Frank Miu, the holder of the A&W franchise here, may have met his match early Monday morning, and it wasn't McDonald's or KFC.
After a decade of building up a chain of American-style root beer and sandwich stores, promoted here as "the father of American fast food," and surviving an onslaught of competition, Miu found himself staring in bewilderment and shock as a squadron of 30 officials from a local court swept into one of his outlets in a busy commercial district in northwest Beijing.
While police officers videotaped the small crowd of restaurant workers and passers-by gathered outside, the court officials seized and carted away the restaurant's tables, chairs and cooking equipment and slapped seals on the doors.
At the bottom of the case is a lease dispute, and those can turn thorny almost anywhere, of course. But Miu's predicament illustrates a larger danger facing Western companies here: cross-currents developing between the traditionally vague, indirect and informal way business deals are often done here and the requirements of a more legalistic court system that sometimes intervenes precipitously in disputes.
Miu, a Harvard-educated lawyer, said he and his Chinese partner, Lin Tao, tried to do business here in the "Beijing style," with private oral agreements overshadowing formal written ones. "As a lawyer here, I did incredible US-style contracts that covered everything," Miu said. "But I always told clients that's not enough -- you need to work on relationships."
Kenneth DeWoskin, a partner at PricewaterhouseCoopers in Beijing who advises foreign investors, said that these days, foreign investors who rely on informal understandings can be badly burned. "Partners, providers or suppliers may not be operating from the same page," he said. "Particularly, businesses that make a soft contribution, such as restaurant formats and management experience, can find themselves challenged to protect their investments."
Investors and lawyers here said that the civil courts have become more effective and impartial arbiters in recent years. But "the fact is that courts can still be significantly influenced by local political and economic interests," DeWoskin said.
Miu and his partner, Lin, think that something like that may be at work in their case. The seizure of their restaurant came with only a day's warning, and without the Haidian District Court entering any formal judgment in the case.
Lin said that the nominal landlord for the property, the International Biological Products Institute, had links to a company once controlled by the city government, and he suggested that those links may have played a role in the court issuing a prejudgment decree.
Judges from the Haidian District Court refused to comment on the case, citing court rules. The institute referred questions to its lawyer, Jiang Jingchuan, who said that nothing improper had gone on.
In hearings three weeks ago, the lawyer for the restaurant chain argued that the institute had never been given legal ownership of the Xingke Office Building, where the A&W restaurant had been located. It still belonged to the Xingke Corp, they argued, and an Xingke official had promised the restaurant chain that its expiring lease would be extended by five or 10 years -- an example of a "Beijing-style" business scenario.
In an interview, Jiang dismissed these claims. "They're just trying to complicate a simple matter," he said. "The fact is, their lease expired, they were repeatedly told they had to vacate and repeatedly said they would, and oral promises don't have any weight in Chinese law."
Miu said the restaurant, opened since 1996 and employing more than 50 people, contributed a large part of his company's earnings. It paid what he called "top rent" for the site -- US$189,000 a year -- and Miu said it was always paid on time.
The court's sudden action threatened far more damage to his business than just the store's closing, Miu said. "We're a chain, and there could be a chain reaction from this," he said. "To use such unusual, drastic means makes it look like we're involved in a serious wrongdoing. The loss to our goodwill and image is unquantifiable."
Miu said he was told that a drugstore would replace his restaurant. But a businessman experienced with such disputes said the site, on a busy corner, would probably be rented to another fast food outlet. "Otherwise," he said, "it doesn't make sense for them to get rid of a reliable renter."
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