Jackie Yun, Wagas and Baker & Spice food and cafe chains

This savvy expat returned to her roots to launch a successful business in China and hasn’t looked back.

Jackie Yun. Picture: John Appleyard.

Sydney-raised Jackie Yun moved to Shanghai 18 years ago – the first descendant of her great-grandfather to return to live in China after he left there 130 years ago to chase his own fortune.

Recently, Yun and her equally low-key Danish business partner, John Christensen, opened their 70th restaurant – 56 in the Wagas chain and 14 branded as Baker & Spice. They employ 1300 staff through their wholly foreign-owned company, Wagas Shanghai Ltd, and only three – Yun, Christensen, and an Australian designer – are foreigners.

The pair has an ambitious target: to open 25 new restaurants every year, reducing the risk by expanding the business purely through cash flow. Their chief financial officer wants them to expand even faster. Theirs is already the biggest China-based wholly privately owned food and beverage company in the country, and the gap between them and their competitors is set to keep growing. But Yun is uncomfortable about such comparisons. “Big statements are not our style,” she says.

Yun’s grandparents had moved to Sydney from Papua New Guinea before she was born, but her parents stayed on in Rabaul to run the family trade store until 1992, when that town of unsurpassed Pacific charm was devastated by an earthquake. They too then moved to Sydney.

Yun had excelled at sport, but felt unmotivated after leaving school and fell into running a café at a swimming pool in Chatswood. Then a cousin who had gone to Shanghai urged her to follow, which she did, attending the city’s top university, Fudan, to learn Mandarin.

“I had a group of foreigners around me who were highly interested in the culture, in just being in China, learning the language, looking to the long term here,” she says. “A lot of them were ambitious and inspiring.” Today, she says, “people come looking more for money and opportunity”.

She moved downtown to be closer to her new friends, but life was much more expensive there than on campus so she needed a part-time job. Inevitably, she returned to café work.

“I wanted to do my own business in Shanghai but had no clue how,” she says. One day Christensen came in as a customer and her friendly efficiency impressed him. He invited her to manage his recently opened restaurant.

“I asked friends,” Yun says. “They said it was daggy.” Christensen had called his restaurant Wagas just because he liked the sound of the name.

‘There’s always an opportunity somehow to make better, even if the business seems to be going well.’

Yun told him that she would take the job as manager on condition that if she proved herself she would become his business partner.

Now Christensen oversees the decoration of the stores, as well as the business development team and the construction operations.

“From stores one to three, I really worked hard on what Chinese people wanted,” says Yun, “because there weren’t so many expatriates. There were 200 Chinese and one laowai – foreigner – walking down the street.”

The menu categories remain principally “modern Asian” inspired soups, sandwiches and salads.

“We learned in those early years what worked and what didn’t,” she says. “We have remained true to our core concept, while constantly working on our product. I learned from John early that there’s always room to improve. There’s always an opportunity somehow to tweak and make better, even if the business seems to be going well.”

In 2007, the company signed five leases in Beijing at some great locations, and then the financial crisis hit. Other tenants who were going to bring crowds of middle-class office workers and consumers to the sites put their ventures on hold. Wagas followed suit.

“We went back to Shanghai and thought, how can we improve our business?” Yun says. They found a baking specialist and launched the Baker & Spice brand, mainly to sell bread, but also to occupy larger venues than the Wagas stores, with prices a little bit higher – “more like food boutiques”.

Ten years ago, when luxury brands were seized upon as important status symbols in China, the trend encompassed not only Gucci and Louis Vuitton, but also international chains such as Starbucks.

“In more recent years, as Chinese people have begun travelling widely. their exposure has broadened,” says Yun. “They have nothing to prove.”

Nowadays they are more inclined to look for value and quality wherever they can be found, including in local brands, rather than requiring a global name as proof of excellence: “They want a good deal, they want to experience many different things – camping, hiking, going to high-class restaurants.”

Yun says the consumers’ search for value with quality “is great for us” because Wagas is very careful about pricing, even though its margins may be slightly lower than those of its competitors.

The chain is now in 10 cities, and the company spends very little on marketing. “We only started a marketing department last year, with one and a half people,” says Yun. “We have gone for good locations – that’s especially important to us.”

It’s not difficult to work out which cities to go to; the challenging part is which ones to remain in, she says. “We entered a couple of markets that seemed a great opportunity, but the economy there changed and we had to make a decision as entrepreneurs whether to stay in or pull out. We have closed a couple.” The customer base is about 80 per cent Chinese, in some stores more.

‘Working in a café isn’t like being a servant. For me, it’s about meeting people and having fun.’

“Everyone’s biggest challenge is HR,” says Yun. “We have to operate a very good training program and have to follow up all the time with quality audits. Five to 10 years ago, people would jump jobs for a few hundred kuai (dollars); that’s a reason one-off restaurants found it hard to survive. Without a foothold in the market, and with little experience, they had to throw money at staff. It wasn’t sustainable.”

If you can’t provide a big picture for staff development and promotion, she says, “these young people aren’t stupid, they’ll move on. This is something we’ve worked very hard on. Our staff culture plays a very big part in our plans.”

Recently she has been telling hospitality interns that “we’re not just teaching skills but influencing them to live, think and eat healthy. We want this kind of environment. Now we are becoming a lifestyle brand, and looking for our staff to demonstrate that as well.”

They are starting to employ millennials, who, she says, are “more open, and fashionable; they care more about the environment, and about having fun. The way they learn is different – not just by rote.”

Wagas has grown organically, and any smaller companies have double the number of head office staff. “We try to do stuff ourselves,” says Yun. “Or we outsource, because it’s cost beneficial. John was originally in logistics, so he naturally thinks like this. People come to pitch us grand IT platforms, for instance, but we don’t buy any of it.”

Instead, they put their money into opening and building up stores, and working on products.

“In the past couple of years we decided we were of a size where we were ready to spend on the back-end, and the transition to that went smoothly,” says Yun.

Their only real competitors are foreign-based firms such as Starbucks. There are too many examples, Yun says, of companies with venture capital buying in and “maybe with a goal of an early IPO, expanding at a crazy rate and then something suffers. Our luxury as owner-operators is we open at a rate we are comfortable with. We are able to scale things now, too.”

Nowadays, Yun visits the family home back in Sydney twice a year. “They also come here quite a lot,” she says.

“My father wasn’t keen on me being in the café industry at first: ‘We didn’t raise you to work like dogs,’ he’d tell us kids. ‘We worked crazy hard so you wouldn’t have to’.” But working in a café isn’t like being a servant, she says: “For me, it’s about meeting people and having fun.”

Yun has some advice to Australians who are interested in doing business. “Come to China,” she says. “Don’t just come on a holiday with a tourist visa. It’s damn hard here, and everywhere. But why wouldn’t you invest proper resources and your own time if you are the decision maker?”