Food Stand Business in Shanghai
March 2, 2014

PictureFood stand sells ready-to-cook meals
I travel to Shanghai about five times a year while I used to live there for more than three years from 2010 to 2013. One of my problems living in Shanghai is food. Chinese dishes are mostly fried and oily, which I tend to avoid. Plus, it is hard for me to get into a Chinese restaurant alone. However, one Chinese food I like is the food stand meals though still oily. In my neighbor, food stands start to show up when the clock hits 9:00pm. There are numerous selections of food from BBQs (many vegies) to fried rice and noodles (similar to Panda Express’).  They are very tasty thinks to lots of oil, pepper, and salt on but again may not be healthy. Since I have always been walking by these food stands, I started to know them well. Thanks to that, I always ask them to use much less oil to cook fried rice and less salt to barbeque vegies.

An enough bowl of fried rice costs 6RMB (used to be 4RMB in 2010). One stick of BBQ vegie is 1RMB and my favorite fried vegie dish is 12RMB. They are cheap enough to fill up my stomach at night. Do they make good earnings? Amazingly, I think, they make more earnings than even white-collar workers in downtown though depending on food stands. One food stand, which I recently drop by the most, is an innovative food stand to me because I have never seen such before in my Shanghai life.

This food stand offers wrapped dishes and each dish is wrapped with a lot of fresh vegies with some meat or eggs. I always pick cauliflower with sliced potatoes and eggplants dishes. After I pick the dishes, the chef fried all the vegies on the dish with some seasonings. Each costs 12RMB and a bowl of steam rice is 1RMB. There are chefs in this food stand. In the other day, one of them, a young lady who always takes care of my food, showed me her silver iPhone 5S. An iPhone 5S costs more than the average Shanghai monthly income. It is very rare to see such item in local food stands. However, think carefully, this food stand is profitable. Each vegie dish can make 12RMB revenue or vegies with meats are much more. They are not doing taxable businesses so the operating expenditure is the only reduction from the revenues to derive the profit. 
PictureFood stands start their businesses at night
Again, a 12RMB vegie dish at the food stand is just about $2.00. This food stand sells about 50+ dishes per night during its operating hours from around 9:00pm to 1:00pm and it opens daily. With simple calculation, this food stand makes at least 600RMB (or about $96) per night. It is a conservative number because meat dishes are more expensive and they even sell steamed rice. In the supermarket near by the food stand, one chunk of cauliflower sells about 3RMB, which should fit into the dish to sell to a customer. Including some other operating expenses (OPEX), such as a worker (only two workers in this food stand), the costs are generally fixed. I believe they get even cheaper vegies and meats somewhere else. CAPEX, which stands for capital expenditure, is a food stand itself and I think the food stand and its small kitchen are cheaper than Starbucks’ espresso machine.   

That being said, their markup is as high as 80 percent and the risk of doing the business is a police enforcement, which sometimes appears to disturb their businesses. Since they operate the food stand business everyday, the monthly revenue easily hit about 18,000RMB (600RMB x 30 days), which is a conservative number. If their OPEX is about 20 percent of the revenue, they at least earn “about” 15,000RMB per month or 7,500RMB per worker. China’s average annual income is about $6,000 (in 2012). On the other hand, a worker at the food stand earns about $15,000 (7,500RMB x 12 months), which is 2.5 times higher than the average. With that amount of income, they have no problem living in Shanghai, the wealthiest city in China. Again, the number is conservative and there is no reason a food stand lady owns the new iPhone 5S.