto to invent another suc­cess­ful business.

          And since this piece is a quan­tum leap com­pared to your first op piece on data, you have a pretty neat and hope­fully prof­itable future in the net writ­ers department.

          Reply
          • Damjan
            May 13, 2010 at 7:38 am

            -+

            More chill, less ill will. Resist the temp­ta­tion to engage when there is no con­flict to be won.

            King Tubby, it all vibes with me and I will con­tinue my best to be as decent as pos­si­ble. As far as this Kro’s Nest saga goes, I’ve said every­thing I want to say and what­ever I felt I had to do is now done.

            You are the great sage of the com­ments sec­tion. I promise that my tem­per is now sub­dued. I will now turn my atten­tion to more wor­thy pur­suits, like clear­ing out my inbox, and join­ing in on the worth­while con­ver­sa­tion that you and Mr. Slaten already started.

        • hong ma
          May 13, 2010 at 4:23 pm

          -+

          I spent hours read­ing here because I ate at Kro’sNest near Peking Uni­ver­sity 3 years ago!To be con­struc­tive both sides should go to an arbi­tra­tion judge like in US.

          Reply
      • Yun
        May 13, 2010 at 10:52 pm

        -+

        Nice idea, I grew up in Kaoh­si­ung, I’ve known Kro since early ’07 start­ing an under­grad­u­ate degree in Peking Uni­ver­sity. I’d agree with you about the pop­u­la­tion and for­eign demand in Kaoh­si­ung, but I feel oblig­ated to tell you that my home­town of Kaoh­si­ung is kinda.… old.

        Well, more pre­cisely, it feels more like a retire­ment city than an up-tempo, rapid paced city. Of course I’d love to see him start up a place in Kaoh­si­ung, and I could prob­a­bly get him a start­ing atten­dance. In fact, I might just text him later about it (of course props to you). But the down­side is that there isn’t that much traf­fic flow. Check out the 夢工廠 depart­ment store. One of the biggest in Asia. Last time I checked with my par­ents, it was a ghost town.
        Kaoh­si­ung would be sweet. Oh yes it would. But it just wouldn’t be Beijing.

        Reply
        • Kevin Slaten
          May 15, 2010 at 6:19 pm

          -+

          @Yun

          A retire­ment city?! haha. Come on, give the Steam­room -- my lov­ing nick­name for Kaoh­si­ung -- more credit than that! A half-driven for­eigner with a lit­tle cash for start-up costs could set up shop in San­min Dis­trict (三民区), any­where on San­duo 3rd or 4th Rd (三多路), or around the Cul­tural Cen­ter (高雄文化中心). Not only do tons of for­eign­ers hang out in these two places, but the young and “hip” Kaoh­si­ungers will con­gest these areas, too.

          In short, there is money to be made. But not as much as Bei­jing -- agreed.

          Reply
    • Damjan
      May 13, 2010 at 7:59 am

      -+

      All good points. Should men­tion that the grub was very highly rated from 2005 right until a cou­ple of months after the Olympics.

      Above all, menu was the dri­ver of the restaurant’s suc­cess and expansion.

      Reply
  19. Heath
    May 12, 2010 at 7:15 am

    -+

    Hey bud, tis Heath. Great post. I’m in OZ now, but have heard a bit about this, and good to see some­one like you clear­ing it all up. I’ll be sure to fol­low to see what happens…

    Reply
    • Damjan
      May 12, 2010 at 11:38 am

      -+

      If its the same Heath that dom­i­nated the Rick­shaw pool table once upon a time, then I ask you,

      what hap­pened to that small city town we used to know?

      Reply
  20. Jay
    May 12, 2010 at 8:53 am

    -+

    Is it really wise to be giv­ing all this infor­ma­tion to Yuan and the police?

    Reply
  21. Jay
    May 12, 2010 at 8:59 am

    -+

    Has such a rip off ever NOT hap­pened to a for­eign part­ner in China? It always hap­pens - espe­cially with restau­rants. As soon as it becomes suc­cess­ful the for­eigner is always pushed out.

    Reply
    • Damjan DeNoble
      May 12, 2010 at 12:03 pm

      -+

      My LSAT stu­dents would point out that you were guilty of using extreme lan­guage. Then they would calmly cross you out as a pos­si­ble answer choice.

      Reply
      • Damjan DeNoble
        May 12, 2010 at 12:07 pm

        -+-1

        That’s my attempt at humor. But, like I told you on HHR, Jay, “At its core, this is not a for­eigner ver­sus local Chi­nese story, but a story where to part­ners failed to sign a con­tract and the bet­ter posi­tioned part­ner won out. It hap­pens to many for­eign restau­rant own­ers, in China, but there’s no sin­gle fac­tor that explains why. By the same token, there are cer­tainly many suc­cess­ful part­ner­ships to speak of.”

        Reply
  22. Chris Edward
    May 12, 2010 at 1:44 pm

    -++5

    The best bit if advice I was ever given is if you would not do the deal in NY, Lon­don, or Syd­ney, dont do it in China.

    Kro wanted to for­mal­ize things but Yang resisted and Kro backed off. I am sure the con­ver­sa­tion went some­thing like this: Kro “Hey Yang, dont you think it would be best that we sit down and ham­mer out this agree­ment and get it signed? This would be best for both of us and if ever, god for­bid, there was ever a dis­pute, we would both be safe becuase the agree­ment will clearly spell out who is respon­si­ble for what and who gets what”. Yang replies ” Come on Kro, how long have we known each oth­ers. We are friends.…you know in China, rela­tion­ships are very impor­tant. You west­ern­ers are always going on about con­tracts. We have to trust each other.…and that does not come from con­tracts. In China, you have to do busi­ness different.….…I feel like you dont trust me by ask­ing me to sign the agree­ment, it does not make me feel good.….it sours the relationship”

    No go back to the advise.….…in New York, would you back off and agree with your part­ner not to sign an agree­ment? No! So dont do in China, what you would not do in New York, Lon­don, Syd­ney, etc.

    Reply
  23. Terry
    May 12, 2010 at 5:56 pm

    -+

    A won­der­fully writ­ten piece Dam­jam about a story that I have heard so many times over my past 15 years here in China. Thanks for the link to your won­der­ful essay for law school that I read on CLB when it first appeared. Nice to re-read good stuff.

    I am sur­prised that no-one here has men­tioned Sam Goodman’s expe­ri­ence and book “Where East Eats West: The Street-Smarts Guide to Busi­ness in China”

    http://​www​.ama​zon​.com/​W​h​e​r​e​-​E​a​s​t​-​E​a​t​s​-​W​e​s​t​-​S​t​r​e​e​t​-​S​m​a​r​t​s​/​d​p​/​1​4​3​9​2​2​8​3​0​2​/​r​e​f​=​s​r​_​1​_​1​?​i​e​=​U​T​F​8​&​a​m​p​;​s​=​b​o​o​k​s​&​a​m​p​;​q​i​d​=​1​2​7​3​6​5​7​4​7​8​&​a​m​p​;​s​r​=​1-1

    Read the reviews!!

    Sam of the rel­a­tively early Bei­jing Sam­mies Deli and Sand­wich deliv­ery fame wrote a great book and hit the lec­ture cir­cuit last year. The book is truly a superb read on entre­pre­neur­ship and busi­ness in China. While not intend­ing to be so, it is actu­ally a great guide to set­ting up a for­eign eatery in China and the tri­als and tribu­la­tions thereof. If I remem­ber cor­rectly, Sam was pre­scient enough to sell before being totally screwed over.

    Reply
  24. Adam Morley
    May 12, 2010 at 8:23 pm

    -++5

    The accu­racy of this arti­cle needs to be checked, both Tube Sta­tion and Blue Jays existed as early as 1999, before Kro ever came to China, I have a lot of love for Kro but that is a bla­tant lie and I know at least 50 peo­ple that were stu­dents with me and can ver­ify that those estab­lish­ments did indeed exist pre-Kro.

    Reply
    • Damjan
      May 12, 2010 at 9:37 pm

      -+-5

      Fact check. Kro’s first year in China was 2000-2001. Tubesta­tion was not around until 2001. If Blue Jays was around 1999, then the facts I put forth wouldn’t be chal­lenged since I said that Kro helped Yuan­Jie with Blue Jays.

      Reply
      • Adam Morley
        May 12, 2010 at 10:02 pm

        -++4

        Fact Check, You are bla­tantly lying. It’s a shame because they’re is absolutely no rea­son to embell­ish details to get your point across. Just because you insisted on doing this I’m send­ing out e-mails to get oth­ers to ver­ify it for me. This is pure yel­low jour­nal­ism no pun intended.

        Reply
          • Adam Morley
            May 12, 2010 at 10:14 pm

            -++4

            Where does that men­tion Kro found­ing Blue Jays? Did you even read that arti­cle you posted?

          • 小马
            July 12, 2010 at 2:14 pm

            -+

            Dam­jan, I must agree that Olav did play a role with Yuan Jie, and report­ing on such a piece I am sure you are tak­ing in all of the mate­r­ial from sources that were around dur­ing that time­frame – even pre your involve­ment. While I am sure you have done a thor­ough inves­ti­ga­tion I was a die hard patriot of the first Blue Jays, which was destroyed due to the con­struc­tion of fifth ring road. It was past wudaokou but in the same gen­eral direc­tion. It was a tragic destruc­tion that would only be cel­e­brated with tons of vodka that Yuan Jie pro­vided – after the 50 Yuan entrance fee. In mid 2000 I returned to the states for a brief year, and upon my return in mid 2001 Blue Jays was no more. With excep­tion to the recre­ation on the west side of worker’s sta­dium – note that Blue Jays was located in the base­ment and there was a Tube Sta­tion on top… Open late for those that may get a crav­ing after seri­ous drinking.

            As for the Tube Sta­tion, the very first was cre­ated down the street from No 2 Mid­dle school attached to Bei­jing Nor­mal Uni­ver­sity, and across the street from Bei­jing Nor­mal west gate. It was started in spring of 2000 two friends: Sea­jin and Ter­rance, and I assisted with the orig­i­nal lay­out. We were try­ing to help with the décor and then just decided to write our names on the wall. In 2001 it expanded with a larger eat­ing area, and all of the walls were cov­ered with say­ings from peo­ple. Usu­ally the scrib­bles were “I was here” or the ran­dom Chi­nese say­ing, ching­lish too

            One thing that is cer­tain, Yuan Jie knew many for­eign­ers, and over the years many of them assisted in the devel­op­ment and pro­gres­sion of his invest­ments. The dif­fer­ence is Olav invested finan­cially, from your arti­cle and media. To attribute too much to Olav for Yuan Jie’s past accom­plish­ments would attribute no honor upon Olav. Quite the oppo­site has hap­pened in the responses that I have seen. I hope that you do will take note of some feed­back that peo­ple have posted in these com­ments and revise you arti­cle tos tick to the facts, and not nec­es­sar­ily opinions.

            I hope that when I return there will still be a Tube Sta­tion next to Bei­jing Nor­mal Uni­ver­sity where I can par­take in a pizza sub and a giant can of Fos­ters. I will not go there because I crave west­ern food, rather from the nos­tal­gia of vis­it­ing a spot with many fond mem­o­ries. Also, most of the time that I was there was not to eat but to drink - great prices on Fosters!

        • C
          May 12, 2010 at 10:07 pm

          -++4

          I think Adam’s right on this one. There was a place called Blue Jay’s that was def­i­nitely open in the Fall of 1999. Per­haps it was still owned by Yuan Jie at this point. Also, Tubesta­tion on Xin­jiek­ouwai was around in 2000--maybe even 1999. Again, maybe they were started by Yuan Jie or some­one else and/or bought by Kro.

          Reply
        • Adam Morley
          May 12, 2010 at 10:11 pm

          -++4

          Tube Sta­tion across from Bei­jing Nor­mal Uni­ver­sity and Blue Jays in I believe Wudaokou were in exis­tence in 1999, pos­si­bly early 2000 but either way they were around pre Kro, we know this because we were in the same school group as Kro but the year before, he had noth­ing to do with found­ing those two venues, I’m not say­ing he didn’t help out but as I don’t know the details but he cer­tainly didn’t found them as a 15 or 16 year old kid liv­ing in the US that never met Yuan Jie. I’m root­ing for Kro but you have your facts wrong.

          Reply
          • Damjan
            May 12, 2010 at 10:29 pm

            (click to show com­ment)

          • Henry
            May 13, 2010 at 2:10 am

            -++5

            I find it hilar­i­ous this guy didn’t bother to check what he pub­lished here, told the guy who respect­fully pointed out the errors that it was in fact the reader who was wrong and backed it up with an arti­cle that doesn’t even cover the topic in ques­tion then tells him not to use f-you atti­tude (which he didn’t). Frankly, if Dam­jam is ok with stat­ing things he’s hazy with as fact and then still defend them with­out actu­ally putting the slight­est bit of research into it then I think it’s safe to agree that this is pure shame­less yel­low jour­nal­ism and noth­ing writ­ten here can be trusted.

          • W
            May 13, 2010 at 12:19 pm

            -++5

            I can also sec­ond Adam’s recollection…I was liv­ing in Bei­jing in 1999 and went to both the Tubesta­tion and Blue­jays. So maybe Kro helped with the redesign? At any rate, Adam’s def­i­nitely telling the truth.

  25. Alan Paul
    May 12, 2010 at 9:07 pm

    -+-1

    A sad and sor­did but not sur­pris­ing tale. I don’t have much else to add to what oth­ers have said, except that I agree with Damjan’s early point:

    “I once believed that if God had it writ­ten in stone that every for­eign restau­rant owner in Bei­jing was guar­an­teed to lose every penny of invest­ment put in, no mat­ter the cir­cum­stances, Kro would still come out ahead, because he was above the circumstances.”

    On a prac­ti­cal level, my kids are dev­as­tated they can’t go to Kros Nest when we have nice return visit to Bei­jing this summer.

    Reply
  26. lolz
    May 13, 2010 at 5:38 am

    -+

    I have not lived in Bei­jing before so I have no idea who this Kro guy is or his pizza joint. How­ever it does sound like his part­ner forced him out for what­ever the reasons.

    I think peo­ple should keep in mind that China only started to allow pri­va­ti­za­tion not so long ago so its laws can hardly address chal­lenges faced by locals, not to men­tion for­eign peo­ple. To say that there aren’t enough lawyers in China is an under­state­ment, but at the same time peo­ple should have real­is­tic expec­ta­tions about China’s evolv­ing laws.

    In the wild-wild west where there are barely any laws you can make a for­tune quickly, but at the same time you can eas­ily lose your shirt as well. Even if he were a good cook I don’t think peo­ple like Kro will not become nearly as suc­cess­ful in the US as he did in China; the same could be said of many if not most expat owned restu­rants and bars. Yet in the case where you have a dis­pute between domes­tic and for­eign part­ner I think it’s pretty sim­ple who will win; the one who knows the local land­scape bet­ter. Risk, rewards.

    Reply
  27. Chris
    May 13, 2010 at 11:45 am

    -+-1

    Pug­ster said “Your atti­tude seems to be that China’s laws are ille­git­i­mate”. They are ille­git­i­mate because the gov­ern­ment is not demo­c­ra­t­i­cally elected nor are the accou­table to the people.

    Pug­ster said - “Here in the US I think some of the laws and court sys­tem is stu­pid and out­dated. But I chose to abide them despite by opin­ions. ” Thats becuase you live in a democ­racy and if you dont like the laws, you can protest against them, vote in politi­cians who will help you change them (or even run your­self), you can orga­nize cam­paigns to change the laws and you have the right to hold account­able those who enforce the laws.…THAT IS THE DIFFERENCE BETWEEN THE US AND CHINA (AND YOU AND ME)

    Reply
  28. chinafashionblog
    May 13, 2010 at 12:02 pm

    -+-1

    Fas­ci­nat­ing story show­ing the darker side of busi­ness in China. Hope Kro gets some kind of jus­tice, unfor­tu­nately it will be tough.

    Reply
  29. SJ
    May 13, 2010 at 2:04 pm

    -+

    Won’t go to the Kro’s Nest again… But I will go wher­ever Kro lands… And I’m sure he will land…

    Reply
  30. Jeff
    May 14, 2010 at 12:13 am

    -+-1

    I used to play soft­ball with Kro and Yuan­jie. I don’t know much about this case, but I will say that Kro is a great guy, and Yuan­jie is a shitty soft­ball player.

    That Kro’s being so mel­low despite this BS is just a tes­ta­ment to how cool he is. I only hope the law comes down on his side.

    Reply
  31. Rossen
    May 15, 2010 at 2:51 pm

    -++8

    As one of the for­eign own­ers of Blue Jay and for­mer part­ner of Yuan Jie, I can cat­e­gor­i­cally state that Kro had no con­nec­tion with the busi­ness in any way. He did not even work there as a bar ten­der. I do not appre­ci­ate the fact that it has been insin­u­ated he was con­nected with my busi­ness, even as an employee, when this is totally not true. he cer­tainly played no part in our pub/club.

    Reply
  32. Matt
    May 16, 2010 at 11:06 am

    -++7

    Let this be a les­son to any­one doing busi­ness here using other people’s names; pay the legal fees, have the reg­is­tered cap­i­tal, and form a proper WFOE (Wholly For­eign Owned Enter­prise) or JV (Joint Ven­ture) with a legally backed con­tract in the PRC. You can­not expect Chi­nese law to pro­tect you with­out hav­ing gone through the proper for­mal­i­ties of form­ing a busi­ness in China. I am form­ing a WFOE right now and although the process is tir­ing, not cheap (~30,000 rmb in legal fees and incor­po­ra­tion fees) and requires a 3 Mil rmb reg­is­tered with cap­i­tal 20% upfront, in the end we will have the legal pro­tec­tion to sur­vive in China’s busi­ness world.

    Reply
  33. at work
    May 18, 2010 at 10:56 pm

    -++4

    Col­or­ful, lad mag story with lots of anec­dotes and name/status drop­ping and asso­ci­a­tion - A-List For­eign­ers flu­ent in Chi­nese (oooooh, the cool kids!), FHM celebrity photo shoot, this and that blog­ger, etc. But the OP was poor on specifics and, given some of the later com­ments, namely those dis­put­ing dates and ownership/working rela­tion­ships of restau­rants named, the OP played fast and loose with at least a few “facts” as well.

    “Bauer says he lost $100,000 early on because he ignored account­ing books and made mis­takes like let­ting kitchen costs overrun.”

    So, does this mean that Bauer ini­tially invested $100,000 (or more) or that rev­enue in this amount (and poten­tial profit/income) was frit­tered away? There is a big difference.

    There is entirely too much default China bash­ing here. This isn’t an indict­ment of busi­ness in China AT ALL. It’s an indict­ment of long-term, will­ful naievety, of busi­ness plans that stayed in the incu­ba­tion stage long after the actual busi­ness had matured, and of those so will­ing to lis­ten to yet another tale of the Chi­nese sirens lur­ing whole­some and salt-of-the-earth for­eign­ers to their rocky demise.

    The OP kind of lost me when he brought Yuanjie’s kid into it, as if hav­ing a kid or a preg­nant wife might have made him sud­denly less than noble? Leave the kid out of it, that’s way too per­sonal with­out a direct link stated in the article.

    Were the roles reveresed, would many be eager to sub­scribe to stereo­types about older, crafty, $$$ steal­ing for­eign­ers pray­ing on gullible, hard­work­ing and charis­matic young Chinese?

    Hope­fully there weren’t too many gram­mar errors in my post, or tell-tale signs of Ching­lish. It seems that some posters, like Pug­ster, were attacked not just for their mes­sage but also, sub­tly, for seem­ing to take side with their “countrymen”.

    So, hope the OP appears to clear some of the mys­tery up. Num­bers, gen­tle­men! WHo put in how much cash, as opposed to charm and for­eigner guanxi? Charm equity and Guanxi cap­i­tal don’t stand up in a court suit.

    Reply
  34. VictorPetrov
    May 19, 2010 at 8:03 pm

    -+-1

    I per­son­ally know very well Yuan Jie for a long time and give all of my sup­port to him. I hope that every­thing will end in his favor.

    I am very sorry for most of the peo­ple here in the forum who want to make it very noisy event and even politi­cize it. Another impor­tant issue is that they also want to drive back the for­eigner investors by sound­ing loud such events.

    And not at last for the writer of the arti­cle -his pas­sion and adher­ence are very obvi­ous, espe­cially the way the arti­cle is writ­ten. I am very sorry for him - loser!

    Reply
    • Jeff
      May 20, 2010 at 12:41 am

      -+

      You sup­port a guy who’s say­ing that Kro is “just a cook” and has no own­er­ship of the restaurant--even though the restau­rant is called “Kro’s”?

      Must be some clever Russ­ian logic. I don’t get it.

      Reply
    • Eric
      May 20, 2010 at 9:08 am

      -+-1

      Yeah, well Russ­ian buis­ness peo­ple can be trusted just as much as Chi­nese ones.. so I am not sur­prised at all that you sup­port the scam­mer.. fuck­ing ruskies.

      Reply
  35. Victor
    May 20, 2010 at 2:48 am

    -++1

    Reply to Jeff:

    Yes, you are a wise guy Jeff,and it is a Russ­ian logic which is much more clever than your Amer­i­can stupidity.

    I don’t know Kro but there is a prob­a­bil­ity that his nick­name comes from the name of the restaurant.

    Have you heard it with your ears that Yuan has called him that way?

    Reply
    • Jeff
      May 23, 2010 at 11:11 am

      -+

      Yes. I know them both. Yuan­jie him­self isn’t actu­ally that greedy, it’s his wife that’s the prob­lem. She’s been pour­ing honey in his ear for years to get rid of Kro because she doesn’t like his tats and brash atti­tude. She also resents that Kro doesn’t seem to respect Yuanjie--actually, Kro DID respect the guy a lot, he just treated him like any Amer­i­can would treat a close bro. He teased and taunted him, even used bad lan­guage and crit­i­cized him. That’s how we treat our friends.

      Sorry if my Russ­ian com­ment offended you, I can see how it would.

      Reply
  36. K
    May 25, 2010 at 4:17 am

    -+

    A word of advice to any­one look­ing to set up a busi­ness in China -- con­trol the books. In my 15 years open­ing restau­rants in China, I’ve heard count­less sto­ries of Chi­nese part­ners run­ning off with the bank. In all cases, regard­less of the legal­ity, it was the for­eign side’s total igno­rance of how the books were kept that made it pos­si­ble. There are many for­eign accoun­tant firms (with Eng­lish speak­ing staff) who can take over daily man­ag­ing of the books, doing quar­terly audits or what­ever. As long as the for­eign side con­trol the books, there is lit­tle the Chi­nese side can do.

    Reply
  37. Renata
    May 28, 2010 at 5:13 am

    -+-1

    i love Kro and i hate Yuan Jie from the very begin­ning, i hope every­thing will be good again for Kro, ASAP!!!

    Reply
  38. Richard Ford
    June 14, 2010 at 10:58 pm

    -+

    Busi­ness­man?

    Cover of a busi­ness magazine?

    Really?

    Pathetic. Busi­ness 101 - no mat­ter where you are in the world. Get a con­tract signed and get the lawyers to do it.

    Pathetic. Good life les­son. He may yet use this expe­ri­ence to become a “busi­ness­man”. Espe­cially when the busi­ness has no IP or inher­ent “exper­tise” that could keep part­ners hon­est. Sub­sti­tutable, replace­able and generic.….… all signs that should cause intro­spec­tion and… a CONTRACT.

    :-s

    Reply

Continuing the Discussion

  1. Hao Hao Report