Investing in your own business can be very rewarding, but also risky. Wayne Parfitt took that risk when, 18 years ago, he borrowed HK$100,000 from his father-in-law and opened a 600-sq-ft pizza restaurant in Sai Kung. The burly 45-year-old, who comes from Australia's Gold Coast, had bought a second-hand pizza oven for HK$500 and as he was fixing it said to his wife: 'If this thing works we are going to make millions, and if it doesn't we're done for.' As it happened it worked, and Parfitt, working with just his wife and a few staff, made a HK$50,000 profit in his first month and has gone on to make millions. Since then his restaurants - Pepperonis, Al Frescos, Jaspas, Cru and Wagyu - have become well known in Hong Kong. He is opening another one soon in Central - Moobaa. In Discovery Bay he has two restaurants: Zaks and Sopranos. Parfitt also has a thriving business in Vietnam, with 25 restaurants, and is planning to open another eight to 10 this year. When he arrived in Hong Kong in the early 1990s, he worked for a couple of restaurants briefly and doubled turnover within a few months for one of them. Rather than make money for someone else, he decided to set out on his own. Before coming to Hong Kong he had some experience in the hospitality business, having been a partner in a restaurant project on Australia's Gold Coast. He had also been a semi-professional rugby league player. Now he runs his business together with his brother Brian and two other senior managers. The business has expanded as he has added outlets and different restaurant styles when seeing a need in the market. After establishing Pepperonis, Parfitt saw room for something more upmarket and opened Jaspas. When he noticed Jaspas was turning away enough people in a night to fill the restaurant, he opened another one and called it Cru. A characteristic of these restaurants is their big, wide-open frontages, which Parfitt says gives them a casual style and feel. So what does it take to run a successful restaurant business in Hong Kong? 'A lot of it is gut feeling,' he says disarmingly. One thing he pays close attention to is the staff he employs. 'You've got to have the right people, who are enthusiastic, and create the right environment where they can come to work because they enjoy it and not just to earn a dollar. 'It has to be fun for the staff and this makes it more enjoyable for the customers. Some people spend a lot of time on getting the decor and the lighting right, but get the wrong staff. That's a big mistake.' This approach is reinforced by Parfitt's informal management style, which he says is deliberately non-corporate. He is usually dressed in jeans and T-shirts. 'If you are doing business, it's got to be fun - you've got to enjoy doing it,' he says. But despite the informality and fun, he maintains a disciplined approach to doing business. 'A lot of people get into this business for all the wrong reasons. They think they are going to have a great social life and they'll get all their friends to come and they'll all get drunk and it'll be a fantastic business,' Parfitt says. This approach generally ends in disaster, he adds. The restaurant business is one of the most difficult in the world, with one of the highest failure rates of any business 'We're in business for two reasons. Firstly to make money, and secondly to have a lot of fun with our staff and customers.' But he says it is a question of people's idea of what making money is. 'For some, HK$10,000 a month is fantastic money. For others, HK$200,000 a month is not enough.' He aims for a profit margin of 18 to 22 per cent. 'If you can get that you're going well.' But to achieve that margin he has strict rules. He does not pay over the odds for rent, and is careful about the wages and food costs. In Hong Kong he spends 10-12 per cent of revenue on rentals, while wages take up 20 per cent. In Vietnam he aims at 30 per cent on food costs, 5 per cent on rentals and 12 per cent on wages. 'Probably because I am not that educated - not that smart, we don't over-analyse, and keep things dead simple. It's service, quality of food, quality of environment, and you aim to give people what they want and to give them a good time.' As a general rule, he does not pay more than 10 per cent of the projected revenue for any one location on rent. But he has had to stretch that rule to 12 per cent over the past year, as 'rents in Hong Kong have been getting ridiculous'. Parfitt is also careful about how the business is funded. He never borrows from financial institutions and is distrustful of banks. 'One moment they are all over you offering money, the next moment they want it back.' So expansion is funded either by cash flow from the business or from business partners. Despite this, the business has grown strongly, with turnover increasing at around 20 per cent a year. But he is coy about revealing actual figures for turnover or net profit. He is frequently approached by landlords, many of them with prime locations, but turns most of them down as they do not meet his criteria. 'We have a formula and we stick to it. If the numbers don't add up, we walk away.' But he admits there was one time he broke his own rules. 'That experience reinforced their importance,' he says. This was when he took on the franchise for the US doughnut company Krispy Kreme. The first rule he broke, he says, was in not being a majority shareholder. It turned out that the doughnuts were not suited to the local market. 'They were too sweet and the menu was too limiting.' But he felt hamstrung in that everything he wanted to do to change the product had to be approved by the head office in the United States and decision making was much slower than he was used to. 'Ultimately, we had no control over the brand. I don't think our management style was suited to being dictated to.' Parfitt ended up paying HK$400,000 for a shop in Causeway Bay against his better judgment. 'We should have had turnover of HK$4 million a month at that price, but we weren't even close. The only thing you could have made money out of there was either selling drugs or sex.' Nevertheless, he says the Krispy Kreme venture would have been viable but the rents killed the business. The mainstay of the franchise was two outlets at the airport, which supported the rest of the franchise. But subsequently the rents at the airport were doubled when they came up for renewal. At that point he closed the business. Parfitt says that the most difficult time he has had doing business in Hong Kong was the last half of last year - dealing with the escalating rents. 'Rents are becoming unrealistic and the price of what we can charge for food is not moving in line with rentals.' He recently closed a Cru restaurant in SoHo. 'It was one of our most profitable restaurants. It was a great business. We were making money and the landlord was making money. Then a new landlord came in and doubled the rent. We said it didn't work for us any more.' High rents also pushed him into closing a Pepperonis outlet in Happy Valley and a Jaspas in Tsim Sha Tsui. So given the high rents, would he still recommend starting a restaurant business in Hong Kong? 'Oh yes, absolutely. It's the greatest place in the world to open a restaurant. Hong Kong is the land of opportunity and always will be. But for what we want to do, I don't have the time to sniff out locations like I used to - I travel too much now.' He says people have to be selective about where they locate their restaurants. But for now, high rents have persuaded Parfitt to slow down in Hong Kong while expanding in Vietnam. His company's strongest growth in the past two years has been in Vietnam, where he expects revenues to outstrip Hong Kong's in 12 to18 months. 'We like Vietnam at the moment. We can get longer leases, and rentals are in line with our formula.' Parfitt opened up in Vietnam in 1996 following a boozy lunch with a banker at his Al Frescos restaurant in Sai Kung. The Hanoi-based banker, frustrated by the lack of Western food outlets in Vietnam, said he thought an Al-Frescos-style restaurant would prosper in Hanoi. Since starting with an Al Frescos in Hanoi, he has rolled out the business, which now includes Pepperonis, Jaspas and Papa Joes, and is about to open a big 500-seater restaurant - The Buffet King. 'We have buffets in all the other restaurants and the Vietnamese just love it - in fact all Asians seem to. We give them Italian, Thai, Texas barbecue, Vietnamese. They pay one price and you can go as hard as you like.' He says investing on the mainland, by comparison, is 'too hard and too expensive unless you are well connected'. Another problem with the mainland is the difficulty in rolling out the business. 'You go to another province and it's like going to a different country, with different regulations and officials to deal with.' For the moment he is focusing on Vietnam. 'I can build a large restaurant in Vietnam and get my investment back inside six months.' Another destination he is interested in is Sri Lanka, and he has also been approached to invest in Cambodia. 'We are very cautious about where we go. There are some markets where our model doesn't fit.' When he moves to a new destination the main things he considers are costs and the willingness of people to eat the food. 'Generally, everyone likes Italian; everyone will eat some form of noodles. Pasta is a biggy, pizza is a novelty. You have to think about what food you can get locally and the availability of cheese.' He has looked at investing in Malaysia and Thailand, but thinks Cambodia is the most promising destination. 'Cambodia is attractive. The cost of doing business is cheap, margins are good and it fits our property formula.' He has also thought about rolling out his Wagyu restaurant in cities around the world. But having looked at New York, London and Sydney, he has been put off by the tax systems, wages and rentals. But wherever he sets up business, there is one overriding principle that he follows. 'You want to invest wherever you get to have some fun. That's the beauty of what we do and that philosophy hasn't changed since day one.'