A long-standing business disagreement between Kro’s Nest partners YuanJie and Olaf Kristoffer "Kro" Bauer culminated in blows and police detainment for Yuan this past Saturday. It's a complicated story with lots of bad vibes bouncing around in it. Here's what we know so far.
Yuan and Bauer’s partnership began in 2001 with the first Tube Station and the now defunct Blue Jays hip hop club. Kro’s Nest first opened in Haidian in 2006 and quickly became popular with expats and locals . Two more locations followed in 2007 and 2008, the latest becoming a veritable institution on Gongti.
The latest round in this on-going fight began when Yuan informed Kro’s Nest staff that Bauer no longer worked for the chain. According to Global Times reports, Yuan threw a roll of packing tape at Bauer, shoved him hard three times, pushed him up against the oven, ice machine, and the bar in the Sanlitun location. Yuan has since been released.
This morning we received a long letter from Damjan DeNoble, a former general manager of Kro’s Nest from 2007 to 2008, who is now studying for a law degree in Michigan. It's an amazing read for anyone familiar with Kro or his pizza:
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 YuanJie's help.
Maybe this happened because YuanJie's wife gave birth to a baby boy two years ago, and Yuanjie decided that there is nothing like a son except for a son. Maybe it happened because Yuanjie's wife no longer liked Kro. Maybe YuanJie no longer likes Kro. In any case, YuanJie 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' "DaJingLi" 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 Christs 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 YuanJie, 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 YuanJie 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 YuanJie pushed to shut me out of the process, and in part because Kro agreed. Kro said that YuanJie 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, YuanJie hired his wife's good friend and secretary to be the Kro's Nest accountant. No one in the company, not even Kro or YuenJie, could make any decisions before she approved them, which meant before YuanJie approved them. YuanJie had outsourced my DaJingLi duties. I was impotent, and YuanJie 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 YuanJie 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 YuanJie 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 YuanJie 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 YuanJie 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 YuanJie'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 YuanJie." Kro believed he and YuanJie were stuck to one another, and for a while there YuanJie might have felt that way, too. But, it seems certain now that YuanJie might 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, YuanJie 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 YuanJie's arrest for assault. But then, "YuanJie 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 YuanJie arrested for assault and if he would succeed, but I didn't have to wonder for long. The Global Times' 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 YuanJie'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 YuanJie 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 [YuanJie] 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.
This is obviously only the beginning of this story. Check back here for further updates.