This paper examines the impact of political, economic, sociocultural, technological and ecological environments on China's restaurant business and discusses the current status and competition of the restaurant industry. The study indicates that liberalization of economic and legal policies of China provided the impetus for growth and development of franchised western restaurant chains as well as local restaurants. Multinational companies have introduced various new foods and service methods with a positive and permanent impact on Chinese eating habits. China's restaurant industry is experiencing the rapid growth stage of its industry life cycle. The future of the restaurant industry in China is very bright and is partly tied to the continuing liberal policies of the government.